Macro Economy

Covid-19 leaves private healthcare sector in financial distress: FICCI-EY study

Our Bureau Hyderabad | Updated on April 17, 2020 Published on April 17, 2020

The Covid-19 pandemic has had an adverse impact on the private healthcare sector, resulting in 70- 80 per cent drop in footfall, test volumes and 50-70 per cent drop in revenue in the last 10 days of March.

And this is expected to sustain in the month of April with the continued lockdown, according to the findings of a FICCI-Ernst & Young survey.

Many small hospitals and nursing homes, especially in Tier-II and -III cities, have been forced to shut their operations since their cash flows have dried up. Any possible ramp-up will be gradual, taking at least three quarters for return to normalcy.

With an estimated impact of ₹14,000-24,000 crore in operating losses for the quarter, the sector would need liquidity infusion, indirect and direct tax benefits, and fixed cost subsidies from the government to address the disruption.

Covid-19 burden

While they have been feeling the burden of Covid-19, private hospitals and nursing homes — that constitute more than 60 per cent of beds at 8.5-9 lakh, 60 per cent of in-patients and 80 per cent of doctors in India — have been investing heavily in manpower, equipment, consumables and other resources to ensure 100 per cent preparedness for safety in the healthcare facilities and eventual treatment of patients, if needed.

Sangita Reddy, President, FICCI and Joint Managing Director, Apollo Hospitals Group, said: “There is an urgent need to consider the healthcare industry’s triple burden of low financial performance in pre-Covid state, sharp drop in out-patient footfalls, diagnostic testing, elective surgeries and international patients across the sector is impacting cash flow; and the increased investments due to Covid-19, which has impacted the hospitals and laboratories like never before.”

Government support

The Prime Minister’s call to honour healthcare professionals has indeed been a morale booster. However, with dwindling revenues, government measures in terms of liquidity infusion, tax reliefs and other waivers have become crucial for the survival of health services providers of the country.

Kaivaan Movdawalla, Partner, Healthcare, EY India, said: “While the private sector stands fully committed to partner with the government as a national duty, it truly finds itself in a compelling situation to beseech the government for ‘differential’ financial forbearance measures and to be supported well, in order to best utilise its capabilities and capacity to serve the nation in this hour of crisis.”

The FICCI-EY report recommends government support through liquidity infusion for financing the operating losses through short-term interest free/concessional interest rate loans to address the liquidity gap to the tune of ₹14,000-24,000 crore.

Published on April 17, 2020

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