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Hospitals ARPOB increases in Q1

ospital chains in India have reported steady growth in two key operational parameters, which are an increase in average revenue per operating bed (ARPOB) per day and declining average length of stay (ALOS) of the patients, reports said. Growth in operational performance has helped hospital chains gain valuations on the stock exchanges.

However, for patients, these parameters translate to an increased treatment cost, which is true even for relatively short hospital stays, reports said. Medical inflation in India was estimated at around 14 percent in 2021, which remains high in post-pandemic times.

For example, the largest hospital chain in the country, Apollo Hospitals, has posted steady growth in its ARPOB from Rs 37,397 in FY20 to Rs 57,760 for the first quarter of the ongoing financial year.

Moreover, in its June quarter earnings call, the company said that it could sustain the improvement in ARPOB to Rs 60,000 in the near term, reports said.

Rise in overall cost of hospitalisation
The overall cost of hospitalization has increased, thanks to the hospitals passing on the inflation in the raw material costs, medical devices, equipment, and consumables, as well as the rise in the staff costs.

Besides these factors, the demand-supply mismatch, rising insurance pen ration, and an inclination towards paying for high-end quaternary care facilities have also pumped the overall increase in APROB. It has also to do with the type of patients visiting the hospitals. Increasingly, patients have health insurance or pay their medical bills from their own pocket against those seeking treatment under various government schemes.

Rising ARPOB
Reports quote India Ratings and Research report as saying that the ARPOB has increased and remained higher than the pre-pandemic levels due to the higher occupancy rate, favorable change in payer mix (higher number of patients with insurance), changes in the case mix (more complex procedures that cost more), and improved operational efficiency.

Future earnings
The ARPOB earnings in the financial year 2023-24 are expected to grow marginally because of an increase in the share of higher-margin elective surgeries. Also, the average occupancy levels are expected to remain higher than pre-Covid levels at 65-70 percent. This is due to the ability of large hospitals to manage complex surgeries. Recovery in medical tourism is also expected to help the surge in hospital earnings. Business Standard

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