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Market analysis and financial forecast for health system

April 22, 2017 Case Study 1 min read
Multicampus health system validates decision for new facility with financial models covering over 10 service lines and locations.

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The client

A $500+ million health system with multiple campuses.

The challenge

The health system was looking to construct a replacement facility in a large metropolitan area and repurpose an existing facility. They were working with a large national investment banker to obtain financing for the relocation and needed a full financial feasibility study, including market demand analysis, to be included in the potential bond offering.

The solution

We were engaged to perform a thorough financial forecast. This included building and developing financial models for over 10 service lines and locations, consolidating those models into one financial pro forma, and integrating the proposed financing structure detailed by the investment banker. Lastly, we were required to perform an examination of that forecast under the AICPA guidelines.

The market demand study focused on the competitive landscape, population growth, service needs, and payor mix of the new location. Our team also met with physician leaders and the county economic development corporation to better understand local and physician sentiment of a new facility and the impact on patients residing in the existing facility’s geography.
Throughout the process, we worked with clinical stakeholders, business development and marketing departments, and the investment banker. Beyond the new facility, we analyzed the health system’s additional service lines and markets to model the impact a new facility would have on their current service lines and operations. Our team concluded the project by meeting with the state commission and potential bondholders to discuss our findings and the results of the feasibility study. 

The benefit

The recommendations resulted in a supply base reduction at an average of 48 percent per category, and an average of 14 percent cost savings per category. It also achieved an overall profit & loss savings of $20M over five years from best cost country savings, long-term agreements, payment term improvements, cost reductions, and headcount reductions. Additionally, it saw supplier lead time improvements of 29 percent, which corresponded to a net decrease in inventory of $2.2M.

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