Case

Well Being health care

16,3 Tsd. mal gelöst
4.3 5 734

Problemdefinition

Your client is Well Being (WB), a private healthcare company based in Germany.

Well Being operates 10 hospitals in Germany (in comparison to 1,000 public hospitals). These hospitals are normally half the size of the public ones and are not providing Accident and Emergency (ER).

Revenue comes from patients claiming their own private insurance or paying by cash. In 2012 Well Being had revenues of €100 m (<1% share in the market) and an operating profit of €0.5 m.

Their main competitor is the governmental national health care (NHC). NHC has asked to outsource some of their patients to WB and WB wants our advice on this offer.


Kommentare

This case is made to be interviewer-led. Therefore the interviewer should guide the interviewee through the interview. The questions should be read out and shared with the candidate.

The case is split into two parts:

The first part describes more qualitative problems and has more open questions that should make the interviewee think about the problem and its solution.

The second part is more about quantitative problems and calculations. Here the interviewee should try to make his own calculations and solve the questions.


Kurzlösung

  • The contract would exceed the capacity on a regular base, leading to a lower quality service.
  • Renegotiate the contract details
  • Add more capacity
  • Get a better overview of the revenue/costs scenario

Detaillierte Lösung

Paragraphs highlighted in green indicate diagrams or tables that can be shared in the “Case exhibits” section.

Paragraphs highlighted in blue can be verbally communicated to the interviewee.

The following framework/structure provides an overview of the case:

I. Background

1. What can be the characteristics of the health care market?

A good answer would include:

Degree of rivalry (High)

The dominant player (NHC) or other private hospital groups lead to low profit margins.

Possibilities to differentiate from competitors:

  • Brand
  • Quality of service
  • Price
  • Location
  • Waiting times (reduce)
  • Expanding its target demographics, new services, new locations, etc.

Supplier power (Medium/High)

  • Top quality doctors are key scarce source.
  • WB should try to attract and retain them.

Buyer power (High)

  • Patients can easily choose one of WB’s competitors.
  • WB should differentiate itself from the competitors.

Threat of substitutes (Low)

No real substitutes for health care.

Entry barriers (Medium)

Entering the market takes a lot of time, investment and expertise. Not difficult for international health care systems.

WB could try to raise entry barriers:

  • Build hospitals in attractive locations
  • Charge a very low, competitive price for its services

NHC has decided to contract out operations for hip-replacement, as they have very long waiting times.

2. What factors should WB consider to decide if they should enter these new contracts?

A good answer would include:

+ Advantages

  • Accepting the contract will increase business volume.
  • As NHC provides bulk contracts it will be easier to plan for the increase (scheduling resources, etc.)
  • NHC patients, who get to know the superior facilities of WB, may be tempted to take out private insurance themselves (increasing the market for WB).

- Disadvantages

  • Additional NHC contracts will increase the waiting time at WB. This will reduce the ability to differentiate from competitors via short waiting time.
  • Private patients might not like being treated together with public patients. This could harm the appeal of private healthcare to current customers.
  • WB might not have enough resources/capacities to treat the increased amount of patients. NHC will also not pay as much as private patients, due to the fact that they sign bulk contracts.
  • It is not certain that WB will turn a profit from these contracts.

II. Capacity

3. How would you analyse the capacity of a hospital, in particular regarding outpatients?

Information that should be shared with the interviewee:

  • WB decided to enter the NHC contracts.
  • Each hospital has 2 different, major areas:
    1. Inpatient” area for surgeries and overnight stays
    2. Outpatient” area for consultations, operations without overnight stays, physiotherapy and tests (X-ray, blood test, etc.)

A good answer would include:

  • Key capacity constraints are personnel and equipment.
  • Every sector of an patients journey through the hospital should be analysed:
    Appointment booking, car park, reception, consultations, physiotherapy, X-ray, leaving hospital … (here the interviewee should not only mention doctors and nurses, but also for instance admin staff)
  • The utilisation of nearly all resources in the outpatients’ area is variable and therefore vulnerable to peak demand that exceeds the supply. This would result in queues and a lower quality of service.
  • Capacity could be added via:
    1. Increasing staff
      - General staff (reception) is easy and cheap to acquire.
      - Clinical staffs (doctors) are expensive and difficult to find.
    2. Acquire equipment
      - Equipment is easy, but expensive to acquire.
      - Extra space could be rented, depending on the location.
  • Bottlenecks are
    1. Clinical staff (doctors, nurses, etc.)
      No substitutes, difficult and expensive to acquire
    2. Physical space (waiting areas, etc.)
      Required, but can become over utilised
    3. Admin staff
      Required, but can become over utilised (will lead to increased process times)

4. How could you interpret the following graph?

Share Diagram 2 with an overview of the patients treated per weekday.

