Hospitals’ ARPOB increases in 9M, and upward trend to stay in FY24

Major Indian hospital chains reported an increase in their average revenue per occupied bed (ARPOB) for the nine months (9M) of the current financial year (2023-24, or FY24) — around Rs 50,000 per bed per day in 9MFY24 compared to Rs 45,800 per bed per day in the same period last financial year (2022–23, or FY23).

According to estimates by rating agency ICRA, ARPOB will increase by 8–10 per cent in FY24.

In ICRA’s sample set of hospitals, the ARPOB has increased by 10.35 per cent in 9MFY24. For the full FY24, ICRA estimates listed companies it tracks to witness healthy year-on-year growth of 8–10 per cent — Rs 49,708 per bed per day from Rs 45,800 per bed per day reported in FY23.

ICRA feels that the rise will be aided by improving specialty and case mix, a better payor mix (with a higher contribution from cash and insurance patients), and annual price revisions by companies to offset cost inflation.

The increase in ARPOB comes despite significant bed additions by hospitals in the past two financial years.

ICRA’s sample set of companies added 545 beds in 2021–22 and 1,043 beds in FY23. The agency also reported that these companies added another 703 beds in the first half of FY24.

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

In the 9MFY24 period, Max Healthcare reported a 14 per cent year-on-year rise in its ARPOB figures, amounting to Rs 74,500 per bed per day from Rs 66,300 per bed per day in 9MFY23.

Similarly, the 9MFY24 ARPOB figures for Apollo Hospitals Enterprise reflect a growth of 11 per cent, reaching Rs 56,823 per bed per day from Rs 51,202 per bed per day for the same period last year.

Fortis Healthcare also reported a 10.7 per cent increase at Rs 59,870 per bed per day in year-to-date ARPOB figures until December 2023, from Rs 54,048 per bed per day in December 2022.

Commenting on the reasons behind the rise, a spokesperson for Max Healthcare said that the growth can be attributed to a significant change in the clinical mix over the past year.

“We are attracting more patients for tertiary and quaternary care work, including high-end chemotherapies and robotic surgeries,” the spokesperson said.

“ARPOB has also improved because of price increases/tariff revisions from institutional payors, which were long overdue and happened this year,” the spokesperson added.

Addressing the trend in an investor call, Venkatesh R, group chief operating officer at Narayana Hrudayalaya, stated that this growth in ARPOB can be attributed to conscious efforts to improve the payor mix, with a 2 per cent increase in cash and third-party administrator volume compared to previous quarters.

“Specialised procedures like robotic and cardiac surgeries with morning/evening discharges contribute more to ARPOB,” he added.

In its investor call for the 9MFY24 period, Vivek Goyal, chief financial officer, Fortis Healthcare, said the ARPOB rise is mainly driven by high-end, specialty cases.

“Fortis’ ARPOB is higher for the oncology and neurology businesses. The company has also invested in robotic surgeries, which should lead to high ARPOB business going forward,” Goyal added.

Major Hospital’s ARPOB per day for 9MFY23 vs 9MFY24

Business Standard