Apollo Hospitals: Powered by proton

Suneeta Reddy is a name that carries considerable heft in the healthcare sector in India. The 59-year-old managing director of Apollo Hospitals Enterprise, along with her three sisters, has transformed a 180-bed hospital,started by her father in 1983 in Chennai, into the largest hospital chain operator in the country.

Reddy joined Apollo in 1989. Her Financial acumen made her spearhead the finance and strategy divisions of the hospital chain. Despite operating in a highly competitive and regulated industry, she has managed to grow the group’s revenues. She was ranked No.3 on Fortune India’s Most Powerful Women in business list last year. With over 10,000 beds across 70 hospitals, Apollo now has a presence in India, Oman, and Bangladesh.

Besides hospitals, the group has also expanded into pharmacy stores, diagnostic centres, clinics, and telemedicine units.In January, Apollo opened a proton therapy centre in Chennai, the first in South Asia, with an investment of ₹1,300 crore, making India the 16th country in the world to offer proton therapy for cancer care. In an interview with Fortune India, Reddy talks about the centre, its expansion plans, and the group’s focus on the latest offerings in cancer treatment.

Edited excerpts:

Healthcare is a highly competitive business. With newer players entering the business, how will Apollo maintain its edge?

The edge we want to maintain is the clinical edge, which will drive all of our revenues. If you look at how we are growing, it will show that the revenues are coming from our centres of excellence, such as cardiac, orthopaedic, oncology, neurology, and by doing so we have leading market share in the cities that we are present. So we do have a plan to continue to increase our market share, and so far, we have been successful.

Also, we are the only player that has gone to tier 2 and tier 3 cities [such as Guwahati, Indore, Nashik, Mysuru, Madurai, Trichy, and Kakinada]. You are able to handle scale when you have a good clinical service protocol. So in terms of patient volumes that we have dealt with and their clinical outcomes,I think we are in the best position to retain that No. 1 position. We have established that Apollo is able to deliver clinical outcomes across scale and do so in a way that is affordable to a large portion of India.

Apollo Proton Cancer Centre is your father Prathap Reddy’s pet project. What led to its formation?

We wanted to have the best clinical outcome in cancer treatment. And my father’s philosophy has always been to bring the best treatment available anywhere in the world to India at a fraction of the cost. And that was the key reason for setting up Apollo Hospitals and for getting the latest technologies in healthcare. We believe that the new cancer centre will help not just India but people across South Asia and West Asia who currently do not have access to proton therapy.

For us, the battle against non-communicable diseases (NCDs) is also crucial. Cancer is one of the NCDs that is growing at a worrying pace of over 20%. While India has seen a remarkable expansion in oncology over the past two decades, we, as a country, are significantly underserved. Our new offering fits well in that context as an integrated cancer centre with the latest technologies in Asia.

How does proton therapy work? What are its main benefits?

Proton’s precise radiation therapy on a tumour is done without damaging cells around it or the other parts of the organ. The velocity of the protons is regulated to minimise damage to healthy tissues. Proton is one of the most advanced forms of radiation therapy in the world today. [Proton beams only target the tumour with sub-millimeter accuracy]. In head, neck, and breast cancers, proton therapy is extremely important, as it prevents the emergence of cardiac problems in women,which typically occurs after four-five years of doing radiation therapy.

Proton has minimal side effects and faster recovery. It is also very good for paediatric cancer and prostate cancer.Proton therapy significantly improves what we call the ‘quality of survivorship’, which is normalcy after remission. Especially for children, it provides better quality of life post-treatment.

What is the current status of proton therapy in cancer care globally?

Where does India stand?With the opening of Apollo’s Proton Cancer Centre, we became the 16th country in the world to offer proton therapy. As of November 2018, there are about 71 operational proton therapy centres globally and about 42 moresuch facilities are under constructions. Globally, the number of patients treated via proton therapy has been growing at about 10%—from 36,000 in 2002 to 149,000 in 2016.

