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Apollo Hospitals

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  • 1. 2009 INDUSTRY ANALYSIS ON APOLLO HOSPITAL AN ASSIGNMENT ON CORPORATE STRATEGY SUBMITTED BY--- GROUP 2. G-02 SUDEEP SHAURYA SHORABH BHATTACAHRJEE GAGANDEEP SINGH VINAY KUMAR BHARDWAJ VIJAYVARGIA RAJOJYOTI BANIK SUBMITTED TO --- Prf. RAJESH VERMA 12/8/2009
  • 2. Industry analysis of Apollo hospital Health care Industry in India In India, the Healthcare system is split into a public sector, a private sector and a wide network of informal healthcare providers operating together in a large and unregulated network. This irregularity has caused wide disparities in access, especially in regional and rural distribution of healthcare infrastructure. Currently, the Indian healthcare sector is valued at Rs.1, 360 (US $34) billion roughly 6 per cent of GDP. The healthcare business is projected to grow to over Rs.1, 600 (US $40) billion or 8.5 per cent of GDP by 2012, according to Price Waterhouse Coopers (PwC) report, 'Healthcare in India: Emerging market report 2007'. The Hospital Industry Some Facts • India‟s healthcare industry is currently worth Rs 73,000 crore which is roughly 4 percent of the GDP. The industry is expected to grow at the rate of 13 percent for the next six years which amounts to an addition of Rs 9,000 crores each year. • The national average of proportion of households in the middle and higher middle income group has increased from 14% in 1990 to 20 % in 1999. • The population to bed ratio in India is 1 bed per 1000, in relation to the WHO norm of 1 bed per 300. • In India, there exists space for 75000 to 100000 hospital beds. • Private insurance will drive the healthcare revenues. Considering the rising middle and higher middle income group we get a conservative estimate of 200 million insurable lives • Over the last five years, there has been an attitudinal change amongst a section of Indians who are spending more on healthcare. Corporate hospitals mushroomed in the late eighties. The boom remained short-lived and out of the 22 listed hospital scrips, most are being trading below par. An increasingly fragmented market, lack of statistics, capital intensive operations and a long gestation period are all wise reasons to shy away from investing in the healthcare industry. Government and trust hospitals dominate the scene. Many of the trust hospitals suffer from poor management. Good corporate hospitals are still too few to amount to a critical mass.
  • 3. Corporate hospitals failed a decade ago because they emerged in isolation and weren‟t part of a larger phenomenon. However, now, there are the insurance companies, the hospital hardware and the software companies that have come together to create the boom. Factors Attracting Corporate In the Healthcare Sector Recognition as an industry: In the mid 80‟s, the healthcare sector was recognized as an industry. Hence it became possible to get long term funding from the Financial Institutions. The government also reduced the import duty on medical equipment‟s and technology, thus opening up the sector. Since the National Health Policy (the policy‟s main objective was „Health For All‟ by the Year 2000) was approved in 1983, little has been done to update or amend the policy even as the country changes and the new health problems arise from ecological degradation. The focus has been on epidemiological profile of the medical care and not on comprehensive healthcare. Socio-Economic Changes: The rise of literacy rate , higher levels of income and increasing awareness through deep penetration of media channels, contributed to greater attention being paid to health. With the rise in the system of nuclear families, it became necessary for regular health check-ups and increase in health expenses for the bread-earner of the family. Brand Development: Many family run business houses, have set-up charity hospitals. By lending their name to the hospital, they develop a good image in the markets which further improves the brand image of products from their other businesses. Extension To Related Business: Some pharmaceutical companies like Wockhardt and Max India, have ventured into this sector as it is a direct extension to their line of business. Opening Of The Insurance Sector: In India, approx. 60% of the total health expenditure comes from self paid category as against governments contribution of 25-30 %. A majority of private hospitals are expensive for a normal middle class family. The opening up of the insurance sector to private players is expected to give a shot in the arms of the healthcare industry. Health Insurance will make healthcare affordable to a large number of people. Currently, in India only 2 million people ( 0.2 % of total population of 1 billion), are covered under Mediclaim, whereas in developed nations like USA about 75 % of the total population are covered under some insurance scheme. General Insurance Company, has never aggressively marketed health insurance. Moreover, GIC takes upto 6 months to process a claim and reimburses customers after they have paid for treatment out of their own pockets. This will give a great advantage to private players like Cigna which is planning to launch Smart Cards that can be used in hospitals, patient guidance facilities, travel insurance, etc. The Consultants, Financiers and Insurance Agencies are to benefit from this boom. The insurers will use PPOs, that will grow into HMOs, to assume insurance risks on clients behalf. Medical Equipments, Medical Software and Hospitals will see the biggest boom.
