AAROHAN 2011

TEAM: LAKSHYA
SYNAPSES HEALTHCARE CONSULTANTS

ALOK DIMRI DEEPAK KR. DHANOTIYA

NITIE, MUMBAI

24-Feb2011

The case is about strategic and operational concerns for Surya Healthcare
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Acquisition vs . capacity expansion Expansion vs . collaboration Network design strategies Increasing Profitability

Aarohan 2011

Analysis of Surya Pharmaceuticals Financial Projections for Surya Hospitals Analysis of Expansion 3 Plans Analysis regarding the location of new plant Comparative Analysis of various existing Surya Hospitals

Strategic Data Analysis

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Analysis of Surya Pharmaceuticals

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Analysis of Surya Pharmaceuticals

Expanding the capacity of own plants

The criterion should not be based only on investment terms but certain non - monetary criterion should also be taken into account while making a judgment .

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Analysis of Surya Pharmaceuticals

Table comparing the relative performance of both the options for Surya Pharmaceuticals

Pharmacy Fixed Legal Short investment aspects term gains

Long term Future gains

Expanding the capacity of own plants

Strategic Expansion Sustainab ility risk Capacity Location Investmen t

Acquisiti 545 Crores Critical -Tax In cash on benefit One time

Competitiv -Easy -Location -Low future -High e strength capacity constraint investment expansion

Increasin 282 Crores -No legal Gradual Operationa -Capacity -No -High -Low g concern investment l Constraint location future capacity ease constraint investment s

Aarohan 2011

Analysis of Surya Pharmaceuticals

Global Demand and expansion plan

Global demand increase US from 05-10 Maunomycin 4.7 % Europe 20 % Asia 17 % Middle East 20 %

Expanding the capacity of own plants

15 % 20 % NA

Moxomycin

100 %

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Analysis of Surya Pharmaceuticals

Acquisition of Rutanis' Plants Expanding the capacity of own plants

From all this comparative analysis, we propose the strategy of expanding the capacity of existing plants keeping in mind the financial, legal, strategic constraints, long & short term advantages and their strategic locations.

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Analysis of Surya Pharmaceuticals

Financial Projections of Surya Hospitals

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Forecasted values for the FY ending March 2011 Cash flow analysis Forecasted
Fixed assets 448.81 Increase in assets 13.96913 % increase in assets 1231.96 Current assets 252.83 Increase in assets 25.8219 % increase in assets 4893.64 Total assets 701.64 Increase in assets 16.7376 % increase in assets 774 Income -1593 Increase in income -67.3004 % increase in income 753.15 Expenditure Increase in expenditure -1452 .05 -65.8466 % increase in expenditure PBDIT Increase in PBDIT % increase in PBDIT
21.84 -141 -86.5881 10 - Jun 3661.68 Mar - 11 4955.743597 1742.873597 54.24662674 Mar - 10 3212.87 1218.55 61.10103 610.88 4192 1829.43 77.4339 2367 776 48.77436 2205.2 755.5 52.11423 162.84 20.94 14.75687 Mar - 09 1994.32 641.25 47.39223 22.6 Mar - 08 1353.07 1698.72 1292.3 1258.47 33.83 -

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1678. the 979.13 368.25 345.65 Expanding375604 capacity of own plants 699.2456042 86.21285536 6634.119201 2442.119201 58.25666032 3217.796655 850.7966554 35.9440919 2947.35638 742.1563802 33.65483313 434.9513908 272.1113908 167.1035316 165.8873 6.538406 2362.57 663.85 39.07942 1591 298.7 23.11383 1449.7 191.23 15.19544 141.9 108.07 319.4502

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Financial Projection Of Surya Hospitals For The Year Ending March 2011

Financial Snapshot of the company

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1742

979.13

Company is going to invest a total of Rs 812 . 17 Crore in next three financial years

All amount in Rs . crores

1200

409.18

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Financial Projection Of Surya Hospitals For The Year Ending March 2011

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Strategic Analysis of Expansion

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Available options with Surya

For Row R1
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For Row R Expanding the capacity of own plants2 For Row R1 For Row R2

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Strategic Analysis of Expansion

Row R1 :Strategic long term factors (Qualitative)

Health care Investment Ease of setting Strategic Long term Service Independen sustainabi level cy lity increase Market penetratio n

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Expand Greenfield A P Brownfield P A Collaborat Surya P e P Other A competitor in A parallel services Health care

