This document provides an overview of quantitative techniques that can be used to analyze the local post-acute healthcare market for a given organization. It discusses calculating metrics like utilization rates, market share, market segmentation, market competitiveness/concentration, and referral source trends to understand the market dynamics. The purpose is to demonstrate possible marketing strategies based on such an analysis of the local market conditions.

1. Originally presented April 2010

2. AGENDA
 Speaker Background
 Purpose
 Market Definition & Rationale
 Analysis Techniques
 Utilization
 Market Share
 Market Segmentation
 Market Competitiveness/Concentration
 Market Attractiveness
 Referral Source Trends
 Referral Source Market Share
 Managed Care
 Conclusions

3. PURPOSE
 To discuss quantitative techniques that can be used to
better understand the local market for a post-acute
healthcare organization using data specific to its
market
 To demonstrate the possible marketing strategies for
the organization, based on the analysis of its local
market

4. SPEAKER BACKGROUND
 Over 20 years in home care
 Over 35 years of marketing & planning experience
 MBA from Mass. Inst. Of Technology Sloan School
 President, Healthcare Market Resources—a
market intelligence company providing
customized local market research for home health
agencies & hospices

5. MARKET DEFINITION & RATIONALE
 Post acute market is defined by those healthcare
organizations to which a patient can be referred upon
discharge from a hospital for additional medical care
 Usually includes skilled nursing facilities, home health
agencies, hospices and rehab and LTAC hospitals
 Will likely be able to participate in the Medicare post
acute bundling demonstration mandated under the
recent healthcare reform legislation
 Only data on Medicare patients is readily available

6. UTILIZATION
 Usually defined as % of Medicare fee-for-service
enrollees, who use the Medicare home health or
nursing home benefit in a given year
 For hospice, it can be defined as % of Medicare
enrollees using the benefit or % of Medicare enrollees
who die on the hospice service
 Level of utilization can determine how much effort an
organization puts forth to find new sources of patients
 Utilization can be leading indicator of future market
potential

7. NEW CUSTOMER OPPORTUNITY
*Weighted Utilization=Pts Served/Medicare FFS Eligible

8. NEW CUSTOMER OPPORTUNITY
ANALYSIS
• Highest state(FL) has a utilization rate that is more
than 6 times larger than the lowest state’s(HI)
• Variation at county level likely to be as large
• As long as your geography is NOT in the Quartile
1(below 10.3%), there is an opportunity to find new
patients
• If it is easier for a referral source to give you a new
patient than to take one away from another agency

9. NEW CUSTOMER OPPORTUNITY
Hospice Utilization
4.0% 3.7%
3.5%
3.0% 2.5% 2.4% 2.3%
2.5% 1.9%
2.0%
1.5%
1.0% 0.6% Hospice Utilization
0.5%
0.0%
** Unweighted ***Weighted Utilization=Pts Served/Medicare Eligible

10. MARKET SHARE
 Market is the percentage of sales of a service in a given
region that is controlled by a company
 It is the best measure of competitive strength in a
sector as compared to other organizations in that
sector.
 It allows for comparison on a year to year basis
 In the post acute market, it is the geography that the
organization serves—counties vs. zip codes

11. MEASUREMENT OF MARKET SHARE
Observations Market Share Metrics
 Overall market share can be Patients Volume $
measured in various ways
 Higher market share on one
metric vs. another can reflect Home Discharges Episodes Revenues
Health
organization’s market
strategy
Hospice Discharges Days Revenues
 Revenues are ultimate
measure, since we take $$ to
the bank
SNF Discharges Days Revenues
 Market share cannot be
‘bought’ because of
reimbursement rules

14. MARKET SEGMENTATION
 A market segment is a sub-set of the market made up of
customers sharing one or more characteristics that
causes them to demand similar services, based on
attributes, such as price or function
 A true segment
 Is distinct from other segments(different common needs)
 Is homogeneous within the segment(exhibits common needs)
 Responds simi9larly to a market stimulus
 Can be reached by a market intervention
 Many firms focus on a given market segment as a means
of differentiating themselves from their competition

15. KEY MARKET SEGMENT
QUESTIONS
 How big is it?
 Is it distinct?
 Can it be targeted/identified?
 Is it attractive/profitable?

