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Target due-diligence Target duediligence

Hospital Feasibility

Š 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com January 10, 2013

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Target due-diligence: Hospital Feasibility in the UK market Client • The client, a ‘Big 4’ consulting firm, was advising the end-user, an investor interested in funding a new private hospital in London

Client Ask • SGS was engaged to conduct a feasibility study and due diligence covering the following aspects: • Determine the potential for demand in the three identified acute service categories, namely, Cancer, Cardiology and Neurology, and benchmark proposed tariffs with prevailing rates for major service categories such as CABG, Angiography, etc. • Assess the current occupancy levels in London for in-patients and gauge the possible demand for out-patient consultations to determine possible revenues for the proposed hospital • Trends and outlook related segments such as international patient segment, namely, medical tourism and UK private medical insurance

Sutherland’s Solution • SGS conducted an extensive secondary research and reviewed the financial assumptions of the model provided, to design a discussion guide for validation of model inputs. SGS held in-depth, consultative and probing interviews with 9 Cardiac Surgeons, 12 General Practitioners, 5 Neurosurgeons, 4 Neurologists, 3 Equipment Vendors and 5 insurance companies to assess the demand environment for a private hospital in West London • Using a bottom-up approach based on demographic data of the region, SGS made a preliminary estimate of the market-size which was validated from competitive intelligence data gathered on-ground. Market segmentation was performed and key drivers of demand were analyzed in great depth

•Benefits to the Client • Provided an independent third-party assessment of the expected demand for services in the region of the hospital • Helped validate assumptions w.r.t pricing of surgeries and diagnostic services and provided necessary justification to tone down the volume expectations in key categories, namely, cardiology CABG, oncology therapies and acute neuro-surgeries • Helped assess support the project would receive from primary sponsors (i.e. surgeons) and made a recommendation accordingly © 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com January 10, 2013

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Addressable market for private hospital segment is quite small, estimated at around 10,000 patients Addressable Market from HNWI ~2,500

# of HNWI X 750,000

Addressable Market from Domestic PMI ~3,400

Avg. household size5

Addressable Market from International Patients ~1,200

# of private medical insurers3

X

Source: SGS estimates, XXX reports

XX%

% of patients opting for private hospital2

X XX%

Ratio of patient to relatives

# of medical tourists

xx%

Prevalence rate of CHD4

X

# of patients in waiting list in England

X XX%

X

% of patients opting for private hospital2

XX%

X

% of patients opting for private hospital2

10.3%

England’s population as % of UK population

123,000 Note: Data has been randomized

X

Incidence rate of Angina1

98,000

Addressable Market from General ~2,500

X

2.5

1,787,000

Addressable Market ~9,600

Incidence rate of Angina1

1 UK’s incidence rate of Angina has been considered 2 Only a particular share of the total patients has been assumed to opt for private hospital treatment 3 Excludes HNWI having private medical insurance

© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

XX%

XX%

X

% of patients opting for private hospital2 X%

5 An Assumption 4 Global prevalence rate of CHD is considered

www.sutherlandglobal.com January 10, 2013

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Volumes are dominated by PCI surgeries; valve operations and arrhythmia interventions have registered the fastest growth Cardiac Surgery

2006

2007

2008

2009

CAGR

PCI – Angioplasty

73,698

77,373

80,331

83,130

4.1%

CABG

24,566

24,959

25,913

25,657

1.5%

Valve Surgery

13,080

14,754

16,489

17,840

10.9%

156

129

122

98

-14.4%

31,440

33,834

38,253

40,091

8.4%

Heart Transplant Arrhythmia Interventions (Includes Pacemaker, ICT & CRT Implants)

Key Observations • Advancement in technology (such as cardiac CT Scanners) is leading to an early detection of ischemic heart diseases and resolution through simpler procedures

such as angioplasty • Valve surgeries and ablation surgeries have registered an above-average growth over the years

Source: SGS research, National statistics

© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

Note: Data has been randomized

www.sutherlandglobal.com January 10, 2013

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Major drivers and inhibitors of demand for cardiac treatment in the private sector Explanation

Reduction in Waiting Time for CABG

Quick Response to Heart Attack Symptoms

Lack of advanced equipment at NHS facilities

• Owing to the Coronary Heart Disease National Service Framework (CHD NSF) launched in 2000, today no patient is required to wait more than three months for heart bypass surgery • This is a significant improvement from 2000, when more than 1,000 patients waited over a year for surgery, and from 1996 when some patients waited over two years

