Enhancing affordability and access to health care in India presents both challenges and opportunities for private companies like Apollo Hospitals, a 50-hospital chain with 8,500 beds. Apollo has already expanded its reach by using information technology and the mobile phone for telemedicine, and reengineered its services to lower costs. Its next endeavor is to help create healthy living environments by promoting clean drinking water, better sanitation and appropriate immunizations, says Sangita Reddy, executive director, in an interview with India Knowledge at Wharton during the 2010 Wharton India Economic Forum.

An edited transcript of the conversation follows.

India Knowledge at Wharton: Thanks very much for joining us. What would you say is the most critical problem facing health care in India today?

Sangita Reddy: I’d say the biggest one is the lack of facilities — just the lack of good infrastructure. This is compounded by the lack of access — whether it is financial or geographic — to the infrastructure that exists.

India Knowledge at Wharton: Is that access the weakest in rural areas? Is that one of the biggest problems?

Reddy: Absolutely.

India Knowledge at Wharton: I was reading that you headed Apollo Reach. Can you describe that program for us?

Reddy: Reach is actually a new model of health care delivery that the Apollo team innovated. At our 25th anniversary [chairman and founder Dr. Prathap Reddy] addressed a senior group of hospital executives. We were in this boardroom and we thought he was going to say, “Good job guys. You have delivered on my vision.” He actually told us: “Do you understand that the Apollo Hospitals model is relevant to about 300 million to 400 million people? But 600 million people or a significant number of India’s population is denied health care and what are you going to do to change this?”

So we went back to the drawing board on innovation — in terms of financial access and geographic access. We have worked for the last 10 years on these two fronts. [First was in] pushing insurance — our own small insurance that we did in our village where for less than $10 an individual would have access to high-end health care. And we have proved that the model was possible, that it was relevant. Based on that model, many others have evolved in our country. [Apollo also has a joint venture with Munich Health, a world leader in the field of health insurance.] So financial access is increasing and we are happy about that. We think it is a positive trend. Lots more needs to be done. But at least it is a movement in the right direction.

The next thing we did was telemedicine because when 80% of the doctors are living in the urban areas and 70% of our population is in the rural, you need to find ways to connect. Technology is affording some solutions. We have tried to use that effectively.

The last one [comes from our] strong belief in M-health and the convergence of health care, IT and the mobile phone. We have tried to drive new models. We are bringing out a lot of innovations. But at the end of the day the mobile phone cannot do a bypass surgery or a hip replacement. So we try to build on a mechanism or a scheme or a program, which takes advanced health care facilities into B- and C-class cities. We hope that one day we will be able to do this in every district headquarters. Today, the average rural Indian seeking health care travels about 54 km (33 miles) for care. We want to cut this down significantly by building these models. We know that we cannot build for the entire country, but what we have done effectively over the last 27 years is to be a thought-leader and a catalyst towards positive progress and direction.

So each hospital is secondary and tertiary care. It is a clean, practical and cost-effective environment. We reengineered everything from the air conditioning to the design to the infection control to the doctor’s module to the way we interact with patients. We reengineered and worked on bringing down the cost per bed by almost 20% to 25% and the operating cost by another 15%. This combination has helped us reach out to a lot more people.

So we now have seven hospitals in the Reach Model. Three are open. The next four will open in the next 60 to 90 days. We will do about 25 of them over the next 18 to 24 months and then we will re-evaluate the model. Reach is really our initiative towards rural empowerment and access to quality health care.

India Knowledge at Wharton: And do you see one day the ability to reach the most remote people?

Reddy: Absolutely. But our thought process is that no single initiative can solve all the problems. It is a combination. So you put up a quality health care environment in a rural setting. You put more mobile vans around that. You connect the mobile vans through telemedicine. You put technology to ensure that you have registered these people. You focus a lot on preventive health care. So your cost or the disease burden comes down because you have spent money appropriately on preventive health care. You try to propagate through government agencies a holistic model, which looks at clean drinking water, better sanitation, and appropriate immunizations.

So once again you have impacted the disease burden. And then you try once more to push a new paradigm, which is that health care should not be about episodic treatment of single ailments. It should be about proactively creating positive health in an environment, about stratifying vulnerable groups, and going to them before the problem exists. If you have had a generation or two generations of diabetes and cardiovascular disease in your family, the likelihood of the kids getting it is a lot more. What can you do?

India Knowledge at Wharton: Is there a huge educational push on Apollo’s part and other organizations to communicate that to people in remote areas? How is that knowledge spread?