Apollo as a group led various innovations—diversifying beyond multi-speciality hospitals, clinics for diabetes, dental care, birthing centres, and telemedicine,among others. Why did it take you so long to enter specialised cancer care?

No, it didn’t take long. We entered specialised cancer care 25 years ago when we set up a dedicated cancer hospital in Chennai. Now, we have 11 oncology centres across the country. We have a huge offering in oncology across medical and radiation. We have one of the best clinical talents in the country and an operational tumour board. We have completed more than 1,800 bone marrow transplants across the group. Only from our oncology vertical, we had ₹750 crore of revenue for the year ended March 31, 2018.

You have invested ₹1,300 crore to setup the Proton Cancer Centre. Is cost one of the key concerns when setting up a specialised hi-tech centre? What are your expansion plans?

We deliberated on the cost issue because you have to think about the financial risk comprehensively. With the support of our board we are solving the funding part of the proton centre. Beyond cost there were other challenges such as getting access to the best clinical talent and obtaining licencing from regulatory bodies, such as the Atomic Energy Regulatory Board (AERB) [since the proton facility was the first of its kind in India, it had never been approved by the AERB earlier].

Along with the centre we have also set up a 180-bed integrated cancer hospital, which provides advanced medical treatment such as ‘Tomotherapy’ [a form of intensity modulated radiation therapy for accurate treatment of cancer]. We are working holistically solutions related to cancer care at the new centre. For the next few years, we have to look at asset utilisation. We believe we have built the centre looking at the future in terms of volumes, etc. That will be our focus.

You mentioned about the funding part of the proton centre. How are you addressing that?

Also do specialised centres such as proton have long gestation periods before they turn profitable? As an option, we are in the process of creating a special purpose vehicle—a legal entity created for a specific purpose such as raising capital. The funding structure will be a combination of equity, junior debt, and senior debt [debt raised against collateral for a set interest rate and time period].

For the proton centre, we are looking to achieve Ebitda break-even by FY22 because there is a consumable cost for the [medical] equipment. For the entire [proton therapy] treatment,we are looking at a cost anywhere between ₹25-30 lakh per patient... should the number of fractions [cycles of treatment] required be lower, then the cost would also be lower. We would be doing around at least 900 cases a year.

Treatment for cancer is highly expensive. Even the entire proton treatment costs ₹25-30 lakh for a patient. Do you feel the cost is a major concern?

I think it is important to understand the value of life. At ₹25-30 lakh we are still at one-third of the cost of what hospitals in the U.S. charge for proton therapy. I believe insurance must play a big role in making healthcare accessible. The working middle class has access to healthcare through their insurance but we are working closely to ensure and socialise proton therapy with all the key insurers and third-party administrators (TPAs) in health insurance. We believe there will be enough demand in the country for customer segments who can afford to pay. Hopefully, if we do create a foundation with some grant then we will be able to pay for those who cannot at a much subsidised rate.

How are you planning to reach out to a larger number of patients?

We are working closely with the insurers and the TPAs, and also exploring the option of working with corporate houses, sensitising them about this treatment. If anyone is in need, we can provide an EMI [equated monthly instalment] option as well. We are working with non-banking financial companies on that. We are also working with crowdfunding platforms.

In India, the common perception is that there are limited options for cancer treatment. How do you look at that? Are we on a par with the West?

Well, I think with all the U.S. Food and Drug Administration approved clinical protocols we are definitely on a par... The West is ahead with research, new trials, and genomics. But we are keeping abreast as to what is happening there so that we will be able to catch up as quickly as possible.

Overall, what is your plan for the group, besides the proton centre?

Our priorities right now—having built out over 10,000 beds—are maximising our asset utilisation, and thereby improving margins, working on our cost structures and becoming more efficient, improving revenue in tier 2 cities and not forgetting the DNA of Apollo is clinical excellence and fantastic clinical outcomes.

(The story was originally published in the April issue of the magazine.)