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Siemens Healthcare Consulting. Profitability analyses page 2. 1. Presentation of Siemens Healthcare Consulting. 2. Business planning, master planning ...

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Customer benefit of Siemens Healthcare profitability analyses August 2012 Bastian Helm, Jens Schneider Copyright © Siemens AG 2012. All rights reserved. Siemens Healthcare Consulting

1. Presentation of Siemens Healthcare Consulting 2. Business planning, master planning & profitability analysis 3. Project process of the profitability analysis 4. Excursus: Practical example – a German hospital

page 2

Profitability analyses

Siemens Healthcare Consulting

Our portfolio contains solutions that address all relevant topics regarding the health care system Three essential categories…

… with an explicit focus… Competence leader for sustainable service provision in the health care system

Strategy and sustainability

Clinical processes

Infrastructure

page 3

 Business- und master planning  Performance indicators and benchmarking  Sustainability assessments and consulting Setting trends for clinical process optimization  Process optimization  Clinical pathways

Development of innovative concepts of technology and infrastructure  Process optimized equipment concepts  Technology and investment planning

Profitability analyses

Siemens Healthcare Consulting

An interdisciplinary team with an exclusive focus on health care topics Our strengths Our consultants focus only on health care topics:  50% of our consultants have previously worked in hospitals and surrounding fields  Extensive experience in: health care system, consultancy and investment banking  Consultants with multiple degrees and doctorates (MD, PhD, etc.)  We have a high international experience in combination with a strong local presence

Managing excellence

Clinical excellence

Technological excellence

 Experienced experts in: Hospital management, investment banking and health economics

 Physicians specialized in: Radiology, cardiology, oncology and neurosurgery

 Physicists, engineers and computer scientists

page 4

 Postgraduate qualifications in management and health economics

Profitability analyses

 Long-time experience in the IT- and technology industry

Siemens Healthcare Consulting

Our customers and references (extract)

Strategy

Infrastructure

Clinical processes page 5

Profitability analyses

Siemens Healthcare Consulting

Our interdisciplinary experienced team Clinical Competence Centers

Siemens Healthcare Consulting

Cardiology

O. Ekinci Cardiology

A. Aisenbrey Business Administration

Dr. S. Dietrich Dentistry

S. Gager Health Economics

M. Haseneyer Computer Science

B. Helm Business Administration

Dr. J. Höllthaler Medicine

T. Hopmeier Business Administration

H. Kirschbaum Computer Science

Dr. J. Kirschbaum Medicine

Dr. E. Klein Medicine

S. Koos Business Administration

Dr. M. Koschnike Business Administration

I. Rebmann Psychology

C. Schmieder Care Management

J. Schneider Business Administration

Dr. D. Seidel Health Management

C. Wild Industrial Engineer

C. Windpassinger Computer Science

V. Ziebandt Business Administration

Dr. J. Kirsten Business Adm. & Biology

Dr. P. Fischer Cardiology

Neurology

Dr. B. Hofmann Neurosurgery

Dr. U. Zikeli Neurology

Oncology

Dr. W. Voigt Oncology

page 6

Dr. C. Förtsch Oncology

Profitability analyses

Siemens Healthcare Consulting

1. Presentation of Siemens Healthcare Consulting 2. Business planning, master planning & profitability analysis 3. Project process of the profitability analysis 4. Excursus: Practical example – a German hospital

page 7

Profitability analyses

Siemens Healthcare Consulting

Profitability analyses offer benefits for external customers and Siemens Healthcare sales organization Perspective of executive board  Initial situation:

 Initial situation:

The executive board is firmly convinced of the medical benefits and technical capability of Siemens modalities  Questions:

page 8

Siemens sales organization identifies customer’s potential for a new or additional modality

 Questions:

 Is the investments worthwhile for my company?  Can we financially afford such an investment?  Do we have an adequate number of potential patients in our catchment area?

Conclusion

Sales perspective (directors and representatives)

 How can we convince the customer of the benefits?  What kind of economic arguments will the customer need?  How can we support our customer?

