Lack of preparation to equip their staff to handle Covid-19 patients, is forcing hospitals to shut down
AK Kaushik, who heads a group of hospitals around Varanasi, says he is finding it difficult to pay his staff salaries on time now. Out-patient department (OPD) footfall has stagnated, so have elective procedures. Patients are avoiding hospital visits as much as possible.
“I have a staff of 600 people across my three hospitals in Varanasi, Gopiganj and Mirzapur. I am now finding it difficult to pay their salaries on time with such a huge shortfall in revenues,” Kaushik says.
From OPD to in-patient department (IPD) or admissions, the conversion rate is roughly 10-12 per cent for the industry. With OPDs down, there are hardly any admissions. Private hospitals, especially smaller standalone ones, are staring at a crisis that they were not prepared for. Analysts say larger corporate chains have to brace up for at least six months for business to return to normal.
Edelweiss analyst Ankit Hatalkar said while the impact of the disruption was sudden, it is likely to last till India’s coronavirus
disease (Covid-19) cases are brought under control. “There is no accurate way to guess timelines on that, but suffice to say that business as usual for hospitals may be a distant scenario. With OP occupancies, particularly for elective surgeries, now at an all-time low, we believe procedure pipelines are likely to remain dry through H1FY21 (first half of financial year 2020-21) and earnings will remain subdued through FY21.”
On top of this, lack of preparation to equip their staff to handle Covid-19 patients, is forcing hospitals to shut down.
Sample this: In the past 24-hours at least two city hospitals, one in Tardeo (Bhatia Hospital) and another in Mulund (Spandan) shut down after patients there tested positive. At Spandan, for example, around 65 doctors and nurses have been quarantined. In Mumbai, major hospitals like Wockhardt and Jaslok have already been declared containment zones. Ironically, both were designated centers for treating Covid-19 patients.
“Hospitals first need to invest in personal protective equipment (PPE) kits for staff, whether or not they are treating Covid-19 patients. These kits come for at least Rs 1,800 or so per unit, and that is why smaller hospitals are shying away or are re-using kits. Some are wearing the same kit through the day during which period they attend to multiple patients. It is a disaster in the making,” said the owner of a private hospital, who did not wish to be named.
are seeking a stimulus package or some form of support from the government to sail through the crisis.
There has been a 50 per cent decline in footfall and 10-30 per cent increase in costs (on supplies). “We need a stimulus on basic costs, like power, ventilators and the cost of capital also. The industry will come together to make a bunch of requests because on the one side we are committed to treating patients, on the other side, unless this industry as private sector survives, we might see a total crash in the system,” said Preetha Reddy, vice-chairperson of Apollo Hospitals Group, recently.
The cost of testing and treating Covid-19, at present, is not cheap though prices for testing have reduced. Apollo is expecting some state governments and the Centre to come up with some support to make the tests and treatment viable by bearing certain part of the cost.
There are fixed costs such as salaries, electricity bills, annual maintenance contract, and these run into several crores a month for a sizeable hospital.
With no elective surgeries and OPD, there has been no income and all private hospitals
are bleeding, said S Gurushankar, president of Tamil Nadu Chapter of Association of Healthcare Providers of India (AHPI), and chairman of Meenakshi Mission Hospital & Research Center.
Already small clinics and hospitals are on the verge of closing. Gurushankar, however, said the industry was with the government at this time of crisis, but a way out of this had to be thought through. The industry, smaller hospitals claim, already runs on margins of around 10 per cent.
“This month, most small clinics cannot pay salaries and staff have already left. From end of April, most big hospitals will run out of working capital and will not be able to meet expenses. This is dangerous, because staff may simply not come to work. It’s already happening in a few hospitals. If hospitals run out of working capital, that will be a disaster,” said Gurushankar.
The industry has demanded that the government waive power costs for three months, provide exemption from goods and services tax, and also release tax arrears, and take measures to protect frontline employers. The government has also been asked to help arrange stocks of protective gear from vendors already providing government hospitals.
Some smaller hospitals have offered their premises to the government for free, sans staff. Joy Hospital in Chembur, an eastern suburb of Mumbai, has offered its entire facility to the Brihanmumbai Municipal Corporation, which is using it to house around 45 patients. “We have not sought any rent for use of our premises, but they will pay the utilities bill for this period. We have capacity for around 85 beds,” said Dipti Joy Patankar, owner of the hospital. As for the corporate chains, there was steady income till Q3. An ICRA analysis shows that hospitals in its sample set saw an 11 per cent revenue growth and a 32 per cent Ebitda growth and the margins too improved from 13 per cent to 15.6 per cent year-on-year for Q3FY20.
However, such hospitals too are bracing up for challenging times. International patients account for 12-14 per cent of aggregate revenues of large hospitals, going as high as 25 per cent for certain super specialty facilities. The revenues from this segment are likely to dry up completely. If the lockdown is extended through a large part of Q1FY21, we estimate impact on private hospitals’ Ebitda at around 10 per cent for the quarter and 3-4 per cent for FY21, Edelweiss noted.