Five KPIs for Due Diligence for Healthcare Providers

Due diligence of hospitals is very complicated, and the typical KPIs list may run in hundreds. Still, it must give a holistic picture of a commercial due diligence exercise.

Over the past 16 years of my experience of conducting various diligence across the sector, here are a few which we believe must also be looked into while performing a commercial due diligence exercise

1. Speciality-wise Market Share in a Micro Market

The healthcare providers market would be among the few, if not only, sectors of which vital parameters like market size need to be appropriately measured independently. The public data needs to be more accurate and measured separately for the micro market.

It is time-consuming; however, vital to understand the market size and share as investors invest in the future. Understanding these parameters at the unit level gives a 360-degree view of the financial projections and builds confidence in future growth.

2. Unit Profitability Ratio

Lately but undoubtedly, healthcare has become blue eye boy for investors; however, the sectors still have to leapfrog, adapting to investors' frame of mind, which they are used to experiencing in other sectors.

There is no denying that most specialities coexist, and it isn't easy to measure the performance of a unit in isolation; however, in our experience, we have seen few specialities contributing significantly to the revenue; however, their profitability at the unit level is questionable.

It is difficult but possible to construct unit-level P&L, which would give much comfort to investors.

3. Case Mix Transition

Understanding contributors of change in average revenue realised per patient is the most critical aspect of analysing future revenue projections. The significant revenue growth comes from technology shifts or changes in the case mix of the patient. The increase in revenue due to technology change comes at a cost and may or may not be a substantial addition to overall financial health; however, the changes in a case-mix impact an institution's overall financial health. Also, a change in the case mix accurately indicates the hospital's consistency of reputation over the period.

4. Planned Vs Emergency Admissions

These two parameters are vital indicators of the image of the hospital brand and people's confidence in the hospital.

The combination of these indicators gives an overall view of the hospital's image. For a planned admission patient had time to do the research and arrive at a conclusion, which is indicative of its reputation in the population, and emergency admissions are indicative of brand recall value and confidence in the systems.

Both indicators must be appropriately spread and follow the industry's benchmarks.

5. Dropout & DAMA Ratio

Patient satisfaction surveys are of very little value as they do not provide the complete picture and are very difficult to measure; however, a deep understanding of patient satisfaction is critical for assessing an asset.

Dropout and DAMA ( Discharged against Medical Advice ) may be the indicators that capture patient satisfaction before and after admission; however, they must be understood in detail and benchmarked judiciously with the industry.

for a brainstorming session on #DueDiligence, Please reach out to manas@synapsehealthcare.net

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