  • 4. SOME PLAYERS - Fortis Healthcare Fortis is the late Ranbaxy‟s Parvinder Singh‟s privately owned company. The company is a 250 crore, 200 bed cardiac hospital, located in the town of Mohali. The company also has 12 cardiac and information centers in and around the town, to arrange travel and stay for patients and family. The company has plans of increasing the capacity to around 375 beds and also plans to tie up with an overseas partner. Max India After selling of his stake in Hutchison Max Telecom, Analjit Singh has decided to invest around 200 crores, for setting up worldclass healthcare services in India. Max India plans a three tier structure of medical services – Max Consultation and Diagnostic Clinics, MaxMed, a 150 bed multispeciality hospital and Max General, a 400 bed hospital. The company has already tied up with Harvard Medical International, to undertake clinical trials for drugs, under research abroad and setting up of Max University, for education and research. Escorts EHIRC located in New Delhi has more than 220 beds. The hospital has a total 77 Critical Care beds to provide intensive care to patients after surgery or angioplasty, emergency admissions or other patients needing highly specialized management including Telecardiology (ECG transmission through telephone). The EHIRC is unique in the field of Preventive Cardiology with a fully developed programme of Monitored Exercise, Yoga and Meditation for Life style management. WOCKHARDT and DUNCANS GLENEAGLES INTERNATIONAL also have major expansion plans.
  • 5. Chairman's Profile Dr. Prathap C Reddy, Chairman Apollo Hospitals Group His dream is to make India the Healthcare Destination of the World. Two decades ago, Dr. Reddy lost a patient who couldn't make it to Texas for an open heart surgery. This was the milestone in the Indian Healthcare Industry. Today people have the opportunity in India to receive the best that healthcare has to offer worldwide. Driven by a deep urge to create world-class medical infrastructure in India and make it more accessible and affordable to a large cross section of our people, Dr. Prathap Reddy opted to give up his successful practice in the US to return to India in the early eighties. Thus, Dr. Reddy began what was truly the process of revolutionizing the path of the Indian Healthcare Industry. Undeterred by initial constraints Dr. Reddy succeeded in setting up the first center of the Apollo Hospitals Group in Chennai in 1983. Apollo Hospitals Enterprise Limited Apollo Hospitals Enterprise Limited (AHEL) is a leading private sector healthcare provider in Asia. It was incorporated as a Public Limited Company in the year 1979, a comprehensive 250-bed hospital with an emphasis on speciality and super specialties in over fifty departments at Chennai. Dr. Prathap C Reddy promoted it. Apollo Hospitals Enterprise Limited (AHEL) owns and operates a network of leading primary, secondary and tertiary hospitals and clinics across India. The Company also has a pan India footprint of 873 standalone pharmacies. The Apollo Hospitals group today includes over 7500 beds across 43 hospitals in India and overseas, neighbourhood diagnostic clinics, an extensive chain of Apollo Pharmacies, medical BPO and health insurance services and clinical research divisions that are working on the cutting edge of medical science. In India, Apollo hospitals can be grouped into the following categories based on their stage of maturity and occupancy levels: Mature hospitals at Chennai, Hyderabad, Madurai, Bilaspur, Mysore, and Visakhapatnam have occupancy levels exceeding 75%. New hospitals at Bangalore, Ahmedabad, have occupancy levels of 60%. Two Hospitals were commissioned during the year, Apollo Loga Hospital at Karur, Tamil Nadu, having 70 beds and a Hospital at Karim Nagar, Andhra Pradesh with 120 beds. As per the Accounting Standard 17
  • 6. issued by The Institute of Chartered Accountants of India, AHEL has two reportable segments, healthcare services and Standalone Pharmacies, Healthcare services segment comprises hospitals, hospital-based pharmacies and Consultancy Division. The other segment comprises standalone pharmacies. The Apollo Group of Hospitals Driven by its line of being the “architect of healthcare” in India, the Apollo Hospitals Group, comprising of one of the largest networks of 26 hospitals, 10 clinics and over 10,000 employees across the country, represents the changing face of healthcare in India contemporary and corporatized. It has been the first private company to administer health insurance in the country and Indraprastha Apollo Hospital in Delhi is the fourth largest corporate hospital in the world. The Apollo group is India‟s first corporate hospital, the first to set-up hospital outside the country and the first to attract foreign investment. With 2600 beds, Apollo is one of Asia‟s largest healthcare players. The recent merger between its 3 group companies, Indian Hospitals Corporation Ltd., Deccan hospitals Corporation Limited and Om Sindoori Hospitals Limited, will help the group raise money at a better rate and by consolidating inventory, it will save around 10% of the material cost. The group is planning to invest Rs. 2000 crore , to bulid around 15 new hospitals, in India, Sri Lanka, Nepal and