1

Cash-Paying �Customers

Customers may be conditioned to pay cash for some healthcare services more than others because insurance hasn’t historically covered it, they already pay portions out-of-pocket (due to copays or high deductibles), and/or they are price inelastic for superior quality (e.g., services for children).

2

Re-occurring �Customers

Healthcare services infrequently generate revenue from a monthly-fee or subscription (though a concierge medicine practice might), so instead, re-ocurring customers are more commonly patients needing a particular service to treat a condition on a regular basis (daily, weekly, monthly) year-after-year.

3

Fragmented �Local Market

The market is not dominated by 1-2 players (concentrated), but instead divided among 10s or 100s of players (fragmented). Considering the fragmentation locally is key as certain services may be concentrated in some geographies but fragmented in others.

4

Low CapEx �Requirements

Growth can be generated without significant capital expenditures (CapEx). Here’s an example of what you don’t want: You buy an imaging center operating at 100% utilization. Further growth would require substantial CapEx to open a large new facility with expensive new equipment (e.g., MRIs, X-rays).

5

Growing �Local Market

The healthcare service business would ideally be in a market growing >10% annually or 2x the country’s GDP. Since healthcare is so local and population demographics can vary materially across markets, the segment must be growing within the local geography in which the business operates.