 Q. 1.

Does Apollo Hospital Madras provide superior value to its customers, shareholders, and
employees through a well-designed service system - in other words is it a breakthrough service
organization?

Ans.1

Does Apollo Hospital Madras provide superior value to its customers, shareholders, and employees
through a well-designed service system – in other words is it a breakthrough service organization?

Apollo Hospital Madras provided superior value to its customers, shareholders and employees through
well designed service system. It is breakthrough service organization as it is the first its kind in India and
become successful with perfectly aligned Strategic service vision with year on year increase in number of
Patients served, profits made and employee satisfaction from individual growth best compensation
benefits (compared to other private hospitals).

1 Customers

Customers in India for the first time were provided a premium health care service by a private
organization. Customers got an opportunity to have quality health care in India without the

need to make trips to abroad for treatment for complex

medical conditions like cardiac and urology.

• Prior to 1983, most of the health care was provided by the

state and was in “nursing homes” which does not have the adequate medical personal or medical
equipment’s for handing

the need for customers. These nursing homes privately run would have less than 20 beds and would refer
to bigger state run hospitals for complicates health procedures.

• But Apollo became the first comprehensive, for-profit

hospital in India and having the capability for advanced

medical procedures and health. Dr. Reddy wanted to give

patients the

most advanced medical care possible at high quality and “with a human face”

Apollo Hospital Madras provide superior value to its customers by providing superior medicate care in
complex ailments (best consultants supported by best technology and supporting staff) coupled with best
of non-medical care, high sanity standard and hospitality while costing less compared with other
private hospitals.

• Service vision is centered around providing its customers high quality treatment for complex
ailments with human face. Pratap Reddy emphasized on personal care provided by each employee to
the patient and health of patient health is most important measure of success.

• Apollo charged 20 to 30% less than local competitors for procedures and charged10 to 15% less than
top hospitals in Bombay and New Delhi.

• Provided in house facilities for treating all complex ailments. This has reduced time delays involved in
diagnosis of ailments (case with private nursing homes). This has reduced the average stay of the
patient at the hospital and hence the cost of treatment.

• Provided treatment for many medical specialties (Exhibit2). This coupled with coordination
from consultants enabled Apollo to provide best medical care to its customers.

• Adequate facilities were provided to make the equipment available for diagnosis thus reducing the risk
of delaying the treatment and deterioration of Customer health condition.

• Apollo Madras achieved lower mortality rates of 2 to 3% which is far less than 15%of
Government hospitals.

• Offered different service products to its Customers such as Primary health, preventive medical
care (Insurance product).

• Vice-President of India chose Apollo Madras for Coronary By-pass operation.

2 Employees

Dr. Reddy wanted to run Apollo based in the “Five star” principles. Employees and

Medical personal formed 2 stars in this philosophy. The basic idea was those respects the individuals
and encourages individual growth, open and constructive organization culture and decentralized
management and a personal rapport with management and all employees.
• Many employees have very strong sense of culture and community with in Apollo. Employees
were encouraged to celebrate functions with family and built personal rapport with other members
of the business unit.

• Apollo Hospital Madras was a truly breakthrough service organization. Apollo Hospital Madras not
only provided quality health care for customers, but was able to motivate employees and create value for
shareholders but as a whole create value for the nation. As a corporate hospital, Apollo did not have any
model to emulate but still it was able to import the knowledge and expertise on medical practice from
western countries and bring quality health care sector. The recent trend of quality & premium health care
in affordable prices is possible due to the pioneering contribution.

which included consultants, lab technicians and supporting staff are provided with superior value by
providing best of benefit plans (compared to other hospitals), team-spirited culture with scope for
individual growth which motivated them to perform better. The staff attrition levels did not affect quality
of operations and in most cases the reason for leaving Apollo is not dissatisfaction. Case facts:

• Employees are middle star for Apollo signifying their central role in success of Apollo.

• Consultants were free to decide the fee to be charged from Patients which is broad range set by Apollo.

• Consultants were provided library faculties with latest medical journals, reference books to
abreast themselves of latest treatments. Consultants were paid to attend medical conferences
abroad.

• Apollo free news letter conferred prestige on individual consultants along with hospital, thus
helping consultants develop strong individual reputation.

• Coordinated atmosphere provided by Apollo enabled consultants to provide besttreatments to

patients with the help of other consultants.

• Apollo’s wages were 10% t 20% more than that of its competitors. Provided additional benefits such
as free medical care for complex ailments, subsidized meals, paid vacation and Attendance bonus.

• Employees are recognized and encouraged for their individual contribution, many from maintenance
and housekeeping departments. Provided scope for individual growth and team-oriented culture
motivated employees to better perform.

• Employees are provided to direct contact with top management.