Malaysia. Apollo claims to maintain the best of medical standards with a record of over 7.4 million treated patients, 3,15,000 preventive health checks done, 98.5 percent success rate in 45,000 cardiac surgeries, etc. And helping the company maintain a balance between the corporate culture and rigorous medical excellence is recognition of IT as intrinsic to every process, whether it is day-to-day running of hospitals, education or telemedicine. The application of IT in the day-to-day working of the largest hospital of the group, Indraprastha Apollo, throws light on the extent of the automation drive within the company. The management realised the fact that in order to have a modern hospital in place all the work processes had to be related to IT. Hence, the need for an end-to- end integrated solution. This led to the implementation of the Hospital Information System (HIS), which was an integral part of the hospital inception project. The hospital today boasts of an integrated HIS, which provides for end-to-end integration of the various processes and functional areas within the hospital to make for a seamless workflow. The work processes of the
  • 7. hospital are primarily divided into two areas the patient (comprising of in-patient and out-patient) and the non- patient all the back-end departments like housekeeping, engineering, finance, materials, purchase and HRD. The workflow process starts with the patient seeking an appointment with the doctor. HIS contains all the information relating to appointment schedules of the doctors. Depending on the availability of the doctor, the patient is given the date and time of appointment. This information is then fed into the system and the updated information is available to the doctor in real-time. On the date of his appointment, the patient registers himself at the counter by filling up of a form, which contains all the basic information related to the patient. This data is feeded into the system with a Unique Hospital Identifier (UHI) number allotted to the patient so that by the time the patient meets the doctor, he already has all the required basic information. This is followed by 15 minutes of consultation with the doctor after which the doctor gives his prescription, the data is again keyed into the system as a patient record under his UHI and is accessible for quick reference. One of the biggest advantages of HIS is that any medically relevant information related to the patient is available at the click of a button, thereby saving precious time, which means a lot when it comes to saving a life. HIS also acts as a kind of ERP for the hospital with its automation of various back-end areas like financial, accounting and inventory, which are integrated with the patient areas wherever required. The hospital has also developed a very effective mailing system for its employees, which is based on Microsoft Exchange. The company‟s Intranet is being used to run mailing applications as well as information relating to company policies, leave information and basic information relating to the company. Other business units Apollo Hospitals Apollo Hospitals Enterprise Limited has over 8065 beds across 46 hospitals in India, rest of Asia and Africa. The hospitals are multi specialty tertiary care facilities with centres-of-excellence in medical disciplines including cardiology, cardio-thoracic surgery, gastroenterology, orthopedics & joint replacement surgery, neurology, critical care medicine, nephrology, oncology, hand & micro surgery and reproductive medicine.
  • 8. Apollo Global Projects Consultancy Apollo offers project and operations management consultancy services with the support of operational and functional specialists. The pre & post commissioning consultancy services include feasibility studies, strategic planning, infrastructure consultation, human resource recruitment, training and medical equipment consultancy, management contracts, establishment of medical and administrative protocols etc. Apollo Health and Lifestyle Limited Apollo Health and Lifestyle Limited, has established over 100 Apollo Clinics across the country, is an integrated model and offers facilities for specialist consultations, diagnostics, preventive health checks and 24- hour Pharmacy, all under one roof. Apollo Pharmacy Apollo Pharmacy is India's first and largest branded pharmacy network; with over 750 retail outlets in key locations across the country. The group adds one pharmacy every 23 hours. Apollo Hospitals Education and Research Foundation AHERF was set up to establish, maintain and support educational institutions in promoting medical, paramedical and hospital management courses. The Institute offers over 18 post graduate teaching programmes, including ones certified by the Royal College of Edinburgh. MedVarsity Online Limited is backed by two giants; Apollo in medicine and NIIT Limited in the field of electronic-education. MedVarsity has developed in- house, over 1500 hours of medical content that is accessible to the medical community, anytime and anywhere. The research division currently undertakes diverse projects from clinical trials in multiple locations to molecular biology, stem cell transplants, epidemiological studies, and in the future identification of genetic Biomarkers.
