1.0 Executive Summary
The market for behavioral health services is healthy, as will be shown by the growth the existing Center has experienced during the past two and a half years. Massachusetts has recently passed a mental health parity bill that will become effective in month one. The bill requires insurance companies to develop benefits for biologically based behavioral health disorders similar to those provided for health disorders. This should help sustain the anticipated projected growth. Currently, the Outpatient Psychiatric Center is referring approximately four phone calls a day to other providers.
The key to success for this turnkey project includes:
- An ability to transfer existing hospital behavioral health contracts to the Center.
- Credentialing clinicians in a timely manner.
- Obtaining initial working capital.
- Contracting with clinicians using reasonable rates.
- Developing and implementing a successful billing and collection system.
- Listening to all customers and attempting to meet their needs.
- Obtaining a medicaid provider number.
The business plan provides a map for sustaining growth, improving revenue collections, and increasing our bottom line to produce a profit.
Chart: Highlights
1.1 Objectives
Goal 1: To continuously develop, strengthen, and improve services offered by the Center.
- Strengthen the current payor mix by developing and maintaining strategic alliances with five major behavioral health managed care companies.
- Identify and develop strategic alliances with three community human service and addiction agencies.
- Identify and foster strategic alliances and networks with eight community medical group practices.
- Transfer and/or hire 80% of staff two months before starting date.
- Identify and implement a billing system two months before starting date.
- Improve the expected receipts rate by 40% over the previous year.
- Increase all services offered through the Center by 80% over the previous year.
- Arrange working capital for the initial phase of the turnkey venture.
Goal 2: To strengthen the Center's commitment to excellence.
- Enhance customer service by offering three in-service trainings related to client satisfaction with treatment, accessibility, and staff-client interactions.
- Continuously assess referral base satisfaction through the use of a referral base satisfaction survey.
- Continuously assess client satisfaction from three perspectives: accessibility, environmental factors, and treatment-related factors.
1.2 Mission
1.3 Keys to Success
- Secure working capital by start of project.
- Be profitable on a forward basis by the seventh month of the first fiscal year.
- Be cash flow positive by the seventh month of operation.
- Being affiliated with a well-respected community acute-care hospital.
- Managed Care friendliness through cooperation, accessibility, and clinical focus.
- Community awareness of services provided by the Center.
- Ascertain a medicaid provider number and developing an interim plan to function during the application phase.
- Staff commitment to excellence as evidenced by the Center's growth and customer satisfaction.
- Accessibility and responsiveness to the needs of the Center's customers.
- Functioning as an organization that is fluid, responsive, and willing to change in order to meet the frequent shifts of the behavioral health industry.
2.0 Company Summary
History
Although the Center is a new company, it is taking over the operation of an existing full-service mental health center. Prior to the privatization of the Outpatient Mental Health and Addictions Center, the Center was part of Anna Jaques Hospital's Psychiatric Services Program. This program offered an array of behavioral health services which included both inpatient and outpatient services. Currently, there are approximately 565 active cases. There are another 233 inactive cases that use the Center's services on an as-needed basis. The Center is located at the Amesbury Health Center, a facility owned by Anna Jaques Hospital. The Amesbury Health Center, formerly a city-owned community hospital, is a four-story brick building. It has been modified to accommodate a child inpatient unit and medical office spaces, including the mental health center.
The outpatient center began as a psychopharmacology center at Anna Jaques Hospital. During 1995, the psychopharmacology center moved to the Amesbury Health Center. At that time, the center expanded to include an Addictions Program.
In 1998, the Center further expanded to offer psychotherapy services. The psychotherapy component consisted of individual, couple, family therapies, and specialized groups. The composition of staff was multidisciplinary and included independently licensed/certified mental health centerians and certified addiction treatment specialists. During this time, the Center was licensed by the Department of Public Health to offer specialized addiction services that included a Second Offenders Program, an Addiction Counseling program, and an Intensive Outpatient Program. The licensing enables the Center to collaborate with other state and community agencies working with substance abuse/addiction populations, resulting in further growth for this program.
Since 1996 the number of visits/procedures has continued to grow to its present day tallies. The total number of visits for 1996 was 1,471, in 1997 it was 1,869, in 1998 it was 3,399, and in 1999 it was 6,158. The projected number of units of service for 2000 is 5,700. Although units of service have increased by 45% over the past two years, the net revenue has decreased per unit of service. As volume has increased, expenses per unit of service has fallen from $88 in 1996 to $52 in 1999. Since 1998, operating expenses have been under control and reasonably proportionate to units of service provided.
