Fortis, Apollo and other top hospitals are spending a lot of what they charge — most of which is going to doctors

Advertisement
Fortis, Apollo and other top hospitals are spending a lot of what they charge — most of which is going to doctors

  • As per Edelweiss Securities, most of the top hospitals spend a large chunk of their revenues on operational costs.
  • The average cost incurred by these hospitals in FY 19 stood at ₹24,219 million —- that’s 88% of their revenue.
  • The average revenue of all the six hospitals stood at ₹27,282 million.

Unaffordable prices and inflated healthcare services have made it difficult for Indians to avail of treatments at affordable rates. In 2018-19, the Indian government received over 241 complaints of overpricing at private hospitals. That is twice the number of complaints it received two years back.

But, are hospitals making undue profits? As per Edelweiss Securities, most of the top hospitals spend a large chunk of their revenues on operational costs. The average cost incurred by these hospitals in FY 19 stood at ₹24,219 million —- that’s 88% of their revenue.

The average revenue of all the six hospitals stood at ₹27,282 million.
Advertisement

Edelweiss Securities analysed the revenue and costs of six major private hospitals — Apollo Hospitals, Fortis Healthcare, Max India, Healthcare Global (HCG), Shalby, and Narayana Hrudayalaya (NH).

Here is a look at how much of hospital revenues are going, and where.

Private hospitals spend a lot of money on their doctors

The major cost of hospitals is that of clinicians. Most of the hospitals spend 17-18% of their earnings on doctors. Apollo incurs the highest clinician cost amongst others, at 28%. Top hospitals tend to bring in popular and busy doctors in as consultants, which inflates this number.

Advertisement

Whereas the average cost incurred on all other non-doctor employees like nurses, administrative and janitorial staff — was 20% of the revenues.

Cost incurred by hospitals on clinicians and other staff members (₹ Million)

ParticularsSector AverageApollo FortisMax + TrustN H HCG Shalby
Clinicians6,50116,391 8,868 4,4905,898 2,1141,243
Personnel5,4089,1437,1137,460 6,2411,845646

Cost per bed (₹ Million)
Cost per bed is among the many factors that influence the cost of treatment. Most large hospitals tend to make hospital stays as comfortable as possible. That is reflecting on their balance sheet.

Advertisement
“We observed that Fortis and Max have the most inefficient model with their cost per bed being the highest among peers at ₹13.7 mn and ₹11.2 mn respectively. On the other hand, NH and HCG have the most favourable cost per bed,” said the report.

ParticularsSector AverageApollo FortisMax + TrustN H HCG Shalby
Cost/bed8.69.513.711.24.05.77.5

Cost of advertising, maintenance and housekeeping (₹ Million)

In FY19, all the hospitals increased their ‘other’ expenses which includes advertising and housekeeping costs by 10%.
Advertisement

“Shalby is best managed in terms of other expenses (17% of revenue). Fortis has the highest other expenses (28% of revenue) largely due to higher rentals, advertising costs and maintenance charges, and an uptick in legal expenses, provisions and housekeeping expenses,” said the report.

ParticularsSector AverageApollo FortisMax + TrustN H HCG Shalby
Others 6,023 10,416 9,960 5,8706,7172,389786

The report also pointed out that patients visit top hospital like Apollo or HCG because of the brand name.

Advertisement
See also: