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Apollo Hospitals First World Health Care at Emerging Market PricesBy Group AN2

CIRCA 1983

ComputersTelephonesInternet1 TV Channel Doordarshan

Health insuranceSurgeryTertiary care centreCardiac services

Bombay BangaloreCalcuttaMadrasPondicherry

Our cities were called..

The defining Moment..

Apollo HospitalsMissionThe mission is to bring healthcare of International standards within the reach of every individual. We are committed to the achievement and maintenance of excellence in education, research and healthcare for the benefit of humanity

Touch a Billion Lives

Founded by Dr.Prathap C. Reddyin 1983 The Apollo hospitals group is the pioneer of integrated healthcare delivery in IndiaAnIndianhospital chain based inChennai, India

Dr. Prathap C Reddy, was bestowed with the second highest civilian award, the Padma Vibhushan, by the Government of India.Touched and enriched 39 million lives who came from 120 countries.Over 10,000 beds across 56 hospitalsMore than 1500 pharmacies,Over 100 primary care & diagnostic clinics,115 telemedicine units across 9 countries. The cost of treatment in Apollo is a tenth of the price in the western world

Spends 5.2% of GDPThe private medical sector remains the primary source of health care for 70% of households in urban areas and 63% of households in rural areasIndustry is expected to grow at CAGR 17%Per capita Healthcare Expenditure to grow at CAGR 15.4%HealthCare Industry

COMPETITORSManipal Group

11 Private7 government Affiliated6000 beds

Fortis Health Care

4 hospitals10 over next 5 years600 beds4000 in next 5 years

Lanka HospitalsA part of the chain of Apollo Hospitals.Commenced on 7th June, 2002. Is a 350 bed multi speciality, tertiary care hospital.Latest diagnostic and high endmedical equipment.Apollos role was both primary investor and 3rd party management operator.47% of investment by International Finance Corporation and 35% by Local Investors.

Apollo PharmacyApollo Pharmacy is the medical store chain of Apollo Hospitals Enterprises Ltd

Revenue of 43% and profit of 40% at AHELs balance sheet

Transformed from a supporting facility to the standalone facility

Targeting to add 250 outlets every year.

Whats new?Plans to launch a pharmacy format thats more than double the size of the existing 350 sq. ft model.

Developed a new line of business in FMCG for related items.

Planning for the turnover of Rs 1150 crores from 1380 outlets across India.

Apollo Global Project ConsultancyThe planning, implementation and operations management arm of theApollo Hospitals Group.

Provides end to end solutions across the healthcare spectrum round the globe.

What they do?Setting up a health care facility

Hospital Operations Management

Strategic Consultancy

Training

Hospital Quality Consulting

SOME UNDERTAKEN PROJECTSApollo Lavasa Hospitals

Bramwell Hospitals, Mauritius

The Lanka Hospital Corporation Ltd, Sri Lanka

Al Hokar, Saudi Arabia

Medicover International, Poland

Yemen International, Yemen

Tertiary Care Hospital, Nigeria

Apollo Health and Lifestyle Ltd.Apollo Health and Lifestyle Limited operates as a subsidiary of Apollo Hospitals Enterprise Limited.

The company was founded in 2002 and is based in Hyderabad, India.

It provides primary healthcare facilities through a network of franchised clinics in India

Offers specialist consultation, diagnostics, preventive health checks, and 24-hour pharmacy.

Expansion and competitionsCore Diagnostics Private LimitedSRL LimitedDaVita Care (India) Pvt. Ltd.Sarvodaya Global LimitedMedica Synergie Pvt Ltd.

Indian CompetitorsIndian CompetitorsAim is to maximize convenience and comfort Is an integrated model and offers facilities for Specialist ConsultationDiagnostics Preventive Health Checks 24-hour Pharmacy, all under one roof

SWOT STRENGTHS

Cost AdvantageProvides primary, secondary and tertiary health care services Quality health careBrand ImageTalented professionalsIntegrated health care servicesHigh Asset utilizationJCI Accreditations

WEAKNESSLess pay compared to international competitorsHigh attrition rates among nursing workforceLack of infrastructure for medical tourismRising cost of health care deliveryPerception as high-end operations

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OPPORTUNITIES

Growth of Health care industry in IndiaTwo third of healthcare expenditure occurs outside hospitalsBooming medical tourismUnexplored international marketHealth insuranceEntering in insurance and other medical servicesEmerging as a global health care providerTHREATS

Migration of skilled technicians to other countriesCompetition from domestic playersPoor public infrastructureChina competent enough to serve medical touristsNational & International Government Regulations

