Dr.

Prathap C Reddy, Chairman Apollo Hospitals Group

Apollo Hospitals First World Heath Care at Emerging-Market Prices

February 21, 2008 Perspectives on Management Peter Bell
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Total population: 1,103,370,000

Statistics-India

Gross national income per capita (PPP international $): 3,460 Life expectancy at birth m/f (years): 62/64 Healthy life expectancy at birth m/f (years, 2002): 53/54 Probability of dying under five (per 1 000 live births): 74 Probability of dying between 15 and 60 years m/f (per 1 000 population): 280/207 Total expenditure on health per capita (Intl $, 2004): 91 Total expenditure on health as % of GDP (2004): 5.0
Figures are for 2005 unless indicated. Source: World Health Statistics 2007
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Statistics-U.S.
Total population: 298,213,000 Gross national income per capita (PPP international $): 41,950 Life expectancy at birth m/f (years): 75/80 Healthy life expectancy at birth m/f (years, 2002): 67/71 Probability of dying under five (per 1 000 live births): 8 Probability of dying between 15 and 60 years m/f (per 1 000 population): 137/81 Total expenditure on health per capita (Intl $, 2004): 6,096 Total expenditure on health as % of GDP (2004): 15.4 Figures are for 2005 unless indicated. Source: World Health Statistics 2007
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Success Story
Dr. Reddy Opportunity The Business Growth Legacy/Leadership Transition

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Dr. Prathap Reddy

Good fortune is what happens when opportunity meets with planning.
Thomas Edison

Market Need Access to Talent His expertise and passion Cost Advantage Culture Regulatory Environment Globalization
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Dr. Prathap C. Reddy

Background
Cardiologist Trained and Practices in the US for 15 years Moved home to India-but had to refer complex cases outside of India Opens first for profit hospital in India-1983

Experience Passion
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This goes back to how and why Apollo began in Madras. (People dont know that I am not a rich man nor am I an entrepreneur.) I did this because in 1979 I spent ten years in US and came back. When I was practicing, I lost a patient, a man who was only 38 years old, he died because he couldnt afford to pay $30,000 and go to Houston for his surgery. And when I saw his wife who was 31-years old with a 7 year old son and a two year old daughter, I said to myself, This tragedy shouldnt befall another person because if Indians are par-excellence overseas why shouldnt we do that for our own people? That was the birth of Apollo. And it was not easy.
Source:http://www.priu.gov.lk/news_update/Current_Affairs/ca200206/20020605exclusive_i nterview.htm
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Indian Market
Large Population-1.1 Billion High infant mortality and morbidity 64% of health care spending direct from the consumer Only 15% of the population has health insuranceaccess is out of reach Quality of government care is sub-par No HMOs (eg. Blue Cross, Tufts, Aetna, etc) Tertiary care market growth rate of 15%

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The Business
Metrics/Results: 1983-2003
Quality
Cardiac (beating heart technique)-99.5%
Only surpassed by Mayo Clinic

Bone Marrow-87% Kidney-95%

Size

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Largest private health care group in Asia 33 hospitals with 6,400 beds Treat patients from 50 countries 14% market share (Tertiary market)
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 People: 10,000 employees (1,000 doctors) Access to talent: India doctors in the US who want to move back home Global Nursing Program (GNP) Pharmacy Network: 43% or revenue and 40% of profits 189 outlets Consistent Quality Financials: Sound financial controls $115 MM in revenue Oper Margin:-22.30% vs 20% Net Margin (M)-7.92 % vs 4% Valuation: $311 MM (Reddy family owns 32%)
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The Business (cont.)

Cost Advantage
Cardiac: $25,000 vs $6,000 Orthopedic: $20,000 vs $4,500 Bone Marrow: $250,000 vs $30,000
Personnel costs Equipment utilization rates Economic life of the equipment Margins

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Apollo-Integrated healthcare delivery company

Apollo Hospitals Enterprise Limited AHEL Pharmacies Business Keimed.com Limited Online Hospital Equipment Services Private Limited (Equi Apollo Health & Lifestyle Limited Apollo Health Street Limited Med Varsity Online Limited Apollo Telemedicine Enterprises Limited Apollo Hospitals Education and Research Foundation Family Health Plan Limited
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Who can be a franchisee?

Apollo Health and Lifestyle Limited selects its prospective franchisees with utmost care. We conduct a thorough due diligence before finalizing a franchisee. Some of the minimum requirements that an Apollo Franchisee must have are: A high level of interest and commitment to healthcare as a business. Prior experience in successfully managing ones own business, preferably in the service industry A strong entrepreneurial spirit and zeal to succeed. Adequate Financial Resources. Ability to manage people. A good social standing and reputation. All our franchisees must also be: Committed to the highest levels of service quality. Willing to undergo rigorous training and a desire to learn various aspects of managing a healthcare enterprise. Genuinely interested in people and be sensitive to his neighborhoods requirements. Source: http://www.theapolloclinic.com
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Growth Opportunities
Integrated Health Care Delivery Networks (IDN) Pharmacies Primary care clinics Other services (eg. Insurance) International Hospital Management Colombo Hospital (Sri Lanka) Romania Medical Tourism Indians living overseas UK and Canadian residents-long waiting times US-43 MM uninsured Americans Patients from countries without quality health care
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Challenges
Quality Access to Capital Profits Local or Global? Who has access to care?
Private Hospitals vs. Public health care in India
Substitute?

Increasing Competition
How does Apollo compete?
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Summary: Takeaways and Questions

Profits vs Quality of Care (is there a trade-off?) Would you go or send a family member? What role should the US Government play? What role should large pharma and medical technology companies play? Private or Public? Who Pays?

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