The interviewee should find out:

  • Both areas exceed their capacity sometimes (lead to delays)
  • The demand for both areas seem to have inversely proportional patient demand (busy days in consultation are quiet days in X-ray and vice versa)
  • There may be a relationship between X-rays and consultations
    1. X-rays lag consultations by one day
    2. X-rays lead consultations by one/two days

Does it seem that consultations lead to X-ray or vice versa?

The interviewee should find out:

  • X-rays consistently lag consultations by one day, but do not lead consistently.
  • There are more consultations than X-rays. X-rays should not cause more than one consultation the next day, but a consultation could cause more than one consultation the following day.

III. Market

5. How many outpatient visits will occur if operations increase by 25%?

Information that should be shared: For each operation about 1 inpatient and 6 outpatient visits are needed.

In total there would be about 1.75 m operations:

As 6 outpatient visits are needed for each operation, there will be 10,500,000 outpatient visits.

Main conclusion

The number of outpatient visits occuring will be 10.5m. The number of operations exceeds the current maximum capacity of the client. It is obvious that on the long-run the capacity will be too small.

VI. Conclusion

6. What is your recommendation to Well Being regarding the strategy?

Main conclusion

  • The additional business would exceed the capacity rather quickly.
  • As demand fluctuates it will exceed 100% of capacity on a regular basis. This will lead to many problems, as delays, lower service quality, higher costs and brand damage.
  • Capacity levels should be monitored in detail.
  • Don’t take on all the contracts of NHC (e.g. half of them).
  • Add more capacity (takes time and may be costly).
  • Get more details about the revenue/costs related to the NHC contracts to determine if it would be economical to agree on them.

Schwierige Fragen

How would you minimise the time for health record processing using the current level of resources? (NHC records must be processed within 48 hours, while private ones have a limit of 24 hours)


Possible solutions:

  • NHC records are more flexible than private bills (48 hours compared to 24 hours). Therefore NHC bills can be handled on less busy days.
  • Consultation and X-ray records are similar. Therefore it would make sense to merge the two departments into one record system and as a result get rid of the capacity problem.
  • Introduce IT-automated electronic health records.
  • Prepare health records for outpatients beforehand. This can unfortunately not be done for X-rays as future X-rays are just known the day before when the appointment is booked.

More questions to be added by you, interviewer!

At the end of the case, you will have the opportunity to suggest challenging questions about this case (to be asked for instance if the next interviewees solve the case very fast).

Verwandte Consulting-Fragen

Two frameworks here: 4 Ps (= price, place, product, promotion), or the Ansoff Matrix (grow with existing or new products in existing or new markets). Both are quite MECE. Word of caution however --... (mehr)

Bisher beste Antwort von 3 Antworten:
McKinsey / Accenture / More than 300 real MBB cases / Collected all Big 3 offers / Harvard Business School

Hi, Focus on the most common industries in the followingpriority (sorted by probability of geting a case): 1-retail and CPG; 2-airlines; 3-Telecom; 4-banking; 5-natural resources; 6-tech There a... (mehr)

Before capacity expansion I would consider comparing demand versus our bottleneck, whereby the focus would be to improve that slowest bottleneck (by e.g. installing a quality assurance control point b... (mehr)

Bisher beste Antwort von 3 Antworten:
Sara
Experte
MBA Candidate at INSEAD / Ex McKinsey / Here to guide you from your very first steps

Dear Kevin, Your objectives are - to make the transition between the two frameworks fluent - to facilitate your work by gathering before information that will be useful later At this scope... (mehr)

Hi TFP, I don't see much how you wanna tackle this question by just dropping a framework like that. I think it something really case/context-specific. So, regarding a general metholodology, here... (mehr)

Verwandte BootCamp-Artikel

The Value Chain

The Value Chain - as e.g. by Porter - is a classic framework to structure the activities of a business and add value to products by transforming resources.

3 Kommentar(e)

CAGR - Compounded Annual Growth Rate - CAGR

The Compounded Annual Growth Rate (CAGR) Is a theoretical steady growth rate over a specific amount of time, not the average of the Y-o-Y growth rates. It can mask sub-trends within the period

5 Kommentar(e)

Growth Strategy

Growth questions are among the most common questions in consulting case interviews: gather the necessary Information about volume and price to find the best growth lever

5 Kommentar(e)
4.3 (734 Bewertungen)
4.3 5 734
Case-Exhibits