Asia renal care taiwan business plan


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Asia renal care taiwan business plan

  1. 1. Asia Renal Care Ltd. (Group E) 1 Asia Renal Care, Ltd. Taiwan Business Plan Group E Carolina Anon James V. Decker Andrew P. Olsen Mark E. Reed University of Maryland University College
  2. 2. Asia Renal Care Ltd. (Group E) 2 Table of ContentsTopic PageExecutive Summary ………………………………………………………… 3–4GroupThe Business ……………………………………………………………… 5 – 6Carolina Anon / Mark ReedThe Proposed Operation …………………………………………………… 6 – 13James DeckerMarket Analysis …………………………………………………………… 13 – 19Carolina AnonMarketing Plan …………………………………………………………… 19 – 22Andrew OlsenPromotion …………………………………………………………………… 22 – 25Andrew OlsenRisks …………………………………………………………………………… 25 – 26GroupFinances ……………………………………………………………………….. 26 – 35Mark ReedReferences ……………………………………………………………………… 36 – 39GroupAppendices (Separate Attachment) …………………………………………… 1 – 39Group  Marketing/Economic Appendix A: ..…………………………… 2–6  Marketing Analysis and Plan Appendices B – E: …………….. 7 – 15  Medical Treatment Law Appendix F: …………………………. 16 – 19  Porter Grid Appendix G: ………………………………………. 20 – 23  Promotion/Advertising Regulations Appendices H – I ………. 24 – 29  Marketing Agency Appendix J: ………………………………. 30  Department of Health Regulations Appendix K: .……………... 31  Department of Health Goals & Priorities Appendix L: ………. 32 – 33  Risk Appendix M: …………………………………………….. 34 – 35  Finance Appendix N: …………………………………………. 36 – 39
  3. 3. Asia Renal Care Ltd. (Group E) 3 Executive Summary (Group) Asia Renal Care Ltd. (ARC) mission is to provide high-quality dialysis care in Taiwan.An experienced management team with dialysis expertise from both Asia and the United Stateswill lead ARC. ARC would be the first U.S. dialysis-company to enter Taiwan and will leveragethe best practices in management and renal care to build the strongest competitive dialysis carenetwork. ARC selected Taiwan because of its infrastructure, health care coverage, prevalencerate and the fact that kidney problems continue to rise dramatically. ARC’s goal is to target renalcare candidates throughout Taiwan. The company will be operating at 75% capacity by yearthree and full capacity by year five and open three Renal Care Centers in the first year alone.ARC will generate revenue by providing renal patients state of the art dialysis treatment andfacilities and superior service. ARC also plans to acquire, consolidate, and improve other dialysisfacilities in Taiwan. ARC intends to use an array of print, online, radio and television ads to bring awarenessto our service and with the assistance of Diversified Agency Services (DAS), ARC will be ableto reach their target market effectively. These mediums will allow ARC to optimize theirmessage while promoting within the rules and regulations regarding medical ads set forth byTaiwan’s laws. In addition, DAS will have an essential role in ARC’s public relations byattaining necessary partnerships with medical facilities and physicians, lobbying the Departmentof Health (DOH) and reaching out to employers and employees. Taiwan like any market has numerous risks that ARC will have to face. Specifically,kidney disease and the number of patients requiring dialysis in Taiwan has been steadily on theincrease dialysis treatment is becoming a heavy financial burden on Taiwan’s insurance program.Currently the Bureau of National Health Insurance must pay more than NT$23.6 billion for
  4. 4. Asia Renal Care Ltd. (Group E) 4renal dialysis. There has also been the risk of some unethical medical facilities placing patientson renal dialysis prematurely in order to increase their own revenues. The risk to ARC is that asthe cost of providing this service continues to increase, so will the pressures on the governmentto curtail coverage or reimbursement, directly affecting ARC revenues. Other additional risks areTaiwan’s tense relationship with China and Taiwan’s lack of sufficient domestic energy sources.These risks can all have a negative affect on ARC’s long term position in Taiwan. Asia Renal Care is looking for external agencies to contribute start-up and short termworking capital in two stages for entry into Taiwan. Start-up capital requirements are $400,000per clinic, with three clinics opened in year one and four additional clinics in year two, for totalinitial infrastructure costs of $2.8 million. In addition to this start-up capital ARC is seeking twoyears of working capital for daily operations, totaling $2.8 million. At the end of year two ARCwill seek an additional $3.9 million in expansion and working capital for further expansion inTaiwan and to continue operations until the breakeven point, forecasted to occur in year four.Total external financing for operations until positive cash flows, net of capital expenditures,which occur in year five are $9.5 million.
  5. 5. Asia Renal Care Ltd. (Group E) 5 The Business (Reed/Anon) Asia Renal Care (ARC) is a startup company whose mission is to provide high qualitydialysis care to patients suffering from end stage renal disease (ESRD), a chronic conditionwhich requires lifetime treatment. ARC’s primary business will be dialysis for patients, but inthe interest of providing one-stop ESRD care for patients, ARC will also provide counselingservices, dietician services and world class medical and nursing care. ARC will provide theseservices through a nationwide chain of dialysis clinics, closely associated with medical facilitiesand hospitals in major markets. ARC will develop a large customer base for these clinics byworking closely with nephrology doctors, who will be encouraged to refer patients to ARCclinics. This strategy of targeting doctors as patient referrers is a key element of ARC’s plan foroperations. ARC’s partnership with industry leaders in their field will help ARC to provide a wide rangeof kidney dialysis related services including:  Hemodialysis - A procedure for removing body waste and extra fluid directly from the blood using an artificial kidney machine.  Continuous Ambulatory Peritoneal Dialysis - an out patient form of dialysis that gives patients more flexibility in treatment.  Continuous Cyclic (or Automated) Peritoneal Dialysis - a machine assisted dialysis treatment performed during the patient’s sleeping hours.  Urea Reduction Ratio Testing - shows the success rate of dialysis and the effectiveness of the dialysis treatments.  Counseling Services – helping patients learn how to manage their condition for optimal health
  6. 6. Asia Renal Care Ltd. (Group E) 6  Dietician Services – helping patients manage dietary requirements for ESRD As the first step in their expansion in the Asia Pacific market, ARC plans to expand intoTaiwan – the most expansive renal dialysis market in Asia and the second largest in the world,following only the United States. To help fulfill their strategy in Taiwan, ARC has enlisted U.S.based strategic partners. The San Francisco based Satellite Dialysis Centers is their operatingpartner in the United States. Satellite’s strong reputation for high-quality dialysis services iscompatible with ARC’s reputation for excellence. ARC brings a wealth of experience in operating and managing dialysis clinics learned inthe most competitive dialysis market, the U.S. Initial executive staffing in Taiwan will be aChief Executive Officer with experience managing dialysis clinics in both the U.S. and abroad, aChief Operating Officer with similar experience in the U.S. market, and a Regional Specialistwith extensive experience in the Taiwan dialysis market. ARC will draw other clinic staffingfrom the pool of available local workers, with additional training provided by ARC and itsaffiliated U.S. companies. ARC has chosen to expand into Taiwan for several reasons. The primary reason foroverseas expansion is that the U.S. market is too competitive, with the majority of the marketshare going to large, highly competitive chains of dialysis clinics. These clinics provideexcellent care at a price, lowered by economies of scale, which ARC can’t hope to match as astartup company. The dialysis market is quite different overseas, however, with clinicsproviding lower quality care with much lower profit margins. ARC believes they can bring skillsand techniques learned in the U.S. market to Taiwan and quickly build a chain of clinics farsuperior to the native offerings, at a price equal to or lower than competing clinics. Working
