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A new hospital in Riyadh: breakeven and payback

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

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

A fictional hospital group, Kestrelvale Hospitals, plans a 200-bed hospital in Riyadh. Building and equipping it costs SAR 1,000,000 per bed. Fixed operating costs are SAR 150 million a year. Each occupied bed day brings SAR 5,000 of revenue and SAR 1,500 of variable cost. What occupancy does it need to break even, and what is the simple payback at 75 percent occupancy?

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. 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.

Breakeven occupancy = fixed costs / contribution per bed day / available bed days
- Contribution per occupied bed day
- Breakeven occupancy
- Key: Profit and payback at 75 percent

4. 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: Contribution per bed day
What a strong candidate does: Revenue minus variable cost.
Contribution per occupied bed day (SAR): 5,000 - 1,500 = 3,500
Step 2: Available bed days
What a strong candidate does: 200 beds times 365 days.
Available bed days per year: 200 × 365 = 73,000
Step 3: Breakeven occupancy
What a strong candidate does: Bed days needed to cover fixed costs, as a share of available bed days.
Breakeven occupancy (percent): 150,000,000 ÷ 3,500 ÷ 73,000 × 100 = 58.71
Step 4: Profit at 75 percent
What a strong candidate does: Contribution on 75 percent of bed days minus fixed costs.
Yearly profit at 75 percent (SAR): 73,000 × 0.75 × 3,500 - 150,000,000 = 41,625,000
Step 5: Payback
What a strong candidate does: Building cost of SAR 200 million divided by yearly profit.
Simple payback (years): 200 × 1,000,000 ÷ 41,625,000 = 4.8

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

Kestrelvale should build the hospital, because it breaks even at about 59 percent occupancy and pays back in about 4.8 years at 75 percent. First, each occupied bed day contributes SAR 3,500, so at 75 percent the hospital earns about SAR 41.6 million a year. Second, there is a cushion of about 16 points between 75 percent and breakeven. The risk is the ramp-up: new hospitals take time to fill and to recruit doctors and nurses. As a next step, model slower first years and confirm who will pay: insurers, government referrals or patients themselves.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.