Case cracking

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Case – Candidate Preparation Materials
This document is intended to help prepare you for the case portion of a McKinsey& Company interview. While interviewers at McKinsey have a good deal of flexibility in creating the cases they use in an interview, we believe that the following case is a good example of the type of case many of our interviewers use. The example below is set up to teach you howto approach a typical case. The italicized sections are descriptions or instructions to help you navigate through this document. The words in plain bold font are the descriptions and questions an interviewer may give to you during the interview. The sections in regular (non-bold) font are possible answers.

Example Case: Magna Health
The interviewer will typically start the case bygiving a brief overview of the context, ending with a question that is the problem definition. At the end of the description you will have an opportunity to ask any questions you might have to clarify the information that has been provided to you. Our client is Magna Health, a health care company in the Midwest. It both insures patients and provides health care services. Employers pay a fixedpremium to Magna for each of their employees in return for which Magna covers all necessary health services of the employee (ranging from physician care, and medications to hospitalization) Magna currently has 300,000 patients enrolled in its plan. It has 300 salaried physician employees who provide a broad range of services to patients in 6 centers. These physicians represent a wide range of specialtyareas, but not all areas. When a patient needs medical treatment in a specialty area not covered by a Magna physician, they are referred outside of the Magna network for care, and Magna pays all referral costs on a fee-for-service basis. Magna doesn’t own any hospitals itself, instead contracting services from several local hospitals. Over the past six months, Magna has been experiencing decliningprofitability. Magna’s CEO has retained McKinsey to help determine what is causing the problem and how Magna might fix it. How can Magna Health improve its financial situation?

• Write down important information • Feel free to ask interviewer for explanation of any point that is not clear to you 1

In most McKinsey & Company cases the interviewer will guide you through the casewith a series of questions that will allow you to display a full range of problem solving skills. Below is a series of questions and potential answers that will give you an idea of what a typical case discussion might be like. Question 1. What key areas would you want to explore in order to understand Magna’s decline in profitability? A good answer would include the following: I would want toconsider Magna’s revenues and costs (variable and fixed). In thinking about Magna’s main cost components – I would want to consider administrative (or non-medical) and medical costs (e.g. hospital, drugs, outpatient care) A very good answer might also include the following: You may choose to dive deeper into the different costs, for example: Outpatient costs could be further split into internalphysician costs versus external referral costs.

• Take time to organize your thoughts before answering. This tells the interviewer that you think about the problem in a logical way • Develop overall approach before diving into details

Or you may decide to explore other factors that affect cost, for example: I would also want to understand how Magna’s patient base demographics/overall risk profilemight affect medical costs Question 2. After reviewing the basics of Magna’s business, your team believes that one of the root causes of Magna’s financial problems is how it manages medical costs, particularly the cost of referrals to specialists outside its physician network. Your team has gathered the following information on Magna and its primary competitor, Sunshine HMO:
Number of patients...
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