3 Share Holders
Apollo created a great value for its shareholders, 40 % of the shareholder of Apollo are people from the
medical background and colleagues who had worked with Dr. Reddy in US. These shareholders along
with generic public were able to reap benefits due to increased spending in health care. The balance sheet
in the case also shows that just after 4th year of operation Apollo was able to break even and by efficient
management & operational principles, Apollo Hospital Madras was able to reduce the operating code and
improve the operating margin and creating the value for shareholders.

are provided superior value through year on year increase in revenue and the number of patients served.
Apollo achieved higher value/cost leverage by reducing average stay of patient at Apollo by two days
compared to competitors. This also enabled Apollo to server more Customers thus increasing the revenue.

• Achieved higher utilization of Medical equipment while balancing the utilization and available thus
not compromising on the quality of service.

• Average number of days patient stayed at Apollo is seven days, two days lesser then competitors.
Apollo generates more revenue in the first four days of patient stay as patient receives treatment which
utilizes consultants, diagnostic services making use of the technical facilities. By reducing the average
stay for a patient, it could accommodate more patients and hence generate more revenue.

• Achieved cost efficiencies through efficient business processes which reduced the cost of treatment for
the patients (charged less than 10 to 15% compared to private hospitals in Bombay and New Delhi).
The costs of diagnostic services were 20 to 30% cheaper compared to local competitors.

• Maintained employee attrition rate which did not affect quality of service provided to customer
thus reducing the amount of training required. Apollo top management could win the confidence of
the employees through various employee benefit programs along with direct benefits.

• Ventured into other services such as Primary health care and Preventive care to increase the number
of patients served and improve revenues. Created network of referral doctors to get more patients thus
creating demand of services.
  Q. 2. What are the key elements (Basic and Integrative) of Apollo Hospitals Madras Strategic
Service Vision?

Ans.2

Apollo Hospitals madras strategic service vision was based on “Five Stars”

These Five stars are:

1. Medical personnel : Highly skilled and experienced doctors mostly returning from western
countries (well known both academically and clinically). Well trained and motivated junior doctors,
technicians, nurses, and other supporting staff.

2. Medical technology: Latest available technology, constant and quick update, high utilization
and availability. Large capital investment emphasis in this area

3. Employees: Constant interaction between all levels. The environment promotes a sense of
family/community. Upper management recognizes attendance, punctuality, achievements in sport, and
honesty through awards. A 10-20% higher wage for the employees than local, private hospitals.
Flexible atmosphere, free medical care, and other economic benefits (loan, wedding gift, subsidize
meals) attract competent employees.

4. Hospitality : Customer oriented/centered service, 30 hrs/year training, well established

guidelines (Induction manual)

5. Value : Care/contact after even being released from the hospital. Guest relations department
improves quality of service and maintains relationship with patients.

Basic elements of Strategic Service Vision:

2.1.1 Target Market segment :

• Middle class and upper middle class Indians who could pay for treatment for complex ailments.
This constituted half of 270 million Indian middle class which is also growing at 8% a year.

• The target segment consisted of

1) individuals who could afford pay from out-of- pocket for the treatment expenses

2) employees of corporations providing medical support to its employees.

• There are International patients from mainly Sri Lanka, South Asia and few fromEurope and US.

2.1.2 Service Concept :

To give patients the most advanced medical care possible at high quality with Human face.

• This includes treatment for complex ailments such as coronary heart surgery.
• Providing best medical facilities and providing them all in house so that treatmentis faster at the
same time generating revenue for hospital.

• Differentiate with other hospitals by providing treatment for complex ailments withhigh quality and
at lower cost with operational excellence.

• Hospitality to the patients for the premium they pay for the service.

• Corporate culture at every service provided.

3 Operating strategy :

• Efficient utilization of resources which generate the revenue the most such as technical facilities
while maintaining the balance between utilization and availability.

• Availability is more important than utilization as reduced availability would deteriorate patient
condition increasing length of patient stay at hospital thus reducing the number of patients served
affecting Apollo revenues.

• Effective integration of all levels of operation, from consultants to housekeeping staff for providing high
quality service. Promotion of team spirit among employees. Stressing the equal importance of all
services provided from treatment to housekeeping.

• Satisfied employees for high quality service with Human face.

4 Service Delivery System:

Service delivery system consisted of

• Consultant doctors for diagnosis and treatment. Supporting staff such as Junior doctors, lab
technicians, maintenance and housekeeping staff.

• Medical Technology for diagnosis of ailment.

• Detailed procedures for every service carried out such as HIV test for every donated blood.

• Availability of facilities to meet peak demand.

• Service delivered with high quality – proper diagnosis with coordination from consultants,
effective treatment with high success rate and hospitality to patients.

2.2 Integrative Elements of Strategic service Vision:

2.2.1 Positioning:

• Treatment of complex ailments (with renowned Consultant doctors and advancedequipment) with
high quality (curing of ailment and low mortality rate) and proper care (treatment with Human face).

2.2.2 Value/Cost leveraging:

• With high availability and best utilization of resources number days patient stayedin hospital
reduced thus increasing number of patients served.

• Patients are categorized first four days patients requiring immediate attention whoalso generate more
revenue for the hospital and patients primarily for convalescence who mainly pay for room and
boarding.

