But there is a catch. Running a hospital is expensive, and staying profitable means continually putting money back into the business. New facilities take time to fill up, while the cost of adding beds has risen sharply. That is where the industry’s profitability meets the growing debate over healthcare affordability and hospital pricing.
The seven hospital chains tracked by Kotak Institutional Equities — Apollo Hospitals, Aster DM Healthcare, KIMS, Max Healthcare, Medanta (Global Health), Narayana Hrudayalaya and Rainbow Children’s Medicare — reported combined India hospital sales of ₹11,740 crore in Q1FY27, up 21.3% year-on-year. India hospital EBITDA rose 21.9% to ₹2,701 crore.
India’s hospital chains: who has the highest margins?
| Hospital Chain | India hospital EBITDA margin |
| Rainbow Children’s Medicare | 28.6% |
| Max Healthcare | 24.3% |
| Apollo Hospitals | 24.2% |
| Narayana Hrudayalaya | 23.0% |
| Medanta | 21.5% |
| Aster DM Healthcare | 20.2% |
| KIMS | 18.9% |
The performance was supported by a combination of higher patient volumes, better realisations and an expanding bed base.
The cost of staying profitable
The hospital business, however, comes with a substantial investment requirement.
Operational beds across Kotak’s India hospital coverage increased 15.3% year-on-year during the quarter, while capacity beds rose 15.6%. New facilities typically take time to build occupancy and reach maturity, which can weigh on margins in the early stages.
Apollo incurred ₹37.5 crore in pre-operative expenses and losses from new units during the quarter. Its established hospitals reported an EBITDA margin of 25.9%.
Max Healthcare, meanwhile, had ₹195 crore of overheads related to new units, including the Kalinga Hospital acquisition.
Kotak expects these newer facilities to become more profitable as occupancy improves. That investment requirement is now central to the debate around hospital pricing.
The Parliamentary Standing Committee on Health has recommended several measures relating to private healthcare pricing, including a proposal to cap hospital room rates at levels comparable with three-star hotels in the vicinity of the hospital.
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The issue was also discussed by senior executives from Max Healthcare, Fortis Healthcare, Narayana Health and Jupiter Hospital at the CNBC-TV18 Hospital Townhall.
Viren Shetty, Vice Chairman of Narayana Health, said capping room charges would not address the main drivers of healthcare costs.
Patients come to hospitals for treatment, doctors and clinical expertise, he said, while the cost of running a hospital also includes medical equipment, clinical infrastructure and infection-control systems.
“Sure, cap the room rates. It does not address the core problem that the government wants, which is that healthcare is unaffordable for a vast majority of people,” Shetty said.
He argued that the focus also needs to shift towards how healthcare is financed, pointing to India’s high dependence on out-of-pocket spending. Insurance and employer-funded healthcare, he said, could play a bigger role.
Hospitals need to keep adding beds
Fortis Healthcare MD & CEO Ashutosh Raghuvanshi also urged caution around the recommendations, pointing to the cost of adding capacity.India needs more hospital beds and healthcare infrastructure, he said, even as the cost of building hospitals has risen sharply.
Raghuvanshi said the capital cost of adding hospital capacity is currently around ₹2.5-3 crore per bed on average, depending on factors such as land prices, construction and equipment costs.
For operators, the calculation is relatively straightforward: a new hospital requires a large upfront investment and takes time to build occupancy. Any change in pricing therefore has to be considered alongside those costs.
Also read: Room rate caps won’t solve healthcare affordability, hospital CEOs say
Max Healthcare Chairman and MD Abhay Soi took a different view of the affordability question. He said affordability ultimately depends on people’s income and purchasing power, rather than hospital pricing alone.
Soi also pointed to the industry’s median profit after tax of around 8%, which he described as reasonable for a capital-intensive, bricks-and-mortar business.
The distinction between EBITDA and net profit is important here. While several hospital chains reported EBITDA margins above 20% during the quarter, their final profit margins are much lower after accounting for depreciation, interest, taxes and other costs.
What could a price cap mean?
Hospital profitability, therefore, is only one part of the equation.
These companies are generating strong operating returns, but they are also spending heavily on new hospitals and beds. A new facility can take years to reach mature occupancy, while the capital cost of adding capacity has risen sharply.
Kotak said the Parliamentary Committee’s report cannot be completely ignored, but implementing even a subset of its 368 recommendations is likely to be a prolonged process requiring further study and nuance.
For hospital operators, the concern is that tighter pricing could affect the returns that help justify further investment. For policymakers, the challenge is to improve affordability without slowing the expansion of private healthcare capacity.
That is the balancing act at the heart of the debate as discussions around hospital room rates move forward.
Also Read: India’s hospital boom has a catch: More beds could mean lower returns before higher profits
