Feasibility_Study_UK_Healthcare_M by Sutherland Global Services

Case Study and Sample Slides UK: Private Hospitals

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Private Hospital London : Feasibility Client • The client is a leading Private Equity Firm

Client Ask • The client mandated SGS to understand the private healthcare market for an upcoming private hospital in the UK. The key research objectives included – Financial feasibility analysis for the hospital on the basis of validation of the financial model with inputs from market assessment – Outlook for private medical insurance and medical tourism market in the UK – Major players, competition and barriers to entry – Market assessment by specialist areas - Cancer, Cardiology and Neurology – SWOT Analysis of the proposed hospital based on individual analysis as above

Sutherland’s Solution • Market assessment was carried out by conducting a mix of primary and secondary research • Sutherland conducted an extensive secondary research to gather insights on the healthcare market in the UK. SGS leveraged its proprietary databases to get access to previous research conducted on the subject; SGS also consulted the healthcare industry experts such as Laing & Buisson • SGS conducted interviews with doctors, equipment vendors and insurance companies to assess competitive positioning of the proposed hospital and validated the assumptions considered in the financial model

• Benefits to the Client • Apart from the target due diligence, SGS helped the client understand the market and hospital’s business model and brand positioning in cardiology, oncology and neurology market segments • SGS also helped the client understand the funding structure and key risks & upsides in the financial model © 2013 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

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Delay in care has led to very high mortality rates for neurology diseases in the UK Prevalence & Mortality of Neurological Diseases* – Country Comparison, 2009 0.12%

Mortality Rate (As % of Population) )

Greece UK

0.10%

US 0.08%

Italy Denmark

0.06%

Spain Australia Germany

0.04%

0.02%

Size of bubble represents the number of neurological disease* patients in 2009

0.00% 0%

Prevalence Rate (As % of Population) Source: Frost & Sullivan.

*For this bubble chart, neurological diseases include Alzheimer’s, stroke, epilepsy and multiple sclerosis

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Pressure on NHS to reduce waiting time has led to a steady increase in neurology attendance volumes NHS Outpatient Volume for Neurology Consultation - # of Attendances 1,400,000 1,200,000

1,000,000 800,000

782,373

855,253

965,004

984,560

2005-06

2006-07

1,071,297

1,178,416

1,273,023

600,000 400,000 200,000 0 2003-04

2004-05

2007-08

2008-09

2009-10

Observations • Outpatient volumes serviced by NHS has grown at a CAGR of 8% over the last six years, aided by a less than commensurate growth in neurology consultants • NHS, currently, caters to 505,000 new referrals and 765,000 subsequent attendances • However, the quality of care remains questionable as most people referred to a neurologist are seen in general neurology clinics held at local hospitals rather than in specialist centers with complete equipment set • Only complex neurological problems (both outpatients and inpatients) are seen at regional neurology and neurosurgery centers (regional neuroscience centers), where a full range of investigations, neurosurgery and subspecialist neurological services are available

Source: NHS (National Health Service: Hospital Episode Statistics)

Note – Outpatients volume is for England only

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Yet waiting time for initial consultation remains inordinately long, compelling patients to tap into the private network Waiting Time for First Neurology Outpatient Consultant Appointment in England, Q4 2007 Effective length of wait, from receipt of GP written referral request to first Neurology Outpatient attendance (Weeks) >13 weeks 4%

0 to 4 Weeks 22%

Those who have been waiting not yet seen at the end of quarter (Weeks) 25,000

20,000

18,746

15,000

11,834

10,000 3,666

5,000

8 to 13 weeks 46%

348 4 to 8 weeks 28%

0 0 to <4

4 to <8

8 to <13

13 plus

• NHS wait times for neurology consultation have been fairly long. About 50% of GP referrals have to wait more than 8 weeks before they receive their first consultations. Only 22% of referrals are discharged within 4 weeks of referrals • Instances of neurological patients being forced to wait up to three years for an outpatient appointment, in certain parts, of the UK are not uncommon. According to the statistics provided by HSE South, in 2011, 59 patients at Cork University Hospital were waiting at least two years for an outpatient consultant neurology appointment. In one case, a patient has been told, the wait will be more than three years • At the Mercy University Hospital (MUH), 108 people are waiting for outpatient neurology appointments — 29 for up to three months and 79 for between three and six months • A long waiting time has forced patients to seek an appointment at small diagnostic centers such as Vista Diagnostics, Heath Lodge Clinic, London Upright MRI Centre, etc.

