SC order on standard rate unlikely to hit hospitals too hard, brokerages believe

Hospital stocks are sharply down in two straight sessions after the SC order.

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26 Aug, 2025 12:21

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The recent Supreme Court order on standard rates for medical treatment services in private hospitals has come as a shocker for the sector, triggering a sharp sell-off in hospital stocks. Brokerages, however, chose not to fan the fire as the they felt the concerns were overdone.

What's more? Jefferies believes that adverse news is not too rare in this space and has not always caused major impacts. It goes on to say that the price weakness in hospital stocks in reaction to the SC order throws up an opportunity to buy.

Shares of major hospitals such as Apollo Hospitals, Max Healthcare, Fortis Healthcare, Global Health and KIMS have taken a 4-14 percent hit in the last two days.

Crux of the outcome

The Supreme Court, while hearing a public interest litigation (PIL) filed by an NGO, directed the Union health secretary to notify the standard hospital rates after consultation with states within six weeks.

As per Rule 9 of Clinical Establishment Rules, 2012, the pricing of
hospital services has to be within the range of rates outlined by the central government in consultation with states, which is yet to happen.

Also Read | Hospital stocks fall for 2nd day after SC threatens to apply CGHS rates for private players

The court not just criticised the government over its failure in specifying the standard hospital rates but also warned of applying Central Government Health Scheme (CGHS) rates for treatment services at private healthcare facilities until standard rates are set. Jefferies feels it is this statement that has sparked investor worries about price regulation for private hospitals.

Slim chances of an adverse order

Just like Jefferies, CLSA too believes that even though the news is a negative for hospitals, it is also quite difficult to be implemented. Analysts at Nuvama Institutional Equities too see the apex court order as a negative surprise for private hospitals, but says that its implementation would be a challenge and may face strong resistance, given that it is a state matter, and the ecosystem is skewed towards private hospitals.

Jefferies feels that litigation is still at an early stage, and it is unlikely to result in any near-term adverse outcome for hospital players.

Several cases in the recent past like the Maharashtra government trying to cap rates for non-Covid treatments, Haryana attempting to reserve beds in private hospitals, price caps on certain hospital consumables and more, have hit the sector, but were unable to bring the sentiment down.

It is because much of the regulatory concerns surrounding the healthcare sector never make it to rules and laws. And, Jefferies doesn't foresee a change this time as well and hence, remains bullish on hospital stocks.  Backing their strong growth prospects, the brokerage advices investors to use any meaningful stock correction as a buying opportunity.

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