India’s medical tourism grew 33% in 2023, to surpass pre-pandemic level in 2024: ICRA

Medical tourism in India increased by around 33% year-on-year in 2023, with expectations to surpass the pre-pandemic levels of 700,000 visitors recorded in 2019 in calendar year 2024, credit rating agency ICRA said. This growth, the agency said, is attributed to the central government’s initiative to extend e-medical visa facilities to nationals of 167 countries, which is likely to further boost medical tourism footfalls.

The rise in medical tourism is supported by India’s competitive treatment costs, quality medical facilities, and relatively short waiting times for procedures. This trend is expected to continue, offering a positive outlook for the Indian hospital industry, said ICRA.

The agency projected that aggregate occupancy for its sample set of hospital companies will remain stable at 61-63% in FY25, down slightly from 64.7% in FY24. This stability is attributed to the ongoing demand for healthcare services and continued market share gains for organised players, it said.

The average revenue per occupied bed (ARPOB) is expected to grow by 4-6% in FY25, following an 11% increase in FY24. This growth is due to an improved specialty mix, a better payor mix focussing on cash and insurance patients, and annual price adjustments to address cost inflation.

ICRA estimates a revenue growth of 12-14% for its sample set companies in FY25. Enhanced operating leverage, cost optimisation, and digitisation measures are likely to sustain an operating profit margin (OPM) of around 22-23%, compared to 23.1% in FY24. Despite the need for additional debt to fund significant bed capacity expansions in FY25 and FY26, ICRA maintained a stable outlook on the Indian hospital industry.

The increasing incidence of non-communicable lifestyle diseases, higher per capita healthcare spending, greater health insurance coverage, and growing medical tourism volumes are expected to support the industry’s growth prospects, it said.

“We expect our sample set companies to add over 4,000 beds in FY25 and another 3,400 beds in FY26. This represents approximately 23% of the existing capacity as of 31 March 2024. While this expansion will involve some debt funding, the debt metrics are expected to remain strong,” Mythri Macherla, Vice President & Sector Head – Corporate Ratings at ICRA, said.

In-patient footfalls for FY24 were steady, supported by a recovery in medical tourism and a shift towards larger hospitals with increased insurance coverage. Technological advancements have kept the average length of stay (ALOS) at 3.4 days, promoting quicker patient turnover, it said.