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Private Hospitals, labs face severe financial stress as spendings on equipment surge to contain virus 

Medical Buyer , Apr 16, 2020

As coronavirus cases are on a rise, the private healthcare sector is spending heavily on additional manpower, equipment, consumables, and other resources to ensure full preparedness for the pandemic. However, this has brought the sector to profound financial stress. The private healthcare sector in the country is witnessing an unprecedented slowdown due to the outbreak of Covid-19 in India and the resultant lockdown, said a FICCI-EY study. The report has also revealed that the occupancy levels have fallen to a mere 40 per cent by March-end, compared to 65-70 per cent before the outbreak. This is further expected to reduce while the impact on diagnostic labs is likely to be even worse, with almost 80 per cent fall inpatient visits and revenue.

The private hospitals were already going through a rough phase after India’s drug price regulator National Pharmaceutical Pricing Authority (NPPA) had capped the prices of stents and knee implants by over 70 per cent in 2017. This led to a deterioration in the profitability margins of most of the corporate hospitals as the hospitals were making around two-third of profits from consumables such as drugs, stents, implants, and the services contributed only remaining one-third of profits, said a report by Care Ratings.

Another major roadblock that the sector faced was the implementation of GST as they were not able to input credit on consumables given the fact that they were under the zero rate category. Meanwhile, India’s private healthcare sector is much more advanced than the government sector facilities. Private hospitals and nursing homes constitute more than 60 per cent of beds at 8.5 – 9 lakh, nearly 60 per cent of inpatients and 80 per cent of doctors in India.