Oncology growth boosts Max Healthcare's average revenue per bed

Max Healthcare's has seen a 20-25% compounded annual growth rate (CAGR) in its oncology business and this is helping drive up the average revenue per occupied bed (ARPOB), Abhay Soi, CMD of the Delhi-based hospital chain , told CNBC-TV18.

“While the rest of our organisation has been growing at around 14 or 15%, our Oncology program has been growing at over 20%. Oncology brings in more money per bed compared to other medical services,” he said.

Two key reasons for this strength were the growth in international patients, which has been increasing at a rate of 25% every year, and the increasing penetration of insurance, he added. “As more people have insurance, they care less about the cost and more about the reputation of the hospital. They are willing to pay more for surgeries in larger hospitals like ours. This segment has been growing at about 25-26% annually.”

In its Q3 results, Max Healthcare mainly attributed its growth to an increase in the ARPOB, which rose by 15% compared to the previous year. However, the report also noted a decrease in the occupancies and a reduction in profit margins.

Soi said the decline in occupied beds was the effect of a high base. Also, last year, the hospital had a large number of dengue patients, which hasn't been the case this year. That led to a minor impact on occupancy rate.

Urging investors to focus more on the EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) per bed, Soi said, even though profit margins have contracted by 30-40 basis points, the EBITDA per bed has been consistently increasing. "This is the 13th consecutive quarter of growth in EBITDA per bed, showing steady progress over time,” he noted.

Max Healthcare shares have gained close to 75% over the past year. The company has a market share of ₹74,850 crore.