• Satisfied Employees for high quality service delivery.

2.2.3 Strategy System Integration:

• Many specialty treatments supported by Apollo (Exhibit 2)

• Renowned Consultant doctors with effective co-ordination between them to provide proper
diagnosis and treatment.

• Highly integrated supporting staff.

• Reduced average stay of patient at hospital.

• High availability of critical facilities.

Q. 3. What accounts for Hyderabad Apollo Hospital's disappointing performance and what are its
future prospects?

Ans. 3

Hyderabad Apollo Hospital had not been as successful as the Madras hospital. Some of the primary
reasons for this were as follows:

Commitment from Consultants:

• One of the issues Hyderabad Apollo hospital faced was the reluctance of the consultants to
commit exclusively to Apollo. Most of the consultants at Apollo Hyderabad were already attached
to other hospitals and went to Apollo only on a part-time basis. As a result there was a delay to
build up the reputation of the consultants, which the Indian patients had always looked for very
keenly.
• In addition to the consultants, there was an issue with the commitment from the local doctors. Several
local doctors perceived Apollo medical center as a threat and hence did not refer patients to the
hospital.

Private Competition:

• Unlike Madras, several other private hospitals preceded Apollo in Hyderabad. These hospitals typically
offered lower prices to the generally price-sensitive residents of Hyderabad. Hence Apollo had to come
up with measures to handle this competition that it had not experienced in its setup at Madras. In order to
handle this, Apollo Hyderabad took several initiatives such as expanding its target customers to outside
Andhra Pradesh, targeting corporations that paid for their employees and identifying profitable
operations.

Quality of operations

• Hyderabad Apollo Hospital also faced criticism with the quality of its non-medical operations. This
resulted is several customer complaints and dissatisfied customers. The CHANGE program that
Apollo had successfully implemented at its Madras operations failed to work here and as a result
Apollo Hyderabad had to come up with a re-engineering process.

Accessibility

• Unlike the Madras facility, Hyderabad Apollo Hospital was located outside the city that resulted in
accessibility issues for several patients. Transportation was an issue and hence it was a challenge to
reach out to several prospective patients.

• However despite the aforementioned worries, Hyderabad Apollo hospital management continuously
worked to address these issues. Its marketing department initiated measures to build relationships with
local referring doctors and some well-known consultants. These initiatives would definitely help
address doubts patients had about the reputation of doctors and consultants at Apollo Hyderabad.

• The launch of Apollo Medical Center would also expand Apollo’s geographic reach and help
Apollo expand its

customer base. Also with the expected growth of Hyderabad, Apollo Hospital attracted several.

3.1Disappointing performance:

• Far from heart of the city: Patients faced transportation difficulties.

• Competing private hospitals: Hyderabad Apollo had to compete with privatehospitals already existing
even before its inception. Private hospitals offered lower prices to both individual and corporate clients.

• Less prestigious staff of consultants that was reluctant to commit exclusively toApollo. They
were working at other hospitals and worked with Apollo as part time.

• Quality concerns at non-medical care.

• Took long-time to build local referral doctor network.

• Unsystematic CHANGE program.

3.2 Future prospects:

• Even at high premium, Hyderabad Apollo could win corporate and individual client base over a period
of time.

• Improved Consultant doctors reputation and hence improved the confidence of prospective Patients.

• Started satellite facilities called Medical Centers within city to improve geographic reach, overcoming
inaccessibility of Hyderabad Apollo Hospital. Medical Centers also provided minor surgeries and trauma
care. Medical Centers also offered full range of diagnostic services and simpler treatments, improving
the revenues.

• Improved referral doctor network by not accepting referral patients on permanent basis.

• Abundance of room for expansion and anticipated growth of Hyderabad city with foreign
and institutional investors.

Q. 4. What expansion vehicle promises to be most effective to enhance Apollo Hospitals' profits as
well as maintaining the recognition of the Apollo name?

Ans. 4

4.1 Indian Medical Corporation (IHC)

as consulting group, to use Apollo experience and expertise in establishing and maintaining health care
facilities, to provide support to entrepreneurs to build and manage new medical facilities. This is to be
achieved through Licensing Apollo name. Licensing Apollo name to groups of Doctors or entrepreneurs
to provide medical facilities under Apollo name, would enable Apollo to grow faster without having to
building wholly owned subsidies. This required talented pool of managers who would run the hospitals as
per Apollo standards.

4.2 Health Maintenance Organization (HMO) :

Health care to be provided to customers in return for a fixed annual premium. Since the income is fixed,
the better strategy would be to prevent illness to spare itself from cost of sophisticated treatments.
However, there is skepticism about how it is going to be received by customers. HMO also require
building network of Hospitals under Apollo Brand name. The profitability of HMO depends upon
effective preventive care and network of Apollo hospitals serving customers. However, with growing
middle class with sizeable spare income to spend on health issues and growing health consciousness and
growing health insurance market, Apollo has great opportunities to grow.
Customer contact approach