• Today, over 70% of people with heart attack symptoms are treated with thrombolytics (‘clot-busting’ drugs) within 60 minutes of calling for help, compared with approximately 24% before the launch of CHD NSF • Better primary emergency response systems can reduce the risk of heart damage and complications and can thus reduce the need for complex surgeries

• Considerable investment made by private clinics in latest technology CT scanners and other equipment have increased their clientele from the NHS network • Lack of advanced cardiac scanning equipment at NHS facilities leads to cardiac patients being referred to private hospitals for scanning and other diagnostic services • The European Scanning Centre, which invested £1.5m for a 3-D CT scanner, has been receiving considerably high number of patients from Harley Street for the 3-D CT scans since it purchased the scanner

Source: SGS primary research, company filings

© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

Note: Data has been randomized

www.sutherlandglobal.com January 10, 2013

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Supply of cardiothoracic surgeons remains a concern as a majority are busy with on–call and elective commitments Cardiothoracic Surgeons Number of Cardiothoracic Surgeons

350

42.8%

Cardiac

275 220

Cardiothoracic Surgeons by Specialty (2010)

Cardiothoracic

250

24.1%

Thoracic

150

21.0%

160

2000-01 150

2004-05

Estimated Requirement*

2009-10

2014-15

Paediatrics

12.1%

Actual Availability

*Note: NHS Executive projected requirements for additional cardiothoracic consultants in England, November 2001

Note: Figures show areas of special interest as specified by respondents. Surgeons may have more than one area of special interest, therefore the above figures may total more than the number of surgeons

• Although UK currently has adequate number of cardiothoracic surgeons, majority of them remain busy with on–call and elective duties. According to a survey conducted by Royal College of Surgeons of England (April 2010), only 6% of total cardiothoracic surgeons generally get free from elective duties while covering on–call responsibilities • While 36% of surgeons surveyed expressed the desire to work part-time in the future only 38% of surgeons dismissed the need to work part-time and the remaining 26% were not sure • Surgeons prefer NHS over private hospitals as (i) they are hired on a salary basis, (ii) incentives for putting extra hours & (iii) they can make big name only through NHS hospitals Source: SGS primary research, Industry statistics

© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

Note: Data has been randomized

www.sutherlandglobal.com January 10, 2013

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Many facilities undertook development of dedicated floors to cardiothoracic activity and critical care Hospital

Facility

Plymouth Hospitals

Nottingham University Hospitals

Oxford Radcliffe Hospitals

South Manchester University Hospitals Basildon & Thurrock University Hospitals

Capex (£ Mn)

Major Improvement Details

58.9

   

Two new theatres, a state of the art critical care and coronary care unit Four co-located 26-bedded wards An administration suite where all clinical specialists and support staff are located A shell for a new general critical care unit and a new expanded library

45.2

    

Includes specialist medical, surgical, nursing and critical care all under one roof New facilities with two cardiology catheter laboratories An overnight-stay ward and technical cardiology on the ground floor Inpatient Morris Ward containing 36 beds on the first floor Two cardiac surgery theatres and a 16-bed critical care unit on the second floor

32.6

   

Four catheter laboratories with an additional shell for a fifth catheter laboratory A new cardiology floor adjacent to the catheter laboratories A floor dedicated to cardiothoracic activity Separate ambulance and patient entrances from the hospital road

27.8

 20 consulting examination rooms, stress test area including a five-room echo suite, tilt test, exercise and ECG rooms plus support rooms  26 critical care bed spaces (including 6 isolation standard spaces) and support rooms  A 250m2 area earmarked for the provision of a cardiac MRI suite

75.2

   

3 cardiac catheter laboratories for tertiary activity and a shell for a fourth laboratory Cardiology inpatient and day stay beds 3 operating theatres and a shell for a fourth A 22-bed critical care facility; cardiothoracic surgery beds

Source: SGS primary research, company filings

© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

Note: Data has been randomized

www.sutherlandglobal.com January 10, 2013

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The UK private cardiology market is fragmented with leading London providers controlling over a third of the market Share of the leading London providers in the overall UK private cardiology market

100%

12.0%

10%

8%

5% 65.0%

Total

The Wellington London Bridge Hospital Hospital

Royal Brompton*

The Harley Street Clinic

Others

Note: Private patients unit is considered The market share is based on cardiac surgeries conducted by the hospitals and is for 2008-09 Source: SGS primary research

Š 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com January 10, 2013

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SGS_Healthcare_Case_Studies_Hospital_due.ppt