Confidential

Margin Enhancement Services to

Healthcare Sector

2PKC Advisory

Overview

Global health care expenditures continue

to escalate, shining a light on health

systems’ need to reduce costs and

increase efficiency

Global healthcare spending is

projected to increase at an annual rate of

5.4% during 2017–2022, from USD

$7.724 trillion to USD $10.059

trillion

Healthcare spending will likely be driven by

the shared factors of aging and

growing populations, developing

market expansion, clinical and

technology advances, and rising

labor costs

Healthcare spending in the Middle East

and Africa region is projected to

increase from USD $196 billion in

2017 to USD $279 billion in 2022

Current ScenarioWhy Healthcare

Advisory?

Key Challenges faced by Healthcare Sector

Recruiting, developing,

and retaining top talent

Creating financial

sustainability in an

uncertain health economy

Investing in digital

innovation and

transformation

Maintaining regulatory

compliance and

cybersecurityUsing new care delivery

models to improve

access & affordability and

reduce costs

Adapting to changing

consumer needs, demands,

and expectations

Our services to healthcare providers are aimed at assisting our clients to drive

continuous cost savings, streamlining activities, standardizing processes,

enhancing transparency and mitigating related risks

Source – Deloitte 2019 Global Health Care Outlook

3PKC Advisory

Our Service Offerings

Pool of

Subject Matter

Experts

Handholding

beyond

Delivery

Customer

Centric

Deep

Industry

Experience

Mix of

Offshore and

Onshore

Delivery Model

Tools and

Best

Practices

Our

Strengths

Our service offerings are designed to provide the most effective and tailored solutions to our healthcare clients driving

organizational development, reduction in costs and increase in profit margins.

Analyze spending and exploit cost saving

opportunities to drive sustainable and long

term savings

Planning and

Budgeting

Streamline planning and budgeting exercise

of the client to develop a comprehensive

business plan

Formulate pricing strategy and develop a

price and package master for the

services rendered

Price Master

Development

Cost AnalysisService

Offerings

4PKC Advisory

Planning and Budgeting Services

Our Impact StoriesWe understand the challenges faced by healthcare service providers in aligning their vision

with their business plan and budget. We assist them in developing a detailed business plan

and budget document to help them gain control of their finances.

Our Value

Proposition Developed capacity utilization strategy by

co-relating bed-nights with OT time. Resulted in

additional revenue of ~USD 18.8 million per

annum for a 300-bed hospital in India

Developed business plan and strategy for

opening interventional radiology to take advantage

of existing Cath lab facilities. Resulted in additional

revenues of ~USD 2.1 million per annum for a

500-bed hospital in India

Applied zero-based budgeting for rationalizing

consumables in cardio thoracic surgeries. Resulted

in saving of ~USD 142 thousand per annum for

a leading 300-bed heart specialty clinic in India

Developed strategy for home care facilities

and conducted detailed budgeting exercisefor a 900-bed medical college and hospital in India.

Resulted in additional gross revenue and

EBIDA with same fixed expenses

Our Approach

Significant saving of management time

Intuitive data presentation

Improved resource allocation

Improved decision making

Increased transparency

Key Benefits

▪ Obtain detailed understanding

of the healthcare unit

▪ Collect data

Assessment

▪ Study the existing set-up

and capacity utilization

▪ Build suitable strategies

Analysis &

Estimation

▪ Develop a three year business

plan with estimates

▪ Prepare development plan for:

- specific medical specialties

-outreach centers

-home care centers

-diagnostic centers

Development of

Business Plan

▪ Deploy “Zero-Based

Budgeting” concept

▪ Develop the budget

document to include:

-Departmental budgets

-EBIDTA statements

-Cash flow statements

-MIS at hospital & dept. level

-Tool for variance analysis

Development

of Budget

▪ Deliver the business plan

and budget to the

management

▪ Train internal

resources for

future budget

preparations

Training &

Implementation

5PKC Advisory

Cost Analysis Services

Our Impact StoriesOur Value

PropositionWe assist our healthcare clients in developing management tools to identify cost saving

opportunities and design a dashboard for its continuous monitoring.Re-designed service prices based on capacity and cost analysis. Resulted in additional

contribution of USD 2.8 million per annum for a 350-bed hospital in India

Developed standard inventory packs for surgeries in

OT complex. Resulted in 5% savings (USD 1.3 million) for a leading hospital chain in India