Reddy: I see a few things. One is that in a country like India there is so much to be done, so many dimensions on which you can do them. So some we do directly. Some we work in propagating thought leadership so that we create one pilot and hopefully others will follow. We are fairly active in multiple governing bodies and voices with the government. So, on the health information side we have created a framework for a joint task force, which is working with the ministry on an India patient health care portal, a multi-language information portal, which will be launched fairly soon. We have been the thought leadership behind that. We have worked on content. We have given ideas from ApolloLife, a patient portal of our own. We have taken those concepts and learning, we have worked on making it more than just static content, but connecting via cell phone, fax, SMS — whatever you can do to make this alive and pushed into the community. We have put some of those models out there, and I think in the next 12 to 24 months you will see some impact.

India Knowledge at Wharton: Very often people in the West will look at a country like India and say, “Your health care is so poor.” But what I’m hearing is that there are probably a lot of lessons that a country like the United States could learn from India in terms of reaching people.

Reddy: You are so right.

India Knowledge at Wharton: What are some lessons you think that other countries should probably absorb?

Reddy: There is a range of them. One is that if you look from a quality perspective we have done about 90,000 open-heart surgeries — 99.9% success rate. This is world-class. Then you go one dimension deeper and you say that we want quality health care but we want it at sustainable costs. And we want equity. We want everyone in society to get it. So what can you do to bring down these costs?

We do a significant number of our surgeries as beating heart surgeries. When you do beating heart, the skill-set of the clinician and the team needs to be far greater. But it brings down the costs of the material input. You don’t use an oxygenator. It also reduces the recovery time. There are pockets of this type of innovation across our system. And we believe in a health care delivery system where the backend cost of administration is less than 6% to 7% versus about 25% in [other] economies. So we understand things like that and we want to create this convergence of technology, of knowledge, of capability to build new models. I think [those are] some of the greatest [lessons].

But … I want to caveat this to say that the American health care system has some amazing capabilities. They have taught the rest of the world advanced health care. The design and the backend administrative problems should never make people forget the fact that some amazing medicine is being practiced — the ability to save lives, to do heroic things, to push research, to create innovation, liver transplant… Everything that has happened and everything that the rest of the world is emulating has emerged out of great institutions in the U.S.

India Knowledge at Wharton: The U.S. probably faces a similar situation to India in that encouraging doctors to move out of large urban areas with large institutions to more rural areas or poorer areas is a hard thing to do. What kinds of incentives can the industry offer to medical personnel who are highly trained to move out of urban areas and to rural areas to address some health care needs?

Reddy: One of the big ones is actually by the [health] ministry and the Medical Council of India to create a new cadre of medical professionals who have done medical school within three to four years. Their costs are lower. And they stay in the rural environment for four years. That I believe is a big one. One of the other ones, which I think is relevant, is that you travel. I don’t think we can ask many people to go and live in rural environments unless the rural environments have schools, colleges, social infrastructure.

But what we can do and what we have been doing for the last 27 years is every weekend somewhere in rural India will be teams from Apollo Hospital — Chennai, Hyderabad, Delhi — going out, traveling overnight by train or by car, traveling into rural India, conducting medical camps, operating in theaters over there, or doing consultations and bringing the patients back. So [it is] a combination of technology, telemedicine, preventive health care, training of the district health care workers and their doctors. No single thing can solve the entire problem. But rural India, when connected with the appropriate bandwidth, will become the back office of urban India. When that happens, the economic capability of those environments will improve. So it is a combination of the information drive and insurance. Insurance in India is very much becoming the fuel which pushes the engine of health care. So when you put fuel into that engine, you will see more infrastructure being developed. So many interesting things are happening on different dimensions.

India Knowledge at Wharton: How much of India’s health care solutions will come out of the private sector as opposed to the public sector?

Reddy: Today about 80% of health care is in the private sector. About 60% to 65% of the beds are in the public sector, but 80% of the care is delivered by the private sector. If you look at the budget allocation or the spending — the out-of-pocket spending — only 30% to 40% of the budget is government driven; 60% of it is private. These trends will continue but what I am hoping will happen is that there will be a new, interesting and genuine model of … public-private partnerships. So far, it has [occurred] in pockets. Apollo did one of the first PPPs. We have done quite a few of them. But when private sector hospitals support government insurance programs effectively in a partnership model you have worked towards creating a provisioning of care and the government has worked towards creating financial access to that care — and this is PPP.

But we also need infrastructure. We need about 100,000 new beds per year for the next eight years to reach the World Health Organization’s requirement in terms of bed numbers. We need to find new models of building. Very few hospital groups are economically attractive and foreign direct investment is going into every other sector in India and not so much into health care. We have to push this concept of PPP into newer dimensions. But most importantly we need innovation. Today’s models of health care are not the solutions for tomorrow’s health care scenarios and problems. We need the ability to do preventive health care and productive health care in a whole new way. Riding on this concept of an information society and a connected world and a connected environment will be this ability to tap the capability of the fragmented health care system in India.