For long, Apollo Hospitals has been riding on its first-mover advantage. But with competition snapping at its heels, there is widespread belief that Apollo hasn't done anything radically game-changing in the recent past.
True, it has a lower debt-equity ratio, has had double-digit profit growth for 20 consecutive quarters and steady footfalls from all over India and the world. But while its main rival, Fortis, has made acquisitions both in India (the big ones being Escorts, Wockhardt and Malar), and abroad, Apollo has stayed away from this route.
Apollo is well aware of the competition. “We are not complacent or numb to this. But it is still early days to talk about competition in the industry. The market opportunities are a lot given the huge demand-supply gap we are staring at. The competition hasn't unfolded completely yet,” says Mr S. Premkumar, Group Chief Executive Officer, Apollo.
Build first, buy later
According to Dr Prathap Reddy, Founder and Chairman, Apollo Hospitals, the country needs plenty more hospitals and beds. Acquisitions don't help in that.
Currently, the Indian population does not even have one doctor for every thousand people, and only has one nurse to serve a thousand people.
The need, however, is for double that number at least. Over the next 10 years, India needs half-a-million doctors and one million nurses.
The group is not averse to acquisitions provided they bring in value to the company, says Mr Premkumar.
Apollo operates 54 hospitals across 8,300 beds. Its aim is to hit 10,000 beds by 2015; and a lot of the capacity addition will come in tier two-and-three towns. About Rs 1,600 crore will be invested on expansion and funded through debt and internal accruals.
Still a big brand
“Network increase is not an arms race. Acquiring ten different units and allowing them to function the way they were will not bring in a common ethos or practice. We have to be conscious of the ethical boundary we believe in,” says Mr Premkumar.
Despite higher capital and operational expenses, Apollo has primarily been able to invest in own property. Apollo is not so entrenched in debt, so it can afford to do it, says an analyst. It is now willing to evaluate operate-and-lease models as well.
Apollo is still a big brand name to reckon with, say industry observers and analysts. It has sought to leverage this name outside its core area. Some ventures have clicked, some have not.
For instance, its pharmacy business has the largest retail network in the country with over 1,300 outlets.
The group went on a rationalisation mode, closing down non-performing stores. With the result, the business turned profitable last year.
Some time ago there was talk of hiving off the pharmacy business (the group was even eyeing the multi-brand FDI retail announcement eagerly).
The group today says it has a defined expansion plan for Apollo Pharmacy. It believes there is more value to be unlocked from this segment.
But with its healthcare BPO business (Healthstreet), Apollo wants to play safe. The group realises the BPO business is not exactly its forte and is looking to shed some stake to players in the BPO business. It has even held discussions with Genpact and Sutherland.
Technology and innovation
Apollo says it is going for clinical excellence and newer technologies and innovations, which will be the true differentiator in the long run. This is perhaps understandable given that its chairman Dr Prathap Reddy still thinks like a doctor.
Apollo has identified focus areas — cardiology, orthopaedics, emergency, transplant and neurosciences.
One centre, which has developed expertise in that area, acts as a ‘Centre of Excellence' for the rest of the Apollo network, facilitating sharing of best practices. For instance, Chennai is the cardio hub, while Delhi is for transplant.
A year-old, Apollo believes the Centre of Excellence strategy will drive volumes and revenue.
Apollo has been toying with technology to reach the last mile through mobile healthcare (it has tied up with operators such as Aircel) and telemedicine centres. But it is yet to yield fruitful results given the bandwidth and connectivity issues in the country.
The group is batting hard for quicker turnaround time and increased revenue per bed. The company has brought down a patient's average length of stay (ALOS) by 10 per cent in the last couple of years.
ALOS is currently 4 days per patient. Apollo says it has done this through better scheduling of investigation and faster paperwork post doctor's clearance for discharge.
More from less
“We are also trying to do more day-care procedures. Robotics and use of more non-invasive technologies have also helped bring down ALOS,” says Mr A. Krishnan, CFO of the hospital chain.
The group is also trying to reduce breakeven time for its full-fledged hospitals but, “we are not quite where we want it to be,” says Mr Premkumar.
Apollo has always managed to woo patients from across the globe, especially Africa and West Asia.
Of the one lakh international patients who came to India last year, over 50 per cent is said to have come to Apollo, according to Dr Reddy.
Medical tourism accounts for 10 per cent of overall revenues, says Mr Krishnan. This has grown from 7 per cent two years ago.
In Delhi, Chennai and Hyderabad, the contribution is 12-15 per cent. Clearly, for Apollo, the globe is now its stage.