  • 9. Apollo Telemedicine Networking Foundation In 1999, Apollo launched its first model Telemedicine Unit at Aragonda village in the Chittoor district. Since then, Apollo has witnessed a steady growth in terms of delivering quality healthcare and reaching out to the masses. Telemedicine is a potent means of harnessing telecommunication technology to deliver healthcare and education to patients in regions that are geographically less accessible. It also saves time and the cost of travel to access quality care. Apollo has pioneered the concept of telemedicine in India and Asia, and has over 100 telemedicine centres in India and overseas. Apollo Insurance Company Limited Apollo DKV is a joint venture of the Apollo Hospitals Group and DKV AG, Europe's largest private health insurer and a Munich Re Group company. The company offers innovative health insurance, wellness solutions and disease management to meet customer needs. Apollo Wellness Plus Apollo Hospitals launched the first Wellness Centre at Apollo Hospitals Chennai in Feb 2005. Wellness Plus is the perfect blend of modern and complementary medicine like aromatherapy, pranic healing, yoga, and meditation that fits the modern lifestyle. Apollo Reach Hospitals An endeavor to bring world class healthcare to semiurban and rural India - every Apollo Reach Hospitals will be a specialty hospital, designed to complement existing private and public healthcare facilities in the proposed towns and villages. Construction of hospitals, procurement of land and identification of cities are underway to set up the first phase of 25 Apollo Reach Hospitals over the next two years across India. With an initial bed strength of 100 - 150 beds, each Apollo Reach Hospital can be ramped up to a 200 bedded specialty hospital
  • 10. Other Services offered by Apollo: -Apollo Pharmacy Apollo Pharmacy operates round the clock catering to all your medicine needs. -Café Apollo Café Apollo is a sit down dining facility of the hospital. It offers a wide selection of snacks and a variety of meals. -Apollo Food Plaza There is food facility located in the atrium of the hospital serving a delightful array of delicacies. Timings : 8.00am - 9:00pm -Fast Food Cafe For the convenience of ICU attendants there is a 24 hours cafe in the ICU lobby. -Gift Shop The Gift Shop carries a wide range of gifts including Confectionery, Cards, Books, Newspapers, Magazines and other novelties. -Bank Facilities -The Oriental Bank of Commerce The Indraprastha Apollo Branch of the Oriental Bank of Commerce is located at one of the Gates. Bank Hours Monday to Friday : 10:00am - 2:00pm Saturday : 10:00am - 12:00pm The bank remains closed on Sundays and National Holidays. -The ICICI ATM Counter The ICICI ATM counter is also located in the hospital.
  • 11. Operations: The hospital has recorded a significant growth within a short span of five years. During the financial year 2000-01, the performance highlights are: Average daily bed occupancy increased by 8 % from 295 last year to 319 this year Number of in-patients increased by 28 % from 18066 last year to 23114 this year. Total income increased by 23 % from Rs. 11267.13 lakhs last year to Rs. 13842.97 lakhs this year. Profit increased by 85 % from Rs. 648.77 lakhs to Rs. 1197.51 lakhs this year. The hospital has performed 1507 open-heart surgeries with growth of 09 % over the previous year. The hospital has performed 903 Neuro surgeries with growth of 46% over the previous year. The hospital has performed 224 Transplant surgeries with growth of 35% over the previous year. The hospital continued to show rising trend during first quarter of current financial year. With the total net profit after tax 401.70 lakhs which is higher by 54 % over the corresponding quarter of previous year. At present, 520 beds have been commissioned.
  • 12. Medical Milestones Employs over 4000 specialists and super-specialists and 3000 medical officers spanning 53 clinical departments in patient care. Achieved a 99.6% success rate in cardiac bypass surgeries, over 91% of these were beating heart surgeries. Conducted over 55,000 cardiac surgeries - one of only 10 hospitals in the world to achieve these volumes. First Indian hospital group to introduce new techniques in Coronary Angioplasty, Stereotactic Radiotherapy and Radiosurgery. Performed over 7,50,000 major surgeries and over 10,00,000 minor surgical procedures with exceptional clinical outcomes. Pioneered orthopaedic procedures like hip and knee replacements, the Illizarov procedure and the Birmingham hip re-surfacing technique. Pioneered the concept of preventive healthcare in India successfully completed over 700,000 Preventive Health Checks. First hospital group to bring the 64 Slice CT-Angio scan system. First hospital group in South-East Asia to introduce the 16 Slice PET-CT Scan. First to perform liver, multi-organ and cord blood transplants in India. Equipped with the largest and most sophisticated sleep laboratory in the world.