Conducted cost analysis and suggestedoutsourcing of centralized lab of a 500-bed hospitalin India. Resulted in increase in net margin from

18% to 32%

Renegotiated with payers on high risk surgeries.Resulted in an increase in price and margin by

about 5% (approx. USD 2.1 million) for a500-bed hospital in India

Implemented consignment inventorymethod with vendors. Resulted in stock reduction

by 25% for a 900-bed medical college and hospitalin India

Assess

▪ Categorize costs using 3Me methodology

▪ Calculate Cost to Capacity for each

resource by applying Activity-based Costing

Enforce

▪ Develop monitoring benchmarks

▪ Help decide action plans

▪ Design dashboards

Discover

▪ Identify and map the clinical

processes and resources

▪ Identify costs at each level

Analyze

▪ Compare profitability

▪ Identify under-utilized resource capacity

Our Approach

Identify

▪ True margins

▪ Total costs of services

▪ Capacity utilization

▪ Recovery rates

▪ Volume levels to generate surplus

Analyze and Understand

▪ Cost reduction opportunities

▪ Package profitability

▪ Medical department wise profitability

▪ Consultant wise costs and surplus

Monitor and Decide

▪ A pricing strategy

▪ Benchmarks for monitoring

▪ Deviations from recovery rates

▪ Decision to outsource expenses

Key Benefits

6PKC Advisory

Price Master Development Services

Our Impact StoriesWe understand that for healthcare service providers revenue cycle management is bothcomplex and important. We assist our healthcare clients to design a price master suchthat same services can be rendered at multiple points at different prices.

Our Value

Proposition

Design

▪ Department-wise, Bed

Category-wise Price Master

▪ Premium & Package Pricing

including exclusions

▪ Category-wise variations

▪ Billing rules

Deliver and Implement

▪ Handover and training of

internal resources

▪ Implementation and

configuration support

▪ Discussion with key Head

of Departments and Senior

Management

▪ Review of relevant HMS

modules

Review and Analyze

Developed a pricing tool for a 500-bed hospital

in India. Resulted in savings of 8% of the gross

revenue through prevention of short billing and non-

billing

Enabled standardisation of package price.

Resulted in handling higher volume of patients

and higher utilisation of beds & OT for a 500-

bed hospital based in India

Developed Standardized price book that

enabled better negotiation, lower disallowances and

faster realisation from payers. Resulted in savings

of USD 1.4 million per annum for a 900-bed

medical college and hospital in India

Designed and implemented complete

automation of pricing of different services for

multiple hospital chains based in India. This resulted

in better realisation per unit service

Performed price adjustment for premium

services for a 500-bed Hospital

Structured pricing across healthcare units

Decline in potential revenue leakage

Increased control on prices

Simplified revenue management

Our Approach

Key Benefits

7PKC Advisory

Credentials

About PKC Advisory

Our Esteemed Clients

Case Studies

Team Profiles

8PKC Advisory

About PKC Advisory

9PKC Advisory

Our Esteemed Clients

10PKC Advisory

Case Studies

Performed Market Study and prepared Business Plan for hiving-off facility management division of a hospital chain

into a separate venture in India

▪ We carried out a comprehensive study of the following:

1) Expansion plans of the chain

2) Assessment of opportunities with existing hospitals in the region

3) Assessment of new hospital projects in the region

4) Extending house keeping and maintenance services to other industries

5) Creating a dedicated team and retaining

6) Bringing an international player as Joint Venture (JV) partner to maintain international standards

7) Consider listing the shares based on ROI and growth prospects

▪ Technology, Training, Compliance & Patient Safety (TTCP) were taken as core factors for the business model. A detailed gap

analysis was done in the market. Based on the gap analysis, we developed a business plan for spinning off the facility

management as a separate business venture, mapping market strategy, strategic roadmap, corporate structure, broad

implementation plan and financial projections.