2.1 Company Ownership
Table: Start-up
|
Start-up |
|
|
|
|
|
Requirements |
|
|
|
|
|
Start-up Expenses |
|
|
Legal |
$2,000 |
|
Stationery etc. |
$400 |
|
Insurance |
$500 |
|
Rent |
$900 |
|
Redecorating and signage |
$2,500 |
|
Staff Training |
$2,000 |
|
Other |
$700 |
|
Total Start-up Expenses |
$9,000 |
|
|
|
|
Start-up Assets |
|
|
Cash Required |
$101,000 |
|
Other Current Assets |
$5,000 |
|
Long-term Assets |
$0 |
|
Total Assets |
$106,000 |
|
|
|
|
Total Requirements |
$115,000 |
Table: Start-up Funding
|
Start-up Funding |
|
|
Start-up Expenses to Fund |
$9,000 |
|
Start-up Assets to Fund |
$106,000 |
|
Total Funding Required |
$115,000 |
|
|
|
|
Assets |
|
|
Non-cash Assets from Start-up |
$5,000 |
|
Cash Requirements from Start-up |
$101,000 |
|
Additional Cash Raised |
$0 |
|
Cash Balance on Starting Date |
$101,000 |
|
Total Assets |
$106,000 |
|
|
|
|
|
|
|
Liabilities and Capital |
|
|
|
|
|
Liabilities |
|
|
Current Borrowing |
$0 |
|
Long-term Liabilities |
$50,000 |
|
Accounts Payable (Outstanding Bills) |
$0 |
|
Other Current Liabilities (interest-free) |
$0 |
|
Total Liabilities |
$50,000 |
|
|
|
|
Capital |
|
|
|
|
|
Planned Investment |
|
|
Direct Owner Investment |
$65,000 |
|
Investor 2 |
$0 |
|
Other |
$0 |
|
Additional Investment Requirement |
$0 |
|
Total Planned Investment |
$65,000 |
|
|
|
|
Loss at Start-up (Start-up Expenses) |
($9,000) |
|
Total Capital |
$56,000 |
|
|
|
|
|
|
|
Total Capital and Liabilities |
$106,000 |
|
|
|
|
Total Funding |
$115,000 |
2.2
Company Locations and Facilities
The Center occupies approximately 2,200 square feet. It has nine clinical offices and group rooms. There is a larger reception area that is separated by a divider, allowing for a child and adult reception area. Included in the square footage is a small staff kitchen, a staff bathroom, and a business/intake office. The offices are handicapped accessible. There is a public unisex, handicapped-accessible bathroom within close proximity to the Center, and one within the building.
Leasing arrangements are in process. Based upon a financial analysis and financial projections, the hospital will need to subsidize rent for the first two years if the project is to succeed. It is our goal to obtain a three-year lease from the Anna Jaques Hospital with an option to renew a second three-year lease. The present location is not critical to the success of the business. After three years we will review our rental options, the need for additional space, and other available facilities in the geographical area prior to renewing the contract.
3.0 Services
3.1 Service Description
- Psychopharmacology: This service
is provided by licensed and board certified psychiatrists (MD/DO) and
certified nurse specialists (RNCNS). Persons utilizing this service may or
may not be in therapy, but need medication to stabilize the
presenting symptoms and to facilitate a return to the person's
previous level of functioning. All age groups are treated. The average
number of sessions is ten per year. Treatment is tailored to the needs of
the individual and guided by an individualized treatment plan based on a
comprehensive biopsychosocial assessment of the individual and their
family, if appropriate. Rates are contracted.
- Psychotherapy: This
intervention is provided by independently licensed certified nurse
specialists, psychologists, licensed mental health counselors, and
licensed, independent social workers. The format of these services are
individual, couple, family, and/or group sessions. All age groups are
treated. The average number of sessions is eight per year. Treatment is
tailored to the needs of the individual and is guided by an
individualized treatment plan based on a comprehensive biopsychosocial
assessment of the individual and his/her family, if appropriate.
Rates are contracted.
- Substance Abuse/Addiction:
Substance Abuse and Addiction treatment centerians provide
professionally-directed evaluation, treatment, and recovery services to
persons with substance related disorders. Interventions are provided by
licensed independent practitioners and/or certified alcohol and addiction
counselors. These services are provided through individual and group
modalities. The program consists of a four-week program that meets nine contact
hours per week. Services are designed to treat the individual's level of
illness severity and to achieve significant changes in an individual's
addictive behavior. Treatment is tailored to the needs of the individual
and guided by an individualized treatment plan based on a comprehensive
biopsychosocial assessment of the individual and his/her family, if
appropriate. Rates are contracted.
- Contracted Services: Services provided to consumers within this category are generally provided off-site at another facility. The services are provided with associated staff and billed via the Center at contracted rates. Services include: consultation, psychotherapy, psychopharmacology, and addiction services.
3.2 Competitive Comparison
- Environment. The Center is
managed-care friendly; we provide prompt and accurate information as
well as good communication. The Center has a shared treatment philosophy.
Our services are accessible and cost effective.
- Marketability. When marketing
our services to managed-care companies and preferred provider
organizations, we take into consideration their needs. For example: group
vs. individual treatment, family vs. individual treatment, after-hours
accessibility, access on weekends, use and tracking of outcome measures,
and customer satisfaction.
- Value-added Customer Contact.
The Center provides free phone or face-to-face contact with therapists
prior to treatment as a means of initiating a therapeutic relationship.
- Location and Ease of Access to Facility.
The Center is easily accessible by both automobile and public
transportation. It has a private entrance which provides
confidentiality. It is accessible to the physically challenged and there
is ample free parking.