  • 13. The Apollo Expertise One of the most respected hospitals in the world, Apollo hospitals specializes in cutting-edge medical procedures. With the evident boom in Medical tourism, we have a lot of health tourists choosing us as their ultimate Health Tourism destination for medical services.They have pioneered many revolutionary procedures and technologies in India, and a whole lot of health tourists come to opting either for medical care or elective procedures. Some of the health procedures are- Cardiac Surgeries Total Knee /Hip Surgery Replacements Birmingham Hip Resurfacing Procedure Liver, Multi-Organ, and Cord Blood Transplants Coronary Angioplasty Stereotactic Radiotherapy and Radio surgery Cosmetic Surgery Bariatric Surgery - laparoscopic Laparoscopic Hernia Repair Laparoscopic Adrenalectomy
  • 14. Group Companies The Apollo Hospitals Group today is not only an acknowledged leader in the world of super-specialty based quality healthcare delivery in Asia, but is also considered as the largest integrated healthcare delivery company, complete in every sense of the term. » Apollo Hospitals Enterprise Limited » AHEL Pharmacies Business » Online Hospital Equipment Services » Keimed.com Limited Private Limited (Equipment World) » Apollo Health & Lifestyle Limited » Apollo Health Street Limited » Med Varsity Online Limited » Apollo Telemedicine Enterprises Limited » Apollo Hospitals Education and » Family Health Plan Limited Research Foundation
  • 15. Revenue Analysis In this economic slowdown, health care industry has got least affected. Apollo Hospitals limited has also increased its revenue from Rs. 1123.81 crores to 1457.98 crores. Yearly sales growth rate has increased by 29.74 % which was 26.13% in the year ended 200803. Revenue from healthcare services increased by 22% to Rs 1123.80 crore and pharmacy business went up by 65% to Rs 334.33 crore. This revenue growth rate is quite higher than the industry standard growth rate. Yearly sales growth rate has increased during the year 2008-09 due to the result of an increase in occupancy and revenue per bed day (RPBD) for hospitals and higher number of SAPs (Stand Alone Pharmacies). In most of the pharmacies have nursing stations attached. The Nursing stations provide basic medical services like measuring blood pressure, dressing, etc. RPBD increased from Rs. 8,767 to Rs. 9,667. The increase in RPBD is largely a result of changes in the acuity of the patients as well as better price realizations.
  • 16. Balance sheet Audited Financial Results for the quarter and year ended 31.03.2008 Amount ( Rs. In Lacs ) PARTICULARS Nine Quarter ended Financial Financial S. Months year year ended ended ended No. (Audited) (Audited) 31.12.2007 31.03.2008 31.03.2007 31.03.2008 31.03.2007 1 Income from operations 23503.48 7967.25 5803.26 31470.73 23271.35 2 Other Income 1959.58 796.88 553.50 2756.46 2103.76 3 Total Income 25463.06 8764.13 6356.76 34227.19 25375.11 4 Expenditure a) Increase/decrease in stock in trade and wip - - - - - b) Consumption of stores & spares 7110.27 2371.94 1641.15 9482.21 6690.90 c) Purchase of traded goods - - - - - d) Staff cost 4617.87 1748.79 1225.42 6366.66 4591.91 e) Consultation fee paid to Doctors 6408.60 2234.66 1533.67 8643.26 6225.38 f) Depreciation 1193.89 423.22 175.86 1617.11 1183.73 g) Other expenditure 3696.58 1211.50 998.91 4908.08 3876.53 Total 23027.21 7990.11 5575.01 31017.32 22568.45 5 Interest 447.39 180.12 134.33 627.51 509.49 6 Exceptional items - - - - - 7 Profit from ordinary activity before tax (PBT) 1988.46 593.90 647.42 2582.36 2297.17 8 Provision for taxation 729.66 237.92 232.53 967.58 824.83 9 Profit from ordinary activity after tax (PAT) 1258.80 355.98 414.89 1614.78 1472.34 10 Extraordinary items ( Net of tax expense) - - - - - 11 Net profit for the period 1258.80 355.98 414.89 1614.78 1472.34 12 Paid-up Equity share capital 9167.30 9167.30 9167.30 9167.30 9167.30 (Face value Rs. 10/- each) 13 Reserves excluding revaluation reserves - - - 2,232.86 2176.40 14 EPS-Basic and Diluted (Rs.) 1.37 0.39 0.46 1.76 1.61 15 Aggregate of Non-Promoter shareholding: Number of shares 45281993 45314709 45007683 45314709 45007683 Percentage of Shareholding 49.40 49.43 49.10 49.43 49.10
  • 17. Porter’s five force model for industry analysis New Market Entrants, eg: entry ease/barriers geographical factors incumbents resistance new entrant strategy routes to market Competitive Rivalry, eg: number and size of firms industry size and trends fixed v variable cost bases product/service ranges differentiation, strategy Buyer Power, eg: Supplier Power, eg: . buyer choice 1brand reputation. buyers 2geographical coverage. size/number 3product/service level change quality. cost/frequency product/service 4relationships with importance customers volumes, JIT scheduling bidding Product and processes/capabil Technology ities Development, eg: alternatives price/quality market distribution changes fashion and trends legislative effects
