ET Intelligence Group: The March quarter performance of hospital companies provided some hints on the structural trends in the industry brought on by the Covid-19 pandemic:Healthcare digitalisation is here to stayWith ramp-up in tele-consultation and app-based services, indicators to measure the performance of hospitals shall no longer be restricted to the number of patients discharged or average length of stay as digitalisation changes the revenue mix. For instance, short day-care procedures conducted through robotics or provision of home-care services may not count for length of stay but still be value accretive. Besides, for integrated players like Apollo Hospitals Enterprise (AHEL) and Aster DM Healthcare (ADMH), tele-consultation also helps in capturing pharmacy prescription and diagnostic testing.Capex in healthcare moving from private to public sectorCovid-19 has cut short the expansion plans of private hospitals that have been reducing their capex in recent years. “Whatever capex is spent will be only of the emergency type and significantly less than normal,” said Viren Shetty, COO of Narayana Hrudayalaya, during the company’s earnings call. Shalby has deferred its capex plans by six months. Apollo had plans to add at 150-200 beds this fiscal, which is now under review. In contrast, the pandemic has forced governments at all levels to set up healthcare infrastructure like hospitals and mobile clinics on a war-footing. The pressure on the government to beef up investment in healthcare is likely to outlive the pandemic.76806265Companies cutting costs on providing healthcare servicesWhile medical services may not turn cheaper for patients due to additional Covid-19 costs, hospital companies are reducing their spend. They are cutting costs through rental waivers, reduction in the number of employees per patient, increasing generalisation of specialists, technology adoption, restructured contracts with doctors and reduction in non-essential repairs and maintenance. For instance, AHEL has guided reducing about 10% to 15% of its costs in the first half of this fiscal. Incidentally, the price caps on non-Covid surgeries are not yet pinching the players. “It’s only in Maharashtra that this has come in and it’s not something that is way off our insurance tariffs,” said K Hariprasad from AHEL in the company’s earnings call. “So, we are fine with the tariffs. It’s not significant erosion to our revenues.”Covid speeding up consolidationFinancially stressed single, standalone hospitals or nursing homes are likely to shut shop due to loss of business amid Covid-related expenses, thereby increasing the share of corporate chains. According to Shetty, the mom-and-pop hospitals with lower cost bases and one or two key specialists cannot sustain the lack of business for long and prefer shutting operations.Pharmacies are driving growthPharmacies, which were among the few services allowed to function during the lockdown, are boosting growth for players like AHEL and ADMH. The former has targeted revenues of 10,000 crore through 5,000 stores in five years, with improved profitability. This trend can lead to emergence of retail pharmacy chains like CVS in the US.