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2014/10/1
2014/10/1
JHBCC
Overview
Fit
Profitability
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2014/10/1
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Overview
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Profitability
2014/10/1
JHBCC
Overview
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2014/10/1
JHBCC
2014
Overview
Fit
Profitability
2014/10/1
JHBCC
Overview
Fit
Profitability
Style
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Tutorial
SPH W2008
Tutorial
Business Situation
SPH W2008
Tutorial
Business Situation
SPH W2008
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SPH W2008
Demonstration
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SPH E9519
Demonstration
Business Situation
SPH E9519
Demonstration
M&A
SPH E9519
2014/10/1
2. Business Situations
a.
b.
c.
d.
e.
2014/10/1
JHBCC
Overview
Fit
Profitability
2. Understanding objectives
3. Clarifying questions
2. Structuring Approach:
3-4 min
1. MECE
3. Analysis
15-20 min
1. Quantitative
2. Qualitative
4. Recommendation
1-3 min
2014/10/1
JHBCC
Overview
Fit
Profitability
Expand into
New
Markets
Existing Rev.
Streams
Achieving
Better Price
2014/10/1
Sell more
(new & old)
JHBCC
Better
Product Mix
Overview
Sell to new
customers
Fit
Profitability
Develop
new
offerings
10
b.
c.
2. Customers
a.
b.
3. Products
a.
b.
4. Company
a.
b.
2014/10/1
JHBCC
Overview
Fit
Profitability
11
2014/10/1
JHBCC
Overview
Fit
Profitability
12
Establishing Background:
Case Information
Our client, Magna Health, insures patients and provides health care services.
Employers pay a fixed premium to Magna for coverage of all necessary health
services for their employees.
Magna currently has 300,000 patients enrolled in its plan. It has 300 salaried
physician employees who provide services to patients in 6 centers. These
physicians represent a wide range of specialty areas, but not all areas. When a
patient needs medical treatment in a specialty area not covered by a Magna
physician, they are referred outside of the Magna network for care, and Magna
pays all referral costs on a fee-for-service basis.
Over the past six months, Magna has been experiencing declining profitability.
Magnas CEO has retained McKinsey to help determine what is causing the
problem and how Magna might fix it.
How can Magna Health improve its financial situation?
2014/10/1
JHBCC
Overview
Fit
Profitability
13
Establishing Background:
Case Information
Our client, Magna Health, insures patients and provides health care services.
Employers pay a fixed premium to Magna for coverage of all necessary health
services for their employees.
Magna currently has 300,000 patients enrolled in its plan. It has 300 salaried
physician employees who provide services to patients in 6 centers. These
physicians represent a wide range of specialty areas, but not all areas. When a
patient needs medical treatment in a specialty area not covered by a Magna
physician, they are referred outside of the Magna network for care, and Magna
pays all referral costs on a fee-for-service basis.
Over the past six months, Magna has been experiencing declining profitability.
Magnas CEO has retained McKinsey to help determine what is causing the
problem and how Magna might fix it.
How can Magna Health improve its financial situation?
2014/10/1
JHBCC
Overview
Fit
Profitability
14
Establishing Background:
Clarifying questions
A. Clarify terminology
What is premium?
A: The specified amount of payment required periodically by an insurer to provide
coverage under a given insurance plan for a defined period of time.
B. Clarify objectives
Is there a specific profitability goal that our client wants to achieve? By when?
A: No, at this time the CEO just wants to see how they can improve ASAP.
C. Clarify scope
Is our client in the U.S.? Should we only consider the domestic market?
A: Yes, you can just focus on our current operations, which is in the Midwest.
2014/10/1
JHBCC
Overview
Fit
Profitability
15
2014/10/1
JHBCC
Overview
Fit
Profitability
16
Magna Health
300,000
$20
Sunshine HMO
500,000
$15
What are the most likely reasons that the average cost of referral
at Magna is higher than at Sunshine?
2014/10/1
JHBCC
Overview
Fit
Profitability
17
Quantitative Analysis:
Determining the scale/impact of the findings
Question 3. Magnas CEO has a hypothesis that Magna is paying too
much in cardiology referral costs for its patient population. He asks
the McKinsey team to look at Magnas cardiac patient population
more closely and tell him how many referrals he should expect on an
annual basis. Assume the following:
Magna has 300,000 patients in any one year
2014/10/1
JHBCC
Overview
Fit
Profitability
18
Qualitative Analysis:
Understanding the HOW and the WHY
Question 4. When the team tells Magnas CEO that based on Magnas
patient population he should expect about 210,000 cardiology referrals
a year he exclaims, We currently pay for 300,000 annual cardiology
referrals for our patient population!
Why might Magnas annual cardiology referrals be significantly
higher than U.S. averages?
2014/10/1
JHBCC
Overview
Fit
Profitability
19
2014/10/1
JHBCC
Overview
Fit
Profitability
20