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Medium M&A Market Entry

JeffCo

#Healthcare
ProHub Comment

This case tests candidate ability to build a financial model by calculating market steal, revenue, and profitability under uncertainty. The key insight is recognizing that despite capturing $107.5M in stolen patients, high renovation costs ($71M) limit profit to $9M—below the $10M target. The case emphasizes that volume alone doesn't ensure profitability; cost structure and renovation efficiency are critical.

Estimated Time 15 minutes
Difficulty Medium
Source Cornell
50 / 100
Your client is the CEO of JeffCo, a healthcare company that owns and operates 15 hospitals in the Philadelphia region. JeffCo operates very lean hospitals. During the COVID-19 pandemic, many hospitals in the region were negatively impacted, many going from profitable to in debt in a short amount of time, leaving market share open for capture. Given that JeffCo’s revenues during the pandemic remained consistent, JeffCo is preparing several options for evaluation and is seeking your advice regarding opening a new “Mega” Hospital to become the flagship of the city.

Clarifying Information

  1. JeffCo is targeting $10M in profitability for Mega-Hospital; looking to calculate year one profitability
  2. Treat patients like at a hospital
  3. Currently operates only in the Philadelphia region and looking to open flagship in Philadelphia region
  4. No outside investors