- Promotion. Our customer-first
philosophy will help attract new customers and maintain existing ones.
- Self-Assessment. A major
thrust of the Center is to continuously self-assess our mode of operating
in order to evaluate how user friendly the Center is for clients, referral
sources, payor, staff and associates, and others.
- Integrated Delivery System. The Center has familiarity, understanding, and willingness to work closely with other health care providers. We are affiliated with an integrated health and behavioral health care system encompassing inpatient, partial, and outpatient services.
3.3 Sales Literature
3.4 Fulfillment
3.5 Future Services
4.0 Market Analysis Summary
The Center has identified several behavioral health payors who have a strong foothold in the Merrimack Valley area. They include: Tufts HMO and Tufts Affiliated Health Programs, Harvard/Pilgrim Health Care, Medicare, Medicaid/MBHP, Magellan/MBC, Magellan Lucent, United Behavioral Health, Behavior Health Network, managed care company (MCC)/Cigna, US Health Care, and Health Care Value Management (indemnity products). Consumers participating in these programs are drawn from the communities of the Merrimack Valley and Southern New Hampshire area. Within this service area it is estimated that HMOs provide insurance for approximately 51% of the population.
It should be noted that there is an abundant supply of behavioral health providers/institutions within the Merrimack Valley and Southern New Hampshire. They include: psychiatric hospitals, residential facilities, outpatient group practices that vary from public to private organizations, and solo practitioners. Customer service, then becomes an even more critical factor. To obtain and maintain a foothold in the behavioral health market will necessitate the provision of optimal, accessible, quality customer service.
The Center has four primary customers, each with their own specific needs. These include:
|
1. Referral Source |
Customer Needs |
|
Physicians |
Professionalism |
|
Hospitals |
Consultation |
|
Schools |
Correspondence |
|
Agencies |
Accessibility |
|
|
|
|
2. Individuals and Families |
|
|
Individuals |
Accessibility |
|
Couples |
Respect |
|
Families |
Compassion |
|
Groups |
Empathy |
|
|
|
|
3. Managed Care Companies and Other Payors |
|
|
MCO's |
Clear communication |
|
Self-pay |
Cost-effective care |
|
Agencies |
Easy access for clients |
|
PPOs |
Shared treatment philosophy |
|
Indemnity Program |
Responsiveness and cooperation |
|
|
|
|
4. Vendors |
|
|
Billing/Collectable |
Cooperative working relationship |
|
Legal |
Timely payment facility owner |
|
Human Resource |
Respect |
|
Insurance |
|
4.1 Target Market Segment Strategy
4.1.1 Market Trends
With the advent of mental health parity in Massachusetts, utilization rates and reimbursement rates should improve. Under the mental health parity law, insurance companies are not allowed to cap mental health services for biologically based mental health disorders. Co-payments cannot escalate during the course of treatment for these disorders.
Managed care organizations (MCOs) are beginning to review provider compensation packages with the intent of increasing compensation rates. Rates have been flat for the past ten years.
4.1.2 Market Growth
Dr. Marc Shay, an adult psychiatrist, has recently become an associate of the Center. He has committed to 12 hours per week, resulting in an increase of services by 48 units per week. His schedule is filled for the next three weeks as of July 10, 2000. He will begin work on July 17, 2000. We are also in the process of negotiating with a clinical nurse specialist to work 12 hours per week. Her specialty is with children and adolescents. Her starting date is estimated to be early September 2000.
4.1.3 Market Needs
4.2 Service Business Analysis
4.2.1 Main Competitors
Not-for-Profit Facility
1. North Essex Mental Health Center
North Essex Mental Health Center, Inc., Newburyport, Massachusetts with a satellite office in Haverhill, Massachusetts. Three years ago, this facility was bought by a subsidiary of Northeast Health Systems of Beverly, Massachusetts. This facility is a community mental health center whose primary consumer is the medicaid population. The center has been providing behavioral health services in the Merrimack Valley area for over 20 years. This center has grown significantly in the last 10 years, culminating in the opening of an Amesbury office. North Essex Mental Health Center is the dominant provider in the Northeast area of Massachusetts. They are the emergency services provider for MBHP and have contracted with the AJH to provide emergency services to their emergency room. Their payor mix is composed of medicare, medicaid, self pay, and some MCOs.
