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N9-705-442

January 18, 2005

Felix Oberholzer-Gee

Tarun KhanNa

Carin-Isabel Knoop

Apollo Hospitals – First-World Health Care at Emerging-Market Prices

If we do this right, we can heal the world.

Dr. Prathap C. Reddy, founder and Executive Chairman of Apollo Hospitals Group

“I am happy,” declared Dr. Prathap C. Reddy, broadly smiling behind his desk in a modest office that had served Apollo’s Executive Chairman since the early days of the hospital group.  “The first part of the game is over.  I have shown the world that we can provide first-class health care in India.”  Apollo’s record was impressive, indeed.  Relying on more than a thousand doctors and a staff of 10,000, Apollo hospitals had come to rival the best health care institutions on the globe.  Apollo surgeons had performed over 50,000 heart operations, with a success rate of 98.5%.  Of 138 bone marrow transplants, 87% had been successful.  And 95% of the 6,000 kidney transplants performed by Apollo physicians had positive outcomes.1  Only Cleveland Hospital and the famous Mayo Clinic surpassed Apollo’s performance.  Was Dr. Reddy, 72, now prepared to lean back and enjoy his success?  Not a chance.

“I want to bring Apollo health care to a large cross-section of the Indian population – and to the world,” explained Dr. Reddy.  “My vision is to develop the large pool of talent in India.  Health care could be the single biggest employer in the country and a resource to the world.  Patients will come from everywhere to India for advanced health care.  We enjoy a huge cost advantage.  But more importantly, our culture is very compassionate.  India is now in a position to give patients the best of the East and the West – compassion and advanced medical technology.”  To put his vision into practice, Dr. Reddy had summoned his three daughters who served with him on Apollo’s board.  “I challenged them,” he explained, “I asked them to rethink the strategy of the group.  What do you want Apollo to be five years from now?  Develop a strategy for our future.”  Dr. Reddy gave his daughters Preetha, Suneeta and Sangita a month for the task.

Health Care in India

In the past two decades, India had made substantial progress in improving public health.  Small pox and the guinea worm were completely eradicated, and health care specialists expected polio and leprosy, afflictions of millions as recently as 1980, to be eliminated in the near future.  Yet, the challenges for public health remained enormous.  Both infant mortality and morbidity were substantially higher in India than in other developing countries.2  Indians spent 5.2% of GDP on health care – less than South Koreans (6.7%) and Brazilians (6.5%) but more than the Chinese (2.7%).  However, most of this spending (64%) came directly out of people’s pockets.  Only about 15% of the Indian population was covered by some type of insurance.3  As a result, access to health care remained out of reach for many.  Moreover, the quality of government-provided care, while more affordable than private services, was often wanting.  Dr. Atul Gawande, a surgeon at Boston’s Brigham and Women’s Hospital, described a visit to a public hospital in Nanded, 400 miles from

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