  7. 7. Asia Renal Care Ltd. (Group E) 7relationships with U.S. clinics and universities will help ARC provide employee and doctortraining that will make ARC the envy of Taiwan dialysis clinics. Proposed Operation (Decker) The ARC business plan will focus exclusively on the target country of Taiwan.Strategic business objectives: Construct the highest quality dialysis facilities in Asia and sell premium services.Operational locations: One of the core customer components of Asia Renal Care is to provide clients withconvenient access to facilities. Reducing the travel time spent going to and from ARC facilitieswill help alleviate some of the disruption caused by thrice weekly dialysis. In most cases thiswill allow a client to maintain close proximity to their familiar medical environment, creating asatisfied customer. Initially ARC will be offering services at three facilities in Taiwan. Thesewill include the following locations: Hsin Ren Hospital, Hsin Fu Hospital and the Chai-En Clinic.During year two, operations will open at the Fuxing Hospital, Yao-Ming Hospital, Hsin ChuangHsin Ren Clinic and the Hong Deh Clinic. After the third year ARC will consider expandingfurther into other areas of Taiwan, including: Teh Chuan Hospital, Jian-Ren Hospital, An-HuiClinic, Ya-Tai Clinic, Shin-Yang-Min Hospital, Tzu Yu Clinic, Chung Kwang Hospital, Young-Ming Hospital, Hua-Shi Clinic, Tung Ning Clinic and the Kuo-Cheng Clinic. ARC will form a committee consisting of local employees from all levels to evaluate thestate of renal care coverage in Taiwan. This committee will issue a status report biannuallywhich conveys recommendations for future expansions and enhancements to existing facilities.This committee will interact with executive management and facility designers to provide currentdata and qualified opinions on operational locations.
  8. 8. Asia Renal Care Ltd. (Group E) 8Facilities: Each facility constructed by ARC will have a consistent floor plan, which will allow foroptimum use of space while creating a highly efficient working environment. These facilitieswill be located in close proximity to major hospitals and clinics. The design will be such thatARC can easily expand them with only minimal structural changes. ARC will either own orlease the facilities depending on a structured formula used to evaluate the economical sense ofproperty ownership versus renting.Management and policies: ARC will work with local hospitals, clinics and doctors within a specified region. A keygoal for long-term success will be the development and implementation of solid clientcontracting from the medical sector to ARC. Also critical to this contracting model is buildingpartnerships with government and private insurance agencies, so the insurance company willplace ARC as their vendor of choice for renal care. As incentive for doing so the insurancecompany will receive a reduced fee for services. Additionally ARC will cater to the doctors inTaiwan, with the understanding that their referrals could help the business.Staffing plans: ARC will recruit a well trained technical medical staff and administrative employees.Roles will include Nurses, Doctors, Trained Renal Dietician, Facility Management, Finance andAccounting, Staff Recruiting and Development, Centralized Purchasing, EquipmentMaintenance, Payroll Services, Billing and Legal Department. ARC executive headquarters willbe located at one central office location in Taipei. Purchasing, payroll, human resources andother non-site specific roles will be at this office location. Below is an outline of the requiredpositions and quantities needed:
  9. 9. Asia Renal Care Ltd. (Group E) 9 Total Employees: Year 1 = 23 Year 2 = 39 Care Facility Personnel: 1 Doctor 2 Nurses 1 Administrative Roving Facility 1 Technician 1 Dietician Personnel: Warehouse Personnel: 1 Driver 1 Inventory manager 1 Shipping & Receiving clerk Central Office Personnel: 2 Executive 1 Human Resources 1 Accounting 1 Legal 1 TrainingRegulations and licensing issues: Our code of business conduct in Taiwan will abide by local and customary businesspolicies and practices. On-site technicians and local area vendors will maintain all dialysis andlab equipment on a regular preventative maintenance schedule. The ARC executive office willmanage state inspected calibration certificates, board training certificates and health care servicepermits. Quarterly reviews will ensure all centers are kept current and not in violation.Logistics: All products used in the ARC facilities will be stored, stocked and delivered from acentral warehouse in Taipei. ARC will keep replacement and service parts for dialysisequipment at this location and monitor inventory and status of the branch facilities via computer. ARC will balance clients between facilities while maintaining a short travel distance forpersons receiving treatment. The same will apply for staff personnel, with personnel movingbetween facilities as demand requires or to relieve other employees for vacation, sickness orpersonal days.Product and customer support: Customer and product support will backed by a talented group of individuals chargedwith achieving defined organizational goals. ARC will maintain their own customer support
  10. 10. Asia Renal Care Ltd. (Group E) 10staff, fluent in both, Mandarin and Taiwanese. A detailed computer based client informationsystem will allow continuous monitoring of quality and provide a basis for improvement. Thecentral office will provide on-going training to each facility. The technical department andmedical equipment vendors will inform ARC employees of new product enhancements andtechnical issues and solutions to keep everyone up to date. ARC will require that vendorsparticipate in staff training and provide round the clock (24hr.) on-call service to all facilities. ARC Balanced Scorecard Financial Perspective Objectives Measures Targets InitiativesProfitable Growth Market Share Increasing market Sales Blitz share Market Promotion Sales from new 10% annual sales customers from new customers Insurance & Hospital Contracting Sales from new Clinic sales match clinics ramp-up targetsCost Reduction Net income per 5% annual increase Monitored Care clinic Management Policy Net income per 5 % annual increase Targeted Cost employee ContainmentAsset Utilization Return on IRR > 30% Financial Growth investment Evaluation Planning Revenue growth Clinics follow ramp- Quarterly Review up, long term 10% annual growth Stability Index Customer Perspective Objectives Measures Targets Initiatives
  11. 11. Asia Renal Care Ltd. (Group E) 11Superior Service New Patient growth 10% annual patient Quality Staff & Service growth (initial growth to match Equipment Excellence ramp-up) Convenient Care Patient Satisfaction 90-100% Satisfaction Safety & ReliabilityPhysician & Growth in number of 10% growth in Customer CareHealthcare referring physicians number of referring ProgramPartnerships physicians Quarterly Open House Repeat referrals 20% of new patients from current Bi-Annual Speakers referrers Performance Surveys Physician 90-100% satisfaction Satisfaction Reference Program Internal Perspective Objectives Measures Targets InitiativesDevelopment of Market Share & Become Taiwan’s Clinic and CompanyTaiwan’s Market Revenue Growth top Renal Care Evaluation Program ProviderRenal Care Increased Patient Cost, Quality, &Market Leader Capacity Strong Customer Service Leadership BaseProvide Highest Physician & Customer Customer IntegrationQuality Service Satisfaction Key Accounts Program Innovation & Learning Perspective Objectives Measures Targets InitiativesMaintain Superior Competence & Industry Respect as Investments inTechnology & Facilities Awareness of Market Leader Superior(R&D) Technology Equipment & Facilities Employee Training Renal Care Univ.Employee & Referrer Satisfaction surveys Consistent Quality Employee TrainingSatisfaction Coverage at all & Feedback LevelsRetention Referrer and Invest in Facilities Employee retention
