G Narotham Reddy
President-Procurement & Corporate Development,
Apollo Hospitals Enterprise Ltd.

Technology Strides Through Capital Expenditure – Apollo Group Of Hospitals

Apollo Hospital management projects its view of the company’s current financial condition and its prospects for future growth through capital expenditure budgeting process. Capital budgeting decisions give an indication regarding what direction Apollo Group plans to move in the years ahead. Capital expenditure budgets are commonly constructed to cover periods of 5 to 10 years and can serve as major indicators regarding Apollo’s five-year plan or long-term goals. The long-term plans are developed by seeking inputs from all stakeholders and units, which are spread across India. These plans are reviewed by a committee and broken down into annual spends and milestones. These plans are tracked and monitored periodically. Deviations are looked into and corrective actions are implemented

Nature of spend. Capital expenditure is broadly classified as: replacement, addition, new technology and strategic investment.

Replacement. Capital expenditure involves the periodic replacement of old machines by new ones. The replacement becomes necessary due to wear and tear or due to obsolescence. Replacement plan across the group is developed by taking inputs from end users and biomedical engineering. Factors, such as age of the equipment, annual maintenance spend, break down history, and the like, are considered in preparing the final strategy. Replacement with newer equipment results in better patient care and reduction in operating costs. Replacement would be typically 30 percent of the overall capital budget.

Addition. This involves capital expenditure to increase capacity in the same class of equipment. Business-growth plans, over-utilization of current equipment due to increase in load or objective to reduce turnaround time (TAT) are some of the reasons, which warrant capital budgeting for the additional resource. The investments are made in the known areas of activity as they involve lesser business risk as compared to bringing new technology; however, a bit of greater risk than replacement expenditure. Share of additional budget would be around 40 percent of total spend.

New technology. Here the investments are made in new cutting-edge technology for improving patient care. Spend in this area would depend upon incremental cash flow and market share in years to come. Inputs from technology partners, industry stalwarts, practising consultants, and potential new market are considered for planning. Such investments are exposed to a greater degree of business risk due to uncertainty in acceptability of new technology.

In the current financial year, the group has allocated an amount of Rs 550 crore toward the CapEx, out of which Rs 350 crore pertaining to medical equipment and Rs 200 crore toward non-medical equipment.

Future roadmap

In line with Apollo culture and endeavour, bringing new technology is the area of focus for the upcoming years. Some of the major CapEx in the current budget period are:

Lab automation – a complete automation of biochemistry and haematology laboratory service system. Major vendors like Siemens, Roche, Beckman, and more, are being considered; vascular robotic system of Corindus for vascular procedures; real-time location system of Trackerwave; digital transformation projects involving application (involving AI and Machine Learning) of DXc Technologies; molecular diagnostic laboratory – a comprehensive solution of entire spectrum of molecular diagnostic service. Major vendors like Thermo Fisher, Illumina, and the like, are being considered; intraoperative MR of Philips Healthcare; Digital pathology of Philips Healthcare; 640-Slice CT scanner from Canon Medical System; and ortho robotic system – Navio of Smith Nephew.

The objectives of Apollo in providing the latest healthcare technologies available worldwide to patients in India at affordable costs are being fulfilled by following streamlined capex procurement processes developed and matured over a long period of time.

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