16. MARKET SEGMENTS
 Home Health
 Primary Diagnosis
 Age
 Race/Ethnic Background
 Source of Referral(Captive)
 Hospice
 Primary Diagnosis
 Site of Care
 Race/Ethnic Background
 Source of Referral(Captive)

18. HOW COMPETITIVE IS MY
MARKET?
 Competitive Market Metric
 Agencies/100K Medicare Patients by State

19. MARKET COMPETITIVENESS
CALCULATION EXAMPLE
 There are 7 meaningful home health agencies in a 4
county area with 22,000 Medicare patients
 Competitiveness factor = 7/2.2 or 3.2
 There is a moderate level of competition in this market

20. RULE OF THREE
 Professors Sheth & Sisodia studied over the evolution of 200
industries and saw the development of 2 types of firms
 Full Line Generalists
 Product/Market Specialists
 Hospital based or local VNA – market specialist
 Ortho agency – product specialist
 Over time, 3 full line generalists grow to 70%-90& of the
share
 Increased share results in better performance for the full
line generalists, but weaker results for the specialists
 UNDERLYING ASSUMPTION: The more concentrated a
market is, the more difficult it is to gain market share

21. HOW CONCETRATED IS MY
MARKET?
 Market Concentration Metric based on “Rule of Three”
 It infers prospects for future success.
 Once referral source have “locked in” a preference, it
requires a greater degree of differentiation to get their
attention and gain trial
 Referrals to captive agencies by parent organization
employees are not a “free market” situation.

22. MARKET CONCENTRATION
CALCULATION
 Segment market between facility-based/affiliated agencies
& freestanding agencies
 Very difficult to take market share away from a facility-
related agency(unless the rules of the game change)
 Focus on freestanding market segment
 Combine market share of three largest freestanding
providers
 If combined market share is above 65-70%, this is a
concentrated market
 This means that referral sources have “locked in” their
agencies and it will be very difficult to get trial, unless the
agency can create a very meaningful difference.

23. MARKET CONCENTRATION
CALCULATION EXAMPLE
Agency Episodes Overall Mkt Freestanding Freestanding
Share Market Mkt Share
Medical Ctr 650 32.5%
Community 350 17.5%
Hospital
Local VNA 275 13.75% 275 27.5%
Nat’l Chain 225 11.25% 225 22.5%
Independent 150 7.5% 125 15.0%
Regional Chain 225 11.25% 225 22.5%
Mom & Pop 125 6.25% 100 10.0%
Overall Market – Unconcentrated(63.8%); Freestanding – Concentrated(72.5%)

24. MARKET ATTRACTIVENESS
 Market concentration levels below the “Rule of Three”
barrier means that referral sources are more likely to
try a different provider
 Relative low levels of utilization means that there are
many new sources of patients to be developed
 Plotting utilization and concentration levels in a
geographic market can guide marketing strategy

25. MARKET ATTRACTIVENESS MODEL
Hospice Utilization Quartile
100 Quadrant III Quadrant IV
Focus on both gaining market share through diiferentiation DIVERSIFY
High Utilization High Utilization
Unconcetrated Concetrated
75
Focus on both gaining market share through Find new sources or types
differentiation and finding new sources or of patients
types of patients
50
Low/Moderate Utilization Low/Moderate Utilization
Unconcetrated Concetrated
25
0 Quadrant I Quadrant II
65
Market Concentration (%)

26. HOSPITAL REFERRAL TRENDS
 Hospital referral practices post-discharge are influenced by
several factors
 Availability of resources within the community
 Historic MD practices
 Competing sites of care under indirect or direct hospital
control
 Measure of success has been SILENCE; decentralized
decision-making has been the norm
 Focus on readmission in healthcare reform legislation will
change success metric to a quantifiable one-readmission
rate
 C-suite involvement will be coming when hospital finances
are at risk
 Will likely change provider market share at the hospital

27. MEDICARE HOSPITAL DISCHARGES
Top 5 = RI, VT, MA, DE & NH Bottom 5 = PR, HI, WY, SD & MT

28. HOSPITAL MARKET SHARE
 Identify total Medicare referrals to home health,
hospice or SNF
 Identify total Medicare discharges
 Identify Medicare discharges for your service area
 Your market potential= Svc Area Discharges x Total HH/Hos/SNF Discharges
Total Discharges
 Your market share = Your Referrals
Your Market Potential
• Visit our Resource page for our article on “Getting a Bigger
Share of Referrals”