  12. 12. Asia Renal Care Ltd. (Group E) 12Improved Small Group/Team Embraced Company Quarterly TeamCommunication of Understanding Strategy Meetings &ARC’s Strategy Training Overall Employee Knowledge ARC Evaluation Meetings & Training ARC plans to use a Balanced Scorecard (BSC) to implement the aggressive goals neededto carve out a successful operation in Taiwan. By using this technique the company will be ableto provide the highest quality dialysis operation in Taiwan and give customers a premium service.Employees will benefit from this approach by having a clear understanding of the strategic plansand goals of the organization. Using the BSC enables ARC to measure the performance of thecompany accurately, keeping on target with a consistent strategy across the board. The four keyaspects of the BSC are below. Financial – For the financial segment ARC will be focusing efforts on achievingprofitable growth, cost reduction and asset utilization. ARC will balance this drive with therealization the investors need some return in the near-term. ARC will give specific attention tothe financial segment of the BSC to ensure they are maintaining and advancing goals. A strongemphasis on sales, canvassing the market through the use of direct calling with hospitals andphysicians, gaining contracts with insurance organizations both State and private, coupled withgeneral service promotion will let ARC meet the aggressive growth goals. ARC will alsomonitor cost reductions at facilities and investment returns on a quarterly basis, evaluate andcommunicate them throughout the company. Customer - ARC will convey knowledge to their customers, ensuring their understandingof the unique and superior service capabilities offered by the state-of-art ARC facilities andexperienced staff. By communicating clearly these benefits ARC will strive to develop
  13. 13. Asia Renal Care Ltd. (Group E) 13physician and hospital relationships that will spawn referral business and lead to annual dialysiscontracts. Satisfaction surveys and secured annual contracts will provide the means to judgesuccess. Internal - ARC will be focusing their internal efforts on quickly expanding the client basewithin the respective regions; creating business for dialysis facilities and creating a demand fornew facilities. The company will gauge success by evaluating performance in the overalldevelopment of Taiwan’s market, becoming the renal care market leader and providing thehighest quality service. Learning & Growth - To offer customers the highest quality dialysis services ARC willneed to maintain a high level of expertise in the field. A continual learning program for allemployees will help ensure the staff is up to date on all current practices and proficient with theoperation of their on-site dialysis equipment, drugs and other related patient care products. ARCwill also need to build a consistent referral business (key to quality internal communication), andhold focus on clearly conveying to employees the status, direction, market trends and strategicchanges. Survey feedback on training and service will monitor success, while quarterly teammeetings provide a forum in which employees can judge the organization and their ownindividual contributions to the goals of the BSC. Market Analysis (Anon)Taiwan Economy Taiwan is currently the 17th largest economy in the world, in terms of Gross DomesticProduct, and also ranks highly in terms of growth in competitiveness. In 1991 Taiwan’s GDP percapita was US$8,992 but by 2003 it reached approximately US$18,000 (CIA, 2003). Realgrowth in GDP has averaged about 8% during the past three decades. Exports have grown even
  14. 14. Asia Renal Care Ltd. (Group E) 14faster and have provided the primary impetus for industrialization. The latter half of thetwentieth century saw Taiwan make a successful transition from an agricultural based economyinto a sophisticated high-tech electronics based one. For many years higher value addedindustries have driven this economic growth. Because of its conservative financial approach andits entrepreneurial strengths, Taiwan suffered little compared with many of its neighbors fromthe Asian financial crisis in 1998-99. In terms of overall economic structure in 1999 (as apercentage of GDP), agriculture accounted for only 2.31%, industry for 37.37%, and services for52.55% indicating the predominance of service industries (CIA, 2003). Taiwan has a dynamic capitalist economy, and along with their expected entry into theWTO, there has been a gradual decrease in restrictions governing investment and foreign tradeby government authorities. Taiwan is also relaxing restrictions on the foreign ownership ofprofessional services, such as the healthcare field, though there are no immediate plans toremove the restrictions entirely. Generally speaking, the need to comply with WTO rules andstandards may reduce some of the risk in doing business in Taiwan. Things will be fairer andmore transparent and predictable (currency fluctuations excluded) and less corrupt. Technically,there will be better protection for intellectual property rights though enforcement still lags behindother developed nations. While the playing field will be more level these developments will alsoattract more competitors than ever before in all industries. Taiwan has introduced incentives toattract foreign professionals to Taiwan (longer-stay more flexible work visas, tax exemptions)and to encourage multinational firms to set up regional headquarters in Taiwan. See Appendix Afor further information.Taiwan Healthcare System
  15. 15. Asia Renal Care Ltd. (Group E) 15 Taiwan has taken measures to control rising healthcare costs, reflected in a public healthbudget that increases by 4% per year. Most significantly, in March of 1995, Taiwan’s Bureau ofNational Health Insurance (BNIH) implemented a National Healthcare Insurance (NHI) byintegrating three separate insurance programs – Labor Insurance, Government EmployeeInsurance, and Farmer Health Insurance – and by expanding the program to cover the remaining43% of the uninsured population. Currently, this program insures nearly 97% of the Taiwanesecivil population of 22.6 million people (Chaing, 1997). By 1998, the total expenditures of theBureau of National Health Insurance represented a 34% increase in total health care expendituresper enrollee. Outpatient expenditures account for more than two thirds of total health careexpenditures and the rate of outpatient expenditures is increasing much faster than that ofinpatient expenditures. Within outpatient expenditures, the rate of increase of visits is muchhigher than price per visit. The rapid growth of health care expenditures is attributable to threeinstitutional factors including low demand-side cost sharing, the lack of referral system, and,most importantly, the fee-for-service (FFS) payment system, otherwise known as thereimbursement system. Taiwan’s 100% health care reimbursement has met with some resistance but not in amanner that would prove harmful to ARC’s mission in Taiwan. Health Minister Chen Chien-jenrecently expressed disagreement with the idea of using national health insurance payments tosubsidize offshore Taiwan kidney-transfer patients instead of Taiwan-based clinics. One of hismain reasons was that the Taiwan government could not find out if offshore Taiwan kidney-transfer patients got their new kidneys legally, therefore putting the government in the positionof possibly paying for something that was obtained illegally. A second concern was the idea that
  16. 16. Asia Renal Care Ltd. (Group E) 16coverage for offshore medical treatments are for emergency-related treatments only, and kidneytransfers do not fit into that category. Overall, NHI has a 75% customer satisfaction rating. The increase in satisfaction islargely due to the removal of financial barriers to health care, such as reimbursement measures,for those newly insured and full coverage extended to chronically ill patients. Health careproviders have noticed an increase in their average income due to the guaranteed payments underNHI. Under the reimbursement system, providers or physicians have enjoyed substantialfinancial return from NHI. However, as a result of NHI’s reimbursement policies, the plan faceshealth care costs which increased at a rate of nearly 19.6% annually. However, the overallpercentage of health care expenditures to gross domestic product in Taiwan is at a relatively low5%, especially when compared to many Western countries. This would seem to indicate that thenew system has been a success.Taiwanese People and Renal Dialysis Treatment Taiwan’s population of 22.6 million experienced a comparatively slow growth rate of0.65% in 2003 (CIA, 2003). The population has 9.3 % over 65 but with the population growthlagging Taiwan will become one of the fastest aging populations, necessitating increasedhealthcare (CIA, 2003). The current life expectancy is 74 years for men and 80 years for women(CIA, 2003). As discussed previously, the quickly aging populations of Asia have made themthe largest market of dialysis patients in the world with 32% of the worldwide total. For Taiwanthis means a total expense for dialysis therapy estimated to be about NT20 billion in 2002(“Dialysis Becomes”, 2003).