Essential aspects  Number of relevant patients  Trends in epidemiology, demography and medical technology  Competition in the catchment area  Reimbursement possibilities for the hospital  Required investment and running costs

A hospital can use such an analysis to convince the supervisory board, health insurance companies and the public funding organisations. Profitability analyses

Siemens Healthcare Consulting

Business planning, master planning and profitability analyses - focus … with a different focus

Three essential categories …

page 9

Master planning

One hospital or other health care provider

Business planning

One medical division/ department

Profitability analysis

One technology/ medical device

Profitability analyses

Siemens Healthcare Consulting

Business planning, master planning and profitability analysis – scope of services Three essential categories …

… with different scopes of services

Master planning  Political and legal topics  Functional design and space planning  Implementation planning

Business planning  Idea creation/ strategic planning  Sales concept/ marketing  Personnel resource planning

Profitability analysis    

page 10

Market and competition analysis Prediction of performance development Analysis of the required resources Calculation of predicted revenues and costs

Profitability analyses

Siemens Healthcare Consulting

1. Presentation of Siemens Healthcare Consulting 2. Business planning, master planning & profitability analysis 3. Project process of the profitability analysis 4. Excursus: Practical example – a German hospital

page 11

Profitability analyses

Siemens Healthcare Consulting

Profitability analysis: project example Customer situation

 German hospital of maximum medical care

Project goal  Profitability analysis for the investment decision Approach

 Planning of a replacement purchase of a modern angiography device for different medical departments  Tense financial situation for investments at the hospital  A leasing provider offered to take over the investment under special conditions  Difficult market position of the hospital in an area with a high number of competitors  Declining number of inhabitants in the hospital’s catchment area

Outcome  Projected performance volume on the new angiography device  Statement on profitability of the investment

page 12

Profitability analyses

Siemens Healthcare Consulting

Module 2 Market- and competition analysis Description

Examples

 Market overview:

Market analysis

Description

 Demographical und epidemiological analysis of the catchment area  Identification of existing facilities in the relevant region Additional market potential

 Competition analysis

Methods

 Data acquisition

Outcome

 Interviews

 Estimation of additional market potential

 Analyses and calculations

page 13

Projected development of case numbers

Profitability analyses

Siemens Healthcare Consulting

Module 3 Required resources

Description

Description

Examples

 Visualization of the required resources:  Spatial requirements  Description of the technical equipment  Personnel requirements  Level of competence of the required personnel

Process of a emergency-intervention

Methods

 Analyses and calculations1

Outcome

 Interviews

 Detailed description of required resources

1depending

page 14

Spatial situation and patients’ pathways

on available data

Profitability analyses

Siemens Healthcare Consulting

Modules 4 and 5 Revenue and cost calculation and final evaluation

Description

Description

Examples

 Revenue and cost calculation:  Identify reimbursement options  Calculation of investment- and running costs  Determine of break-even point

Financial model

 SWOT-analysis

Outcome

Methods

Break-even- and sensitivity analysis  Data acquisition  Forecast model1  Revenue and cost determination  Profitability analysis  Final documentation  Presentation 1depending

page 15

on available data

Profitability analyses

Siemens Healthcare Consulting

1. Presentation of Siemens Healthcare Consulting 2. Business planning, master planning & profitability analysis 3. Project process of the profitability analysis 4. Excursus: Practical example – a German hospital

page 16

Profitability analyses

Siemens Healthcare Consulting

Siemens SiemensHealthcare HealthcareConsulting Consulting

Profitability analysis of a Hybrid-OR Final presentation Hospital in West Germany, 2012 Bastian Helm, Jens Schneider Copyright © Siemens AG 2012. All rights reserved. Siemens Healthcare Consulting

Management Summary The investment in a Hybrid-OR is reasonable from a medical, economic and strategically perspective

Initial situation

The German hospital considers an installation of a Hybrid-OR, which should be previously analyzed in terms of efficiency in respect of the current market situation.

Market potential

In addition to the existing patients there is a heterogeneous competitive situation for relevant patients in the catchment area. An ultra-modern Hybrid-OR and a targeted marketing concept could increase the numbers of patients in the regarding departments without any side-effects by 10% per year.

Resources

Economic profitability

Recommendation

page 18

Both the spatial and technical requirements for the installation of a Hybrid-OR are fulfilled by the hospital after some reconstruction work. The quantitative and qualitative requirements of the personnel are only partially fulfilled currently.

An efficient working process of the Hybrid-OR leads, on the most conservative assumptions, in both scenarios to a cumulated and discounted operative result between T€ 2.000 (scenario 1) und T€ 2.500 (scenario 2) at a 8-year period.

An investment in a Hybrid-OR is reasonable from a medical, economic and strategically perspective. However, a professional OR-management, interdisciplinary collaboration, acquisition of heart surgeons and the extension of the trauma center are required for a successful operation.