a. Strengths:
- Size
- Location
- Capital
- Bureaucratic flexibility
- Affiliations programming
- Availability of home-based and school-based services
b. Weaknesses:
- Size (considered to be arrogant by some area professionals resulting in a negative perception in the community)
- Accessibility - perception among professionals that it is difficult to obtain appointments within a reasonable period of time
- High staff turnover
- No IOP
c. Potential Impact of Strengths:
- Politically well connected
- Large pool of resources to draw from
- Staff availability to respond to request for proposals (RFPs) and request for quotations (RFQs)
d. Strategies To Thwart Competition:
- Develop reputation for providing quality services
- Respond to the needs of referral sources
- Respond and demonstrate respect to consumer
- Develop niche markets
- Continuum of services available from inpatient, to partial, to intensive outpatient services
- Availability of child/adolescent psychopharmacologist
- Increase visibility of, and procedures offered by, the Center
- Strong referral base from physicians practicing within the AJH health care system
2. Arbour/HRI Counseling
HRI/Arbour Psychological Center is a moderate-size, for-profit mental health center. It is a full-service multidisciplinary center, offering mental health services to children, adolescents, and adults. It was recently procured by Arbour Mental Health Systems. This center has recently invested money to refurbish a facility that houses their geropsychiatry program. Their payor mix is spread among Medicare, Medicaid, self pay, and MCOs
a. Strengths:
- Size
- Good location in downtown Haverhill
- Resources
- Affiliations
- Programming: geropsychiatry partial hospitalization program
- Community respectability
b. Weaknesses:
- Unknown at this time
c. Potential Impact of Strengths:
- Part of a large system
- Strong referral base
- Programming/outreach home-based legal services
d. Strategies to Thwart Competition:
- Develop reputation for providing quality services
- Respond to the needs of referral sources
- Respond and demonstrate respect to consumer
- Develop niche markets
- Continue services available, from inpatient, to partial, to intensive outpatient services
- Availability of child/adolescent psychopharmacologist
- Increase visibility of, and procedures offered by, the Center
- Strong referral base from physicians practicing within the AJH health care system
3. Harris Street Associates
Harris Street Associates is a multidisciplinary group practice providing mental health services to the Newburyport and Haverhill communities. It was established over fifteen years ago by several local psychiatrists and psychologists. Their payor mix has been primarily with MCOs, with some indemnity programs. It has had a rocky financial history, culminating in being bought by H.E.S. For the past three years, H.E.S. has attempted to turn around the financial status of the agency without success. It was recently announced that the center is closing on October 30, 2000.
4. Harborside Psychological Center
Harborside Psychological Center is located in Newburyport, Massachusetts. It is a multidisciplinary mental health group practice. Until recently, their service focus has been psychotherapy with children, adolescents and adults. Currently, this center has added pharmacology to their list of services. Their payor mix is composed of MCOs and employee assistance programs (EAPs).
a. Strengths:
- Size
- Location quite good in downtown Newburyport
- Resources
- Community respectability
- Multidisciplinary composition of the Center
b. Weaknesses:
- Not close to public transportation
- Not visibly known to the public
- Psychopharmacology time is limited
c. Potential Impact of Strengths:
- Strong referral base with MCOs
d. Strategies to Thwart Competition:
- Develop reputation for providing quality services
- Respond to the needs of referral sources
- Respond and demonstrate respect to consumer
- Develop niche markets, especially with children and adolescents
- Continue services available, from inpatient, to partial, to intensive outpatient services
- Availability of child/adolescent psychopharmacologist
- Increase visibility of, and procedures offered by, the Center
- Strong referral base from physicians practicing within the AJH health care system
4.3 Market Segmentation
All services are offered to all age groups, with a modality of treatments that include individual, couple, families, and group. Some customers will use only one service at a time, while others will use a mix of the various services simultaneously.
Chart: Market Analysis (Pie)
Table: Market Analysis
|
Market Analysis |
|
|
|
|
|
|
|
|
|
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|
Potential Customers |
Growth |
|
|
|
|
|
CAGR |
|
Psychotherapy |
6% |
5,784 |
6,793 |
7,374 |
7,846 |
8,348 |
9.61% |
|
Psychopharmacology |
0% |
3,911 |
5,184 |
6,282 |
6,282 |
6,282 |
12.58% |
|
IOP |
0% |
898 |
898 |
988 |
988 |
988 |
2.42% |
|
B H Contracts |
5% |
0 |
0 |
2,000 |
2,000 |
2,000 |
0.00% |
|
Other |
0% |
0 |
0 |
0 |
0 |
0 |
0.00% |
|
Total |
13.56% |
10,593 |
12,875 |
16,644 |
17,116 |
17,618 |
13.56% |
5.0
Strategy and Implementation Summary
The target customers are the consumers of mental health services (i.e. individuals, couples, families, and groups). The composition breakdown is approximately 50% adults and 50% children, adolescents, and families. The second target customer are the payors. They are an integral piece of this turn key project. The payors are basically the gatekeepers for referrals and authorizations.
5.1 Sales Strategy
- Managed
Care Companies (5-6)
- Preferred
Provider Organizations (2-3)
- Medical
Groups (5)
- Community
Agencies (3)
- Consumers/Clients
Wherever possible, our niche marketing approach will be linked to our sales strategies.
5.1.1 Sales Forecast
Operationally, the Center is prepared to handle growth. Support staff is in place, as are other necessary environmental resources. The immediate problem would be to transfer patients from one center to another. Through a planned transition program being driven by the therapists, it should occur without too much difficulty or confusion.
The chart and table depict a modest 18% growth rate for the second year, and a 23% growth rate for the third year. The second year growth rate will be the result of adding additional therapy hours. The third year growth will be a result of adding therapy contracts. We are in the process of negotiating with Harbor Schools to provide on sight therapy services.