  17. 17. Asia Renal Care Ltd. (Group E) 17 Dialysis Patients by Area (2002) 26% North America 32% Latin America Europe/Middle East/Africa 11% Asia Pacific 31% The utilization of healthcare is dependent upon acceptance by patient and family, andfaces barriers such as mistrust of medical professionals, money, saving face, and familyresponsibilities. The fact that for these reasons Asians and Pacific Islander Americans are lesslikely to see a physician impacts the success of prevention programs, such as those offered byARC (Chen, 1994). However, people’s health is the most valuable possession in the Easterncivilization, which contributes to a greater demand for healthcare. Also, the NHI system haseased any financial barriers to seeking healthcare. Prior to 1990, studies of the health status of Asians and Pacific-Islanders as a wholesuggested a lower risk for death and disease (Huff & Kline, 1999). However, newer studies see atrend towards poorer health status in general, especially among those that live in poverty. Inmany cases the degree to which they have adopted the culture and behaviors of Western societyimpacts their health status as well. Comparisons of illness patterns show an increased rate ofkidney disease as well as various cancers. In Taiwan, the occurrence of patients who need renal dialysis is approximately 1,449 permillion inhabitants or approximately 32,500 people. This is the second highest figure in theworld in percentage terms and the highest growth rate (“Dialysis Becomes”, 2003). This putsTaiwan in the top position by a wide margin in the Asian market, far ahead of Hong Kong with
  18. 18. Asia Renal Care Ltd. (Group E) 18850 patients per million inhabitants and China with 50. They are also by far the world leader inprevalence and incidents of Early Stage Renal Disease (ESRD) patients 45 and older and theyare second only to the U.S. in treating patients 20 – 44 (Appendix C). The annual increase indialysis patients tops the world at 3,000 to 4,000 per year, mostly senior citizens, making Taiwana very favorable market from a growth perspective. In addition, 93.9% of those currentlyreceiving dialysis treatment are treated with in-center hemodialysis in Taiwan, with the majoritybetween the ages 45 – 74 (Appendix D). Further detailed information regarding dialysis inTaiwan and its comparison to other markets can be viewed in Appendix B – E. The high percentage of ESRD patients is mainly attributable to the fact that there arehigher percentages of patients with diabetes and high blood pressure in Taiwan, and thesepatients tend to use more medication that contain nephrotoxins. People over 65 with high bloodpressure and hyperazoturia who have suffered from diabetes for more than 10 years tend to bepotential nephrological patients as well.Taiwan Competitive Dialysis Market The rapid growth of the dialysis market in Taiwan and its potential means large scalecompetitors await ARC in the Taiwan market, including Fresenius, Gambro, and Baxter. Thesecompetitors are currently dominating the Taiwan market and have put significant resources intoobtaining market share, so ARC must be dedicated to compete. Many of these companiesprovide some of the comprehensive services that ARC intends to offer, though none have it as akey element of their strategy. Baxter’s Renal Division, for example, provides both dialysisproducts and services to support people with kidney failure. They have also undertaken acommunications program to raise awareness of the viable options available for kidney dialysis,targeted at a broad audience including current and potential kidney patients, caregivers, medical
  19. 19. Asia Renal Care Ltd. (Group E) 19professionals, and media organizations. This reinforces their own role in the market andincreasing patient familiarity with their name. This aggressive market movement is somethingARC must seek to match and innovate beyond. Marketing Plans (Olsen) ARC has an extensive vision that includes significantly improving the quality of life forEnd Stage Renal Disease (ESRD) patients in Taiwan along with promoting the development ofrenal therapy in Taiwan by working with leading medical institutions, such as StanfordUniversity Medical Center, one of ARC’s main partners. Furthermore, ARC wants to be thepartner of choice for leading physicians and healthcare providers, operate with the highest levelof professionalism and integrity, and provide a fulfilling and rewarding work environment for allARC employees.Sales Objective: ARC will strive to be operating at 75% capacity by year three, and 90% by year four.Moreover, it is our intention to open three Renal Care Centers in the first year, four centers in thesecond year, and five per year for the next three years for a total of 22 centers in five years ofoperation. By the second year of operations, we believe that we will achieve over $2.9 million inrevenue, which will be four times more than the estimated $600,000 in revenue in our first year.ARC generates revenue by providing renal patients state of the art dialysis treatment andfacilities and superior service. Cost and quality leadership will be our distinguishing factor. Inyear three we will more than triple our revenue to over $8.4 million and we will almost doublethat revenue to just over $16.4 million in year four. Patient capacity and total number ACRcenters in operation directly affect these figures.Sales & Revenue Generation:
  20. 20. Asia Renal Care Ltd. (Group E) 20 There are enormous growth opportunities in Taiwan for ARC. As renal care in Taiwanexpands and develops, ARC will establish its market position so patients, physicians/healthcareproviders, and hospitals will begin to recognize the superior service of ARC compared to thecompetitors. ARC will build the strongest competitive dialysis care network in Taiwan throughworld class quality medical standards, operating systems, academic affiliations with US partners,superior market understanding, and strong financial backing from investors. ARC will leveragethe best practices in kidney dialysis and transfer them to Taiwan. This will include world class-quality medical and nursing care, state of the art dialysis facilities never before available inTaiwan, dietitian and counseling services, and a patient-focused service mentality. Thesemeasures will provide a culture of improved service and care for dialysis patients in Taiwan,which will be its foundation for establishing a dominant market position. It will also enableARC to establish necessary partnerships with physicians and hospitals.Sales & Marketing Strategy: ARC will be pursuing early-mover advantages for dialysis treatment in Taiwan. ARCwill be the first large U.S. dialysis company to enter Taiwan with an extensive plan of expansionand development and a comprehensive strategy of enhanced service. ARC’s competitors do notcurrently have strong connections with doctors or hospitals, and ARC plans to take advantage ofthis opportunity to pursue aggressive growth. As a more Western lifestyle becomes more common in Taiwan, the need for quality renalcare will become ever more important. ARC intends to promote the fact that they are a superioralternative to current renal care providers in the region and the added benefits they providepatients and physicians. ARC will utilize the expertise of its international partners to circumventthe competition and bring the most advanced information, cost and quality systems to Taiwan