  • 18. worries Apollo hospital. • The threat of new entry is quite high: if anyone looks as if they‟re making a sustained profit, new competitors can come into the industry easily, reducing profits; Ex.- Fortis , Max, Escort , WOCKHARDT and DUNCANS GLENEAGLES INTERNATIONAL • Competitive rivalry is extremely high: if someone raises prices, they‟ll be quickly undercut. Intense competition puts strong downward pressure on prices; • Buyer Power is strong, again implying strong downward pressure on prices; and • There is some threat of substitution. Ex Telemedicine or shifting to other medicine like ayuraveda or natural care Unless it is difficult to find some way of changing this situation, this looks like a very tough industry to survive in. Maybe he'll need to specialize in a sector of the market that's protected from some of these forces, or find a related business that's in a stronger position. Key points: Porter's Five Forces Analysis is an important tool for assessing the potential for profitability in an industry. With a little adaptation, it is also useful as a way of assessing the balance of power in more general situations. It works by looking at the strength of five important forces that affect competition: • Supplier Power: The power of suppliers to drive up the prices of your inputs; • Buyer Power: The power of your customers to drive down your prices; • Competitive Rivalry: The strength of competition in the industry; • The Threat of Substitution: The extent to which different products and services can be used in place of your own; and • The Threat of New Entry: The ease with which new competitors can enter the market if they see that you are making good profits (and then drive your prices down). By thinking through how each force affects you, and by identifying the strength and direction of each force, you can quickly assess the strength of the position and your ability to make a sustained profit in the industry.
  • 19. Opportunities in hospital With global revenues of approximately US$ 2.8 trillion, the healthcare industry is the world‟s largest industry and India is emerging as a major player in this industry, because of its high population. As per the Insurance Regulatory and Development Authority (IRDA), the Indian healthcare industry has the potential to show the same exponential growth that the software and pharmaceutical industries have shown in the past decade. Further, as per the IRDA, only 10 percent of the market potential has been tapped till date and market studies indicate a 35 percent growth in the coming years. A big opportunity for the industry emerges from the privatization of the insurance segment, which would extrapolate into a new delivery system in India. There is a vast insurable population in India, given that only 2 million people i.e. 0.2 percent of the total population are covered under Med claim. According to a recent study, there are 315 million potentially insurable lives in the country. First, there are economic factors that make India an exciting market. Since healthcare is dependent on the people served, India‟s huge population of a billion people represents a big opportunity. Today, people are spending more on healthcare and preferring private services to government ones. Hospitals in India are running at 80-90% occupancy. With the demand for healthcare far exceeding supply, India‟s health care industry is expected to grow by around 15% a year for the next six years. Hospitals in India conduct the latest surgeries at very low cost. Corporate entities entering the healthcare sector, introducing managerial practices and tools are showing a marked preference for professionals, leading to the expansion of the hospital management education industry. Threats The cost burden is set to increase due to the limited resources, and rising incomes will translate to higher wages, supply and capital costs. Real estate prices have become prohibitively high and a deterrent to take on new projects. This will add to higher costs of Healthcare delivery which has to be borne by the consumer. Medical equipment accounts for 40-45% of the total expenditure in hospitals. Any change in technology will make existing medical equipments obsolete. High rate of advancement in medical technology is leading to shorter lifespan, obsolescence of medical equipment, requiring medical professionals to upgrade their skills on a constant basis. The density of doctors per 10,000 population in India is 6 while the world average is 13. There could be a shortfall of over 450,000 doctors in the year 2012.Density of nurses per 10,000 population is 13 in India while world average is 28. The migration of skilled technicians and nursing personnel to developed countries due to higher compensation levels leaves behind a void in quality of personnel at the disposal of hospitals. Apollo is one of the strongest brands with minimal threats in the near time. This means, easier access to capital, continuing with the current leadership position in the market and comprehensive services with relatively greater margin. Apollo‟s success has been drawn from the fact that it has added a number of synergic revenue streams to its business. As a result, its multi-income inflow has helped it cover its fixed investments faster than the other companies in the sector.
