India’s Hospital Sector Boom: Healthcare market may reach $364 billion by 2034, says report

Hospital Industry Expected to Expand Over the Next Decade: The Indian hospital sector is expected to witness strong and sustained expansion over the next decade, according to a research report by brokerage firm Mirae Asset Sharekhan. The report said this growth will be supported by structural demand and a new investment cycle.

India’s Hospital Market Projected to Grow Sharply

According to the report, India’s hospital market is projected to grow from US$75.3 billion in FY2018 to US$193.4 billion in FY2025, registering a CAGR of 14.4 per cent. The market is further expected to expand at a CAGR of 7.2 per cent to reach US$364.6 billion by 2034.

The report attributed this growth to rising per capita income, increasing insurance coverage, an ageing population and the growing burden of chronic diseases.

Shift From Profitability-Led Growth to Volume-Led Expansion

After years of balance-sheet improvement and cautious expansion, listed hospital companies are now accelerating capacity additions. According to the report, this marks a shift from growth driven mainly by average revenue per occupied bed (ARPOB) to a more volume-led expansion strategy.

The report added that rising private insurance penetration and a persistent shortage of hospital beds are likely to attract long-term investment into the sector even beyond FY2030.

Private Hospitals Expected to Grow Faster

The report noted that the addressable market for hospitals is expanding across multiple areas.

The private hospital segment is expected to grow at a compound annual growth rate of 10.6 per cent, supported by an improved payer mix and rising ARPOB levels.

Hospital Bed Shortage Continues to Be a Major Challenge

The report highlighted that capacity constraints remain a major concern in India’s healthcare sector.

India has only 1.3 hospital beds per 1,000 people, compared to the global average of 2.9 and more than 2.5 in countries like Brazil and Vietnam. This low availability increases the demand for new beds without reducing the need for them.

Bed utilisation at leading hospitals is now consistently above 60 per cent. Apollo Hospitals is operating close to 70 per cent occupancy, helping support profitability and returns.

Insurance Penetration Changing Revenue Mix

The report also pointed to a shift in payer mix in favour of hospitals.

Private insurance now contributes 30-43 per cent of revenues for hospital chains such as Apollo Hospitals and Max Healthcare, compared with 20-25 per cent a few years ago. At the same time, out-of-pocket healthcare spending is gradually declining.

Government-backed schemes such as Ayushman Bharat PM-JAY are also helping increase patient volumes and market reach, particularly in tier-2 and tier-3 cities. However, fixed package pricing under such schemes continues to put pressure on margins.

Hospitals Focus on Financial Stability and Expansion

According to the report, hospitals operating with occupancy levels above 65-70 per cent can maintain healthy EBITDA per bed. Hospitals integrated with the National Health Claims Exchange are also better positioned to manage claim cycles ranging from 60 to 120 days.

The report further noted that the capital expenditure cycle reflects the sector’s evolution—aggressive expansion before FY19 had pushed net debt-to-EBITDA ratios to around 5 times. Between FY19 and FY24, hospital companies focused on operational efficiency and speciality services, reducing leverage to nearly 1 time.

FY25 is expected to mark the beginning of a fresh growth cycle, with higher capital expenditure indicating a stronger focus on expansion backed by healthier balance sheets.

Opportunities and Challenges Ahead

The report said significant opportunities remain to address India’s estimated shortage of nearly 2 million hospital beds, expand into smaller towns with lower land costs and less competition, and adopt technologies such as AI diagnostics and teleconsultation to improve operational efficiency.

Medical tourism also continues to be a key growth area due to its higher-margin revenue potential.

However, challenges such as a shortage of skilled healthcare professionals, regulatory pricing caps and delays in reimbursements under public healthcare schemes continue to affect the sector.

Despite these challenges, the report said India’s hospital industry remains well-positioned for long-term growth. Private players currently account for nearly 60 per cent of the country’s healthcare infrastructure, while insurance penetration remains at 3.7 per cent of GDP, lower than the global average of 6-7 per cent. According to the report, this provides significant room for further expansion in the coming years.

With ANI Inputs