  21. 21. Asia Renal Care Ltd. (Group E) 21(Roberts, 2000). ARC will also promote the exchange of information, training and humanresources between world-class renal care specialists (Roberts, 2000). These measures will act asan added incentive for potential physicians in Taiwan to join the ARC network. Partnershipswith physicians are imperative to the success of ARC, since dialysis patients depend on them torecommend or refer them to a dialysis facility. Through these various measures, along withsharing their expertise and information in the field of nephrology, ARC will be able to establishan extensive network of renal care providers while also promoting the importance ofcomprehensive renal care in Taiwan.Revenue Generation Strategy: ARC has determined that emphasizing improved service and care to dialysis patientsthrough its world-class, state of the art facilities, which have not been seen before in Taiwan, willbuild its reputation as a trusted, high-quality, superior renal care provider. This will become thefoundation for future success and market dominance in the region. In addition, it will createsignificant demand for ARC’s services and opportunities for growth, while generating significantreturn for investors. ARC’s cost and quality leadership, along with the ability to providesuperior service and care, will be the driving point that attracts patients and physicians to theARC network. Furthermore, ARC’s customer service leadership and experienced managementgroup will separate them from their competitors and reinforce its renal care leadership. Aspatients and physicians realize the benefits of using ARC’s services, market share anddominance will increase. In the future, as the market becomes more competitive and patientdemand increase, ARC plans to acquire, consolidate, and improve other dialysis facilities inTaiwan as a means of rapid expansion. This will also guarantee that ARC can continue to meettheir clients’ demands at the highest satisfaction levels.
  22. 22. Asia Renal Care Ltd. (Group E) 22Target Market: ARC’s target market will mainly consist of dialysis patients in Taiwan, but will includeoverseas tourist and expatriates that require medical services (Roberts, 2000). With kidney-related problems on the rise, ARC’s objective is to target anyone in Taiwan that needs dialysistreatment. Since there is 100% medical coverage in Taiwan the patient does not have to worryabout the expense of dialysis treatment. With about 94% of dialysis patients receiving treatmentin a dialysis center, ARC is determined to be the center of choice when it comes to dialysistreatment. It will be ARC’s cost, quality, and service leadership that will separate it from itscompetitors and attract its target market. Promotion (Olsen) Promotion in Taiwan can be a fairly difficult and confusing process for a new companyentering the market, especially one in the medical field. The laws and regulations regardingadvertising are both the federal and local, but mostly federal. There is no one specific, single rulecovering the whole topic of advertising, so legal rules governing advertising are in severalseparate laws (Appendix I). The Government Information Office (GIO) oversees advertisingregulation in Taiwan, and is in charge of enforcing existing laws and regulations. Broadcastadvertising on all television stations must be authorized by the GIO. The GIO looks forsubstantiation of claims made about the effectiveness of the product as well as generalcompliance with advertising regulations. Since medical ads are restricted in many ways in Taiwan, ARC is limited to how they canpromote their service. Medical organizations such as hospitals and clinics can engage inadvertising, with restriction. The content of medical ads is limited to general information, suchas the address, telephone number, and registration number of the organization and the name and
  23. 23. Asia Renal Care Ltd. (Group E) 23experience of doctors, with the comments on the curative effect of therapy or equipment notallowed. In addition, companies can not attract patients by illegal methods, and they can notproduce medical ads under another partys name, quote medical journals, or present ads as aninformational interview. See Appendices H – I for more detailed information regarding whatcontent is and is not allowed in advertising, specifically medical ads. It is ARC’s intention to use an array of print, online, radio and television ads to bringawareness to our service. There are a variety of newspapers and health, sports, and businessmagazines that can reach ARC’s target market. The same is true with online advertising, whichhas been steadily increasing in Taiwan. About 9% of online users frequently click on online ads,while 77% occasionally hit the ads (Ho, 2004). Furthermore, 14% of Internet surfers would referto online ads when making a purchase decision and 69% would once in a while (Ho, 2004).Radio and television promotion may be ARC’s greatest tool in promoting their services, since itcan reach the largest possible audience. It is essential that ARC develop a precise target strategy for all promotion methods toeffectively reach users, which means feeding useful information to the right recipients. Theassistance of a skilled marketing company, like Omnicoms Diversified Agency Services (DAS),whose companies are skilled in marketing and promoting healthcare related services (Appendix J)will be very beneficial for ARC. They will help ARC optimize their message while promotingwithin the rules and regulations regarding medical ads set forth by Taiwan’s laws. In addition,DAS would have an essential role in ARC’s public relations by attaining necessary partnershipswith medical facilities and physicians, lobbying the Department of Health (DOH) and reachingout to employers and employees.