Profitability analyses

Siemens Healthcare Consulting

Management Summary The investment in a Hybrid-OR is reasonable from a medical, economic and strategically perspective

Initial situation

The German hospital considers an installation of a Hybrid-OR, which should be previously analyzed in terms of efficiency in respect of the current market situation.

Market potential

In addition to the existing patients there is a heterogeneous competitive situation for relevant patients in the catchment area. An ultra-modern Hybrid-OR and a targeted marketing concept could increase the numbers of patients in the regarding departments without any side-effects by 10% per year.

Resources

Economic profitability

Recommendation

page 19

Both the spatial and technical requirements for the installation of a Hybrid-OR are fulfilled by the hospital after some reconstruction work. The quantitative and qualitative requirements of the personnel are only partially fulfilled currently.

An efficient working process of the Hybrid-OR leads, on the most conservative assumptions, in both scenarios to a cumulated and discounted operative result between T€ 2.000 (scenario 1) und T€ 2.500 (scenario 2) at a 8-year period.

An investment in a Hybrid-OR is reasonable from a medical, economic and strategically perspective. However, a professional OR-management, interdisciplinary collaboration, acquisition of heart surgeons and the extension of the trauma center are required for a successful operation.

Profitability analyses

Siemens Healthcare Consulting

New standards in terms of diagnosis and therapy by a next generation Hybrid-OR

The combination of e.g. a Siemens Artis Zeego and an adjustable OR-table creates an ultra-modern Hybrid-OR, setting new standards in diagnosis and therapy in cardiology, neurosurgery as well as vascular- and trauma surgery

Patient

Hospital

• Optimal imaging with reduced contrast media administration, radiation burden and avoiding of repositioning • Gentle intervention by a minimallyinvasive technique: Quicker cure and reduced length of stay (LOS) • High patient-safety due to a intraoperative quality-check  faster intervention

Region

• Innovation leadership in vascularand cardiac surgery • Direct quality-check reduces complication and re-operation rate (approx. 10% are faulty)1 • Incentive for innovative medical personnel • Additional reimbursement potential due to an extension of the range of treatment • LOS and operating time reduction (approx. 11%)2

1) Advisory Board Company

page 20

• Location development especially for age-related diseases (e.g. reduced contrast media administration by approx. 45%2)  Treatment of patients with preexisting kidney diseases • Technological leadership and new standards of care • Medical and regulatory future trends: Future complex interventions will only be executed in a Hybrid-OR3

2) Analyses of the Hybrid-OR “Klinikum Barmherzige Brüder” Regensburg (Prof. Steinbauer) 3) Siemens Clinical Competence Center Cardiology

Profitability analyses

Siemens Healthcare Consulting

Prospectively the following diseases from different disciplines will be treated in the Hybrid-OR

Vascular surgeon

Orthopedist, Trauma surgeon

Interventional cardiologist

Interventional radiologist

Neuro- Neurosurgeon radiologist

Specialist





Hybrid-OR - AAA1 Endograft Procedure - TAA2 Endograft

- Hip surgery at multimorbid patients

- Minimal-invasive coronary arteries bypass / (PCI)

- Spinal surgery

- Minimal-invasive valve surgery

- Polytrauma

- TAVI5

- Complex peripheral cases - Quality-control of complex procedures (10% error ratio)



- Heart defect intervention

- Oncologic procedures

- Carotisangioplasty (CAS)

- Carotis stenting

- Aneurysm coiling

- kyphoplasties (stabilization of vertebrae)

- Intracranial stents

- Interventional therapy of myomas (Gynecology)

1) AAA: Abdominal aortic aneurysm Hybrid-OR necessary

2) TAA: Thoracic aortic aneurysm

Hybrid-OR suitable

3) CABG: Carotid artery stenting

 Already existing In set-up

4) PCI : Percutaneous coronary intervention 5) TAVI: Transcatheter aortic valve implantation Source: Advisory Board Company

page 21

Profitability analyses

Siemens Healthcare Consulting

Practical example: A Hybrid-OR supports the treatment of aortic valve stenosis (AS)

Treatment of aortic valve stenosis – Calcification of the aortic valve

Current approach • Sternotomy (full or partial) • Use of life support machine • Removement of the degenerated valve

• Replacement by a mechanic or biologic valve

Hybrid-OR approach (TAVI)