The objective of the assignment was to evaluate the profitability of hiving of facility management of the hospital chain across

India and present a business plan with milestones. Facility Management included: House Keeping & Infection Control, Security

Services and Maintenance Services including Bio-Medical Engineering ServicesOverview

Objective

Approach

Value Added

01

02

03

04

Case 1

Market Study

and Business

Plan

▪ The management was able to leverage the investment made in TTCP by serving the other players in the market. It was able to

unlock the value available within the group. The group turnover as well as the EBIDTA moved up substantially

▪ The hospital chain was able to bring an international partner. The increase in contribution to the bottom line due to higher

levels of efficiency in services was around 8-10%

▪ The business plan was the basis on which Client assessed the financial and operational viability of this venture

▪ Ultimately the otherwise high cost of bringing in an international training partner was saved in the form of a JV as well as the

cost of training could be defrayed among the clients outside of the chain too.

11PKC Advisory

Case Studies

Prepared Business Plan for separation of pharmacy business of a regional hospital chain with about 6 branches in

South India

▪ We carried out a financial assessment and prepared a detailed business plan with the following core objectives

1) Improving margins through aggregation

2) Expanding into retail pharmacy (Stand Alone Pharmacy (SAP)) - Direct Sale to Customers (D2C)

3) Retaining margin in existing B2B segment through outsourcing

4) Reduction in inventory levels, wastages and expiry drugs

5) Overall margin in Pharmacy turnover including SAPs to be achieved at 15% ROCE

6) SAP to give a margin of 3-4%

▪ The business plan had to include the details of year-wise plan for opening new stores with locations and time frame to become

a matured store with standard turnover and margin.

The client wanted to separate the pharmacy business to improve the margin and grow a retail chain of pharmaciesOverview

Objective

Approach

Value Added

01

02

03

04

Case 2

Business

Plan

▪ The management was provided with a road map to achieve following metrics in business:

1) Blueprint for expanding SAP location-wise and year-wise

2) Data driven store expansion resulting in fewer closures

3) Back-end supply chain with well established distribution network

4) Measure conversion of prescriptions

5) Promoting private labels wherever possible to improve margin without compromising on clinical quality (6-10% of turnover)

6) Close monitoring of progress of new stores to matured stores

7) Standard practices across stores resulting in ease of scaling up and control operations and finance

8) Integrated customer loyalty program

9) Year wise growth for 4 - 5 years in top line and bottom line after initial gestation period of 18 months.

12PKC Advisory

Case Studies

Performed Zero-Based Budgeting for a 500-bed super specialty hospital with multiple referral centers in India

▪ We carried out a financial assessment and interacted with all the departments and management to achieve the following

objectives:

1) Develop a vision and growth strategy by working with the management team. The major objective was to double the

revenues and achieve an EBIDTA of 22-26% in four years

2) Identify patient segments and launch digital relationship for improving brand recall as well as retail revenue

3) Differentiate services in to Premium, Normal and Standard. This helped to develop different strategies depending on

competitive landscape and set achievable goals for growth and plan resources accordingly

4) Develop overall hospital budget and medical department-wise budgets, estimating the revenues and expenses as if the

departments are launched afresh

5) Set up targets for top consultants in consultation with them according to the capacity and resources available/ required with/

by them

6) Rationalize material consumption and overheads according to the activity level

7) Plan marketing department targets, B2B network, referral centers, city centers and branch level plans

▪ The Zero Budget approach helped to relook at marketing and operations from ground level and connect to overall growth plans.

