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Apollo Hospitals – First-World Health Care at Emerging-Market Prices - page 4 / 19





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705-442Apollo Hospitals

About two thirds of the Apollo physicians were Indians who had returned home from careers in the United States and Great Britain.  (In the United States alone, there were almost 40,000 physicians of Indian origin, about 5% of all physicians.  Indians made up roughly 20 percent of the foreign-trained doctors in the United States.)  “We have a database with 2,000 Indian doctors who practice abroad, and we advertise job openings in international medical journals.  At this point in time, Apollo is quite competitive.  Our technology is similar to the technology at other leading institutions, and we have the advantage that people like to live in their own culture,” explained Dr. B. Premkumar, Senior Vice President Medical, who oversaw Apollo’s worldwide recruiting efforts.

The Colombo Hospital

Apollo’s leadership encouraged managers to seek out regional and global business opportunities.  Among the international successes was the establishment of a hospital in Colombo, Sri Lanka, a 350-bed super specialty hospital.  “The venture in Colombo is an amazing startup that reached a dominant position right away,” said K. Padmanabhan, the Apollo Group President, who was responsible for strategic planning.

Sri Lanka was our first big investment outside of India.  We looked there since we had a large number of patients from Sri Lanka.  Six or seven years ago, we would not have thought that we’d invest.  We thought we’d facilitate investment and manage operations.  We tried to do that for two or three years, but we failed because no one else was willing to invest given the conflicts between the various factions in the country.2  So we decided to serve as the primary investor.

Along with Apollo, which held a 47% share in the project, the International Finance Corporation (IFC) took a small equity stake.  Local investors held 35%.  Padmanabhan felt that few health care companies would have been able to surmount the issues that plagued the project after its opening.  He explained:

When we started, we found that Sri Lankan patients were unwilling to accept Sri Lankan doctors.  Since this was Apollo from India, why were there doctors from Sri Lanka?  So we had to send a large number of doctors.  We could not get qualified nurses either.  Six were from Sri Lanka, 250 from India.  Then came the interpretation services for Sinhalese patients.  Initially, we found much more acceptance with Muslims who were relatively well off and were used to coming to India for treatment.  The Tamils were comfortable.  But after five to six months we got a good share of Sinhalese patients.  They might have been frightened that the hospital was too expensive, with its granite floors, the large driveway and the helipad on the roof.  Now we’re seen more or less as a local hospital and a premium health care provider.

The Colombo facility allowed patients who had historically gone to Thailand or Australia for treatment to remain in Sri Lanka.  The project also led to new business opportunities.  “Sri Lanka gave us confidence,” Padmanabhan explained.  For instance, Apollo took an equity stake in a major project in Bangladesh.  Apollo’s managers had also started studying a project in Bucharest, Romania.

Pharmacy Network

The Hospital Division was responsible for 55% of AHEL’s revenue and 50% of its profits.  43% of revenue (40% of profits) came from the Pharmacy Division.  Initially, Apollo had added pharmacies to its own hospitals to benefit Apollo patients.  By 2005, however, the group operated the largest pharmacy network in India with 189 outlets.  70% of these were standalone pharmacies that were not connected to an Apollo hospital.  Management expected much of the future growth to be in

2 In 1983, tensions between the Sinhalese majority (mostly Sinhala-speaking Buddhists) and the Tamil minority (mostly Hindu) led to a civil war between Sri Lanka’s government and the Liberation Tigers of Tamil Eelam (LTTE).  According to government estimates, the on-and-off war has cost more than 50,000 lives.


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