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Stretch: A 150-bed hospital in a smaller Indian city
You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.
Case timer
00:00
1. Read the prompt aloud
Read it slowly, then pause. Let the candidate ask questions before they structure.
A private hospital group plans a 150-bed hospital in a fast-growing smaller city in central India. The exhibit shows the expected ramp-up. Does the investment meet the group's seven-year payback, and what would you change?
Format note: Difficulty: Stretch. Format: interviewer-led, with an exhibit. Industry: Healthcare. Region: India. Interview length: about 40 minutes. The company is fictional and all figures are illustrative.
2. Answers to clarifying questions
Give these answers only if the candidate asks. If they ask something not listed, give a sensible answer or say it does not matter here.
If asked: What payback does the group require?
Answer: Within seven years.
If asked: What revenue per occupied bed per day do current hospitals earn?
Answer: About INR 30,000.
If asked: What does the new hospital cost?
Answer: About INR 1 crore per bed, INR 150 crore for 150 beds.
3. The hypothesis a strong candidate states
Listen for an early, testable guess like this one. It does not need to match word for word.
New hospitals take years to fill. My hypothesis is that slow ramp-up makes the seven-year payback hard to meet, and that patient mix in a smaller city could lower revenue per bed.
4. A model structure
Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.
- Payback = capital cost / yearly EBITDA as the hospital fills
- Revenue: beds x occupancy x days x revenue per bed-day
- EBITDA margin as occupancy rises
- Key: Payback versus seven years
- Patient mix and capital cost
Exhibit 1
Reveal to candidate: when they ask for this data, say "Open Exhibit 1" (they press "Show exhibit 1" on their screen).
| Year | Occupancy (%) | EBITDA margin (%) |
|---|---|---|
| 1 | 40 | 0 |
| 2 | 55 | 12 |
| 3 | 70 | 20 |
So-what
Profit arrives only from year 2, and full margin only from year 3, so early years recover little of the capital.
5. The working, step by step
Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.
Step 1: Year-3 revenue
What a strong candidate does: 150 beds, 70 percent full, 365 days, INR 30,000 per occupied bed-day.
Year-3 revenue (INR): 150 × 0.7 × 365 × 30,000 = 1,149,750,000
Step 2: Year-3 EBITDA
What a strong candidate does: At a 20 percent margin.
Year-3 EBITDA (INR): 150 × 0.7 × 365 × 30,000 × 0.2 = 229,950,000
Step 3: Year-2 EBITDA
What a strong candidate does: 55 percent full at a 12 percent margin; year 1 breaks even.
Year-2 EBITDA (INR): 150 × 0.55 × 365 × 30,000 × 0.12 = 108,405,000
Step 4: Payback
What a strong candidate does: After three years, the rest of the INR 150 crore is recovered at the year-3 EBITDA rate.
Payback (years): (1,500,000,000 - (150 × 0.55 × 365 × 30,000 × 0.12 + 150 × 0.7 × 365 × 30,000 × 0.2)) ÷ (150 × 0.7 × 365 × 30,000 × 0.2) + 3 = 8.05
Step 5: Curveball: patient mix
What a strong candidate does: Interviewer: "In this city, about 40 percent of patients would come through a government insurance scheme that pays about INR 18,000 per bed-day (illustrative; actual scheme rates are often lower)." Blended revenue per bed-day:
Blended revenue per bed-day (INR): 0.6 × 30,000 + 0.4 × 18,000 = 25,200
Step 6: Year-3 EBITDA with that mix
What a strong candidate does: Costs stay the same, so the lost revenue comes straight off EBITDA.
Year-3 EBITDA with scheme patients (INR): 150 × 0.7 × 365 × 30,000 × 0.2 - 150 × 0.7 × 365 × (30,000 - 25,200) = 45,990,000
Step 7: Option: lease the building
What a strong candidate does: Interviewer: "A local developer would build and lease the building, cutting the group's own capital to about INR 60 lakh (6,000,000) per bed for equipment and fit-out." Candidate: "Then our capital is:"
Capital with a leased building (INR): 150 × 6,000,000 = 900,000,000
The recommendation to listen for
At the end, say: "The CEO walks in. What is your recommendation?"
Do not approve the hospital as planned. First, even with all patients at INR 30,000 per bed-day, payback is about 8 years, beyond the 7-year rule, because the first two years recover little. Second, if 40 percent of patients come through the government scheme, year-3 EBITDA falls from about INR 23 crore to under INR 5 crore, and the hospital may never pay back. Third, a leased building cuts the group's capital from INR 150 crore to about INR 90 crore. Rework the plan: lease the building, focus on specialties where private insurance and self-paying patients are common, agree a cap on scheme beds, and resubmit with a payback test on the blended patient mix.
Risks a strong answer names: Lease costs lower EBITDA, so the lease terms must be tested; Doctors may be hard to recruit in a smaller city.
Next steps: Get lease quotes from two developers; Survey the city's patient mix and competitor hospitals.
Strong versus weak
A strong answer
Modeled the ramp-up, tested payback against the rule, caught the patient-mix risk, and proposed a lower-capital model.
A weak answer
Used year-3 profit for every year, found a quick payback, and approved the hospital.
Score the candidate
Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.
Total
0 out of 25
Score all five criteria to see the band and the feedback template.