Situation Analysis

Management of an NCI-designated North American cancer hospital wrestled with a billion-dollar-plus expansion—an investment decision made even more complex because medical technology and patient demand is changing so rapidly. With a life span of several decades, management worried that a facility designed around today’s treatment protocols could be made obsolete if medical technology dramatically changed how patients undergo cancer treatment and care in the future.

Discovery and Solution

SDG was brought in to help the working team assess uncertainty in the demand for the new facility and what form it might be expected to take in the future. To facilitate this, SDG forecasted 15-year inpatient and outpatient demand by gathering information from historical patient-encounter data sets as well as expert assessment. SDG developed a decision framework integrating the demand forecast to evaluate various expansion strategies. In the end, SDG recommended a hybrid approach that was expected to generate 15% more value—defined not only in terms of NPV of future cash flow but also the value of medical innovation, competitive position, access to talent—than any of the strategies initially proposed.

Results and Impact

The insight and recommendation helped the management team better understand the uncertainty, achieve clarity on their choices, and reach internal alignment. This led to approval of a $1.2 billion expansion over the next 5 years. The hospital recently announced its expansion plans publicly.