Expanding the capacity of own plants

A P P A P P A A

P A A P P A A P

P A A P P A A P

--P --A A P P A

--------A --P ---

High Patient concentrat ion

High Competitio Private / Pub n High lic market share

Infrastruc tural availabili ty Low

Private hospital charges High

---

Row R2 :Market force analysis (Quantitative)

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Strategic Analysis of Expansion

This has been explained by following snapshot of the table. Row R1 :Strategic long term factors
Health care

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Expand

Investment Ease of setting

Strategic Long term Service Independen sustainabi level cy lity increase P P --A A P Competitio Infrastruc Private n High tural hospital availabili charges ty Low High

Market penetratio n -------

Greenfield A A P P Health care High High Patient Private / Pu concentrat blic ion market share

Expanding the capacity of own plants

Row R2 :Market force analysis

A- Avoid P-Prefer

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lysis regarding the Probable Location of new Hospita

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Matrix showing the region wise presence of different hospitals

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Primary Care North East West South

Hope Chain, Singhania, Mellow Hope Chain Hope Chain

Secondary Care
Mellow

Tertiary Care
Hope Chain, Singhania, Mellow Hope Chain, Surya

Singhania

Hope Chain, Surya

Gentle Touch, Earnest Gentle Touch, EarnestGentle Touch, Surya, Earnest

o, Surya Group should concentrate on Eastern and Western part of India for all the three categories and Northern Part of India

ategory.

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Analysis regarding the Probable Location of new Hospitals

Comparison of states based on Average Hospital Charge per unit Inpatient Day by Public & Private Hospitals:

State 18
Himachal Pradesh Uttar Pradesh Orissa Madhya Pradesh Gujarat Maharashtra Tamilnadu Kerala

Public
4 28 4 11 13 26 16 40 24

Private
51 140 115 154 251 269 297 203 201

Ratio
62.75 5 28.75 14 19.3 10.34 18.56 5.1 8.4

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All India

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Analysis regarding the Probable Location of new Hospitals

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Analysis regarding the Probable Location of new Hospitals

Comparing the ratio of Distribution of Inpatients between Private and Public Hospitals: 20 State
Gujarat Maharashtra North East Punjab Orissa Madhya Pradesh Himachal Pradesh

Public
45 36 77 34.5 89 63 93

Private
55 64 23 65.5 11 37 7

Ratio
1.2 1.78 .30 1.9 .123 .59 .07

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All India 50

50

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Analysis regarding the Probable Location of new Hospitals

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Analysis regarding the Probable Location of new Hospitals

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Based on these two analyses for the states whose data has been provided, Surya can consider expansion of its operations in the states of Gujarat, Maharashtra, North East, Punjab & Orissa. The decision on primary, secondary or tertiary type should be taken as described in previous section.

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Analysis regarding the Probable Location of new Hospitals

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Comparative Analysis of various Surya Hospitals

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Comparative Analysis of various Surya Hospitals

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Data Envelopment Analysis ( DEA ) as a tool for the analysis Various input and output parameters selected for the analysis are : Inputs Outputs
Number of Beds Average length of stay No. of personnel Inpatient Income (Rs. Crores) Outpatient Income (Rs. Crores) Income per bed (Rs. Crores)

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Comparative Analysis of various Surya Hospitals

Table showing various inputs & outputs considered In DEA

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Inputs
DMUs
Bandra
No. of Beds 92 Length of Stay Personnel 4.4 4.4 4.9 4.7 4.5 4.6 758 262 549 118 221 89

Outputs
Inpatient Outpatient Income per Income Income bed (Rs. 398.7Crores) (Rs. Crores) (Rs. Crores) 14.5 4.3
181.3 113.2 127.2 171.1 44.7 21.7 50.7 5.5 0.7 5.4 0.9 1.7 3.2 1.3 0.9

Bangalore 1 600 Bangalore 2 567 Nagpur

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D EA

Hyderabad 1 130 Hyderabad 2 50

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Comparative Analysis of various Surya Hospitals

Table showing the overall efficiency scores of various Surya Decision Making Units
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Decision Bandra making Units Bandra Bangalore 1 Bangalore 2 Nagpur Hyderabad 1 Hyderabad 2 Overall Efficiency 0.99 1 0.99 1 1 1 5.99 Bangalore 1 0.42 1 0.75 0.42 0.42 0.60 3.64 Bangalore 2 0.22 0.41 1 0.22 0.22 0.72 2.81 Nagpur 1 1 1 1 1 1 6 Hyderabad 1 1 1 0.68 1 1 0.77 5.46 Hyderabad 2 0.67 0.41 0.99 0.67 0.67 1 4.44

