Industry primers

Industry primer

Healthcare: A Case Interview Primer

The patient receives the care, but someone else usually pays: name the player, and who pays it, first.

What's new here: how healthcare makes money.

The business
Market
Not used in this case
Existing businessRevenue
Product 1
Price
  • List price
  • Discounts and promotions
  • Mix across tiers or sizes
  • Price against competitors
  • What customers are willing to pay
Quantity
  • Number of customers: market size x your share
  • Purchases per customer: how often they buy
  • Units per purchase
  • Customers kept versus lost
  • Capacity: how many you can actually serve
Product 2
Service 1
For a service, units are visits, hours or members
Mix
  • Share of revenue from each
Existing businessCost
Variable
Product 1
  • Materials or inputs per unit
  • Labor per unit
  • Delivery
  • Payment fees
Product 2
Service 1
Fixed
  • Rent
  • Salaried staff
  • Marketing and overhead
New business
Ways inwhat each costs up front
Build
  • Build-out and equipment
  • R&D
  • Time to launch
  • Team to hire
Buy (M&A)
  • The target on its own: its revenue, cost and profit
  • Synergies: extra revenue, cost savings
  • Price paid: valuation, how it is financed
  • Integration: cost, time, culture and people risks
Partner
  • Fees or revenue share
  • Control
  • Contract terms
  • Exit
Projected revenue
Projected cost
Operations and risks
Not used in this case
The business
  • 1MarketNot used
  • 5Operations and risksNot used

The patient receives the care, but someone else usually pays. Name the player, and who pays it, first.

How the business makes money: who pays, for what, and the main costs.

Who pays

In healthcare

  • Usually not the patient: an insurer, an employer or a government plan
  • Members or employers pay the insurer

For what

In healthcare

  • Providers: care, by visit, procedure or stay
  • Drug and device makers: products the doctor chooses, the hospital buys and the payer covers

How revenue is earned

In healthcare

  • Providers: patients × visits × the rate each payer pays
  • Insurers: premiums, then claims paid out
  • Makers: units × price, while a patent protects it

The main costs

In healthcare

  • Providers: staff, buildings and equipment, mostly fixed
  • Insurers: claims
  • Makers: research and trials, years before a sale

What decides profit

In healthcare

  • Who pays, and at what rate
  • How full the beds and rooms run
  • For makers: what the pipeline holds

The patient receives the care, but the payer usually sets the price: name the player and who pays it first.

Create a free account to read the rest.

It takes a minute, and reading is always free.

Create a free account I have an account: sign in

Reading helps. A live case shows you where you stand.

Try your first case free Start Learn free