The client had a situation of flat revenue levels for the past three years and declining margins. The client wanted to identify

growth levers, set achievable targets for underperforming medical departments and consultants, identify underutilized medical

assets and rationalize costs at every departmentOverview

Objective

Approach

Value Added

01

02

03

04

Case 3

Planning and

Budgeting

▪ The management was provided with a detailed budget at hospital level, department level, fresh investments required and

release under utilized capacity as well as set efficiency norms for all expenses

1) An immediate growth of 20% was possible from revenues of USD 1.7 million to USD 2.1 million per month

2) Interventional radiology and liver transplant were established as premium services for 30% growth from second year

onwards. Both ICU and Cath lab could be utilized better

3) Material consumption was controlled in consultation with doctors and a saving of 12% on USD 0.6 million was achieved

4) Average Revenue per Operating Bed per day was increased from USD 195 per bed per day to USD 237 per bed per day.

13PKC Advisory

Case Studies

Performed Cost Analysis for a 300-bed Super Specialty hospital with multiple referral centers and an OT complex with

6 theaters including a dedicated Cardiac as well as Ophthalmology theater

▪ We carried out costing of services using Time Driven Activity-Based Costing (TDABC) method (endorsed by Harvard Business

School) to arrive at the cost of Inpatient, Outpatient and Day Care services in the hospital.

1) Develop a Detailed Template for capturing data for each department (both medical & non-medical) with all costs grouped in

to five drivers – Manpower, Materials, Machinery, Expenses and Utilities

2) Fix Capacity limits and Units of costs for various resources and arrive at standard time spent by the resources with each

clinical and non-clinical activities of the patient

3) Group all departments into medical support and service departments

4) Allocate Costs to all patient related activities based on the allocation parameters developed for each department whether

medical or support

5) Arrive at Cost per Surgery, Cost per day per bed for medical admissions, Cost per procedure and Cost per patient for

Outpatient Services

6) Fix Standard Recovery Rate for all key surgeries and procedures and arrive at cost per test/ procedure for lab and radiology

7) Fix inventory levels for the OT complex, reduce the cost of materials and develop inventory packages for surgeries

8) Rationalize manpower costs and increase manpower capacity by task shifting at all levels. This contributes to increase in

margin in fixed reimbursement tied to clinical outcomes.

The Ophthalmology Theater and three general theaters were operating at 40% capacity and bed utilization was at 57%. The

client wanted to understand cost of services including the cost per surgery department wise, OT utilization, material

consumption of surgeries, expense levels according to bed capacity utilizationOverview

Objective

Approach

Value Added

01

02

03

04

Case 4

Costing

▪ An immediate savings of 5% on revenue of base of USD 2.1 million per month due to savings in consumption of materials by

15%

▪ Ophthalmology OT capacity was increased with additional surgeries from 2 per day to 8 per day with fixed cost remaining the

same and revenue per surgery being reduced to generate demand. This led to an increase in revenue from USD 84 thousand

to USD 222 thousand per month based on 20 working days

▪ Higher utilization of other OT could be achieved with least increase in manpower cost with task shifting and training. This led to

a saving of 8% in manpower cost which was brought down from 28% to 22% of the revenue

▪ Break-even Point for number of beds to be occupied and number of surgeries per day for the theaters were identified.

14PKC Advisory

Case Studies

Carried out OT Costing for a 1400-bed Multi Specialty hospital attached to a medical collage hospital in Karnataka,

India

▪ We carried out costing of surgeries using Marginal Costing method to arrive at break-even point, capacity utilization and cost

per surgery for additional number of surgeries to fix a flexible pricing for additional number of surgeries

1) Average Revenue and Cost per surgery was arrived at

2) Based on detailed discussions with OT team as well as analysis of OT records, utilization of each theater was determined

3) Break Even Point in terms of number of surgeries was identified

4) Additional number of surgeries that could be done within the existing fixed cost structure was identified

5) Manpower utilization in step with OT utilization was identified with a clear finding that additional manpower was not needed

to increase the number of surgeries

6) Reasons for underutilization were also identified.

