Major drop in revenue

Interview/ Dilip Jose, managing director & CEO, Manipal Hospitals

While public hospitals have been waging a war on Covid-19, private hospitals have been fighting a perception battle. They have been facing flak for not pitching in to contain the pandemic and for placing a high price tag on treatment. But the pandemic has taken a toll on private hospitals, too, leading to a loss in revenue. In an interview, Dilip Jose, MD & CEO of Manipal Hospitals, details the challenges faced by private hospitals and the way forward. Excerpts:

Q/ How do you see the impact of Covid-19 on private hospitals?

A/ The lockdown and restriction on movement have significantly reduced the number of people accessing hospitals. The later part of March and the whole of April saw only urgent care and emergencies at most hospitals. As bulk of the costs associated with running a hospital is fixed, the drop in revenue resulted in large losses. We have been able to manage the cash flow by cost reduction and deferral with the support of all business associates and banks, and have avoided layoffs at all levels, including contract employees.

Q/ What is the cost of Covid-19 treatment in private hospitals?

A/ The cost of Covid-19 treatment would vary depending on the severity of the disease. Major increase in cost occurs when a patient ends up requiring critical care and has serious comorbidities.

Q/ At a time when hospitals are burdened with reduced revenues, there is increasing pressure to bring down the cost of Covid-19 treatment. What does that mean for private health care?

A/ The reduction in revenues of hospitals from April onwards is on account of the lockdown restrictions.... Treating Covid-19 patients is not at all expected to plug this gap in revenues. Given the criticality of the pandemic, most hospitals are stepping up to work with the state governments to ensure that everything possible is being done to care for the Covid-19 patients. Some of the recent changes in guidelines on early discharge would also help in significantly bringing down the cost of treatment.

Q/ What are the additional costs now?

A/ The increase in operating costs during the pandemic has been essentially on account of the additional safety protocols. In terms of material costs, these are for PPEs of doctors and staff treating Covid-19 patients, increased consumption of masks and gloves as well as use of sanitisers. Other costs incurred include setting up of separate fever clinics in hospitals, thermal scanning equipment as well as those related to social distancing requirement. More than these incremental costs, what has had a major impact on hospitals is the major drop in revenue as all elective and non-emergency procedures were stopped.

Q/ How are hospitals managing their expenses?

A/ Most hospitals have reported about 30 to 40 per cent of the normal revenue in April. Since the cost structure of hospitals is mostly fixed, this has led to significant cash losses in the month. There are instances of smaller hospitals and nursing homes closing down operations already. Others have managed by cutting expenses to only bare essentials, and by deferring payments, additional borrowings and even slashing payments to doctors and employees.

Q/ Do you expect the government to support the industry?

A/ The government has taken some early steps already. The moratorium announced by the Reserve Bank of India, too, would help. What is required in the short term is support with affordable working capital. In the medium term, the urgent need is to catch up on investments required to create a robust public health care infrastructure across all levels. As a percentage of GDP, our current spend is way below the requirement and a sharp focus on this area would make us better prepared to face challenges of the future, which might be even more complex than the current one.