Rising health costs

Just before the rain and thunder in the afternoon on Thursday, there was some welcome sunshine – an ideal time for Aldoris, the choon paan karaya, to come down the lane with his now- familiar breakfast offering.

As his modified tuk-tuk wound its way down the lane with its delightful tune, there were plenty of neighbourhood customers who were glad at the opportunity to welcome a known visitor for some conversation and sales amidst the prolonged lockdown. Aldoris’s maalu paans, tea-buns, string hoppers, ‘crocodile’ (kimbula) buns and other pastries were snapped up like hot cakes.

“Sir, sancharana seema ethi kaalaya dik-karaida (Sir, will they extend the travel restrictions)?” asked Aldoris from Ranidu who lives down the road. “Mama hiththanne ne, mokada juni 14 wena-kota api sumana thunak mehama indala thiyana hinda (I don’t think so, since we (would) have been in a lockdown for at least three weeks up to June 14),” Ranidu said.

I was in the office room when Kussi Amma Sera came into the kitchen with some ‘crocodile’ buns for the household. She was without her friends, heeding my warning last week that they should not meet when there were COVID-19 restrictions on gatherings.

As she placed the buns on a plate, the phone rang. It was Seeni Bola, my banker friend (so named, after he once boasted that other banks were handling ‘seeni bola’ deposits compared to his bank) on the line.

At the same time the heavens opened up with thunder, lightning and heavy rain resulting in the neighbours scrambling back to their homes.

“Hello… hello, how are you,” asked Seeni Bola. “Fine,” I said.

“I was planning to ask you about the health sector, particularly the private health sector. They must be making a lot of money during the pandemic,” he said.

“All the hospital companies have been doing well over the past year and that’s showing in some of the financial results of these companies,” I said, adding: “All the large hospitals have intermediate care centres at hotels for asymptomatic COVID19 patients and this is also bringing in money for both the hospitals as well as the hotels.”

“Hmmm… the hotels where these centres are located have been able to pay staff salaries and for utilities like water and electricity with this income, in the absence of tourists,” he said. We ended the conversation after a long chat on vaccinations and the problem of supplies.

Interestingly, while hospital companies are doing well, it’s not reflected in the stock market where the demand is more for conglomerates. This is one of the reasons why the stock market cannot be considered a barometer of the economy since it doesn’t reflect the positive trends in the economy, like (in this case) health-related stocks which should have been an attractive investment.

While households are seeing their health-related costs going up due to the pandemic, with some having to fork out at least Rs. 140,000 for a 2-week quarantine at a hotel at Rs. 10,000 per day – in most cases the daily cost is much more – that is also reflected in the consumer spending trends.

According to the Colombo Consumer Price Index (CCPI) in May when inflation rose to 4.5 percent, the prices of items in the Non-Food category recorded an increase due to price increases observed in health – payments to medical laboratories and payments for room charges of private hospitals/nursing homes.

Elsewhere, health and hospital-related companies did very well in the financial year ending March 31, 2021

At the Hemas Group – which has its own hospital chain – the healthcare sector recorded a revenue of Rs. 10 billion during the quarter (January-March 2021) against Rs. 8.9 billion over the corresponding period last year, an increase of 12.3 percent.

The growth in the sector was collectively driven by Pharmaceutical Distribution and Manufacturing businesses. Hemas said its hospitals’ business witnessed a positive quarter-on-quarter momentum in patient footfall. Additional revenue streams such as mobile lab services, home care services and the Kaya intermediary care centre supported revenues for the quarter. Hemas Hospitals also opened its own laboratory to test PCR samples during the latter part of the quarter.

In the case of diversified Sri Lankan conglomerate Sunshine

Holdings, healthcare led its growth, while this segment remained the major contributor to total group revenue in 2020/21 at 53 percent.

Sunshine said that during 2020/21, the group’s healthcare sector grew its revenue by 14.5 percent year-on-year to Rs. 12.8 billion. The sector achieved growth in Pharma, Medical Devices and Retail sub-sectors with significant improvement in the second half of the year owing to the recovery from the COVID-19 lockdown.

Pharma and Medical Devices sectors achieved the highest per quarter revenue during the last quarter, while Healthguard, the pharmacy/ retail arm of the group’s healthcare sector, witnessed an increase in sales in mid2020/ 21 which was predominantly driven by the increase in health and wellness consciousness of consumers with the spread of COVID- 19 in the country. Sunshine’s healthcare sector merged with Akbar Pharmaceuticals in January 2021, making it Sri Lanka’s first fully integrated healthcare company with the addition of pharma manufacturing and R& D operations. There were no immediate revenue figures from hospital companies like Nawaloka, Asiri or Durdans.

In the case of the government’s health spending, according to provisional estimates, while the earlier vaccination of 20 percent of the population cost Rs. 9.1 billion, the total cost to vaccinate another 60 percent of the population is around Rs. 27.3 billion.

Under these estimates for COVID-19 related expenditure, cash transfers to vulnerable groups (Samurdhi, etc.) amounted to around Rs. 6 billion in 2020 and around Rs. 15 billion so far in 2021.

Kussi Amma Sera was looking miserable this morning – probably missing the chat with her friends – while placing a mug of tea on my table with a glum expression. “Ada yaluwo ne-neda (No friends today, eh),” I asked her. “Ne Sir (No Sir),” she said and walked away as I reflected on the huge cost that Sri Lankans have to painfully bear during the pandemic.