Table: Sales Forecast
|
Sales Forecast |
|
|
|
|
|
Year 1 |
Year 2 |
Year 3 |
|
Unit Sales |
|
|
|
|
Psychotherapy |
5,784 |
6,792 |
7,374 |
|
Psychopharmacology/MD |
2,520 |
3,264 |
3,950 |
|
Psychopharmacology/CNS |
1,391 |
1,920 |
2,332 |
|
Addictions/3 hr IOP |
310 |
310 |
450 |
|
Addictions/1hr IOP |
588 |
588 |
538 |
|
Contracts |
0 |
0 |
2,000 |
|
Other |
0 |
0 |
0 |
|
Total Unit Sales |
10,593 |
12,874 |
16,644 |
|
|
|
|
|
|
Unit Prices |
Year 1 |
Year 2 |
Year 3 |
|
Psychotherapy |
$59.52 |
$59.52 |
$59.52 |
|
Psychopharmacology/MD |
$40.92 |
$40.92 |
$40.92 |
|
Psychopharmacology/CNS |
$32.55 |
$32.55 |
$32.55 |
|
Addictions/3 hr IOP |
$77.19 |
$77.19 |
$77.19 |
|
Addictions/1hr IOP |
$22.32 |
$22.32 |
$22.32 |
|
Contracts |
$0.00 |
$0.00 |
$59.52 |
|
Other |
$0.00 |
$0.00 |
$0.00 |
|
|
|
|
|
|
Sales |
|
|
|
|
Psychotherapy |
$344,264 |
$404,260 |
$438,900 |
|
Psychopharmacology/MD |
$103,118 |
$133,563 |
$161,634 |
|
Psychopharmacology/CNS |
$45,277 |
$62,496 |
$75,907 |
|
Addictions/3 hr IOP |
$23,929 |
$23,929 |
$34,736 |
|
Addictions/1hr IOP |
$13,124 |
$13,124 |
$12,008 |
|
Contracts |
$0 |
$0 |
$119,040 |
|
Other |
$0 |
$0 |
$0 |
|
Total Sales |
$529,712 |
$637,372 |
$842,225 |
|
|
|
|
|
|
Direct Unit Costs |
Year 1 |
Year 2 |
Year 3 |
|
Psychotherapy |
$35.71 |
$35.71 |
$35.71 |
|
Psychopharmacology/MD |
$28.64 |
$28.64 |
$28.64 |
|
Psychopharmacology/CNS |
$19.53 |
$19.53 |
$19.53 |
|
Addictions/3 hr IOP |
$13.12 |
$27.02 |
$27.02 |
|
Addictions/1hr IOP |
$4.91 |
$6.47 |
$6.47 |
|
Contracts |
$0.00 |
$0.00 |
$35.71 |
|
Other |
$0.00 |
$0.00 |
$0.00 |
|
|
|
|
|
|
Direct Cost of Sales |
|
|
|
|
Psychotherapy |
$206,558 |
$242,542 |
$263,326 |
|
Psychopharmacology/MD |
$72,183 |
$93,481 |
$113,128 |
|
Psychopharmacology/CNS |
$27,166 |
$37,498 |
$45,544 |
|
Addictions/3 hr IOP |
$4,068 |
$8,376 |
$12,159 |
|
Addictions/1hr IOP |
$2,887 |
$3,804 |
$3,481 |
|
Contracts |
$0 |
$0 |
$71,420 |
|
Other |
$0 |
$0 |
$0 |
|
Subtotal Direct Cost of Sales |
$312,863 |
$385,701 |
$509,057 |
Chart: Sales Monthly
5.2 Value Proposition
5.3 Competitive Edge
5.4 Marketing Strategy
Target marketing of our services is critical to growth. Strategies will include:
- An emphasis on customer-driven, quality service
- Building a relationship business
- Focusing on five behavioral health payors
- Identify and build a niche market
Marketing tools will include: direct mail, print and audio advertising, public speaking, and relationship building with identified managed care corporations and persons.
5.4.1 Promotion Strategy
- Participation
in activities related to treated disorders at the center, e.g., National
Depression Screening Day.
- Developing
a brochure, logo, and business cards to promote the Center.
- Networking
with various health care providers, community agencies, and state
agencies.
- Media
advertisement, especially to announce the professional affiliation of a
new associate or new program.
- Use
of follow-up letters to referral sources.
- Offering
informational workshops to the public.
- Networking
with the media to facilitate articles about the Center.
- Join small business groups/organizations as a means of increasing public awareness.