  • 20. Strengths Apollo is an integrated healthcare organization with a comprehensive span of healthcare capabilities, enabling us to provide end-to-end services to patients. We provide seamless delivery of services at every level of care – primary, secondary and tertiary. Being the largest purchaser and consumer of medical consumables in the private sector, we are able to leverage on cost and benefit from our group bargaining position to obtain better terms from our suppliers and service providers. Our quality consciousness and patient-centric approach has improved our operational and clinical efficiency, and led to numerous accolades in the medical arena in India. We have implemented clinical governance measures that have gone a long way in ensuring and improving the quality of clinical care at all levels of healthcare provision in Apollo Hospitals. We have obtained 4 JCI accreditations across all specialties, the first in the country to do so. Also, our quality programmes are registered by the Indian Council of Medical Research, ISO 9002, from Bureau of Indian Standards & British Standards of India. We have focused on the provision of high-quality healthcare at affordable rates. Our brand name has helped us to expand our operations in India and overseas, besides extending our range of services. High-quality medical facilities and services are offered at cost competitive rates when compared to the Western and European regions making India the preferred choice for medical travel. We have consistently invested in medical technology and equipment so as to offer the highest quality healthcare services to our patients. The availability of sophisticated medical equipment, such as the PET-CT scan, 320 Slice CT Scanner, Cyber knife ensures that we are among the few healthcare providers in India capable of offering advanced healthcare procedures such as stereo tactic radio surgery and bone marrow transplants to our patients. The major strength contribution to the success of Apollo Hospitals has been the clinical excellence governed by strong medical value system and ethics. Our Medical success rates have been world class. Apollo stands unique among the few providers of quaternary care for complicated medical conditions, and is saving more and more lives every day. We have a professional management team with a strong performance culture. We maintain strong, enduring relationships with doctors and medical professionals. This has attracted medical professionals returning from abroad to work with us. We believe one of the pillars of our success is our huge talent of approximately 811 doctors across 50 specialties. We are among the largest networks of doctors in India, and have approximately 3,130 nurses, 1,104 paramedical personnel and 513 executives. Weakness We have added 297 Stand-alone pharmacies during the year, since most of the pharmacies are in the incubation stage which can depress the margins. High attrition rates among the nursing workforce to Western countries and competitors due to higher salaries and perks being offered necessitates higher investment in training to ensure that the clinical staff is equipped with the right skills, competencies and expertise needed to deliver quality healthcare. The rising costs of healthcare delivery makes majority of the private hospitals expensive for a normal middle-class family. Internal control systems and their adequacy The company deploys a robust system of internal controls to allow optimal use and protection of assets, facilitate accurate and timely compilation of financial statements and management reports, and ensure compliance with statutory laws,
  • 21. Business strategy Apollo‟s business model has been a successful as it is able to generate profit even in the face of being capital intensive in nature. Our mission is to continuously keep improving the quality of healthcare services provided to the communities we serve and strive to bring healthcare services of international standards within the reach of every individual. At the same time, we seek to generate strong financial performance and appropriate returns to our investors through disciplined and balanced execution of a comprehensive business strategy that reinforces both quality of care and financial strength. We seek to further strengthen our position as a leading healthcare service company by successfully differentiating our service offerings and increasing the scale of operations. We would be looking to dominate the healthcare space by increasing bed strength in the cities where we are already present in addition to commissioning of new hospitals in Tier 2 and Tier 3 cities through the “Reach initiative”. The Reach model is expected to be a “no-frills” model, providing cost-effective quality healthcare. The facilities shall be of the level of higher secondary and acute care, capable of developing into a tertiary care centre. Each facility will be conceptualized to cater to the shortage in nursing infrastructure in the country, by providing for nursing colleges. Leverage our intellectual property and domain knowledge to create “Centres of Excellence” of high-end medical care services at the new and existing facilities. Share best practices across all the locations to enable increase occupancies at newly launched hospitals. Improve asset utilization across all the hospitals. We have also made significant investment in our human capital to meet both our in-house needs and our consultancy services business through the establishment of nursing schools and colleges and hospital administration colleges. Growth in Standalone Pharmacies revenues would be driven by new store rollouts as well as maturity of existing stores. We also believe that growth can also be achieved as we add new service lines in our existing markets, invest in new technologies desired by physicians and patients, and demonstrate the quality of the care provided in our facilities. Given the non-availability of adequate health care facilities in most parts of India, we believe that high-growth opportunities remain in our existing markets as well as new geographies that we are seeking to enter. Competitive and Regulatory Environment In the healthcare services segment, we face competition from other acute care hospitals, including tertiary hospitals located in larger markets; specialty hospitals that focus on one or a small number of lucrative service lines; standalone centres at which surgeries or diagnostic tests can be performed; and physicians on the medical