29. MEDICARE HOSPITAL DISCHARGES
Converse, Platte & Nobriara Counties Wyoming
Zip Codes : 82224; 82229; 82633; 82637; 82222; 82225; 82227; 82242; 82201; 82210; 82213; 82214; 82215
Days pe r Char ge s pe r
Pr ovide r Nam e Pr ovide r Type Pr ovide r Addr e s s Pr ovide r City State Dis char ge s Dis char ge Dis char ge
WY OMING MEDICA L CENTER A cute Care 1233 E ST 2ND ST
A CA SP R
E WY 311 4.9 20,473
PLA TTE COUNTY MEMORIA L HOSPITA L - CA H Short Term A cute Care 201 14TH STRE T
E WHE TLA ND
A WY 310 2.8 5,839
MEMORIA L HOSP OF CONV ERSE COUNTY - CA H Short Term A cute Care 111 SOUTH 5TH STRE T P
E O BOX 1450 DOUGLA S WY 277 3.4 11,993
UNITE ME
D DICA L CENTER A cute Care 214 E ST 23RD STRE T
A E CHE E
Y NNE WY 131 6.2 32,725
POUDRE V A LLE HOSP
Y ITA L A cute Care 1024 S LEMA Y A V E FORT COLLINS CO 42 9.6 43,810
IV INSON MEMORIA L HOSPITA L A cute Care 255 N 30TH LA RA MIE WY 26 6.3 32,339
REGIONA L WEST ME CE
D NTER A cute Care 4021 A V E B SCOTTSBLUFF NE 16 5.4 14,877
UNIV ERSITY OF COLORA DO HOSP A UTHORITY A cute Care 4200 E 9TH A V E DENV ER CO 6 5.7 38,645
RA PID CITY REGIONA L HOSPITA L A cute Care 353 FA IRMONT BLV D RA PID CITY SD 6 6.7 25,424
CA MPBELL COUNTY MEMORIA L HOSPITA L A cute Care 501 S BURMA A V E O BOX 3011
/P GILLETTE WY 5 4.2 8,323
BA NNE BA Y WOOD ME
R DICA L CENTER A cute Care 6644 BA Y WOOD A V E MESA AZ 4 4.5 27,401
PRESBY TERIA N/ST LUKE'S MEDICA L CTR A cute Care 1719 E 19TH A V E DENV ER CO 4 20.8 139,735
UNIV ERSITY OF UTA H HOSPITA L A cute Care 50 N MEDICA L DR SA LT LA KE CITY UT 4 11.0 44,709
SA INT FRA NCIS HOSPITA L, INC A cute Care 6161 SOUTH Y A LE & 4818 E 67TH STRE T
E TULSA OK 3 12.3 36,409
WY OMING BEHA V IORA L INSTITUTE Psychiatric Hospital 2521 E ST 15TH STRE T
A E CA SP R
E WY 3 15.3 11,447
Y UMA REGIONA L MEDICA L CENTER A cute Care 2400 A V ENUE A Y UMA AZ 2 3.0 10,297
WESTERN A RIZONA REGIONA L MEDICA L CTR A cute Care 2735 SILV E CRE K ROA D
R E BULLHE D CITY
A AZ 2 6.5 49,545
EISENHOWE ME
R DICA L CENTER A cute Care 39-000 BOB HOP DRIV E
E RA NCHO MIRA GE CA 2 7.0 52,159
CENTURA HLTH/P NROSE ST FRA NCIS HOSP
E A cute Care 2215 N CA SCA DE A V E COLORA DO SPRINGS CO 2 13.0 48,263
NORTH COLORA DO MEDICA L CENTER A cute Care 1801 16TH STRE T
E GRE LE
E Y CO 2 5.0 32,062
EXEMPLA LUTHERA N MEDICA L CTR A cute Care 8300 W 38TH A V E WHE T RIDGE
A CO 2 4.0 40,552
MCKE ME
E DICA L CENTER A cute Care 2000 BOISE A V E LOV ELA ND CO 2 3.0 27,049
DESERT SPRINGS HOSPITA L A cute Care 2075 E ST FLA MINGO ROA D
A LA S V EGA S NV 2 3.0 37,399
MEMORIA L HOSPITA L OF UNION COUNTY A cute Care 500 LONDON A V E MA RY SV ILLE OH 2 2.5 10,785
BA PTIST ST A NTHONY S HS BA PTIST CA MPUS A cute Care 1600 WA LLA CE BLV D A MA RILLO TX 2 6.0 12,239
DIXIE REGIONA L MEDICA L CENTER A cute Care 544 SOUTH 400 E ST
A ST GEORGE UT 2 4.0 15,732
MEMORIA L HOSPITA L OF SHERIDA N COUNTY A cute Care 1401 W 5TH ST SHERIDA N WY 2 5.0 9,574
WEST P RK HOSP
A ITA L DISTRICT A cute Care 707 SHERIDA N A V E CODY WY 2 3.5 15,508
ST JOHNS HOSPITA L A cute Care 625 E BROA DWA Y , PO BOX 428 JA CKSON WY 2 7.0 25,532
ST JOSE H'S HOSP
P ITA L MEDICA L CENTER A cute Care 350 WEST THOMA S ROA D PHOENIX AZ 1 19.0 260,016
DE E WE
L BB MEMORIA L HOSPITA L A cute Care 14502 WEST ME KE BLV D
E R SUN CITY WEST AZ 1 2.0 9,871
HA V A SU REGIONA L MEDICA L CENTER A cute Care 101 CIV IC CENTE LA NE
R LA KE HA V A SU CITY AZ 1 8.0 19,788
LOMA LINDA UNIV ERSITY MEDICA L CENTER A cute Care 11234 A NDERSON ST LOMA LINDA CA 1 1.0 6,141