5.4.2 Positioning Statement
5.4.3 Pricing Strategy
5.5 Strategic Alliances
6.0 Management Summary
6.1 Organizational Structure
An advisory management group, consisting of the Center's staff, will meet on a regular basis to review the Center's financial structure, identify customer relations issues, and develop future goals for growth, marketing, and sales. This group will be assigned the task of developing a plan to implement and integrate a Continuous Quality Improvement (CQI) component and culture into a private practice Shared Service Model (SSM). A customer relations committee will be formed to brainstorm, formulate ideas, plan and implement activities to enhance levels of satisfaction among all customers. The organizational chart follows:
|
|
Amesbury Psychological Center |
|
|
|
Organizational Chart |
|
|
|
|
|
|
ADVISORY BOARD |
CENTER DIRECTOR |
CONSULTANTS |
|
SUPPORT STAFF |
ASSOCIATES |
MEDICAL DIRECTOR |
|
|
MEDICAL STAFF |
|
|
|
THERAPISTS |
|
|
|
ADDICTION STAFF |
|
|
|
CONTRACTS STAFF |
|
6.2 Management Team
**Names have been removed for confidentiality
6.3 Management Team Gaps
6.4 Personnel Plan
Human resources, legal, fiscal billing, and marketing/sales will be out sourced. We are in the process of identifying a human resource company and a billing/collection company. The billing company will be paid a percent of fees collected with a goal of collecting at least 93% of that billed. Thought will be given to other risk variables to be included in the contract. The costs for the Human Resource services are not determined as of this writing.
The president/director's compensation will be a combined package that includes 75% administrative salary and 25% from clinical work.
Table: Personnel
|
Personnel Plan |
|
|
|
|
|
Year 1 |
Year 2 |
Year 3 |
|
Center Director (.75 FTE) |
$41,244 |
$42,481 |
$43,755 |
|
Client Accounts Coord. (.75 FTE) |
$23,244 |
$23,941 |
$24,659 |
|
Secretary/Recep (1 FTE) |
$24,000 |
$24,720 |
$25,462 |
|
Receptionist (.50 FTE) |
$11,256 |
$11,594 |
$12,302 |
|
Total People |
4 |
4 |
4 |
|
|
|
|
|
|
Total Payroll |
$99,744 |
$102,736 |
$106,178 |
7.0 Financial Plan
- Reducing the days in receivables and improving the quality of receivables,
- Improving cash flow, and
- Significant growth the first year and modest growth the second and third year.
7.1 Important Assumptions
There are several assumptions related to this turn key project.
- The economy continues at its present rate, without major recession.
- Expected receipts will improve dramatically by out sourcing billing and collections.
- The current climate for these services will continue.
- Behavioral health contracts will be transferred to the Center without difficulty.
- Center clinical associates will be credentialed in a timely manner, or the Center will be able to credential by "job description."
- Our staffing patterns and facilities will be able to handle the projected growth.
- The average days of receivable will be 67 or less.
- Unlike inpatient behavioral health services, managed care manages the services but has not attempted to cap them. It is assumed that this trend will continue. There are also signs that managed care companies are moving away from micromanaging these services.
- A mutually-agreed upon plan will be devised to prepare for the transition of medicaid clients to the Center.
The following table summarizes the general financial assumptions.
Table: General Assumptions
|
General Assumptions |
|
|
|
|
|
Year 1 |
Year 2 |
Year 3 |
|
Plan Month |
1 |
2 |
3 |
|
Current Interest Rate |
9.75% |
9.75% |
9.75% |
|
Long-term Interest Rate |
9.75% |
9.75% |
9.75% |
|
Tax Rate |
2.50% |
0.00% |
2.50% |
|
Other |
0 |
0 |
0 |
7.2 Key Financial Indicators
Similiarly, collection days remains the same during the next three years. However, efforts will be made to improve this variable with the use of electronic billing.