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Anorganizationthat Provides or arranges managed care forhealthinsuranceSelf-funded healthcare benefit plans Acts as a liaison withhealthcare providers on a prepaid basis.HEALTH MAINTAINANCE ORGANISATIONNew field to venture Scope for development in Insurance sector

PORTER'S FIVE FORCESThreat Of New EntrantsGovt. regulation of entryCan bring in new technologiesHigh investment in infrastructureLow barriers of entry, easy investment funding

Large number of playersPrice competitionEasy investment availableLow pool of talented doctors, so increase in rivalry will increase charges of the doctorsScope of Public private partnershipsGovt. Hospitals-A strong competitionHigh exit barriers

Threat Of Existing Competition

Threat of SubstitutesA basic requirementFacilities in other countries

There is some threat for substitution in the form Ayurvedic Homeopathic treatments

Threat of SuppliersLess Medical equipment suppliersHuman resource talented pool of Indian doctors and surgeonsAttrition of nurses to western countriesHigh costs of advance technologies

Threat Of BuyersLow competition in the tertiary care services as of 2004cost advantage over other countriesChina, Malaysia locations for cheaper medical servicesFew Medicine costs are high in Apollo pharmacy

Building a Health Maintenance OrganizationBuilding and running wholly-owned hospitalsLicensing its name to facilities it manages under contractHuge initial investmentHigh returnsHuge untapped marketBrand Name to facilitate the salesCustomers easily availableEvery customer stepping in can be a prospective insurance takerAs a complementary it will help the primary hospital serviceHuge investmentSlow processHuge untapped marketFacilitates entry of new competitionResources availability near the centerFull fledged facility to be developed from scratchLess investment involvedA Faster processResources already at place, mere improvements requiredFacilities to be streamlined in the right direction as they already do in their consulting wing though deign and workforce facilitiesAdditional Licensing fees as revenueDilution of resources

Q1. Which expansion option is best suited for Apollos needs and capabilities

Market segmentationCost/Product DifferentiationOperationsService Sectors

What are the key elements of Apollo Hospitals Madras strategic Service vision?

Market SegmentationIncrease penetration in insurance(%)Middle to upper income patientsAgeing PopulationWorking Population

Cost/Product DifferentiationLong term relationships with medical professionalsTo enhance patient experience and valueEnd to end offeringsStandardization of clinical protocolsLow cost treatment (Economies of scale)OperationsStringent quality norms and protocolsStrong Execution StrategyAcumen to match care demand and market gaps with creation of assetsService SectorsPrimary Secondary Tertiary

Competition from private hospitalsPoor operations strategyCustomers are price sensitiveLocation far from cityLarge number of private doctors and clinicsNo clear medical and business GoalsHigh attrition rateMedical tourism is lessThe main problem for expansion is lack of trained doctors and trained manpower

What account for Hyderabad Apollo Hospitals disappointing performance, and what are its future prospects?

FUTURE PROSPECTSMore GlobalizationInfrastructure ImprovementTransportation FacilitiesAdvertise as centre for International TourismAcquire international projectsTrain doctors and manpower

Integrated Health Care Delivery NetworkInternational Hospital ManagementMedical TourismAlready VenturedExperience in managing hospitalsCost AdvantageConsumer TrustCost leadershipService at par with global standardsExpertise in this businessHigh profit marginHigh success rate of operations at low costSome of the primary care clinics are doing wellIntegrated service is providedSuperior Skills compared to countries like China

STRENGTHS

Integrated Health Care Delivery NetworkInternational Hospital ManagementMedical TourismSome of the franchises are not doing goodContributes only 2.4% of revenuesWeak competitive position in India vs countries like ThailandProfitability issuesMay have cultural differencesMost of the patients are domestic

WEAKNESS

Integrated Health care delivery networkInternational hospital managementMedical tourismTwo thirds of Health care expenditure happens outside HospitalsOpens up to European MarketsRevenue is expected to be at 1.1 to 2.2 Billion dollarsCompliments pharmacy vice versaInternational PresenceHuge cost advantage & skill availabilityHelps in up sellingCan grow as a Global BrandEffective utilization of existing infrastructureReferral networks owing to geographical presenceFirst Mover advantage

OPPORTUNITIES

Integrated Health Care Delivery NetworkInternational Hospital ManagementMedical TourismFranchise model may not be successfulRequires to hire staff with local languageInternational competitionTough competition from Local clinicslocal culture and practicesLocal InfrastructureMillions of physicians operatingThreat of loosing coat advantageAfter Care services

THREATS