Admedi Co.

Our client has recently acquired a healthcare software company, Admedico, which sells only administrative systems to large hospitals. Our client produces medical devices and services. They would like us to find new opportunities to increase revenue.

Our client has recently acquired a healthcare software company, Admedico, which sells only administrative systems to large hospitals. Our client produces medical devices and services. They would like us to find new opportunities to increase revenue.

Key Framework Components: This candidate should recognize to omit costs from her line of questioning; if she fails to do so, push her to focus only on revenue. A strong framework will consider market size and growth, competition, customers, company capabilities, and opportunities for cross-selling revenue with the parent business Additional Information: If the candidate requests information regarding market size and growth, show her Exhibit 1. From this information, she should recognize physician support systems are an attractive market. Additional information to provide upon request: • Hospitals make up the vast majority of the total medical software market • There has been consolidation in the industry, with three large hospital networks dominating 45% of the market • Cost controls have been instituted as larger networks acquire smaller hospitals (e.g., centralization of functions) • Many hospitals seek to consolidate their vendor base • Many hospitals are currently upgrading their older systems • Larger hospitals generally try to consolidate purchasing both within and across hospitals • Software decisions are usually made by the hospital IT group, while instrument purchases are made by the medical staff Additional Information: If the candidate requests information regarding competition, show her Exhibit 2. A strong candidate would note that the concentration varies strongly by market (concentrated in administration systems and patient administration but fragmented in the physician support market) Additional information to provide upon request: • Analysts reports have margins of 25-30% for administrative systems and patient administration; margins are higher in the physician support segment, typically 45-50% • HTI and HCS Software Systems recently expanded from their core markets (i.e., the ones where they are much larger) into adjacent ones. Ask the candidate why they might have done so. She should recognize they may be a threat to Admedi Co.’s core business • Several companies that recently switched to HTI said they did so because they were offered better pricing and service for software spanning all three segments • One company reached out to Admedi Co., but was unable to get a representative to describe its options • Admedi Co.’s marketing department is organized regionally [note: a strong candidate will recognize this is a poor fit with hospital’s desire to centralize purchasing] • There are currently no sales teams dedicated to the four or five largest networks, though HTI employs such an approach • Admedi Co.’s administration product is seen as the best in the market; it is modular in design, allowing for easier upgrades; the software development team believes certain modules could provide the foundation for other administrative software programs. • Admedi Co. has also consistently received excellent reviews for its customer support Recommendation: The candidate should recognize that the higher gross margins make physician support a potentially attractive market, but the entry barriers may be high given an increased level of complexity and specialization. She should note that the patient administration segment is a more adjacent jump. Additionally, she should recognize that the sales/marketing functions are in need of improvement. She may also point out that HTI and HCS are likely to be their main sources of competition. A strong recommendation will mention the choice between organic and inorganic growth. In particular, she may note that the modular nature of the current product may be more conducive to entering the patient administration segment organically, while the physician support market is likely to acquire an acquisition, given Admedi Co.’s current lack of relevant technical capabilities.