The hospital wanted to understand revenue & cost per surgery as well as break even point. The hospital also wanted to identify

underutilization and suggest ways for improving the utilization to increase the net revenueOverview

Objective

Approach

Value Added

01

02

03

04

Case 5

OT Costing

▪ Average OT utilization was at 57% with a scope to increase the number of surgeries by 4133 per annum. At average revenue

per surgery at USD 1123, scope to generate USD 4.6 million per annum was identified

▪ Staff and equipment capacity were available to perform the increased number

▪ Break-even point was identified at 3628 surgeries at current revenue per surgery and fixed costs

▪ Since fixed costs were not to increase, the additional contribution could be moderated to incentivize doctors from outside the

hospital to utilize the OT. This led to an increase in total revenue and margin

▪ Based on non-peak hour utilization, arrangements were made to bring in more surgeries without compromising clinical safety

and outcome.

15PKC Advisory

Case Studies

Performed Pricing for a 500-bed Super Specialty Hospital in India

▪ A complete Price Book was prepared containing prices for surgeries, procedures for Inpatient, Outpatient, Day Care &

Emergency and Trauma Care considering Premium, Standard and Normal category of medical services of the hospitals and a

comparative analysis within the competitive landscape was performed

1) Mapping different price points at multiple service points for different patient segments and payers

2) Define Surgical, diagnostic and medical package of services for different specialties in consultation with clinicians including

defining units of service for every component of service

3) Define inclusions and exclusions to packages including chargeability of use of certain equipment whether per hour or per

day

4) Defining Price Points (in consultation with clinicians) according to grades of medical event

5) Define Billing rules with levels of authorization for discounts and credits

6) Reasons for underutilization were also identified

7) Fixing categories of services in to Premium, Standard and Normal according to the strengths of the hospital in comparison

with competitors.

The Management wanted to create a proper price book covering all surgeries and procedures, package & open billing,

daycare, Trauma and Outpatient services. The management also wanted to frame billing rules and save leakages from top line

due to improper handling of pricing and billing process. Ultimately the Price Book had to be integrated into the hospital

management software

Overview

Objective

Approach

Value Added

01

02

03

04

Case 6

Pricing

▪ Revenue leakage of 6-7% due to improper billing was arrested

▪ Additional billing of exclusions brought in a revenue of 2-3%

▪ The Price Book helped in streamlining discounts saving about 2-3% of the revenue

▪ Bed Category wise Price Points for Cash/ Cashless/ Reimbursement (except for Bundled Payments) brought in additional

revenue of 5% on an average

▪ The total savings for the hospital at 450 operating beds and Average Revenue Per Operating Bed Per Day of USD 348

amounted to USD 0.6 million per month.

16PKC Advisory

Team Profiles

17PKC Advisory

S.Manivannan

Subject Matter Expert

Profile Brief

Manivannan has over 19 years of work experience in

providing healthcare management consulting and advisory

services in India.

He has worked with All India Institute of Medical Sciences

(AIIMS), Apollo Hospital Group, KLES, Belgaum, SRM

Medical College & Hospital and Star Health Insurance

Company and has done assignments related to management

audit, project review, budgeting and costing, operational and

financial review, hospital information system development and

legal compliance & reporting.

He is currently an advisor to Health Care Pricing Committee of

FICCI, New Delhi and a visiting faculty (cost accounting) at

Indian School Business (ISB), Mohali. He is also a knowledge

partner to Institute of Cost Accountants of India and Ministry of

Health in healthcare costing.

Specializations

▪ Healthcare Strategy and Management Consulting

▪ Healthcare Costing, Budgeting & Pricing

▪ Operations Management

▪ Healthcare Technology Solutions & Digital Platform

▪ Implementation Solutions

Education and Certifications

▪ Chartered Accountant, Institute of Chartered Accountants of

India

Representative experience

▪ Published a Research Paper on Healthcare Costing as knowledge partner to Federation of Indian Chamberof Commerce & Industries, New Delhi

▪ Selected more than 12 hospitals across India and adopted “Time Driven Activity-Based Costing” Modelendorsed by Harvard Business School

▪ Provided support as a knowledge partner to Institute of Cost and Works Accountants of India in releasingIndia’s first Costing Manual for Hospitals

▪ Established Costing System and Price Tool for a well known 300-bed Multi Specialty Hospital in Tamil Nadu,India

