Ayushman Bharat accounts for 48% of revenue at hospitals in Tier II and III cities

Certain regional hospital networks now earns 48% of its total revenue from Ayushman Bharat, the government’s insurance scheme for low-income households. This is a remarkable shift for a programme that private hospitals once considered as a low-margin obligation. What was previously valued primarily for patient volume is now becoming a key financial pillar of regional healthcare. 

A new report from healthcare investment firm Somerset Indus Capital Partners shows that at some regional hospital chains, the Ayushman Bharat scheme has become one of the largest contributors to cash flow, particularly in the country’s smaller cities where private insurance is less.

Across Somerset’s hospital portfolio, roughly 29% of all patients were treated under the scheme last year. Those visits translated into thousands of heart, cancer, and critical-care surgeries, procedures that would otherwise be financially out of reach for most low-income households in the country.

Sterling alone performed more than a thousand cardiac surgeries and a similar number of oncology procedures under the scheme, underscoring the extent to which Ayushman Bharat is financing high-value, previously unaffordable interventions.

The numbers reveal how deeply state reimbursements have reshaped demand in Tier II and Tier III markets. Under the scheme, procedures such as pacemaker implantations, laparoscopic gallbladder surgeries, and stroke thrombolysis are priced at a fraction of private market rates, often 50% to 70% lower. 

For patients, the difference is transformative. For hospitals, the predictability of payments and steady patient volume help offset the lower tariffs. Many operators say the scheme has become a stabilising force in markets where private insurance penetration is thin and out-of-pocket spending is often catastrophic.

The model has created a new equilibrium. Rather than competing for small pockets of insured or upper-middle-class patients, regional hospitals are now building capacity around government-backed demand. 

Bed allocation, staffing patterns, and department-level investments, particularly in cardiology, oncology, and critical care, are increasingly shaped by Ayushman Bharat caseloads. Public health centers and government hospitals have become vital referral feeders, pushing more scheme-eligible patients into private systems.

As India expands the scheme and adds more complex procedures to its reimbursable catalog, private hospitals may find that the most reliable revenue growth is no longer at the premium end of the market but in the public programme they once treated as an afterthought. In many of the country’s small and midsize cities, Ayushman Bharat is no longer supplemental, it is the business model.

But even as it becomes central to the business models of many small-city hospitals, the programme continues to draw pointed criticism from health economists, hospital associations, and state governments. One of the most persistent concerns is that financial reimbursement rates under the scheme are often far lower than the actual cost of delivering care.

Doctors and administrators argue that complex cardiac, cancer, and neurosurgical procedures are often reimbursed at levels that leave hospitals operating at a loss, leading many facilities to selectively avoid high-cost procedures or restrict the number of Ayushman Bharat patients they accept.