The healthcare industry is expected to grow annually at 16-17 per cent to reach ₹8.6 lakh crore by FY22 on the back of the Centre’s Ayushman Bharat scheme which, if implemented successfully, can go a long way in meeting the severe shortage of healthcare infrastructure, says a brokerage report.
The significant interest in acquiring Fortis Healthcare signifies the attractiveness of the domestic healthcare industry, says the report.
“We believe the key reasons for this interest is the shortage of healthcare infrastructure, including bed capacity, medical practitioners, etc., and the government’s mega plan of expanding healthcare reach across the country through the Ayushman Bharat scheme,” ICICI Securities said in a weekend note.
Hospitals are expected to grow at 16-17 per cent CAGR to reach ₹8.6 lakh crore by FY22 from ₹4 lakh crore in FY17.
Interestingly, the present strength of doctors in the country can handle about double the current beds considering the ratio of beds per doctor in other emerging nations as also the global average.
“We believe the Ayushman Bharat scheme can provide significant growth opportunity for hospitals, though its successful implementation has to be seen,” it noted.
Infrastructure shortage
Looking at the infrastructure shortage in the sector as a growth opportunity, the report notes the country has just 0.7 beds per 1,000 people compared to the global average of 2.7 and the WHO recommendation of 3.5 beds.
This is why hospitals are in expansion mode.
In terms of manpower, the country has just 0.7 physicians and 1.7 nurses per 1,000 people compared to the global average of 1.4 physicians and 2.9 nurses respectively.
Therefore, there is significant untapped opportunities.
The ambitious Ayushman Bharat seeks to provide healthcare coverage of ₹5 lakh each for 100 million families. Implementation of such a large plan can provide huge growth potential for healthcare companies, the report said.
The industry also has been facing several challenges on pricing and margins. Considering the government focus on providing low-cost healthcare services to the poor, these challenges are expected to continue.
To overcome pricing challenges, hospitals should focus on diversified speciality mix rather than single therapeutic area.