Revival of medical tourism boosts India’s hospital industry: ICRA

A robust revival in medical tourism was one of the main contributors to a sequential improvement in patient footfall at hospitals throughout the FY23, rating agency ICRA has said. 

Maintaining a stable outlook for the Indian hospital industry, ICRA said the industry’s performance is being driven by a surge in non-communicable lifestyle diseases, increasing per capita healthcare spending, rising awareness, expanded health insurance coverage, and a rise in medical tourism. 

Medical tourism is showing signs of recovery from the impact of the Covid-19 pandemic. According to data provided by the Ministry of Tourism, foreign tourist arrivals (FTA) for medical purposes grew steadily from 2017 to 2019. In 2017, the FTA figure stood at 495,000, which saw a significant increase to 644,000 in 2018 and further to 697,000 in 2019. This upward trend underscored India’s appeal as a cost-effective destination for high-quality medical treatments and advanced healthcare facilities. 

However, the onset of the Covid-19 pandemic in 2020 brought about a dramatic shift. FTA for medical purposes plummeted to 183,000 as international travel restrictions and lockdowns came into force. Despite pandemic-related challenges, the FTA figure for medical purposes rebounded to 304,000 in FY23. 

“There has been a sequential improvement in patient footfalls in the hospital sector throughout every quarter of FY23, except for Q3, attributed to the deferral of elective surgeries during the festive season. Factors driving this improvement include a robust revival in medical tourism and shifting patient preferences towards larger hospitals due to increased insurance coverage,” ICRA said adding that the average length of stay (ALOS) in FY23 stood at 3.6 days and is expected to remain low, facilitated by faster patient throughput supported by technological advancements. 

ICRA has said that the aggregate occupancy rate for its hospital industry sample set will remain robust at 63-65% in FY24, slightly lower than the 65.1% recorded in FY23. This projection is underpinned by sustained demand for healthcare services and ongoing market share gains for organized players. The anticipated moderate growth of 5-7% in the average revenue per occupied bed (ARPOB) for FY24 follows a substantial expansion of 10% in FY23. 

“Several companies within ICRA's sample set have announced substantial expansion plans, including the addition of over 8,400 beds and comprehensive upgradation/refurbishment plans over the next four years. This strategic move translates to a remarkable capacity increase of over 26% compared to March 2023 levels. Additionally, some major players in the industry are actively seeking inorganic growth opportunities, which could result in incremental bed additions through mergers and acquisitions,” said Mythri Macherla, Assistant Vice President and Sector Head at ICRA. 

ICRA’s sample set encompasses the hospital businesses of nine listed companies, including Apollo Hospitals Enterprise Limited, Aster DM Healthcare Limited (India business only), Fortis Healthcare Limited, Healthcare Global Enterprises Limited, Krishna Institute of Medical Sciences Limited, Max Healthcare Institute Limited, Narayana Hrudayalaya Limited, Rainbow Children’s Medicare Limited, and Shalby Limited.