Hospital Stocks Rally on Dalal Street After CGHS Rate Update

Hospital stocks rose sharply on Monday after the Ministry of Health and Family Welfare announced revised rates for around 2,000 medical procedures under the Central Government Health Services (CGHS) scheme. This marks the first major revision in over 15 years and will take effect from October 13.

The announcement led to strong buying interest in healthcare shares. Fortis Healthcare surged more than 7%, Max Healthcare jumped 6.3%, while Yatharth Hospital, Krishna Institute of Medical Sciences (KIMS), and Aster DM Healthcare gained nearly 4.5% each. Apollo Hospitals also advanced 2.5%.

Rate Hike Expected to Boost Profitability

The revised rates are expected to increase hospital charges by 5–30% for several key procedures, especially in cardiology, oncology, and orthopedics. This could help improve hospital margins and cash flows from patients treated under the CGHS scheme.

The CGHS currently covers around 4.6 million beneficiaries across 75 cities. With the revised rates, hospitals are expected to show greater interest in joining the scheme, which could lead to higher patient inflow and additional revenue growth. 

Who Benefits the Most from CGHS Rate Update?

Hospitals with a higher share of income from government health schemes are expected to benefit the most from the change. Yatharth Hospital currently earns the largest share of its revenue from CGHS patients, while Max Healthcare derives nearly 20% of its income from the scheme.

For Fortis and KIMS, CGHS patients contribute about 12% of total revenue, and for Apollo Hospitals, around 6%. Previously, low reimbursement rates had limited hospital participation in the scheme. The new rates could encourage more hospitals to offer services under CGHS, expanding patient access to private healthcare facilities.

Market Outlook and Valuations

In the last 6 months, most hospital stocks have already seen strong gains (between 5% and 77%) compared to a 13% rise in the benchmark Nifty index. Currently, hospital stocks are trading at fair valuations of 20–25 times their Enterprise Value (EV) to Ebitda. Yatharth Hospital trades at the lower end, around 13 times EV to Ebitda, mainly due to its higher government-linked revenue exposure.

Read more: Insurance Premiums GST-Free from Sept 22, 2025: Costs May Still Rise.

Conclusion

The revision in CGHS procedure rates has provided a short-term boost to hospital stocks and may improve profitability in the sector. However, given the recent rally in prices, further gains could be limited in the near term. The policy update is likely to encourage greater hospital participation in the CGHS network, improving access to affordable healthcare for government beneficiaries.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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