Small and medium hospitals market likely to reach Rs 5 trillion by FY27: Report

According to a joint report by LoEstro Advisors, an investment banking and consulting firm, and Medium Healthcare, a healthcare consulting firm, the small and medium enterprise (SME) hospitals segment is projected to achieve a market size of Rs. 5 trillion (US$ 60.08 billion) by the financial year 2026-27. This growth is being driven by localized demand, niche specialization, and various initiatives. Despite catering to 60% of healthcare needs and accommodating 90% of overall hospital beds in India, SME hospitals in this segment are encountering challenges related to sustainability and competition from larger hospital chains. 

Managing partner at LoEstro Advisors, Mr. Rakesh Gupta, highlighted the vital role that SME hospitals play in Indian healthcare, particularly in Tier-II and Tier-III cities. However, these establishments operate with an average revenue per occupied bed (ARPOB) that is 40% lower than that of larger chains. They also manage longer patient stays and face higher operational costs. The report emphasizes that SME hospitals have lower profitability, extended average length of stay (ALOS), low occupancy rates, and are experiencing customer migration towards larger hospital chains, affecting their business performance. 

The report further notes that SME hospitals generate approximately 40% less revenue per occupied bed due to fewer high-value procedures and charges. Additionally, their significant focus on obstetrics and gynecology results in an ALOS that is 33% higher than that of large private chains. SMEs are also contending with competition from both large hospital chains and specialized local clinics that concentrate on specific medical fields. Large hospital chains have expanded their presence by adding around 400 more centres outside Tier-I cities in the last five years, with plans for further growth through brownfield expansions. Meanwhile, specialized local clinics are emerging as a viable option for middle-income groups, creating additional competition for SME hospitals. 

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.