Every day, whenever he is in Chennai, Dr Prathap C. Reddy, founder and Chairman of Apollo Hospitals Enterprise, visits his group's flagship hospital on Greams Road. Reddy, 79, has been following this routine ever since the hospital was set up three decades ago. He inspects the premises, meets the staff and sees patients. He often talks to patients' relatives as well to find out what they think of the facilities the hospital provides. "Feedback is important if we have to continuously improve," says Reddy.
This constant desire to improve may well be the secret of his success. Reddy has transformed not just his company, but also, in the process, India's health-care sector. He opened the country's first corporate hospital, in Chennai on September 18, 1983, at a time when hospitals were mostly run by statebacked institutions or charitable organisations. Over the next two decades, Apollo became India's largest operator of hospitals. Many others have since followed suit, creating a new business model and providing the wider public with a health-care alternative which never existed earlier. Apollo today owns 36 hospitals in India with 5,800 beds, and manages another 13, including one in Bangladesh, with 2,038 beds.
In recent years, however, Apollo has been overtaken by the younger Fortis Healthcare. Fortis, controlled by the billionaire brothers Malvinder and Shivinder Singh, opened its first hospital in 2001 and expanded rapidly through acquisitions. It now operates 75 hospitals with 12,000 beds in India and several other countries. India accounts for 68 hospitals and 10,000 beds.
Apollo has also been feeling the heat from regional rivals such as Max Healthcare in north India, Manipal Hospitals in the south, Vaatsalya Healthcare in the tier II and III towns of southern India, and specialised chains like the Bangalore-based HealthCare Global Enterprises. Vaatsalya, for instance, runs 17 hospitals in Tier II and Tier III towns in Andhra Pradesh and Karnataka. Its cofounder and CEO Ashwin Naik says the company aims to increase the number of hospitals to 50 in four states. HealthCare operates 25 cancer treatment hospitals, mostly in smaller cities. It was set up in 2005 and has 425 oncologists in its network. "The focus is on personalised medicine with in-depth analysis so that there is proper cancer treatment instead of a hit-and-miss approach," says founder and Chairman B.S. Ajaikumar.
The health-care sector is also changing. Lifestyle diseases such as diabetes are on the rise, and the growing spread of health insurance has made costly health-care facilities affordable for many more than before. The Apollo management is conscious of the changing market dynamics.
So how is it gearing up for the change? "We led the change in Indian health-care. If there are others now and they are growing, let them," Reddy told Business Today in his office at the Apollo hospital on Hyderabad's tony Jubilee Hills Road. "Apollo alone cannot address all the healthcare needs of the country." However, conversations with Reddy and Suneeta Reddy, one of his four daughters and Joint Managing Director at Apollo Hospitals, showed the company has indeed been working on a number of fresh initiatives in recent years.
One of them is 'Transformation 360', another 'Rocket 14'. The first aims to bring about a 360-degree change in Apollo's approach to efficiency, growth, branding and innovation. The second, begun last year, focuses on clinical service excellence goals for 2014. There is also 'CONECT', an acronym for cardiology, orthopedics, neurosciences, emergency, cancer and transplants, which focuses on setting up centres of excellence in each of these.
While Apollo initially focused solely on expensive medical care at its high-end hospitals, it is now opening neighbourhood clinics as well where it does not conduct surgeries but only offers consultations and diagnostic services. It is also setting up specialised clinics for dental care, diabetes (branded as "sugar" clinics), and dialysis. "The focus is more on day-care formats where patients go back home the same day the surgery is conducted," says Krishnan Akhileswaran, Apollo's Chief Financial Officer.
No doubt, high-end care will remain Apollo's bread and butter. But while such hospitals currently account for 95 per cent of the company's revenue from healthcare services - which excludes the pharmacy business - their share will fall to 75 per cent in the next five years, with revenue from specialised clinics making up the rest.
The company's consolidated revenue for April-to-September 2012/13 was Rs 1,843.3 crore, up 22 per cent from a year earlier. The company expects this pace of expansion to continue.
Apollo has performed on the stock markets as well. On November 27, its shares hit a record high of Rs 902.85, after rising 60 per cent in 2012. The benchmark Sensex rose 19 per cent during the period. An analyst, who does not wish to be named, says the strong market response is due to robust earnings growth, largely from the hospitals business, for the past several quarters. On November 29, however, the stock fell after foreign institutional investor CLSA sold almost all its 6.15 per cent stake in the company for about Rs 706 crore, more than three times the Rs 214 crore it paid to buy the stake five years ago.
Apollo aims to invest about Rs 2,000 crore to add 3,000 beds in the next three years. This includes entering the Mumbai market where it wants to set up three hospitals with a total capacity of 900 beds for Rs 710 crore. It also aims to add about 700 beds in Chennai for Rs 510 crore, and 305 in Bangalore at a cost of Rs 140 crore. Further, it will invest Rs 642 crore to build a network of no-frills hospitals and 1,250 beds under the "Reach" brand in tier II towns such as Trichy, Nellore, Nashik and Patna. The company has 11 "Reach" hospitals, and intends to increase the number to 20 by 2015. The share of these hospitals in the company's health-care revenue will rise from 11 per cent to 20 per cent by 2015.
Besides, Apollo will invest Rs 300 to Rs 500 crore over the next three to five years in growing the retail healthcare formats. The goal is to increase the number of neighbourhood clinics and diabetes centres from the current 100 to 250, and dental clinics from 20 to 100. Pharmacies will also rise to 2,000 in three years from 1,400 currrently.
Apollo is also leveraging new technologies to drive growth. "We introduced robotic surgery last year," says Suneeta Reddy, referring to surgical procedures conducted using robots. The company conducts such surgeries at four major hospitals. Such surgeries are more precise and less invasive, and so help improve average revenue per bed by reducing the time patients need to stay in hospital after the surgery.
"Faster delivery of care means more throughput of patients," she adds. And, a healthier topline.
No comments:
Post a Comment