  24. 24. Asia Renal Care Ltd. (Group E) 24 As previously mentioned, it is imperative that ARC develop partnerships with establishedmedical facilities and top physicians. This will be extremely important to the strength of theirmedical ads, since it can include the name and experience of physicians. It will also support thefact that we are the best without directly stating we are the best, which would be illegal, whileadding credibility to that claim. It would be wise to get the support of the DOH and work carefully with them becausethey regulate medical care in Taiwan (Appendix K). Furthermore, there are various goals andpriorities the DOH has put forth to promote healthcare improvements, a healthy lifestyle, andhealth education (Appendix L). The Taiwanese government recognizes the need for healthpromotion initiatives and is positioning Taiwan for a healthier society for the 21st century. Withkidney disease on the rise and dialysis treatment becoming more common, renal care educationis imperative and working with the DOH in promoting improved kidney health will be anexcellent tool for promoting ARC’s extensive services. Health promotion is also gradually finding a place in the workplace, which could beanother means of promotion for ARC. ARC could go into various workplaces and haveseminars/clinics/symposiums with the employees where they can stress the importance of renalcare and preventative measures to ensure healthy kidneys. There are numerous benefits ofworking with the DOH and employers in educating citizens/employees about renal care. Oncethey start to take preventative measures healthcare costs may decrease, eliminating one of thelong-term risks for ARC – removal of dialysis care from the NHI reimbursement program. ARC believes that it can successfully promote its service and message of renal care,especially with the assistance of a skilled marketing company like Omnicom. Through theabove-mentioned methods, ARC is confident that the target market will receive their message
  25. 25. Asia Renal Care Ltd. (Group E) 25effectively and knowledge of the company and its service will dramatically. This will beimportant to ARC’s success in Taiwan. Risks (Group) Kidney disease and the number of patients requiring dialysis in Taiwan has steadily beenon the increase. As previously mentioned, Taiwan’s population has 100% medical coveragewhich covers dialysis treatment. However, dialysis treatment is beginning to take its toll onTaiwan’s insurance program. Simply put renal dialysis is becoming a heavy financial burden.The Bureau of National Health Insurance (NHI) paid more than NT$20 billion for renal dialysisin 2002 (“Dialysis Becomes”, 2003) and that figure increased to NT$23.6 billion in 2003 (Su,2004). It actually cost the government in 2002 over NT$16 million to treat just one patient,which was the most ever (Su, 2004). In the past, patients had to pay for renal dialysis on their own, but under the currentregulations, the NHI pays the bill as long as a patient produces a renal dialysis application formwith the signature of a licensed kidney disease doctor. However, some unethical medicalfacilities have supposedly placed patients on renal dialysis prematurely in order to increase theirown revenues (“Dialysis Becomes”, 2003). Another problem is that many patients feel thatdialysis is a forced choice for them and many patients are tired of receiving the treatment threetimes a week for the rest of their lives (“Dialysis Becomes”, 2003). This can become a problemfor ARC, because as the cost of providing this service continues to increase, so will the pressureon the government to curtail coverage or reimbursement, directly affecting ARC revenues. Taiwan’s relationship with China is a continuous problem that could affect ARC’s longterm position in Taiwan. Most in Taiwan are content to maintain the status quo (Cheng, 2004),but there is always talk of independence, which leads to this ever-growing uncertainty. Given the
  26. 26. Asia Renal Care Ltd. (Group E) 26current economic interdependence between Taiwan and China, which is vast and increasing, awar between Taiwan and the mainland would not be in anyone’s economic interest. However, aslong as there is talk of independence there is the threat of war and economic interest alone doesnot always guarantee peace. Another potential problem facing ARC’s entrance into Taiwan is its lack of sufficientdomestic energy sources. Taiwan is almost totally dependent on energy imports, leading to veryhigh energy costs without reducing energy consumption, which has continued to increase(Allison, 2000). This is an increasing problem for Taiwan and the rest of Asia. See Appendix Mfor further information. ARC will have to pay very close attention to this problem becausehigher energy costs could have a negative affect on their revenue, as it will cost more to operatetheir medical facilities. Financial Plan (Reed)Financial Plan Summary: Asia Renal Care is looking for external agencies to contribute start-up and short termworking capital in two stages for entry into Taiwan. Start-up capital requirements are $400,000per clinic, with three clinics opened in year one and four additional clinics in year two, for totalinitial infrastructure costs of $2.8 million. In addition to this start-up capital ARC is seeking twoyears of working capital for daily operations, totaling $2.8 million. At the end of year two ARCwill seek an additional $3.9 million in expansion and working capital for further expansion inTaiwan and to continue operations until the breakeven point, forecasted to occur in year four.Total external financing for operations until positive cash flows, net of capital expenditures,which occur in year five are $9.5 million.
  27. 27. Asia Renal Care Ltd. (Group E) 27Sources of Funding and Cash Flow: ARC is seeking external funding for the initial startup capital required for expansion inTaiwan. The preferred form of initial funding is an equity investment by a venture capitalinvestment firm or firms totaling $5.7 million. This includes anticipated initial startup fundingrequirements of $2.8 million in capital investments to open three clinics in year one and fouradditional clinics in year two. It also includes $2.9 million in working capital to fund operationsfor the first two years of operation. After this two year initial period ARC can either raise anadditional $3.8 million to continue expansion at a rate of five clinics per year for years threethrough five, or continue self-sustaining operations with seven clinics. If ARC does not receive additional funding, positive income of $50,000 occurs in yearthree with a net cash flow of $400,000 in that year. Payback of the initial $5.7 millioninvestment occurs in year six with no further expansion. ARC could finance limited continuedexpansion through operations beginning in year four with a postponed payback depending on thescale of expansion. ARC could also continue expansion through debt financing, albeit with anegative impact on cash flow and payback. The preferred situation for ARC is a continued expansion through year five, funded by anadditional $3.8 million in equity capital contributed in year three. This scenario allows ARC tofund five additional clinics in years three through five for a total of 22 clinics. Positive incomeof $90,000 occurs in year four in this scenario, with positive cash flows of $919,000 year five.With a total investment of $9.5 million, payback occurs in year seven with a net positive cashposition of over $5 million at the end of that year.Financial Goals:
  28. 28. Asia Renal Care Ltd. (Group E) 28 ARC plans to build and staff world class quality dialysis clinics in Taiwan, creating adialysis center that is significantly better than competing clinics. This leading quality will allowARC to achieve full customer loads quickly in new clinics, with a stated goal of 90% of fullcapacity operations within four years of opening the clinic. This rapid patient load ramp-up willlet ARC have clinics operating at a net profit within three years of opening, which is the secondfinancial goal of operations. ARC plans to use clinic management and cost cutting techniqueslearned in the highly competitive US market to operate highly profitable clinics in Taiwan, witha goal of 15% corporate net profit margins in steady state operation.Financial Risk: The dialysis business is a somewhat unique situation from a business risk perspective.There are large fixed costs associated with dialysis, including the cost of the equipment itself,fixed salary costs, and insurance, combined with a total lack of control over reimbursement rates.Counterbalancing this is the fact that ESRD is a chronic condition, and patients receiving dialysiswill continue to receive it until they either receive a transplant or die. That fact coupled with asolid government administered health plan that pays high fixed reimbursement rates means thesource of cash flow is fairly stable and predictable, because once patients become clients of ARCand get used to the high quality service, they are unlikely to go elsewhere for treatment. Asignificant enabler for this patient stability is maintaining good relations with the referringdoctors, which is a key focus of ARC’s business strategy. Overall, ARC’s success or failure inmanaging these risks and driving strong patient growth through good doctor relations will beapparent during the first two years of operation, and positive results in that period shouldfacilitate additional funding and expansion.