Adoptions for the future • The number of severe AS will increase, due to the demographic trend

• No longer sternotomy and life support machine necessary

• Covering of the old valve with a

• Increasing number of patients with a high risk or contraindication

catheter-guided valve

• The intervention takes place at the beating heart

• Shorter operating-time, less

• Good long-term outcome • Few severe following

2)

complications, less painful

complications 3)

1)

1) Klinikum Dortmund: http://www.klinikumdo.de

page 22

2) Mayo Clinic: http://www.mayoclinic.org/aortic-stenosis/ 3) German heart foundation: www.deutscheherzstiftung.de

Profitability analyses

Siemens Healthcare Consulting

Management Summary The investment in a Hybrid-OR is reasonable from a medical, economic and strategically perspective

Initial situation

The German hospital considers an installation of a Hybrid-OR, which should be previously analyzed in terms of efficiency in respect of the current market situation.

Market potential

In addition to the existing patients there is a heterogeneous competitive situation for relevant patients in the catchment area. An ultra-modern Hybrid-OR and a targeted marketing concept could increase the numbers of patients in the regarding departments without any side-effects by 10% per year.

Resources

Economic profitability

Recommendation

page 23

Both the spatial and technical requirements for the installation of a Hybrid-OR are fulfilled by the hospital after some reconstruction work. The quantitative and qualitative requirements of the personnel are only partially fulfilled currently.

An efficient working process of the Hybrid-OR leads, on the most conservative assumptions, in both scenarios to a cumulated and discounted operative result between T€ 2.000 (scenario 1) und T€ 2.500 (scenario 2) at a 8-year period.

An investment in a Hybrid-OR is reasonable from a medical, economic and strategically perspective. However, a professional OR-management, interdisciplinary collaboration, acquisition of heart surgeons and the extension of the trauma center are required for a successful operation.

Profitability analyses

Siemens Healthcare Consulting

The analysis of the catchment area shows a heterogeneous competitive situation and possibilities to extend the catchment area towards north and south Stream of patients of the relevant departments (neuro, cardio, vascular)1 Planned

 A basis of relevant patients exists in the hospital (detailed analysis: 500 patients1) Planned

 Criteria for additional patients: The catchment area is weighted by travelling-time, competition and emotional barriers  We suppose a supra-regional attraction of the Hybrid-OR for polytrauma

 However, there is less Hybrid-OR competition in the eastern and southern part of the catchment area, further installations are planned already2

Hybrid-OP location2

1) German hospital §21 KHEntgG-Data 2011

page 24

2) Siemens Internet research

Profitability analyses

Siemens Healthcare Consulting

Relevant ICDs for the Hybrid-OR will increase in the catchment area (I65, I70, I71, I72, I73) Projected case numbers in 20301,2

Assumptions  The demographic trend in the catchment area1 shows a significant increase of elderly persons (>40 years of age)

+49% 4.942 1.622

3.320

Increase

2010

 Inhabitants maintain on the same level (approx. 1.8 million inhabitants in the catchment area)  Vascular diseases (ICD I70) will have the biggest share of future diagnoses

2030

 Additional patients can be gained by good marketing strategies of the hospital (e.g. medical competence center)

Development of relevant ICDs for the Hybrid-OR in the catchment area1, 2 I65 Occlusion and stenosis of precerebral arteries

I72 Other aneurysm and dissection

I70 Atherosclerosis

I73 Other peripheral vascular diseases

 Highly qualified personal and innovative medical technology will guarantee a high standard of care

I71 Aortic aneurysm and dissection +22%

+38%

+49%

4,942

4,567 4,065 3,320

268

293

3,435

2,668 81

243

35

2010 1) National statistics offices, 2012

page 25

111

238

2020

244

259

4,255

3,897

13

133

263

15

2025

151

275

17

 Under conservative calculations, these assumptions will lead to a growth in patient numbers of 10% per year (without sideeffects)

2030

2) Federal government’s health monitoring, 2012

Profitability analyses

Siemens Healthcare Consulting

TOP 10 DRG, that should be crucial for the alignment of the hospital and the Hybrid OR, as well as strategic potentials1 DRG