As sales of services increase, operating costs will rise as well. Every effort will be made to contain these costs proportionately. There are no actual or projected significant increases evident. The variable costs will increase during the third year as we need to hire new staff for the projected contracts. The hiring will not be concluded until the contracts are signed so as to avoid any unnecessary spending.
Chart: Benchmarks
7.3 Break-even Analysis
Chart: Break-even Analysis
Table: Break-even Analysis
|
Break-even Analysis |
|
|
|
|
|
Monthly Units Break-even |
752 |
|
Monthly Revenue Break-even |
$37,618 |
|
|
|
|
Assumptions: |
|
|
Average Per-Unit Revenue |
$50.01 |
|
Average Per-Unit Variable Cost |
$29.53 |
|
Estimated Monthly Fixed Cost |
$15,400 |
7.4 Projected Profit and Loss
Chart: Gross Margin Monthly
Chart: Gross Margin Yearly
Chart: Profit Monthly
Chart: Profit Yearly
Table: Profit and Loss
|
Pro Forma Profit and Loss |
|
|
|
|
|
Year 1 |
Year 2 |
Year 3 |
|
Sales |
$529,712 |
$637,372 |
$842,225 |
|
Direct Cost of Sales |
$312,863 |
$385,701 |
$509,057 |
|
Other |
$0 |
$0 |
$0 |
|
Total Cost of Sales |
$312,863 |
$385,701 |
$509,057 |
|
|
|
|
|
|
Gross Margin |
$216,850 |
$251,670 |
$333,167 |
|
Gross Margin % |
40.94% |
39.49% |
39.56% |
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
Payroll |
$99,744 |
$102,736 |
$106,178 |
|
Marketing/Promotion |
$7,700 |
$10,500 |
$11,100 |
|
Depreciation |
$0 |
$0 |
$0 |
|
Leased Equipment |
$3,000 |
$3,000 |
$3,500 |
|
Billing Fees (6% of billed plus 1.5% copays) |
$22,951 |
$31,869 |
$42,111 |
|
Insurance |
$3,500 |
$3,600 |
$3,600 |
|
Rent |
$10,992 |
$11,000 |
$26,400 |
|
Human Resource/HR Logic |
$6,000 |
$6,000 |
$6,000 |
|
Med Dir.,Multidisc.,RNCS Sup. |
$10,000 |
$12,000 |
$12,000 |
|
Telephone |
$6,000 |
$6,500 |
$7,000 |
|
Postage |
$1,050 |
$1,300 |
$1,400 |
|
Office Supplies |
$3,860 |
$4,110 |
$4,200 |
|
Payroll Taxes |
$0 |
$0 |
$0 |
|
Contract/Consultants |
$10,000 |
$10,000 |
$10,000 |
|
|
|
|
|
|
Total Operating Expenses |
$184,797 |
$202,615 |
$233,489 |
|
|
|
|
|
|
Profit Before Interest and Taxes |
$32,053 |
$49,055 |
$99,678 |
|
EBITDA |
$32,053 |
$49,055 |
$99,678 |
|
Interest Expense |
$4,400 |
$3,436 |
$2,260 |
|
Taxes Incurred |
$1,103 |
$0 |
$2,435 |
|
|
|
|
|
|
Net Profit |
$26,550 |
$45,619 |
$94,983 |
|
Net Profit/Sales |
5.01% |
7.16% |
11.28% |
7.5 Projected Cash Flow
Chart: Cash
Table: Cash Flow
|
Pro Forma Cash Flow |
|
|
|
|
|
Year 1 |
Year 2 |
Year 3 |
|
Cash Received |
|
|
|
|
|
|
|
|
|
Cash from Operations |
|
|
|
|
Cash Sales |
$52,971 |
$63,737 |
$84,222 |
|
Cash from Receivables |
$356,266 |
$557,202 |
$724,642 |
|
Subtotal Cash from Operations |
$409,237 |
$620,940 |
$808,864 |
|
|
|
|
|
|
Additional Cash Received |
|
|
|
|
Sales Tax, VAT, HST/GST Received |
$0 |
$0 |
$0 |
|
New Current Borrowing |
$0 |
$0 |
$0 |
|
New Other Liabilities (interest-free) |
$0 |
$0 |
$0 |
|
New Long-term Liabilities |
$0 |
$0 |
$0 |
|
Sales of Other Current Assets |
$0 |
$0 |
$0 |
|
Sales of Long-term Assets |
$0 |
$0 |
$0 |
|
New Investment Received |
$0 |
$0 |
$0 |
|
Subtotal Cash Received |
$409,237 |
$620,940 |
$808,864 |
|
|
|
|
|
|
Expenditures |
Year 1 |
Year 2 |
Year 3 |
|
|
|
|
|
|
Expenditures from Operations |
|
|
|
|
Cash Spending |
$99,744 |
$102,736 |
$106,178 |
|
Bill Payments |
$369,968 |
$482,273 |
$628,567 |
|
Subtotal Spent on Operations |
$469,712 |
$585,010 |
$734,744 |
|
|
|
|
|
|
Additional Cash Spent |
|
|
|
|
Sales Tax, VAT, HST/GST Paid Out |
$0 |
$0 |
$0 |
|
Principal Repayment of Current Borrowing |
$0 |
$0 |
$0 |
|
Other Liabilities Principal Repayment |
$0 |
$0 |
$0 |
|
Long-term Liabilities Principal Repayment |
$9,000 |
$11,515 |
$12,620 |
|
Purchase Other Current Assets |
$0 |
$0 |
$0 |
|
Purchase Long-term Assets |
$0 |
$0 |
$0 |
|
Dividends |
$0 |
$0 |
$0 |
|
Subtotal Cash Spent |
$478,712 |
$596,525 |
$747,364 |
|
|
|
