Apollo Hospitals of India

Apollo Hospitals of India

Executive Summary

Dr. Reddy, you have done an incredible service for the people of India. You have started them on an incredible journey toward affordable, quality health care. You have started to reverse the “brain drain”, giving bright, entrepreneurial-minded individuals an option to stay at home. You have demonstrated incredible conviction and perseverance. The hospitals that you have been able to establish in India have gained a reputation for superior health care and an incredible value. You are at a point where you need to balance the pursuit of your dream with business realities. The current infrastructure that you have established relies heavily on your families involvement and the institutionalization of your “five star” approach. In order to continue your effectiveness the expansion needs to be closely monitored. You should continue on the road of increasing hospitals, expanding programs at the IMH in order to develop management resources. This approach allows you to maintain the focus and commitment that has gotten Apollo to where it is.

Organizational Profile/Overview

Dr. Reddy, Apollo Hospitals was created out of your vision to make top-notch quality care available locally to the people of India. This vision is accomplished by strict adherence to your “five star” approach. The success of Madras can be attributed to your intense conviction and dedication. The success of the Hyderabad Hospital, although not as quick as Madras, can also be attributed to the conviction of your vision for creating standards that add to patient value. You have built an exceptional reputation regarding quality of care. People are willing to travel from all points of India and from abroad to receive care. They are willing to pay higher prices for the care that you have been able to provide. You are at a point where there is a need to balance the social and business costs of any proposed expansion. Up until this point, you have set up a centralized organization that relies heavily on nepotism. You have been able to control all the aspects of the “five star” approach. Extensive growth will require you to relinquish some of this control or at a minimum set up an infrastructure that will allow for easier monitoring and correction of problems.

Critical Issues

The major problem you are facing Dr. Reddy is how to effectively balance the desire for expanding your visions with the business limitations. At this juncture we do not have the management resources to expand. The supply of top-notch, renowned health professionals in India is not growing as quickly as we would like. Medical technology is available but very capital intensive. We have invested heavily in training our medical and non-medical staff and emphasizing that the ultimate value to the customer is how they are treated in all areas of their stay. This is one area where I feel we are doing good, however we must weigh any expansion plans against all of the areas that I have outlined above. We must have a balanced and structured plan in place to deal with the challenges of growth. We need to fully understand how the different paths will affect us.

Alternatives

Þ  Licensing

The licensing approach involves allowing other hospitals to use the Apollo name.

§  Strengths

·  Spread Apollo influence and recognition quickly

·  Enable the sharing of financial risk

·  Not very capital intensive

§  Weaknesses

·  Occupy the resources of the Apollo managers (Puts them in the role of “police officers”

·  Risks the Apollo reputation

Þ  HMO

The HMO approach would involve owning some facilities in the network, running others licensed to use the Apollo name, and accrediting and monitoring others

§  Strengths

·  Strengthen the Apollo name

·  Increase Revenues

·  Approach to health care (emphasis on prevention to minimize costs) matches Dr. Reddy philosophy

§  Weaknesses

·  Uncertainty of own Indians would accept the concept

·  High financial risk

·  Absorb management time

·  Represents departure from primary experience

·  Potential conflict with focus on profit rather than patient needs

·  Government roadblocks

Þ  Build own hospitals

This approach involves continuing to use the approach utilized by starting the Madras and Hyderabad hospitals. Basically it involves sticking with the status quo.

§  Strengths

·  Ability to influence operations

·  Takes advantage of the companies experience

§  Weaknesses

·  Very capital intensive

·  Probably running out of daughters to manage hospitals.

·  Only gradually expands the Apollo reach

·  Do not have high caliber physicians to place in these hospitals

Þ  Buy hospitals

This approach involves assimilating existing hospitals. It is similar to the status quo except that we would take an existing hospital and attempt to mold it into an “Apollo Hospital”.

§  Strengths

·  Not as capital intensive as building new hospital although more capital intensive as licensing.

·  Takes advantage of the companies experience

§  Weaknesses

·  Current employee resistance

·  Only gradually expands the Apollo reach

·  Do not have high caliber physicians to place in these hospitals

Þ  Expand the IHM

This approach would involve committing resources to insure that there was an adequate supply of trained management personnel.

§  Strengths

·  Expands the pool of qualified managers for Apollo to deploy.

§  Weaknesses

·  Would postpone growth of the hospital chain

Recommendation

At this point in time, I would recommend building additional hospitals. This approach allows Apollo to continue towards its ultimate goal of providing comprehensive health coverage, while allowing for other events to occur in parallel. There are not enough resources available to deploy that are committed to the “Apollo Way”. While new hospitals are being built the IHM could be expanding its training programs and producing additional management resources that can be deployed. At the same time, we will be able to fight the government red tape and continue our education of the Indian people regarding the benefits and necessity of health care.

Action Items

Short Term

Þ  Build new hospitals

Þ  Expand programs at the IHM and IHC to increase available manager resources

Þ  Work on a process/procedure to allow for the efficient and effective implementation of a licensing program

Mid Term

Þ  Implement the licensing program

Long Term

Þ  Incorporate the ultimate goal of HMO