UNIV OF CA LIFORNIA SA N DIEGO ME CTR
D A cute Care 200 WEST A RBOR DRIV E SA N DIEGO CA 1 13.0 17,084
SUTTE ROSE ILLE ME
R V DICA L CENTER A cute Care ONE MEDICA L PLA ZA ROSE ILLE
V CA 1 1.0 21,684
ST JOSE H HOSP
P ITA L A cute Care 2700 DOLBE R ST
E EUREKA CA 1 1.0 6,682
JOHN F KENNEDY MEMORIA L HOSPITA L, INC A cute Care 47-111 MONROE ST INDIO CA 1 2.0 44,713
CENTURA HE LTH-ST A NTHONY CE
A NTRA L HOSP A cute Care 4231 W 16TH A V E DENV ER CO 1 4.0 21,666
CENTURA HE LTH-A V ISTA A DV E
A NTIST HOSP A cute Care 100 HE LTH P RK DR
A A LOUISV ILLE CO 1 4.0 38,228
KINDRE HOSP
D ITA L DENV ER Long Term A cute Care 1920 HIGH ST DENV ER CO 1 26.0 61,853
SP LDING RE
A HA BILITA TION HOSPITA L Rehabilitation Hospital 900 POTOMA C STRE T
E A URORA CO 1 5.0 12,649
SOUTH BA Y HOSPITA L A cute Care 4016 STA TE ROA D 674 SUN CITY CENTER FL 1 4.0 19,109
MERCY MEDICA L CENTER-SIOUX CITY A cute Care 801 5TH ST BOX #316B SIOUX CITY IA 1 1.0 4,992
CLOUD COUNTY HE LTH CE
A NTER A cute Care 1100 HIGHLA ND DR CONCORDIA KS 1 5.0 11,359
CLOUD COUNTY HE LTH CE
A NTER Short Term A cute Care 1100 HIGHLA ND DRIV E CONCORDIA KS 1 5.0 11,359
ROCHESTE ME
R THODIST HOSPITA L A cute Care 201 W CENTE ST
R ROCHESTER MN 1 5.0 12,681
COMMUNITY MEMORIA L HOSPITA L A cute Care 855 MA NKA TO A V ENUE P
, O BOX 5600 WINONA MN 1 5.0 15,416
FA IRV IEW LA KE RE
S GIONA L MEDICA L CENTER A cute Care 5200 FA IRV IEW BLV D WY OMING MN 1 8.0 23,526
JA CKSON MEDICA L CENTER Short Term A cute Care 1430 NORTH HIGHWA Y JA CKSON MN 1 2.0 2,120
ST JOHNS REGIONA L HE LTH CE
A NTER A cute Care 1235 E CHEROKEE SPRINGFIELD MO 1 1.0 1,997
ST V INCENT HE LTHCA RE
A A cute Care 1233 N 30TH ST PO BOX 35200 BILLINGS MT 1 3.0 13,399
GOOD SA MA RITA N HOSPITA L A cute Care 10 E 31ST STRE T P O BOX 1990
E KE RNE
A Y NE 1 2.0 5,329
GRE T P
A LA INS REGIONA L MEDICA L CENTER A cute Care 601 W LEOTA ST NORTH PLA TTE NE 1 5.0 18,881
V A LLE HOSP
Y ITA L A cute Care 223 N V A N DIE A V E
N RIDGEWOOD NJ 1 3.0 68,125
DE CONE
A SS HOSPITA L A cute Care 5501 NORTH PORTLA ND A V ENUE OKLA HOMA CITY OK 1 17.0 95,940
OKMULGE ME
E MORIA L HOSPITA L A cute Care 1401 MORRIS DRIV E P O BOX 1038
, OKMULGEE OK 1 1.0 1,964
SA INT FRA NCIS HOSPITA L A T BROKE A RROW
N A cute Care 3000 SOUTH ELM PLA CE BROKE A RROW
N OK 1 12.0 20,941
GEORGE NIGH REBA BILITA TION CTR Rehabilitation Hospital 900 E ST A IRP
A ORT ROA D OKMULGEE OK 1 11.0 10,595
SA INT V INCENT HE LTH CE
A NTER A cute Care 232 WEST 25TH STRE T
E ERIE PA 1 7.0 43,147
SIOUX V A LLE HOSP
Y ITA L A cute Care 1100 S EUCLID A V E SIOUX FA LLS SD 1 4.0 11,391
FA LL RIV E HOSP
R ITA L - CA H Short Term A cute Care 209 N 16TH ST HOT SPRINGS SD 1 4.0 8,447
SUMMIT MEDICA L CENTER A cute Care 5655 FRIST BLV D HERMITA GE TN 1 7.0 27,217
LA V A CA MEDICA L CENTER A cute Care 1400 NORTH TEXA NA STRE T
E HA LLETTSV ILLE TX 1 5.0 5,129
LDS HOSPITA L A cute Care 8TH A V ENUE & C STRE T
E SA LT LA KE CITY UT 1 9.0 47,221
DA V IS HOSPITA L A ND MEDICA L CENTER A cute Care 1600 WEST A NTELOP DRIV E
E LA Y TON UT 1 10.0 19,249
OV ERLA KE HOSPITA L MEDICA L CENTER A cute Care 1035-116TH A V E NE BELLE UE
V WA 1 1.0 2,826
ST JOSE HS HOSP
P ITA L A cute Care 611 ST JOSE H A V E
P NUE MA RSHFIELD WI 1 2.0 4,990
MEMORIA L HOSPITA L SWE TWA TE COUNTY
E R A cute Care 1200 COLLEGE DR/PO BOX 1359 ROCK SPRINGS WY 1 2.0 11,091
E A NSTON RE
V GIONA L HOSPITA L A cute Care 190 A RROWHE D DR
A E A NSTON
V WY 1 1.0 5,474