  29. 29. Asia Renal Care Ltd. (Group E) 29Revenue Breakdown: ARC is a service company, providing outpatient hemodialysis treatment to patients withEnd Stage Renal Disease through independent dialysis clinics. These clinics provide services fordoctor referred patients that pay for the dialysis through government health plan reimbursement.The normal dialysis patient requires 10 treatments per month and the current reimbursement rateis $156 per treatment. With fixed reimbursement rates, the only way for ARC to increasedialysis revenues is through increasing the number of patients serviced, either through increasingthe number of patients per clinic or by increasing the number of clinics. Increasing the numberof clinics is the preferred method for increasing revenues, but increasing the number of patientsper clinic is perhaps the most efficient. For this reason, ARC will pursue an aggressiveexpansion plan as outlined, but will also pursue methods of increasing patient density. Thiscampaign for increasing patient capacity will become a major focus of the company beginning inyear five, at which time all of the first year clinics will have reached their full patient capacityand revenue growth from them will stop. ARC expects that it can realize a 20% increase inpatient capacity in the period from year five to year eight, allowing revenue growth to continueeven after expansion stops. Since this is a somewhat ambitious goal, the pro forma financialforecasts do not reflect increases in patient capacity. The newly opened clinics will not immediately operate at 100% of capacity, which is 100patients per clinic, but will instead undergo a period of increasing patient load, a ramp-up period.The financial plan accounts for this ramp-up through the use of ramp-up factors that generallyapply until the clinic reaches 90% capacity. The percentage figure used for the ramp-up is theaverage percentage of full operations for the clinic for the year. In other words, if the ramp-up is50% it means the clinic is operating at an average 50% capacity for the entire year. This
  30. 30. Asia Renal Care Ltd. (Group E) 30simplification avoids the difficulty of calculating year-start and year-end figures, or othermethods of calculating revenues and revenue increases during the ramp-up period.Expense Breakdown: Variable Labor - Significant portions of the labor costs are variable because they are tiedto the patient load of the clinic. As a clinic increases the patient load it also needs to increase thenumber of nurses and support technicians servicing those patients. While this variability isactually tied to patient load and could be expressed as a multiple of the number of patients, it isinstead expressed as a percentage of revenues. Tying the labor expenses to revenues allows thefinancial plans to include inflation as a part of the labor costs. As inflation increases salaries andlabor costs it should also increase reimbursement rates and revenues, so keeping labor costsconnected to revenues simplifies financial planning. Fixed Labor – Fixed labor expenses are a smaller portion of the total labor expense, andprimarily reflect the need to keep a doctor on staff without regard to actual patient load. For thisreason fixed labor costs have a fixed value during the first three years of a clinic’s operation, andthen change to a percentage of revenues. Long-term fixed labor costs are tied to revenues formuch the same reason variable labor costs are – there is a small correlation between patient loadand fixed labor increases, as patient load increases there is a need for more than one doctor onstaff, and tying fixed labor costs to revenues also accounts for inflation. Supplies – Supplies are the single largest expense for ARC. Supplies are the dialyzerused to clean the blood, blood tubing, needles, and the like. ARC will initially procure theseitems from local suppliers in Taiwan, but at a later point ARC can investigate a global sourcingnetwork if desired. Some of these products are perishable, and so will have to be procured in
  31. 31. Asia Renal Care Ltd. (Group E) 31Taiwan. Due to high Taiwan distribution costs, ARC’s cost for supplies is higher than that ofclinics in the US and Europe. The cost of supplies is also tied to revenues instead of patients. Admin Expenses – This category accounts for clinic administration and is expressed asboth a variable cost related to revenues with an additional expense incurred during clinic ramp-up. This ramp-up cost reflects the increased costs associated with developing a patient base forthe clinic, above and beyond normal administrative expenses. This includes extra marketingexpenses and other unforeseen initial costs. Once the clinic reaches 90% capacity the extraadministrative expense goes away. Fixed Expenses – These are normal operating overhead expenses, expressed as a fixedcost during ramp-up and then as a percentage of revenues. These expenses will be higher thanfor comparable clinics in the US or Europe because of the high costs in Taiwan’s cities. Rent – In an effort to reduce lease cost fluctuations ARC will sign long-term leasecontracts on clinic facilities where possible. As is common in many major Asian cities, rent isvery expense and can be volatile, especially on the upside. Rent expenses in the financial plan isa fixed cost to reflect the desired long-term lease arrangement, but the initial expense value in theplan is higher than anticipated actual rental expenses to allow leeway for the high degree ofvariability in rent costs. Country Overhead – Expressed as a straight percentage of revenues, this categoryaccounts for other variable costs associated with the country of entry. It allows for unique orunanticipated additional costs inherent to each country, includes potential costs associated withgovernment licenses or marketing expenses, and insurance. Corporate Overhead – These are normal corporate overhead expenses incurred by achain of independent clinics, and include headquarters staff labor and admin costs. The financial
  32. 32. Asia Renal Care Ltd. (Group E) 32plan expresses these expenses as a fixed cost with a variable component tied to the number ofclinics in operation.Potential Impacts: Exchange Rate Impact – ARC will face relatively small exchange rate risks in theirTaiwan operations for several reasons. The first reason is that the Taiwan government has beenvery willing to support the Taiwan dollar in the past, with fluctuations in only a 10% bandaround 34 TWD/USD over the past four years. This consistency in the exchange rate makesfuture planning more accurate and reduces the need for exchange rate planning in the financialmodels. A second reason that exchange rates won’t have much of an impact on ARC’s normaloperations is that ARC will book both the revenues and expenses in Taiwan. Since ARC is anin-person service company revenues will naturally be in Taiwan dollars, and expenses will alsobe in Taiwan dollars through the use of Taiwan labor and overhead. The only foreign currencyexpenses will be purchase of equipment and supplies, and ARC will initially procure mostsupplies locally. If ARC begins sourcing supplies globally at a later time than exchange ratechanges will have an impact on this area. Equipment is a significant foreign currency expenseand this only significantly impacts expansion, not day to day operations. Since ARC plans toreinvest profits into expansion for the first five years at least, there are no exchange rateconsiderations for the repatriation of profits, but if ARC expands to other countries in the futureas planned Taiwan profits used to finance such expansion will be subject to exchange rate risks. Inflation Impact – Similarly to the foreign exchange rate impact, inflation will play asmall role in financing for ARC. Historically, Taiwan has had low rates of inflation, less than5% in the period from 1985 to present, and less than 2% in the period from 1997 to the present(CIA, 2003). However, the primary reason that inflation will play a small role for ARC is that
  33. 33. Asia Renal Care Ltd. (Group E) 33both revenues and expenses will be booked in Taiwan, meaning that increases in revenues shouldoffset corresponding increases in expenses due to inflation. There is a risk that inflation willimpact certain expenses without impacting revenues, area such as rent, supplies sourced globallyand capital expenditures for equipment purchased abroad, but these issues are dealt with in therespective areas, instead of through a broad adjustment for inflation. Reimbursement Impact – The most significant impact on ARC’s future revenues is thedialysis reimbursement rate. Since Taiwan covers all citizens for dialysis through thegovernment health plan the only way reimbursement rates will increase is through increases fromthe government health plan, unlike countries with private insurance plans where reimbursementrates may vary. If reimbursement rates do not increase to keep pace with inflation then actualfinancial performance will not match forecast returns. A typical reimbursement rate scenario isthat reimbursement rates will lag for a period of time and then the government will increase ratesto catch up to inflation, creating a situation where revenues will lag for a period and then jumpwhen reimbursement rates as increased, then slowly lag again until the next increase.Financial Statements: Included below are composite financial statements for both the two year expansion optionand the continued expansion option, showing projected revenues, costs, and cash flow positionsuntil the payback period is reached, six years for the two year plan and seven years for thecontinued expansion plan. Additional financial statements, including 10 year projections,financial planning inputs, single center financials, and yearly planning projections are included inthe appendix of this plan.