▪ Developed Zero-Based Budget for a 300-Bed hospital with budget for various medical specialties and targetsfor marketing department

▪ Developed Price Book and Standard Package Template for more than 1500 surgeries and proceduresacross 30 medical specialties for a super specialty, 500-Bed corporate hospital including Liver and RenalTransplant departments

▪ Designed, developed and implemented Hospital Management System for a 1000-bed Medical Collage andHospital based in India

▪ Carried out financial and operational reporting review of a Regional Hospital Chain based out of Tamil Nadu,India

▪ Acted as a Domain Expert to support IT solution development of a Regional Hospital Chain based out ofTamil Nadu, India

▪ Managed 800-bed Medical College and Hospital as well as its performance reporting to Board of Trustees inKarnataka, India

▪ Acted as a Chief Advisor to a leading (4th largest in India) Medical Lab Chain covering Finance, Costing,Budgeting, Supply Chain, Franchisee Management and Quality Review

▪ Worked with a leading Ophthalmology Chain in India for their first phase of expansion across South of India

▪ Conducted risk-based audits for a 400-bed Heart Specialty Centre at Mumbai, India

▪ Performed costing of Asia’s largest Trauma Care Centre based in India

18PKC Advisory

Rupesh Srivastava

Director

Profile Brief

Rupesh has a total work experience of over 15 years in

providing risk and business solutions in India and Middle East.

Prior to PKC Advisory, he has worked with KPMG in their

Governance Risk and Compliance Services Practice wherein

the work required extensive project management and

execution of risk-based assignments combining multi-

disciplinary backgrounds. His experience spans across a

spectrum of verticals including Healthcare, Hospitality,

Manufacturing, Metal & Mining, Real Estate, Retail, Insurance

and Financial Services Industry.

Rupesh leads the Process & IT Consulting practice at PKC

Advisory. He is actively involved in business development and

in managing client relationships and is also responsible for

quality review and overall delivery of the engagements.

Specializations

▪ Risk-Based Internal Audits

▪ Process Risk Consulting

▪ Model Business Processes

▪ Enterprise Risk Management

▪ Corporate Governance Solutions

Education and Certifications

▪ Chartered Accountant, The Institute of Chartered

Accountants of India

▪ MBA (Finance), NMIMS, Mumbai, India

Representative experience

▪ Led risk-based Internal Audit of Billing & Collections function covering Admission, Cancellation, Refunds,

Collections, Charge Capture, Bank-in & Sales Reconciliation, and Tariff Master Management processes for

IPD as well as OPD areas of a leading private sector healthcare chain based out of India

▪ Managed Internal Audit of Medical Records Management function of a multinational group of hospitals based

out of India

▪ Supervised process review of Sales & Marketing, and Third Party Administration functions of a leading

private sector hospital group based out of India

▪ Led Physical Verification of key assets and inventory of a leading retail pharmaceutical chain of Asia

▪ Managed process review of end-to-end Blood Bank operations for a large hospital chain of Asia covering

processes like Blood Sourcing, Screening and Quality Control, Blood Storage & Segregation, Blood

Requisition & Issuance, Consent Management, Recordkeeping, and Regulatory Compliance

▪ Handled review of operational and regulatory requirements for Narcotics Management for multiple units of a

leading healthcare service provider of Asia

▪ Led process review of Bio Medical Waste Management process for one of the leading group of hospitals in

India

▪ Managed internal audit of Housekeeping & Laundry and Food & Beverage processes for a leading hospital

chain based out of India

▪ Supervised controls testing of Finance & Accounts, HR & Admin, Engineering and Security functions for

multiple hospitals in India

▪ Led Internal Audit for end-to-end Procurement and Inventory Management function of a leading multinational

healthcare chain of Asia covering processes like Purchase Requisitioning & Ordering, Physical Storage &

Safeguarding of Stock, Handling of Regulated Stock and Vendor Managed Inventory (VMI), Inventory levels

monitoring, Receipts & Issuance, and Vendor & Item Master Management

Email : info@pkcadvisory.com Website : www.pkcadvisory.com