Daijiworld Media Network – New Delhi

New Delhi, Jul 23: India's organised healthcare sector is entering a new phase of expansion, with hospital chains increasing bed capacity, entering new markets and strengthening existing networks despite short-term pressure on profitability, according to an EY report.

The EY Healthcare Newsletter: Q4FY26 and FY26 Update said hospitals and diagnostic companies recorded healthy revenue growth during FY26, driven by higher patient volumes, improved occupancy rates and a rising share of specialised treatments. The report noted that healthcare providers are accelerating investments in new hospitals, brownfield expansions and acquisitions, reflecting confidence in sustained long-term demand.

Unlike earlier years when growth was largely fuelled by pricing, hospitals are now benefiting from increased patient footfall and a richer mix of specialised treatments. Apollo Hospitals and Max Healthcare reported 16 per cent revenue growth in FY26, while Fortis Healthcare, KIMS Hospitals and Medanta also registered double-digit growth.

According to the report, hospitals are witnessing higher demand for advanced procedures in oncology, cardiology, neurosciences and organ transplants, which generate significantly higher revenue per occupied bed than routine medical care. Aster DM Healthcare said cardiology and oncology together contributed nearly one-fourth of its revenue after posting growth of 25 per cent and 23 per cent respectively during the year.

Most leading hospital chains maintained occupancy levels between 60 per cent and 75 per cent during FY26. Max Healthcare reported occupancy of around 76 per cent, Apollo Hospitals 67 per cent, Fortis Healthcare 68 per cent and Medanta 62 per cent, enabling them to absorb fixed costs while retaining room for future growth.

Hospital operators have also announced ambitious expansion plans. Apollo Hospitals intends to add around 3,400 beds between FY27 and FY30, while Medanta plans to add about 2,700 beds over the next three to four years. Fortis Healthcare aims to expand by another 1,800 beds, and the combined Aster DM Healthcare and Quality Care platform plans to add nearly 4,445 beds. Max Healthcare is expanding across cities including Lucknow, Pune, Dwarka and Dehradun, while KIMS Hospitals is building new facilities across southern India.

The report said hospital chains are increasingly relying on brownfield expansions, operations and management agreements, and acquisitions to expand more rapidly while keeping capital expenditure under control. Brownfield projects, in particular, allow hospitals to add capacity within existing campuses, reducing costs and enabling quicker monetisation.

Despite the strong growth, profitability has come under temporary pressure as newly commissioned hospitals take time to achieve optimal occupancy. Apollo Hospitals reported a marginal decline in hospital margins due to pre-opening losses from four new hospitals. KIMS Hospitals also recorded lower EBITDA margins after commissioning facilities in Maharashtra, Karnataka and Kerala. Medanta cited the ramp-up of its Noida hospital as a factor affecting margins, while GPT Healthcare and Jupiter Life Line Hospitals also highlighted start-up costs associated with new facilities.

The diagnostics segment continued to perform strongly during FY26. Dr Lal PathLabs, Metropolis Healthcare, Thyrocare Technologies and Vijaya Diagnostics all reported healthy revenue growth, supported by higher test volumes, preventive health packages and specialised diagnostic services.

Metropolis Healthcare recorded 24 per cent revenue growth during FY26, while Thyrocare Technologies grew by 21 per cent and Vijaya Diagnostics by nearly 19 per cent. Dr Lal PathLabs posted around 12 per cent revenue growth while maintaining EBITDA margins of approximately 28 per cent.

The report noted that diagnostic companies are expanding beyond conventional pathology testing into preventive health check-ups, genomics, wellness testing and specialised diagnostics, which generally offer higher margins. Metropolis Healthcare now operates more than 5,000 collection centres across 750 towns, with several companies continuing to expand laboratories and service centres in smaller cities.

Despite global geopolitical uncertainty, EY said investor confidence in India's healthcare sector remains strong. Private equity investments continue to remain healthy, while several healthcare companies are preparing for initial public offerings (IPOs). Although healthcare deal activity moderated in the fourth quarter of FY26 compared with the previous quarter, the report expects momentum to improve during the first half of FY27 as investors continue to view healthcare as a resilient and defensive sector.

The report concluded that India's organised healthcare industry is shifting from consolidation to expansion, with demand increasingly spreading beyond metropolitan cities into Tier-II and Tier-III markets. While balancing rapid expansion with profitability remains a key challenge, EY said sustained patient demand could make current investments the foundation for the sector's next phase of long-term growth.