Description

Development

CMI

Cases year 1 Revenue

F08A

Rekonstruktive Gefäßeingriffe ohne Herz-LungenMaschine, …

6,444

10

18.769 €

F51B

Endovaskuläre Implantation von Stent-Prothesen an der Aorta, nicht thorakal

5,121

50

14.916 €

F28A

Amputation mit zusätz. Gefäßeingriff oder mit Hauttransplantation, mit äußerst …

5,014

40

14.604 €

F08B

Rekonstruktive Gefäßeingriffe ohne Herz-LungenMaschine, ohne komplizierende …

4,260

50

12.408 €

F08C

Rekonstruktive Gefäßeingriffe ohne Herz-LungenMaschine, …

3,635

70

10.587 €

F14A

Komplexe oder mehrfache Gefäßeingriffe außer große rekonstruktive Eingriffe …

3,064

50

8.924 €

F12E

Implantation eines Herzschrittmachers, ZweiKammersystem, …

2,821

50

8.217 €

F08E

Rekonstruktive Gefäßeingriffe ohne Herz-LungenMaschine, …

2,311

150

6.731 €

B04B

Eingriffe an den extrakraniellen Gefäßen mit …

2,293

20

6.679 €

F59A

Komplexe Gefäßeingriffe ohne komplizierende Konstellation, …

2,149

200

6.259 €

F98Z

Endovaskuläre Implantation eines Herzklappenersatzes oder transapikaler …

11,502

30

33.501 €

Polytrauma

Ø 6,583

80

Ø 19.174 €

Diverse

1) Relevant existing DRG of the hospital and strategic potentials; Source: Inek DRG Browser for major departments 2011

page 26

Profitability analyses

Siemens Healthcare Consulting

Management Summary The investment in a Hybrid-OR is reasonable from a medical, economic and strategically perspective

Initial situation

The German hospital considers an installation of a Hybrid-OR, which should be previously analyzed in terms of efficiency in respect of the current market situation.

Market potential

In addition to the existing patients there is a heterogeneous competitive situation for relevant patients in the catchment area. An ultra-modern Hybrid-OR and a targeted marketing concept could increase the numbers of patients in the regarding departments without any side-effects by 10% per year.

Resources

Economic profitability

Recommendation

page 27

Both the spatial and technical requirements for the installation of a Hybrid-OR are fulfilled by the hospital after some reconstruction work. The quantitative and qualitative requirements of the personnel are only partially fulfilled currently.

An efficient working process of the Hybrid-OR leads, on the most conservative assumptions, in both scenarios to a cumulated and discounted operative result between T€ 2.000 (scenario 1) und T€ 2.500 (scenario 2) at a 8-year period.

An investment in a Hybrid-OR is reasonable from a medical, economic and strategically perspective. However, a professional OR-management, interdisciplinary collaboration, acquisition of heart surgeons and the extension of the trauma center are required for a successful operation.

Profitability analyses

Siemens Healthcare Consulting

Required resources The spatial and technical requirements for a Hybrid-OR will be fulfilled after reconstruction work and investments Spatial and technical requirements1

Technical equipment (extract)  Artis Zeego with large detector (30 cm x 40 cm)  2 monitor mountings (1x Large Display, 1x 3 monitor suspension system)  Software TAVI and 3D imaging  Hemodynamic measuring unit and FFRFunction to optimize the reimbursement  Defibrillator and angiography syringe

a

Spatial requirements  At least 70 sqm

 Additional required space for a central control room, technics, patient locks and a common room Product example

 Required height of the examination room 2,9 m – 3,1 m  Radiation protection (approx. 1-2 mm Pb)  Air conditioning (Class 1a)  Power supply (approx. 60 KVA)

1) Siemens AG page 28

Profitability analyses

Siemens Healthcare Consulting

Required resources Both quantitative and qualitative requirements are only partially fulfilled currently Legal requirements1

Required skills of personnel

a

 Commitment to respecting areas of specialty as well as qualification and knowledge of radiation protection of the physicians  Quality commitment for interventional radiology is defined by the service provision regulations of the National Health Insurance (NHI)  All examinations and treatments are defined in the regulations for further education of the medical association Further education2  An introducing on-site-training and a following certification is prerequisite  A device-training for the assisting personnel and the treating physicians is recommended when new product features are implemented

1) Survey of the Siemens AG 2011 2) Siemens AG page 29

Profitability analyses

Siemens Healthcare Consulting

Management Summary The investment in a Hybrid-OR is reasonable from a medical, economic and strategically perspective

Initial situation

The German hospital considers an installation of a Hybrid-OR, which should be previously analyzed in terms of efficiency in respect of the current market situation.

