The medical and healthcare industry was witnessing a boom until recently. It hasn’t been that long when media was flooded with the stories of fund inflows, big announcements and investments coming in for the sector. However, in the last few years, the story hasn’t been the same. Nowhere close even. Demonetisation and capping laws are killing it all, slowly but surely.
A few years ago India was witnessing an interesting and unusual brain-drain. It was in the reverse. Many Indian origin reputed doctors and medical practitioners who had earned big name and sufficient respect world over were returning to their roots. They had started setting facilities and hospitals in India and the country was becoming a hot medical tourism destination. People had started flying in for world-class facilities at affordable prices. Indians, who otherwise had to travel far for better medical facilities, got equally good options too. The sector was blooming and witnessing unprecedented growth.
But then the policy decisions hit the sector like a plague – an ailment that was hard to fight. And the industry eventually succumbed. There is a long list of hospitals who are fighting for survival. Discussing the issue in detail, Anurag Srivastava, Vice President, EHL Healthcare Pvt Ltd elaborated on the reasons behind the downfall.
Demonetisation – the first demon
“Small and the medium level players in the health and medical industry faced the first blow with demonetisation. Since liquidity was out of the window, the visits to medical practitioners went down to ‘unavoidable’ medical situations only. Regular check-ups, wellness visits, and routine rounds and tests were all struck out of the list,” told Srivastava.
Capping – the final blow
The biggest blow to the sector came from the law on capping. Drugs, knee-caps, and cardiac stents being price capped, the margin percentage of hospitals went for a toss. Srivastava added, “The profitability on most of the surgeries has gone down drastically. The medium sized hospitals have been badly affected. Being low on working capital, the standalone players can barely sustain and have now to look for mergers and acquisition. They are left with no choice.”
Dalip Kumar Chopra, director, Gurdasmal Hospitality & Consultancy Sevices Pvt Ltd said, “There is no margin left in the sector. And it’s not that the margin was undue and unjustified. Hospitals have a huge ongoing maintenance cost to bear. They have to keep the machinery updated all the time, the upkeep cost is sky high. If the margins are not big enough to offload the cost, they can’t survive.”
“Patients’ demand for better and latest services is growing while the margins are shrinking. Everybody wants the latest digital X-ray even if it is not prescribed. Expensive machines become outdated in no time. If the margin is not left to earn, how will the facilities recover their investment and earn for the next upgrade?” he asks.
“Only the biggest and the richest players will survive as they can afford to do that. Moreover, they can wait to reach the level of monopoly. While the smaller players die an untimely death, they’ll be left to reap the benefits later,” added Chopra.
Key to Survival
GO BIG: As per Srivastava, the key to survival, for players that are not among the cash-rich chains, is to add more beds and cities on their list. Then you have a better chance of getting acquired, merged or funded from various entities. There is a long list of small hospitals and chains that are open to joining hands and discussing associations.
GO SMALL: Another way to survive is to stick to the Ambulatory Care services. As per Srivastava – “The daycare facility or specialised treatment offering clinics which have a small turnaround time of patients are doing fine. As their patient rotation is fast and overheads not too high, they can manage to survive and grow.”
The industry that has served millions of ailing Indians and many foreigners too is today suffering the blows of imbalanced policies. If not provided relief soon, the sector is bound to flow in the hands of foreign funds and that will bring in another set of complications in terms of unregulated treatment prices, monopoly, and control. In the interest of best practices, innovation and job creation in the deepest corners of the country should remain out of the glitches of the centralised powers and corporates. It’s high time the government takes note of the issue and starts the treatment before it’s too late.