Source: Department of Health, Secondary Research.

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NHS ‘waiting time’ is unlikely to reduce significantly as the demand-supply gap for neurologists is not narrowing # of Neurologists (consultants) 790 800 700

Shortage

665 600

600

663

500 400

550

500

300 200 100 0 2005

2007 Estimated Requirement*

2009 Actual Availability

Observations • According to the Society of British Neurological Surgeons, the UK's neurosurgery units face severe shortage of doctors and beds • Also, as per the Society, just over half of the UK's total neurological units had reached the minimum number of consultant surgeons and only 14% had the recommended number of intensive care beds

Source: Royal College of Physicians, Sutherland Estimates, British Neurological Surgeons

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As a result, significant volume of investigative neurological work is being carried out in the private hospital / clinics Types of Investigations Required • Detailed Examination – The first and foremost diagnostic tool in neurology is the detailed history and examination undertaken by a skilled clinician with a wide experience of the varying presentations of neurological conditions • CT & MRI – Imaging the brain and spinal cord with computerized tomography (CT) and magnetic resonance imaging (MRI) is essential to investigate many people with neurological diseases • EEG & EMG – Electroencephalography (EEG) may be useful in patients with loss of consciousness and epilepsy, and nerve conduction studies and electromyography (EMG) in the assessment of patients with weakness or numbness • Lumbar Puncture – Lumbar puncture with analysis of the cerebrospinal fluid is important in selected patients, especially those with suspected brain infection or inflammation • Biopsy – Nerve, muscle and brain biopsy and the use of DNA testing and other specialized tests are sometimes of great diagnostic value

Type of Center

Players

Cost Comparison

Neuro-diagnostic centers

MRI: Consultation Fee:

£180-£200 £250-£300

Multi-specialty Hospitals

MRI: Consultation Fee:

£600-£750 £150-250

Specialist Hospitals

MRI: Consultation Fee:

£900-£1,500 £250-350

Source: Secondary & Primary Research

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As compared to neurology, NHS has a better score-care for inpatient neurosurgeries NHS Inpatients Volume - # of Patients Admitted 300,000 250,000 200,000

206,133

213,887

194,717

203,829

220,224

197,780

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

234,407

281,280

286,568

2008-09

2009-10

250,434

150,000 100,000 50,000 0 2006-07

2007-08

Observations • NHS inpatients volume has grown at a CAGR of 4% over the last nine years (2001-2010) • Average length of stay of inpatients has reduced to 7.1 days in 2009-10 from 9.5 days in 2000-01

Source: NHS (Hospital Episode Statistics)

Note – Inpatients volume is for England only

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Demand for neurosurgeries continues to grow NHS Inpatients Volume Segmentation 194,717 16% 2% 3%

100% 80%

206,133 13% 2% 3%

234,407 14% 2% 3%

286,568 12% 2% 3%

36%

41%

37%

35%

43%

41%

44%

48%

2000-01

2003-04

2006-07

2009-10

60% 40% 20% 0%

Spinal cord & other contents of spinal canal

Peripheral nerves

Tissue of brain

Meninges of brain

Others

# of Finished Consultant Episodes (FCE) with Specified Spinal Procedures (‘000) 300 250 200 150 100 50 0

204

233

248

164

180

3 13 13

3 15 14

4 18 15

4 21 17

5 23 16

2005-06

2006-07

2007-08

2008-09

2009-10

Discectomy Source: NHS (Hospital Episode Statistics)

Decompression

Fusion

Other spinal procedures

Note – Inpatients volume is for England only

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