Market potential

In addition to the existing patients there is a heterogeneous competitive situation for relevant patients in the catchment area. An ultra-modern Hybrid-OR and a targeted marketing concept could increase the numbers of patients in the regarding departments without any side-effects by 10% per year.

Resources

Economic profitability

Recommendation

page 30

Both the spatial and technical requirements for the installation of a Hybrid-OR are fulfilled by the hospital after some reconstruction work. The quantitative and qualitative requirements of the personnel are only partially fulfilled currently.

An efficient working process of the Hybrid-OR leads, on the most conservative assumptions, in both scenarios to a cumulated and discounted operative result between T€ 2.000 (scenario 1) und T€ 2.500 (scenario 2) at a 8-year period.

An investment in a Hybrid-OR is reasonable from a medical, economic and strategically perspective. However, a professional OR-management, interdisciplinary collaboration, acquisition of heart surgeons and the extension of the trauma center are required for a successful operation.

Profitability analyses

Siemens Healthcare Consulting

Cost- and revenue calculation The following method was used for the cost- and revenue calculation Data basis: DRG Browser for the main departments 20111

Assumptions  Identification of the relevant profit shares in the IneK DRG Browser 2011  Determination of the TOP 10 DRG by case severity and additional potential in the area of TAVI and polytrauma  DRG distribution of potential patients by the nationwide frequency according to the DRG Browser 2011  Revenue = Cost weight (DRG Browser 2011) x Landesbasisfallwert 2011  Costs = According to DRG Browser 2011  Saving potential per DRG after installation of a Hybrid-OR were taken into account, conservative assumptions on basis of practical experiences2  Full cost accounting: Installation of a HybridOR is a new implementation, hence, it is recommended to be viewed as a stand-alone profit center

1) IneK 2) Practical experience Prof. Steinbauer (Regensburg) page 31

Profitability analyses

Siemens Healthcare Consulting

Cost- and revenue calculation – comparison of scenarios Under conservative assumptions, the calculation is profitable in both scenarios Prognosis (cumulated) incl. financial investment [€]

Basic assumptions  Number of cases in t1 500: Existing relevant cases in the hospital  Additional potential of polytrauma and TAVI is generated by the Hybrid-OR  Investment costs total: T€ 3.500, including reconstruction costs T€ 2.500, medical technology T€ 800 and OR-equipment T€ 200 Assumption Scenario 1  Financial investment incl. reconstruction costs with an annual amortization over 8 years and an interest rate of 3% Assumption Scenario 2  Complete investment in medical technology and reconstruction costs in period t0

Break Even in scenario 1 in period 4, Break Even in scenario 2 in period 5.

page 32

An investment in a Hybrid-OR is reasonable from a medical, economic and strategically perspective in both scenarios.

Profitability analyses

Siemens Healthcare Consulting

Cost- and revenue calculation – Scenario 1 Under conservative assumptions and including all investments, the calculation is profitable in period 4 Prognosis (cumulated) incl. financial investment in T€ Cum. Outcome

Assumptions Scenario 1

Outcome incl. Financial investment

2.000 1.800

4.500 4.000 3.500

1.500

3.000 2.500 2.000

1.148

1.632 912 479

0

-835

407

1.183

1.213

1.238

484

1.500 1.000 500 0 -500

-427

-1.313

-1.000 -1.500

-1.313

2012 2013

5.500 5.000

2014

2015 2016 2017

2018

 Financial investment incl. reconstruction costs with an annual amortization over 8 years and an interest rate of 3%  Calculated on the basis of existing potential patients and strategically potential for an Hybrid-OR and prognosis of future growth rate based on the market-, technical- and incidence analysis  Consideration of a discount for supererogation of 30% in t1 and following t2 of 70% each in year 1 and 30% in year 2 of the supererogation  PHI 10,0%, NHI 90,0%  Revenue PHI = NHI x 1,5  Revenue growth of 1,14% p.a. covered

2019 2020

 Cost growth of 2 % p.a. covered  Investment in 2012; Start in 2013  Scenario 1 is profitable in period 4.  The cumulated and discounted operative result over 8 periods reaches a value of T€ 2.000 page 33

An investment in a Hybrid-OR is reasonable from a medical, economic and strategically perspective for scenario 1

Profitability analyses

Siemens Healthcare Consulting

Cost- and revenue calculation – Scenario 2 Under conservative assumptions and including all investments, the calculation is profitable in period 5 Assumptions Scenario 2

