India's hospital stocks are surging today: Here we decode why
What's the story
India's hospital stocks have witnessed a major surge today. The spike comes after the government announced a revision of the Central Government Health Services (CGHS) package rates for the first time in 15 years. The revised rates will be applicable from October 13. Leading hospital chains saw their shares jump, with Apollo Hospitals rising by up to 3.7%, Fortis by 5%, and Global Health by just over 1%. Some hospital stocks also saw gains of up to 6%.
Market reaction
Apollo Hospitals, Fortis Healthcare, and Global Health see gains
The announcement of the revised CGHS rates has led to a major rally in hospital stocks. Apollo Hospitals' shares rose by up to 3.7% to ₹7,730 per share during today's trading session. Fortis Healthcare's shares also saw a jump of 5%, reaching ₹1,027 while Global Health hit an intra-day high of ₹1,347 with an increase of just over 1%.
Historical context
Why the CGHS scheme needed a revision?
The CGHS scheme had been running on outdated rates for years, causing problems for both patients and hospitals. The old rates didn't account for rising medical costs, equipment prices, and staff salaries. As a result, many hospitals refused to offer cashless treatments under CGHS. This left patients in a lurch as they had to pay hefty amounts upfront and wait months for reimbursements.
Revised framework
New structure for nearly 2,000 medical procedures
The Centre has introduced a new multi-layered structure for nearly 2,000 medical procedures. The rates will now be determined based on four criteria: hospital accreditation, type of hospital, city classification, and ward entitlement. The NABH-accredited hospitals will now set the benchmark rate, while non-accredited facilities will be paid 15% less as an incentive to maintain higher standards.
Future implications
Positive impact on healthcare sector
The revision not only addresses a long-standing issue but also opens up a channel that had become stagnant. For private hospitals, which had begun distancing themselves from CGHS due to poor margins, this could mean a renewed participation and smoother cashless operations.