The report points out that patients cite long waiting period, poor hygiene and untrained staff as significant drawbacks with SME hospitals.
Published Nov 26, 2024 | 7:00 AM ⚊ Updated Nov 26, 2024 | 7:00 AM
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Small and Medium Enterprise (SME) hospitals are the backbone of India’s healthcare system, delivering 60 percent of healthcare services and accounting for over 90 percent of hospital beds.
Yet, these hospitals face increasing challenges that threaten their ability to continue serving millions, particularly in Tier-II and Tier-III cities, according to the “Hospitals for Bharat” report.
SME hospitals, defined as those with less than 200 beds, dominate India’s healthcare landscape. Serving primarily in regions where government facilities are sparse and large hospital chains are yet to mark their presence, these hospitals are the primary care providers for a vast portion of the population.
Their critical role is further amplified by India’s abysmally low healthcare spending of 2.4 percent of its GDP, ranking 174th globally.
According to the report, SME hospitals operate at a significant financial disadvantage compared to their larger counterparts. Their Average Revenue Per Occupied Bed (ARPOB) is ₹25,000–₹30,000—40 percent lower than large hospitals, which earn approximately ₹50,000 per bed.
This disparity stems from a reliance on low-ticket procedures and an absence of premium services. Compounding this is a higher Average Length of Stay (ALOS) of 5–6 days compared to the industry average of 4–4.5 days, reflecting the poor patient turnover.
The report states that large hospital chains are expanding aggressively into Tier-II and Tier-III cities, targeting affluent patients with state-of-the-art infrastructure, strong branding, and advanced medical capabilities. These expansions, often via acquisitions of SME hospitals, are drawing high-paying patients away from standalone facilities.
Specialised local clinics are also eroding SME hospitals’ market share by offering niche services, affordable pricing, and personalised care. This creates a competitive environment where SME hospitals struggle to differentiate themselves.
“Accreditation is critical for building trust and ensuring quality. Yet, only 2 percent of SME hospitals are accredited by the National Accreditation Board for Hospitals & Healthcare Providers (NABH). This not only impacts confidence in patients but also limits their ability to attract insured and higher-paying patients,” reads the report.
Meanwhile, the report also points out that patients frequently cite long waiting period, poor hygiene, untrained staff, and inadequate communication as significant drawbacks. Such operational inefficiencies contribute to patient dissatisfaction, with surveys identifying staff behaviour, facility maintenance, and billing disputes as top concerns.
Larger hospital chains outspend SME hospitals on marketing by significant margins, allocating ₹422,000 per bed compared to just ₹10,000. With growing reliance on digital channels for patient acquisition, this marketing disparity limits SME hospitals’ visibility.
The report analysis jointly developed by LoEstro Advisors and Medium Healthcare, sheds light on these challenges and outlines actionable solutions to ensure the sector’s sustainability and growth.
The report is the first of its kind to comprehensively analyse India’s SME hospital landscape. It highlights their indispensable role in healthcare delivery while emphasising the urgent need for transformation amidst financial, operational, and competitive pressures.
The SME hospital market has grown at an impressive 12.9 percent Compound Annual Growth Rate (CAGR), outpacing the overall hospital sector’s growth of 11.3 percent.
The report suggests that this growth is is due to factors such as localised preferences, where patients in smaller towns prefer to seek healthcare closer to home, avoiding having to travel to metropolitan centres.
Additionally, demand for specialised services in departments like orthopaedics, oncology, and critical care are in high demand, creating more opportunities for SME hospitals. These hospitals cater to uninsured patients, offering cost-effective care that attract high patient volumes.
Initiatives like the Ayushman Bharat direct significant patient volumes to these hospitals, enhancing their outreach. Importantly, rising treatment costs have pushed many to seek affordable options provided by SME hospitals.
However, despite this growth, the report paints a stark picture of operational inefficiencies, low revenues, and competition from larger chains and specialised clinics.
Despite these challenges, SME hospitals have have considerable opportunities to address inefficiencies and enhance both their operational and financial performance.
The report suggests that specialised services like cardiology, oncology, and neurosurgery can significantly boost revenues, with ARPOBs ranging from ₹50,000 to ₹150,000.
“Establishing Centers of Excellence (CoEs) not only enhances profitability but also builds a strong reputation for quality care. High-margin specialities, with contribution rates between 30–70 percent, can be a game-changer for many SME hospitals,” suggests the report.
Also, by leveraging technology, SMEs can transform patient journey and improve operational efficiency. Meanwhile, tele-medicine can help bridge the urban-rural gap, through remote consultations. Smart ICUs will make advanced critical care capabilities possible in under-resourced hospitals, and Electronic Health Records (EHRs) would streamline workflows and enhance patient management.
Achieving NABH accreditation can significantly improve patient trust, satisfaction, and hospital credibility. Accredited hospitals have shown a 10 percent improvement in patient feedback scores, with marked increase in service quality and operational standards.
The report highlights practical initiatives that some SME hospitals have successfully implemented to improve operations and outcomes. One such initiative is the introduction of bundled service pricing, which offers patients comprehensive care packages combining diagnostics and treatments.
This approach has made healthcare more affordable and improved patient satisfaction by simplifying billing and providing clarity.
Another transformative practice involves the use of centralised diagnostics. By pooling resources for laboratory and imaging services, hospitals have achieved economies of scale, which has not only reduced costs but also improved the quality and speed of diagnostic processes.
Loyalty programs have also proven effective, with hospitals incentivizing repeat visits through rewards and discounts, thereby boosting patient retention rates.
Additionally, the report delves into case studies showcasing innovative uses of technology in rural settings. For instance, one rural ICU integrated remote monitoring capabilities through a smart ICU system, enabling the successful treatment of a patient suffering from severe acute respiratory distress syndrome (ARDS).
This intervention eliminated the need for a costly and risky transfer to a tertiary care facility, demonstrating the life-saving potential of technology in resource-limited environments.
Such examples underline how practical solutions and technology-driven models can address the diverse challenges faced by SME hospitals, paving the way for enhanced healthcare access and delivery.
The “Hospitals for Bharat” report is a clarion call for change, urging stakeholders to recognise the indispensable role of SME hospitals in India’s healthcare ecosystem. As Rakesh Gupta, Managing Partner at LoEstro Advisors, eloquently states:
“Transforming SME hospitals isn’t just about their survival. It’s about ensuring that affordable, quality healthcare is available to every Indian, irrespective of their geography or income.”
(Edited by Neena)