Prognosis (cumulated) incl. financial investment in T€ Cum. Outcome

 Complete investment in medical technology and reconstruction costs in period t0

Outcome incl. Financial investment

2.500

5.000

2.300

4.000

1.648

2.100 977

897

1.393

1.621

3.000 1.671

1.688

466

0 -1.000

-807

-3.615

2.000 1.000

-1.155 -2.548

-2.000

-3.445

-3.500

 Calculated on the basis of existing potential patients and strategically potential for an Hybrid-OR and prognosis of future growth rate based on the market-, technical- and incidence analysis

6.000

-4.422

 Consideration of a discount for supererogation of 30% in t1 and following t2 of 70% each in year 1 and 30% in year 2 of the supererogation

-3.000

 PHI 10,0%, NHI 90,0%

-4.000

 Revenue PHI = NHI x 1,5

-5.000

2012 2013 2014 2015 2016 2017 2018 2019 2020

 Revenue growth of 1,14% p.a. covered  Cost growth of 2 % p.a. covered  Investment in 2012; Start in 2013

 Scenario 2 is profitable in period 5.  The cumulated and discounted operative result over 8 periods reaches a value of T€ 2.500 page 34

An investment in a Hybrid-OR is reasonable from a medical, economic and strategically perspective for scenario 2

Profitability analyses

Siemens Healthcare Consulting

Management Summary The investment in a Hybrid-OR is reasonable from a medical, economic and strategically perspective

Initial situation

The German hospital considers an installation of a Hybrid-OR, which should be previously analyzed in terms of efficiency in respect of the current market situation.

Market potential

In addition to the existing patients there is a heterogeneous competitive situation for relevant patients in the catchment area. An ultra-modern Hybrid-OR and a targeted marketing concept could increase the numbers of patients in the regarding departments without any side-effects by 10% per year.

Resources

Economic profitability

Recommendation

page 35

Both the spatial and technical requirements for the installation of a Hybrid-OR are fulfilled by the hospital after some reconstruction work. The quantitative and qualitative requirements of the personnel are only partially fulfilled currently.

An efficient working process of the Hybrid-OR leads, on the most conservative assumptions, in both scenarios to a cumulated and discounted operative result between T€ 2.000 (scenario 1) und T€ 2.500 (scenario 2) at a 8-year period.

An investment in a Hybrid-OR is reasonable from a medical, economic and strategically perspective. However, a professional OR-management, interdisciplinary collaboration, acquisition of heart surgeons and the extension of the trauma center are required for a successful operation.

Profitability analyses

Siemens Healthcare Consulting

SWOT-Analysis A SWOT-Analysis can illustrate important fields of action for a successful establishment of an Hybrid-OR Strengths    

Weaknesses

Basic utilization for an Hybrid-OR exists Personnel resources with relevant experience for the portfolio partially exist currently Spatial requirements are fulfilled after reconstruction work The hospital’s portfolio and relevant departments are already existing mainly

Opportunities       

Threats

Foundation of a cardio-vascular center in a catchment area with a high amount of relevant patients, considering the demographic trend Diversification of the range of services in the areas: TAVI and polytrauma Improved image and competitive position due to investments in new and ultra-modern medical equipment Improvement of the own position in hiring new chief physician Foundation of a cooperation network with established referring physicians and other hospitals without Hybrid-Ors in the region Increase of the level of awareness with targeted marketing at referring physicians and the population A constant number of inhabitants with a growing number in the relevant target group(>40 years of age)

page 36

 Geographic location near with a high number of competitors in the market segment  Limited catchment area due to actual offerings and competing hospitals with an Hybrid-OR  Level of awareness as a cardio-vascular center non-existent

 Portfolio extension in a regional market with very strong competition  Number of patients are not growing as projected  Staffing of physicians and assistants for the planned departments in an rural area  Foundation of the trauma center with consideration of the spatial and personnel requirements due to DGU (German foundation for trauma surgery)  Bottlenecks in the Hybrid-OR have to be managed with a professional OR-management

Profitability analyses

Siemens Healthcare Consulting

Do you have any questions?

Bastian Helm Project manager Siemens Healthcare Consulting Allee am Röthelheimpark 3a 91052 Erlangen Phone: 09131 – 84 4510 Fax: 09131 – 84 3758 Mobil: 0173 – 70 72 164 E-mail: [email protected]

page 37

Profitability analyses

Siemens Healthcare Consulting © Siemens AG 2012. All rights reserved.