31. MANAGED CARE TRENDS
 Medicare managed care is generally a less attractive
payor than traditional Medicare fee-for-service
 Managed care generally pays less per unit of service,
more closely monitors length of stay, has a higher risk
of denial and requires more administrative effort than
Medicare FFS
 Knowing Medicare managed care levels is key in
assessing market attractiveness and sales rep
performance

32. SAMPLE
MEDICARE MANAGED CARE PENETRATION- 2002-2005
STATE:CHOSEN
2005 2004 2003 2002
MANAGED MANAGED MANAGED MANAGED
MEDICARE CARE MEDICARE CARE MEDICARE CARE MEDICARE CARE
STATE COUNTY ELIGIBLE ENROLLEES % ELIGIBLE ENROLLEES % ELIGIBLE ENROLLEES % ELIGIBLE ENROLLEES %
ADAIR 3,309 3,298 3,298 3,309
ALLEN 3,144 3,174 3,172 3,219
ANDERSON 2,751 2,756 2,737 13 0.47 2,773 18 0.65
BALLARD 2,047 2,042 2,051 2,061
BARREN 7,216 7,246 7,304 7,343
BATH 2,186 12 0.55 2,173 12 0.55 2,165 20 0.92 2,182 20 0.92
BELL 6,522 190 2.91 6,549 179 2.73 6,592 172 2.61 6,602 173 2.62
BOONE 11,139 1082 9.71 11,275 1153 10.23 11,342 1181 10.41 11,565 1226 10.60
BOURBON 3,241 3,257 3,274 3,293
BOYD 10,854 160 1.47 10,811 148 1.37 10,762 149 1.38 10,707 152 1.42
BOYLE 5,240 5,259 5,265 13 0.25 5,306 13 0.25
BRACKEN 1,558 1,550 1,545 1,571
BREATHITT 3,019 11 0.36 3,026 12 0.4 3,022 13 0.43 3,036 11 0.36
BRECKINRIDGE 3,440 3,447 3,447 12 0.35 3,434 17 0.50
BULLITT 6,776 135 1.99 6,829 223 3.27 6,898 230 3.33 6,980 256 3.67
BUTLER 2,098 2,112 2,120 2,140
CALDWELL 2,797 38 1.36 2,798 50 1.79 2,802 48 1.71 2,829 50 1.77
CALLOWAY 6,097 13 0.21 6,142 11 0.18 6,153 11 0.18 6,183 11 0.18
CAMPBELL 13,191 2046 15.51 13,196 2091 15.85 13,171 2083 15.82 13,174 2079 15.78
CARLISLE 1,169 1,157 1,167 1,156
CARROLL 1,755 1,758 1,773 1,781
CARTER 5,037 32 0.64 5,035 35 0.7 5,040 35 0.69 4,927 39 0.79
CASEY 2,814 2,798 14 0.5 2,796 13 0.46 2,806 12 0.43
CHRISTIAN 8,786 31 0.35 8,826 39 0.44 8,812 43 0.49 8,847 44 0.50
CLARK 5,573 39 0.7 5,613 46 0.82 5,618 56 1 5,689 63 1.11
CLAY 4,051 4,074 4,164 4,219
CLINTON 2,268 2,272 2,287 2,300
CRITTENDEN 1,844 1,860 1,873 1,883
CUMBERLAND 1,642 1,637 1,634 1,642
DAVIESS 16,696 50 0.3 16,776 56 0.33 16,794 50 0.3 16,932 48 0.28
TOTAL 148,260 3,839 2.59 148,746 4,069 2.74 149,078 4,142 2.78 149,889 4,232 2.82

