Apollo plans to go big on small cities

Written by fe Bureau | New Delhi | Updated: Feb 2 2014, 07:20am hrs
ApolloThe rural expansion strategy is part of Apollo?s plan to add 2,685 beds across 13 new hospitals over the next three years. PTI
In the eighth decade of his life, with a huge healthcare empire to his credit, one would expect Apollo founder Prathap C Reddy to take it easy. But the man is still planning big. Having successfully created a chain of big, multispecialty hospitals across Asia, he now wants to take advanced healthcare to rural areas.

At the Express office in Delhi on Friday for an Idea Exchange, a very dapper and sprightly Reddy revealed that four out of every five hospitals that Apollo builds in the next five years would be in tier II-III cities. Apollo is also betting on growth of high-speed mobile data technology to expand the reach and scope of telemedicine, which, Reddy said, would go a long way in creating awareness and options for affordable healthcare.

Reddy, a cardiologist, said at the Idea Exchange, With a hospital next door, a villager can save time and money otherwise needed to travel to a city. Also, with land cost and lower running costs in smaller towns, the hospital can also pass on the cost benefit to the patient.

He added that most of these hospitals would be multispeciality, as diseases do not operate in isolation and a patient needs multispeciality care.

The rural expansion strategy is part of Apollos plan to add 2,685 beds across 13 new hospitals over the next three years. The hospital chain also plans to add five cancer and heart-specialty hospitals in the next 18 months.

Part of the investments for this expansion would come from the Rs 550 crore raised from American private equity fund Kohlberg Kravis Roberts for a 6% stake in Reddys holding company, PCR Investments.

JP Morgan analysts said Apollo expects cost per bed in tier II cities under its Reach initiative to be R40-60 lakh, versus Rs 80-100 lakh in large cities, with a break-even period of about two-three years versus five-six years for hospitals in large cities.

On attracting and retaining talent in smaller towns and cities, which is a major challenge faced by hospitals expanding in rural areas, Reddy said: Mostly doctors are concerned about a good education for their children. Fortunately these days smaller cities have excellent schools, which has helped us to attract and send skilled people to smaller towns.

However, he rued that despite immense potential, India has failed to become a global healthcare destination, capable of attracting 50% of the $10.5-billion medical tourism industry.

He said if visa rules for foreign patients are simplified and other rules relaxed, more patients from abroad would visit India for treatment. Apollo Hospitals is in talks with the government for introducing a separate visa category for medical purposes.

India not only has clinical excellence, but it also has cost benefits. Having got that brand, we would have expected that India would become a great attraction for people, but that has not happened, he said.

The country attracted only 3,50,000 medical tourists

in 2012 compared to 1.2 million by Thailand and 6,10,000 by Singapore, as per data from Patients Beyond Borders, a guidebook for medical tourism.

Apollo is also scouting the market for a foreign partner for its pharmacy business, who would bring economies of scale to the business, as sourcing involves not just drugs, but also other over-the-counter products.

The octogenarian, who started Indias first corporate hospital in Chennai in 1983, still considers himself a doctor first and then an entrepreneur, adding that even today he misses regular practice.

And, while he may have decided to make his eldest daughter Preetha Reddy (managing director of the group) his successor, he still likes to have the last word in everything.

For instance, at the release of his biography, Healer: Dr Prathap Chandra Reddy and the Transformation of India by Pranay Gupte in the capital on Thursday evening, he said: If my lifes story proves anything, it is that India, too, is a land where dreams can come true if you show courage and determination and have full faith in yourself and your mission. Dream fulfilled!