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Comparative Analysis of various Surya Hospitals

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According to the column sum maximization, Nagpur is having highest score of 6 out of 6 and is considered to be the performing DMU among the existing DMUs. DE Analysis shows that Greenfield Hospital , Bandra Brownfield Hospital , Nagpur can be taken as benchmarks the other DMU s .

the best

and for

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Comparative Analysis of various Surya Hospitals

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Analysis of Individual Hospitals

Facts case : and assumptions as per

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Standard average length of stay is 4 days. Mid size hospitals (141-220 beds) have highest profitability. Highest margin is attained in multi specialty hospitals although revenue follows the reverse trend. Note: For * Refer DEA analysis.

High average income per bed (4.3) & average length of stay (4.4). Low average occupancy rate. (75% in 2010) Specialty in cardiac care. Suggestions:

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Implementation of strategies for improving bed occupancy rate. Improve networking & increase the no. of referral points. Implement strategies suggested for increasing outpatient income. Expand in other specialties by Brownfield expansion.

Surya Heart Hospital, Nagpur

Features: Most efficient hospital. * High average occupancy rate (96%) & average length of stay (4.7). Low outpatient income (5.5). Specializes only in cardiac care. Suggestions:

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Try to increase the specialty cares. Should try to increase the efficiency of other hospitals of the group. Implement strategies to reduce length of stay and occupancy. (Appendix) Analysis of Individual Hospitals

Very high average length of stay. Low average income per bed. Multi specialty hospital. Suggestions: Implement strategies to improve hospital profitability. High concentration required on average length of stay.

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Surya Hospital,Cunningham Road, Bangalore Features: Good no. of specialties. Lower efficiency as compared to others. *in Bangalore can Both Greenfield Hospitals Low Inpatient income, with each other . By %) & average income per bed collaborate average occupancy rate (89 this , they will Higher average length of stay (4.9).

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become multi specialty referral centers for each other Suggestions: .

Implementation of strategies for improving hospital productivity, bed occupancy rate & outpatient income. (Appendix) Improve networking & increase the no. of referral points.

Analysis of Individual Hospitals

Features: Very low avg. occupancy rate (39%) & outpatient income (0.7). High average length of stay (4.5). Low average income per bed (1.3). Specialization only in cardiac care.

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Suggestions: Implement strategies to improve hospital occupancy and outpatient income. (Appendix) Develop specialization in other specialties.

Surya Hospital, LB Nagar, Hyderabad

Both Features:

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Brownfield Hospitals in Hyderabad can also consolidate and try to develop a multi specialty Very low average occupancy rate (31%) and low income per bed (0.9). center . Their consolidation is a strategic move to High average length of stay (4.6) tackle income (5.4). Low outpatient the tough competition of southern India in a unified way .
Suggestions: Implement strategies for improving hospital profitability and occupancy rate.

Analysis of Individual Hospitals

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Recommendations

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Strategies to bed occupancy Strategies to improve Improve Bed Occupancy

Table showing the average bed occupancy of various hospitals
Hospital Three months ended June 30, Fiscal Year ended March 31, 2010 2010 Surya Hospital, Bandra, Mumbai 74% 75%
Surya Hospital, Cunningham Road, Bangalore Surya Hospital, Indira Nagar, Bangalore Surya Heart Hospital, Nagpur Surya Hospital, Banjara Hills, Hyderabad

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50% 89% 88% 42% 34%

46% 89% 96% 39% 31%

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Strategies to Improve Bed Occupancy

Surya Hospital, LB Nagar, Hyderabad

Strategies to improve bed occupancy

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Plan of stay including expected date of discharge should be given to every patient Development of a key worker role Standardized length of stay for each condition Closer working with intermediate care services Weekly discharge planning meeting of wards Empowering staff to improve the ways of working Implementing productive ward practices

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Strategies to Improve Bed Occupancy

S tra te g ie s to Im p ro v e H o sp ita l P ro fita b ility

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Strategies to Improve Hospital Profitability

S tra te g ie s to Im p ro v e O u tp a tie n t S e rv ice s

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Strategies to Improve Outpatient Services

S tra te g ie s to Im p ro v e H o sp ita l P ro d u ctiv ity

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Strategies to Improve Hospital Productivity

References
Introduction to Data Envelopment Analysis & its Uses, William W.
38 Cooper, Lawrence M. Seiford, Kaoru Tone, 2006, Springer Science + Business Media, Inc. www.beckershospitalreview.com http://findarticles.com http://www.allbusiness.com

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