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How Hospitals can ride the pandemic?

Published on May 31, 2020
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Hospitals are being looked up to since the Coronavirus pandemic struck the world. There has been a notion that Healthcare is one of the few sectors that has been positively impacted by the pandemic. But the truth is far from this.

 

OPD (Out-Patient Department) accounts for nearly 7% of the revenue in most of the hospitals. During the lockdown, a Bangalore based doctor said: “We used to see 50 patients a day in OPD but now see only 5 to 10 patients a day.” This implies your general revenue has been completely hit.

 

Around 10–15% of the revenue comes from international patients. This has become null. Even for patients within the same city, transport issues cannot be ignored. This has pushed to delay their health checkups. One week before 1st lockdown, the estimated numbers were down by 40%. ICICI direct says the impact on revenue to last for the next two quarters.

 

In case you’ve invested in ventilators, you do know that it doesn’t come cheap. In general, it costs INR1.5 lac per ventilator, must-have equipment which cannot be avoided.

 

Dr Rajashekar, medical director, Shekar Eye Hospital, and president of Karnataka Ophthalmic Society said “There is a discussion among private nursing homes to shut down for six months. There is a 90 per cent drop in patient footfall in eye hospitals and we are finding it difficult to pay rent, electricity and employee salaries. Doctors contributed from their pockets for the salary of lower-rung staff like technicians. Expenses have risen by 20 per cent because of investments in PPE kits and cleaning the hospital more.”

Abhay Soi of Max Healthcare said, “It is also expected that occupancy would fall by 30%, patients joining only in emergencies.

Jefferies, a research firm, said that though the fall in occupancy is a one-time hit, the key challenge will be on the balance sheet as most hospitals have cash-in-hand for only one to two months of operations.

“While we expect funding to be available and government to also provide relief especially to hospitals, this is a key overhang,” wrote Piyush Nahar, an equity analyst with Jefferies. The firm cut its target valuations to 20–25% below the historical average from 10–15% earlier.

 

Another worry is that a few hospitals haven’t been safer as well (as we’ve seen in Mumbai). That’s the risk our doctors and nurses are taking by being on the front-line. But, this has deepened fear in the people minds as a few hospitals themselves have become containment zones.

 

What can Healthcare do to survive this chaos?

Hospitals stand as a symbol of Life & Safety. Therefore, the management must follow the protocol in regards to safety from Covid19.

Some of the hospitals have moved to Telemedicine & video consulting to address OPD & Non-emergency situations. The same can be done at your hospital as well. You can also enrol your hospital in a few healthcare apps which will provide additional leads and revenue.

 

Most of the hospitals have one or two months of cash flow. Since it is highly probable you are cash-strapped and also investing in the protocols, it is better you start looking at improving operational efficiency. So, here you need to cut down on your operating costs. Be it on rent, energy bills.

 

One metric a hospital needs to look is Cost per Bed, which is equal to the amount spent on Operating the space divided by the number of beds. The top hospitals like Apollo, Fortis & Max which have 500 beds on an avg., Edelweiss securities reported that the average Cost per Bed is INR8.6 million per year or INR23,500 per day.

 

For Rent: You can renegotiate with your landlord for a reduction in rent by at least 15%.

 

For energy bills: You can implement tools which track your bills. And you can even adopt Zodhya’s products which directly reduce bills during your building operation(Not self-promoting here, but we do have about 15 use cases where we have proved an avg. saving of 20% on the bill).

 

If you could also get some government/ private grants, that would enable some cash flow.

 

As the saying goes “ Revenue is vanity, Profit is sanity, Cash is the king”. It is important to have Working Capital cash.

 

Mostly, it is the patient who searches a hospital for cure. Can you do something here? Providing online care to your existing patients, videos about the safety measures you’ve been taking inside the hospital could be some of the promotional ways to attract more patients. If you can take such extra steps, you will be best-remembered.

 

We always take pride in putting out the knowledge we have to you. There might be some important considerations which we missed out on but we expect a proper knowledge is gained through discussions. Please let us know your thoughts in the comments below.

Written by Zodhya

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