33. POST-ACUTE BUNDLING
• Medicare Axiom-”That which gets done is that which is
paid for”—will be broken eventually. Silos will be
destroyed.
 Hospice services, excluded from the voluntary
pilot, could be a “gaming” opportunity
 Need to understand what are “best practices” to
minimize overall expenditures for the
ACO(Accountable Care Organization) over the
first 30 days
 Post-acute setting costs + hospitalization and emergent
care costs will provider selection

34. CONCLUSIONS
 Process to analyze a post-acute market is similar
Market Size Market Growth
Market Utilization Market Share
Market Segmentation Market Competitiveness
Market Concentration Market Attractiveness
Referral Source Trends Market Share by Referral Source
Managed Care Trends

35. CONCLUSIONS
 SNF, Home Health and Hospice Silos will divide into
two segments over next 5-10 years—Post-Acute &
Chronic
 Post-acute market will be characterized by centralized
decision-making regarding patient care & co-ordination
 Chronic segment will be more ill-defined with less
accountability and co-ordination
HOW WILL YOUR ORGANIZATION PLAY IN BOTH
SEGMENTS?

36. CONTACT INFORMATION
Rich Chesney
President, Healthcare Market Resources
rchesney@healthmr.com
215.657.7373
215.657.0395(f)
www.healthmr.com