Why SME Hospitals Matter in India’s Digital Health Transformation

Small and Medium Enterprise (SME) hospitals deliver 60 percent of India’s care and account for over 90 percent beds, offering affordable care to millions, especially in tier-2 and tier-3 cities, semi-urban regions, and rural areas.

Despite catering to vast population, they continue to operate at lower revenue per bed compared to large chains and battle operational inefficiencies such as longer wait times and poor facility management, leading to patient dissatisfaction.

Digital integration can improve patient satisfaction, yet the SME hospitals are still catching up. The hurdle for these hospitals is not the lack of intent; it’s the lack of enablement.

Digitalizing SME hospitals: Gaps and Opportunities

SME hospitals are generally classified as facilities having less than 200 beds. Of around 80,000 hospitals across the country, only about 4,000 have more than 100 beds. Around 30,000 operate with 30-100 beds, and roughly 45,000 have fewer than 30 beds, making smaller hospitals central to healthcare access.

Digitalisation is no longer optional for these hospitals. However, many smaller facilities struggle due to the high upfront cost of EMR systems and ongoing IT support. Limited staff training, fear of workflow disruption, and uncertainty about data privacy and returns on investment also slow adoption. The challenge is further compounded by multiple software providers whose systems do not easily work together.

Consequently, SMEs largely remain missing from conversations around advanced digital health technologies and AI, limiting the integration of such technology to large premium setups, while those driving local healthcare remain under-integrated. Hence, the very access gap that technology intends to bridge, continues to widen.

Enabling Inclusive Digital Transition

Strong regulatory incentives, national digital frameworks and institutional support is essential to ensure smoother digital transition. One such mechanism built to reduce these gaps is Ayushman Bharat Digital Mission (ABDM), India’s digital health backbone. Key ABDM enablers for hospitals include:

• Digital Public Infrastructure
  Through Health Facility Registry (HFRs), Health Professional Registry (HPR) and ABHA IDs, it can help SMEs go digital without having to build everything from scratch.

• Interoperability Frameworks
  Ensures that hospitals, labs and other healthcare stakeholders can securely exchange data through standard systems, reducing duplication and fragmentation

• Consent-based Data Exchange
  Enables safe, secure and consent-based maintenance and sharing of health records.

• Building stronger Health Networks
  It encourages voluntary participation of public and private hospitals, enabling SMEs to become a stronger part of the boarder national health ecosystem.

While ABDM can ensure the possibility of wider integration, the quality of how the infrastructure operates also depends upon the consistency of an organisation’s internal processes. Accreditation frameworks, such as National Accreditation Board for Hospitals and Healthcare Providers (NABH), address this layer, helping hospitals move toward quality and digital maturity in a practical and scalable way. Key NABH Digital Health initiatives include:

• Integrated Digital Health Standards for Hospitals
  NABH has developed comprehensive digital health adoption roadmap, integrating clinical  and digital standards along with healthcare software certification frameworks. 

• Certification of Healthcare Software
  NABH now certifies solutions pertaining to Hospital Information Systems and Electronic  Medical Records, helping hospitals make informed procurement decisions and adopt  technology with ease. 

• Building a New Workforce
  NABH has launched programs to train and certify digital health consultants who can guide  hospitals through transformation. This emerging ecosystem of ‘Digital Mitras’ aims to create  feet on the street for healthcare digitization across India. 

• Education, Research and Implementation Support
  Effective digital transformation requires building ecosystem capacity, particularly for SMEs, through targeted training, research, implementation support and impact evaluation. NABH provides digital transformation toolkits and budgeting guidance to hospitals to ensure smoother transition.

This is a gap that academic institutions can also bridge. For instance, digital health is one of the core focus areas at ISB’s Max Institute of Healthcare Management, where research projects examine the system-level impact of emerging digital technologies.

Furthermore, financial and policy incentives will also shape adoption. Governments and insurers must create mechanisms to incentivise a standardised digital adoption throughout the healthcare ecosystem, particularly the tightly budgeted SMEs.

Why This Matters

Digitally enabling smaller hospitals is key to safe, consistent care and for building standardised, interoperable systems at scale. With reliable data, hospitals and policymakers can reduce inefficiencies, manage rising costs, and respond more effectively to growing health demands.

India’s healthcare future will not be shaped by large corporate hospitals in a metro. A 30-bedded hospital in a Tier 3 town matters just as much. If the SME hospitals are empowered the right standards, tools, and support, digital transformation in India will not remain limited to a few. It will become truly national and inclusive.

*This blog draws insights from the address of Mr. Rizwan Koita (Chairperson NABH and Co-founder & Director of Koita Foundation) delivered during ISB’s Healthcare 4.0 Summit in February 2026.