Private Hospital in Delhi 

I: Your client is a private hospital situated in Delhi. They are facing loses since last few years. Analyze why and provide recommendations.

C: Where is the hospital located? Do we own the whole facility or are we leasing it? What are the different departments present in hospital and what all services we provide e.g. consult, testing, surgery etc?

I: The hospital is in Delhi, and we own the facilities and infrastructure. IT was three wards, namely, maternity, emergency and general. We provide all these services.

C: Sure. Is there any other income I should consider? What is the customer segmentation for our hospital in terms of income? Who all are our competitors in this area?

I: No, let's focus only on these three departments. Our customers are from moderate income and high-income category. We have a two other hospitals in the area who provide similar service.

C: Okay. I believe I have sufficient grasp on the scenario. I did like to divide into the components of revenue and cost. Would you like me to analyze either of these in particular?

I: Let’s focus on revenue aspect. Could you provide three different approaches to calculate the annual revenue?

C: Sure. Below are the three approaches I could think of to calculate the revenue.

C: Supply approach (Staff): (#Staff) x (days of operation per year) x (% utilization of staff) x (average revenue generated per staff per day)

C: Supply approach (Beds): (#Beds) x (days of operation) x (%occupancy) x (amount charged per bed per day)

C: Demand approach (customers): (Days of operation) x (Avg customer footfall per day) x (Avg amount charged per customer)

I: Sounds good. Let us take the second approach using number of beds. We have a fixed cost of Rs. 12 crore. I would like you to calculate the loss being faced using the following case data. (refer previous page for case data)

C: Based on the data provided we are generating a contribution of Rs. 7.5 crore yearly. Since our fixed cost is Rs 12 crore we are facing a loss of Rs. 4.5 crore. Now, to analyze the reason for low occupancy, are we seeing a lack of supply from the hospital since the hospital is understaffed or is it a lack of demand?

I: You are correct. It is a supply side issue, since we lack the amount of doctors we are not able to attend to all the patients coming in.

C: The shortage of doctors could be due to either internal or external reasons. Internally the reasons can be low monetary incentives to join our hospital, or lack of proper facilities, or equipment needed. Externally the reasons can be unavailability of doctors in our location, unattractiveness of the hospital location in terms of commute or stay.

I: That is a good breakdown. Our facilities are not up to par in terms of equipment and technology being used. Please provide recommendations to improve profitability.

C: Sure. In short term, we should focus on investing in equipment necessary for the services we provide that match the industry standard needed. We should start contacting and bringing onboard doctors to meet the demand. On a long term, as the demand grows organically, we should also focus on expanding the number of beds of and services being provided to accommodate the demand.

I: Sounds good. Let us close the case here.