  • 22. staffs of our hospitals. The shortage of bed supply in India continues to be high, although several healthcare service providers have aggressive organic growth plans. In addition, our competitors are also expanding presence by acquiring/ partnering with existing smaller hospitals. Going forward, pricing could come under pressure in our key markets and competition for medical staff could intensify both of which may have an adverse effect on our operations. It is widely recognized that India has a shortage of physicians in certain practice areas, including specialists such as cardiologists and orthopedists, in various areas of the country. Healthcare insurance penetration is Increasing rapidly, which may lead to a scenario where the costs of providing care rise faster than reimbursement rates. We are putting in place systems and procedures to increase cost efficiency and transfer best practices across our hospital network. Our standalone pharmacies (SAPs) compete primarily with the unorganised sector. Organised sector penetration in the pharmacy sector is currently only 2%, and unorganised players are able to offer similar services as the organized players. We differentiate ourselves by ensuring high quality of the drugs supplied through SAPs, ensuring convenience for and building deeper relationships with the end-customer and creating linkages between our hospitals and SAPs. The pharmacy supply chain in India has multiple layers of suppliers, middlemen and retailers. Apart from distribution, costs are another important element in this price-sensitive market. Some Suggestions for improving the position of the Apollo hospitals 1. The general perception that large hospitals, with high bed-occupancy rate, are profitable, is misleading. Global experience shows that hospital with more than 250 beds don‟t do well. Many Indian hospitals are following the US healthcare industry, by decreasing the average length of stay of patients and increasing patient turnover. US research shows that 80% of the revenues form a patient comes in the first 72 hours post- admission. Hospitals generate a lot of revenues from General Inspection, because the patient turnover is very high. A large percent of revenues come from specialized services like operations and surgeries. It is because of these reasons that many corporates are planning for a small 100 beds specialized hospitals, which caters to specific diseases like cardiac, cosmetic surgery, neurology etc. Research shows that there exist a lot of space for super- specialized hospitals with 100-150 beds, which generate revenues equivalent to large 500 bed general hospital. Typically large hospitals with approximately 500 bed capacity takes about 9-10 years to break even whereas super-specialty hospitals with about 100 beds take about 6-7 years to break even. Therefore, going in for super- speciality hospitals seems to be a more viable option today.
  • 23. 2. Hospitals could also generate revenues from medicines if they are supplying them in-house. Some hospitals make it mandatory for the patients to buy medicines from the hospital‟s chemist shop. A margin of 15- 20 % can be charged for such medicinal supplies. Though many hospitals run by Trusts do not earn this way, but new entrants or corporates for whom private healthcare sector is a direct extension of their line of business ( eg. Pharma companies), can generate good returns from medicine supply. 3. Health Plan packages can be provided by hospitals to family and corporate. For example Family Health Plan Services (FHP), a subsidiary of Apollo Hospitals does health management of employees of its clients.With a wide net work of Hospitals and Healthcare providers countrywide, and a tie -up with General Insurance Corporation of India, FHP offers a range of services to employees and dependants, such as Preventive Healthcare, Corporate Counseling, welfare Programmes, Claims Administration, Patient-care Coordination and so on. So FHP's healthcare packages, optimize the benefits while keeping the cost under control. 4. Apart from preventive healthcare, stress management programs could be provided. For example „Effective Stress Management Programme‟ offered by Wockhardt Hospital. This programme provides a medical perspective of stress and is conducted by a medical professional. The programme includes a series of one-to-one sessions, with a clinical Psychologist highlighting the factors responsible for inducing stress, and the methodologies, which can be adopted to cope with this phenomenon practically. 5. Hospitals can become integrated healthcare systems i.e. when medicines, food services, laundry and linen etc will become "purchased" services. These third-party operations will increase the profit margins. 6. Mergers could be used for synergy of skills - i.e. to help the merged organisations benefit from one another's individual strengths by applying them across the board. It also helps them to make joint investments in branding or information technology and also to react effectively to the changed market forces. Alternatively hospitals can go in for Group Purchases, as in USA. The buying power of large GPOs in USA like Premier, VHA / UHC and AmeriNet gives them the clout to exert price pressure on suppliers, particularly for products in lower demand. And as GPOs have consolidated, manufacturers have offered bigger discounts to hang on to their contracts. So there exists a lot of supply management opportunity, which will affect spending productivity.
  • 24. SWOT analysis based upon industry analysis