McKinsey Cup Winners from Katz Advise PNC to Skip Canada

As a consultant, advising your client not to act on a business decision, particularly when management is gung-ho about its prospects, is one of the most difficult challenges you face. In this scenario, you need both the hard data to support your recommendation and the candor and tact to present it convincingly without upsetting your client.

Katz MBA students demonstrated the poise of a seasoned consultant in a spring 2014 Consulting Field Project with their client PNC Healthcare. The scope of work was to assess whether PNC Healthcare should expand its lucrative operation of processing payments between insurance companies and health providers into the Canadian market, and, if so, what pricing and distribution strategies would be the most effective. PNC’s acquisition in 2013 of RBC Bank gave the Pittsburgh-based institution, the fifth-largest in the United States, an interest in the Canadian market, which has over $210 billion in annual health care expenditures, according to the students’ estimates.

In the U.S. there is much opportunity for growth in health care payment processing because “we have millions of patients, hundreds of insurance plans, and rising health care costs. All of that is translated into inefficient claims processing,” said Antonio Morayta (MBA ’14), now an international marketing manager for Hunter Fan in Memphis, Tenn.

Morayta spoke at the Katz McKinsey Cup, the competition in which all student Consulting Field Project teams present their work to a judge’s panel of Pittsburgh-area executives. Joining Morayta on the project were teammates Harris Vuadens (MBA ’14), Shorya Bhatnagar (MBA ’14), and Sushil Raina (MBA and MIS Candidate for the Class of 2015). Their faculty advisor was Clinical Assistant Professor of Business Administration Jay Sukits.

To determine the feasibility of PNC Healthcare’s entrance into the Canadian market, the students first outlined the size of the market. Unfortunately for their client, the size of the market pie shrunk as students familiarized themselves with the market. Canada’s publicly funded health care system rendered more than two-thirds of the market untouchable and the fee structure on most of the remaining market was unattractive. This left a realistic market size of about $87 million, a pittance compared with the U.S. marketplace of $806 billion in annual transfer payments.

Don’t go to Canada, the Katz students advised. But their recommendation came with a silver lining: the students created an e-claim market score index, which they applied to other countries and identified France, Germany, and Japan as developed economies with significant growth potential for PNC Healthcare’s business.

The Consulting Field Project, which combined business questions in banking, healthcare, and information technology, brought together, in a real way, the business skills from students’ marketing, strategy, finance, and supply chain management classes. Other finalists for the spring 2014 McKinsey Cup competition completed projects for BNY Mellon, Eaton, Giant Eagle, GlaxoSmithKline, L.B. Foster, McKesson, Philips Respironics Unit, Schneider Downs, UPMC Center for Connected Medicine, and Westinghouse Electric.

“The highest compliment a consultant can receive from a client is that the recommendation they provided is so strong that the client can make a strong decision based on it,” said Vuadens at the conclusion of his team’s McKinsey Cup presentation.

The words of Mary Butler, a senior vice president at PNC Healthcare, left little doubt the students accomplished just that. Said Butler: “The team did a great job exploring every facet of the concept…identifying plausible opportunities, drilling deep to validate it as a true opportunity or a distraction, giving us the answers we need to make a sound decision.”

The PNC Healthcare team was voted as the winner of the spring 2014 McKinsey Cup. Their victory showed that, as consultants, sometimes the best advice is what not to do.