The case tests the interviewee’s ability to probe and develop a customer segmentation, digest a relatively complex chart, isolate the most critical information and determine profitability.
The data provided by both exhibits should be requested; try NOT to show the exhibits until need for the data is demonstrated
Strong interviewees should use common sense to make reasonable assumptions before you provide required inputs.
Paragraphs highlighted in green indicate diagrams or tables that can be shared in the “Information to share” section.
Paragraphs highlighted in blue can be verbally communicated to the interviewee.
Paragraphs highlighted in orange indicate hints for you how to guide the interviewee through the case.
Suggested case structure:
Here the interviewee should investigate the customer segmentation by disease area and the costs per member.
Information that can be shared if inquired:
Competitive dynamics (not core to case)
With increasing health care costs, the industry is under pressure to innovate new products that will control spending
Assume client is first to market
Past attempts to purely automate disease management have yielded minimal savings
All activity conducted remotely via phone/email
Typical profile is registered nurse that wants to work from home
It’s difficult to actually reach patients, so coaches can contact 8 members per day (assume 25 days per month)
Annual costs per coach: $60K salary +20% other (training, benefits, laptop, etc)
There are no other program costs
What can we get out of this chart?
Share Diagram 2 if interviewee inquires information about the client’s membership segmentation and/or exposure to disease areas.
If the interviewee is not going in that direction, you can ask:
“How would you segment the client’s members?”
Share Table 1 if the interviewee inquires asks for medical cost data.
Try to avoid handing out Table 1 until Diagram 2 has been discussed (hint: if interviewee leads with profitability, steer him/her to first think about the customer segmentation)
Which segment is likely to generate the greatest per member costs? Why?
Using Diagram 2, discuss which segments and disease areas are most important to explore.
Interviewee should choose to focus on the 65+ segment
65+ (Medicare) patients are the sickest, followed by the individuals, while the group members are the healthiest (younger, working).
Sicker patients are likely to drive higher costs, which will make them better candidates for the disease management program (i.e., the 5% cost reduction will have a bigger impact).
Which disease area should we look at first?
Interviewee should choose to focus on diabetics (Assume all are Type 2 for the purposes of this case)
Diabetics make up the largest portion of sick members.
As a chronic disease is primarily brought on by behaviour, Type 2 diabetics are most likely to benefit from disease management program.
Number of 65+ diabetics
Reviewing both exhibits, the interviewee should determine if health coaches are profitable in each of the three segments.
Cost per Coach
Size of Portfolio
Savings for one portfolio of 65+ diabetics
- Profit is $72,000 per health coach, which is 50% of the total revenues/savings generated.
- Based on a PMPM diabetic cost data, the “Individual” segment is break-even (50% less savings as PMPM is only $150)
- Based on a PMPM diabetic cost data, the “Group” segment is a loss.
Give the interviewee a moment to prepare a recommendation.
The following one is a strong example:
- The client should launch the health coaching program, and first focus on diabetes for the 65+ Medicare segment
The client should take the following steps:
- Launch a pilot program to prove out assumptions (e.g., 5% cost reduction, Coach portfolio capacity, etc.)
- First expand to entire 65+ segment ($144M per year savings, a 2x return on each Health Coach)
- Consider introducing to expand to the Individual segment despite only being able to break-even.
This could be done due to customer retention, a moral rationale and many other factors.