Max Healthcare, Narayana, KIMS shares drop up to 6% today. What analysts say

Max Healthcare Institute Ltd and other hospital stocks fell on Monday morning amid persisting concerns over the Supreme Court (SC) order where it asked the central and state governments to come out with a proposal for hospital rates in line with the Clinical Establishment Act (CEA). The SC suggested it would implement CGHS rates across hospitals as an interim measure. Analysts said the news of strict price regulation is sentimentally negative for hospital shares.

Shares of Max Healthcare fell 5.29 per cent to hit a low of Rs 727.30 on BSE. Krishna Institute of Medical Sciences Ltd (KIMS) declined 1.7 per cent to Rs 2,209.60. Apollo Hospitals Enterprises declined 0.71 per cent to Rs 6,094.05.

Narayana Hrudayalaya Ltd tanked 2.15 per cent to Rs 1,292.90. HealthCare Global Enterprises Ltd was, meanwhile, up 0.19 per cent at Rs 351.55.

"We believe that the impact on private hospitals will be minimal, as service charges are determined by the quality of care provided. It is challenging to establish a standardized rate for services, considering variations in the quality of products and technology employed. Private hospitals, equipped with state-of-the-art facilities, incur higher treatment costs due to advanced technologies and superior product quality," said SMIFS in a note.

Max Healthcare shares fell 5.29 per cent to hit a low of Rs 727.30.

KIMS, Yatharth, Narayana Hrudayalaya, and HCG are expected to experience minimal impact, given that a substantial portion (20-35 per cent) of their revenues is derived from government business, the brokerage said adding that these hospitals are strategically oriented towards providing affordable healthcare services.

BNP Paribas said the implementation of a strict fee structure for Indian private hospitals is unlikely as hospitals differ considerably in terms of infrastructure, instruments used during surgeries, skills and experience of medical staff and complexity of ailments dealt with.

"We think any strict price regulation will hurt investor sentiment on the sector at a time when private hospitals have laid out significant investment plans over FY24-28 to expand their bed-count and network as well as to improve their quality and range of services. While the difference in treatment costs of private and public hospitals are typically 30-40 per cent for key specialties such as Cardiology, Orthopaedic, and Neurosciences, we think it is unlikely that even if a fee structure is imposed for private hospitals, the treatment cost would fall significantly to levels anywhere close to that of public hospitals," BNP Paribas said.

 

The brokerage maintained positive view on Indian hospitals and said any meaningful price correction, on the back of this news, as an opportunity to Buy Apollo Hospitals shares. The brokerage has a target price of Rs 6,754 on the stock.