|
|
|
Net Cash Flow |
($69,475) |
$24,415 |
$61,500 |
|
Cash Balance |
$31,525 |
$55,940 |
$117,439 |
7.6 Projected Balance Sheet
Table: Balance Sheet
|
Pro Forma Balance Sheet |
|
|
|
|
|
Year 1 |
Year 2 |
Year 3 |
|
Assets |
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
Cash |
$31,525 |
$55,940 |
$117,439 |
|
Accounts Receivable |
$120,475 |
$136,908 |
$170,268 |
|
Other Current Assets |
$5,000 |
$5,000 |
$5,000 |
|
Total Current Assets |
$157,000 |
$197,847 |
$292,708 |
|
|
|
|
|
|
Long-term Assets |
|
|
|
|
Long-term Assets |
$0 |
$0 |
$0 |
|
Accumulated Depreciation |
$0 |
$0 |
$0 |
|
Total Long-term Assets |
$0 |
$0 |
$0 |
|
Total Assets |
$157,000 |
$197,847 |
$292,708 |
|
|
|
|
|
|
Liabilities and Capital |
Year 1 |
Year 2 |
Year 3 |
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
Accounts Payable |
$33,450 |
$40,193 |
$52,690 |
|
Current Borrowing |
$0 |
$0 |
$0 |
|
Other Current Liabilities |
$0 |
$0 |
$0 |
|
Subtotal Current Liabilities |
$33,450 |
$40,193 |
$52,690 |
|
|
|
|
|
|
Long-term Liabilities |
$41,000 |
$29,485 |
$16,865 |
|
Total Liabilities |
$74,450 |
$69,678 |
$69,555 |
|
|
|
|
|
|
Paid-in Capital |
$65,000 |
$65,000 |
$65,000 |
|
Retained Earnings |
($9,000) |
$17,550 |
$63,169 |
|
Earnings |
$26,550 |
$45,619 |
$94,983 |
|
Total Capital |
$82,550 |
$128,169 |
$223,153 |
|
Total Liabilities and Capital |
$157,000 |
$197,847 |
$292,708 |
|
|
|
|
|
|
Net Worth |
$82,550 |
$128,169 |
$223,153 |
7.7 Business Ratios
Table: Ratios
|
Ratio Analysis |
|
|
|
|
|
|
Year 1 |
Year 2 |
Year 3 |
Industry Profile |
|
Sales Growth |
n.a. |
20.32% |
32.14% |
2.30% |
|
|
|
|
|
|
|
Percent of Total Assets |
|
|
|
|
|
Accounts Receivable |
76.74% |
69.20% |
58.17% |
25.20% |
|
Other Current Assets |
3.18% |
2.53% |
1.71% |
33.00% |
|
Total Current Assets |
100.00% |
100.00% |
100.00% |
60.00% |
|
Long-term Assets |
0.00% |
0.00% |
0.00% |
40.00% |
|
Total Assets |
100.00% |
100.00% |
100.00% |
100.00% |
|
|
|
|
|
|
|
Current Liabilities |
21.31% |
20.32% |
18.00% |
23.10% |
|
Long-term Liabilities |
26.11% |
14.90% |
5.76% |
19.60% |
|
Total Liabilities |
47.42% |
35.22% |
23.76% |
42.70% |
|
Net Worth |
52.58% |
64.78% |
76.24% |
57.30% |
|
|
|
|
|
|
|
Percent of Sales |
|
|
|
|
|
Sales |
100.00% |
100.00% |
100.00% |
100.00% |
|
Gross Margin |
40.94% |
39.49% |
39.56% |
0.00% |
|
Selling, General & Administrative Expenses |
39.65% |
36.14% |
32.27% |
73.80% |
|
Advertising Expenses |
0.00% |
0.00% |
0.00% |
0.40% |
|
Profit Before Interest and Taxes |
6.05% |
7.70% |
11.84% |
8.90% |
|
|
|
|
|
|
|
Main Ratios |
|
|
|
|
|
Current |
4.69 |
4.92 |
5.56 |
2.45 |
|
Quick |
4.69 |
4.92 |
5.56 |
1.95 |
|
Total Debt to Total Assets |
47.42% |
35.22% |
23.76% |
42.70% |
|
Pre-tax Return on Net Worth |
33.50% |
35.59% |
43.66% |
8.10% |
|
Pre-tax Return on Assets |
17.61% |
23.06% |
33.28% |
14.20% |
|
|
|
|
|
|
|
Additional Ratios |
Year 1 |
Year 2 |
Year 3 |
|
|
Net Profit Margin |
5.01% |
7.16% |
11.28% |
n.a |
|
Return on Equity |
32.16% |
35.59% |
42.56% |
n.a |
|
|
|
|
|
|
|
Activity Ratios |
|
|
|
|
|
Accounts Receivable Turnover |
3.96 |
4.19 |
4.45 |
n.a |
|
Collection Days |
83 |
82 |
74 |
n.a |
|
Accounts Payable Turnover |
12.06 |
12.17 |
12.17 |
n.a |
|
Payment Days |
27 |
27 |
26 |
n.a |
|
Total Asset Turnover |
3.37 |
3.22 |
2.88 |
n.a |
|
|
|
|
|
|
|
Debt Ratios |
|
|
|
|
|
Debt to Net Worth |
0.90 |
0.54 |
0.31 |
n.a |
|
Current Liab. to Liab. |
0.45 |
0.58 |
0.76 |
n.a |
|
|
|
|
|
|
|
Liquidity Ratios |
|
|
|
|
|
Net Working Capital |
$123,550 |
$157,654 |
$240,018 |
n.a |
|
Interest Coverage |
7.29 |
14.28 |
44.11 |
n.a |
|
|
|
|
|
|
|
Additional Ratios |
|
|
|
|
|
Assets to Sales |
0.30 |
0.31 |
0.35 |
n.a |
|
Current Debt/Total Assets |
21% |
20% |
18% |
n.a |
|
Acid Test |
1.09 |
1.52 |
2.32 |
n.a |
|
Sales/Net Worth |
6.42 |
4.97 |
3.77 |
n.a |
|
Dividend Payout |
0.00 |
0.00 |
0.00 |
n.a |