Economy unlocks, but health sector struggles to get back on its feet

BENGALURU: The first four months of the pandemic in Karnataka, after the lockdown was imposed in March, were tough on the private hospital sector. Trouble began when people stopped coming to hospitals, fearing they would contract the coronavirus.“The moment flights were curtailed, people coming to metro cities for treatment stayed back, as mobility became a problem. After a few days, even inter-district travel was restricted, adding to the problem,” said Dr Deepak Balani, Chief of Medical Services at Sakra World Hospital.

The Federation of Indian Chambers of Commerce and Industry, in collaboration with Ernst and Young, conducted a study to assess the impact of Covid-19 on private hospitals and the diagnostic services sector. This was based on the last week of March 2020, when the lockdown kicked in. “The Covid-19 pandemic caused an adverse impact on the private healthcare sector, resulting in 70%-80% drop in footfall, test volumes and 50%-70% drop in revenue in the last ten days of March. Many small hospitals and nursing homes, especially in tier-II and tier-III cities, were forced to close down operations since cash flows dried up. A possible ramp up will be gradual, taking at least three quarters to return to normalcy,” the study stated.

Picking up the pieces 
Since July, the sector is slowly getting back to its feet due to the Covid surge. Non-Covid services and elective surgeries are still not taking place, and are down by more than 90 per cent, Private Hospitals and Nursing Homes Association (PHANA) said.

“We thought things would improve during the Unlock phases, but in private hospitals, Covid patients make up three-fourths of footfall, and with the government capping prices, revenue in tertiary care hospitals is affected. Only about 40% of non-Covid patients are coming to hospital as they are afraid. Only 40% of surgeries are being carried out, which is a drastic fall for us,” said Dr Balani.

High spend, low earnings
Apart from reduced income, private hospitals face a problem of increased expenditure.
Dr R Ravindra, Medical Director of Suguna Hospital and President of PHANA said, “Spending has increased due to cost of PPE kits, human resources are paid more to motivate them to work with Covid patients, there’s bio-medical Covid waste disposal, and paid leave for healthcare workers in isolation who are accommodated in hotels.”

“We’ve had to take insurance for our staff, which is added expenditure. Also, no compensation is given by the government if private healthcare professionals test positive. Private hospitals are just managing to make ends meet, and revenue has reached 80 per cent of what it was in the pre-Covid era,” Dr Ravindra added.As per the Apollo Hospitals report of Q1FY21 earnings, hospitals’ standalone revenue of healthcare services decreased by 42 per cent to Rs 6,824 million, compared to Rs 11,725 million in Q1FY20.

“Karnataka region revenue degrew (decreased) by 38 per cent. Overall occupancy in the cluster was 293 beds (36% occupancy) as compared to 544 beds (71% occupancy) last year,” Apollo Hospital said in a statement. On the whole, revenues degrew 16% to Rs 21,715 million, as opposed to Rs 25,719 million in Q1FY20 for this hospital group.

Job losses, pay cuts 
In all, 58 small, mid-sized and large hospitals have shut down, as per PHANA. The financial situation led to layoffs, especially in hospitals attached to medical colleges, in paramedical, pharmacology, biochemistry, anatomy and other non-clinical sections.

“Salaries of doctors not involved in Covid work, like surgical departments, dental, ENT, cardiology and other non-medical specialities, have been affected, while freelancers have also taken pay cuts. Those in corporate hospitals have taken a 40-50 per cent pay cut. Some hospitals that restarted during Unlock phases are offering only Out Patient Department services,” Dr Ravindra said.

Demands from private sector
The FICCI-EY study estimated an impact of Rs 14,000 to Rs 24,000 crore operating losses for the quarter. It recommended liquidity infusion, indirect and direct tax benefits, and fixed cost subsidies 
from the government to address the disruption. It also mooted customs duty and GST exemption on essential medicines, consumables and devices for treatment of Covid patients, and waiver or reduction of health cess on medical devices.