  34. 34. Asia Renal Care Ltd. (Group E) 34Corporate Financials Year Inputs 1 2 3 4 5 6Number of New Centers 3 4 0 0 0 0Total Number of Centers 3 7 7 7 7 7Revenues $ 608,400 $ 2,940,600 $ 7,402,200 $ 11,559,600 $ 13,384,800 $ 14,196,000ExpensesVariable Labor $ 85,176 $ 411,684 $ 1,036,308 $ 1,618,344 $ 1,873,872 $ 1,987,440Fixed Labor $ 105,000 $ 245,000 $ 245,000 $ 304,268 $ 401,544 $ 425,880Supplies $ 182,520 $ 882,180 $ 2,220,660 $ 3,467,880 $ 4,015,440 $ 4,258,800Admin Expenses $ 186,420 $ 511,030 $ 734,110 $ 785,980 $ 669,240 $ 709,800Fixed Expenses $ 420,000 $ 980,000 $ 980,000 $ 998,048 $ 1,070,784 $ 1,135,680Rent $ 324,000 $ 756,000 $ 756,000 $ 756,000 $ 756,000 $ 756,000Country Overhead $ 36,504 $ 176,436 $ 444,132 $ 693,576 $ 803,088 $ 851,760Corporate Overhead $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000Corporate Overhead Variable $ 10,000 $ 30,000 $ 70,000 $ 70,000 $ 70,000 $ 70,000 $ 70,000Total Expenses $ 1,869,620 $ 4,532,330 $ 6,986,210 $ 9,194,096 $ 10,159,968 $ 10,695,360Expenses as % of Revenues 307.3% 154.1% 94.4% 79.5% 75.9% 75.3%EBITDA $ (1,261,220) $ (1,591,730) $ 415,990 $ 2,365,504 $ 3,224,832 $ 3,500,640EBITDA as % of Revenues -207.3% -54.1% 5.6% 20.5% 24.1% 24.7%Depreciation $ 150,000 $ 350,000 $ 350,000 $ 350,000 $ 350,000 $ 200,000Earnings before Interest and Taxes $ (1,411,220) $ (1,941,730) $ 65,990 $ 2,015,504 $ 2,874,832 $ 3,300,640Interest $ - $ - $ - $ - $ - $ -Profits before Taxes $ (1,411,220) $ (1,941,730) $ 65,990 $ 2,015,504 $ 2,874,832 $ 3,300,640Taxes 25% $ - $ - $ 16,498 $ 503,876 $ 718,708 $ 825,160Net Income $ (1,411,220) $ (1,941,730) $ 49,493 $ 1,511,628 $ 2,156,124 $ 2,475,480Net Income as % of Revenues -232.0% -66.0% 0.7% 13.1% 16.1% 17.4%Capital Expenditures $ 1,200,000 $ 1,600,000 $ - $ - $ - $ -Cash FlowNet Income $ (1,411,220) $ (1,941,730) $ 49,493 $ 1,511,628 $ 2,156,124 $ 2,475,480Depreciation $ 150,000 $ 350,000 $ 350,000 $ 350,000 $ 350,000 $ 200,000Capital Expenditures $ 1,200,000 $ 1,600,000 $ - $ - $ - $ -Net Cash Flow $ (2,461,220) $ (3,191,730) $ 399,493 $ 1,861,628 $ 2,506,124 $ 2,675,480Net Cash Position $ (2,461,220) $ (5,652,950) $ (5,253,458) $ (3,391,830) $ (885,706) $ 1,789,775Terminal Value (x EBITDA) 5 $ (6,306,100) $ (7,958,650) $ 2,079,950 $ 11,827,520 $ 16,124,160 $ 17,503,200Figure 1. Two Year Expansion
  35. 35. Asia Renal Care Ltd. (Group E) 35Corporate Financials Year Inputs 1 2 3 4 5 6 7Number of New Centers 3 4 5 5 5 0 0Total Number of Centers 3 7 12 17 22 22 22Revenues $ 608,400 $ 2,940,600 $ 8,416,200 $ 16,122,600 $ 25,552,800 $ 34,476,000 $ 41,067,000ExpensesVariable Labor $ 85,176 $ 411,684 $ 1,178,268 $ 2,257,164 $ 3,577,392 $ 4,826,640 $ 5,749,380Fixed Labor $ 105,000 $ 245,000 $ 420,000 $ 654,268 $ 926,544 $ 1,049,660 $ 1,178,860Supplies $ 182,520 $ 882,180 $ 2,524,860 $ 4,836,780 $ 7,665,840 $ 10,342,800 $ 12,320,100Admin Expenses $ 186,420 $ 511,030 $ 1,044,810 $ 1,534,130 $ 2,057,640 $ 2,243,800 $ 2,313,350Fixed Expenses $ 420,000 $ 980,000 $ 1,680,000 $ 2,398,048 $ 3,170,784 $ 3,265,760 $ 3,376,960Rent $ 324,000 $ 756,000 $ 1,296,000 $ 1,836,000 $ 2,376,000 $ 2,376,000 $ 2,376,000Country Overhead $ 36,504 $ 176,436 $ 504,972 $ 967,356 $ 1,533,168 $ 2,068,560 $ 2,464,020Corporate Overhead $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000Corporate Overhead Variable $ 10,000 $ 30,000 $ 70,000 $ 120,000 $ 170,000 $ 220,000 $ 220,000 $ 220,000Total Expenses $ 1,869,620 $ 4,532,330 $ 9,268,910 $ 15,153,746 $ 22,027,368 $ 26,893,220 $ 30,498,670Expenses as % of Revenues 307.3% 154.1% 110.1% 94.0% 86.2% 78.0% 74.3%EBITDA $ (1,261,220) $ (1,591,730) $ (852,710) $ 968,854 $ 3,525,432 $ 7,582,780 $ 10,568,330EBITDA as % of Revenues -207.3% -54.1% -10.1% 6.0% 13.8% 22.0% 25.7%Depreciation $ 150,000 $ 350,000 $ 600,000 $ 850,000 $ 1,100,000 $ 950,000 $ 750,000Earnings before Interest and Taxes $ (1,411,220) $ (1,941,730) $ (1,452,710) $ 118,854 $ 2,425,432 $ 6,632,780 $ 9,818,330Interest $ - $ - $ - $ - $ - $ - $ -Profits before Taxes $ (1,411,220) $ (1,941,730) $ (1,452,710) $ 118,854 $ 2,425,432 $ 6,632,780 $ 9,818,330Taxes 25% $ - $ - $ - $ 29,714 $ 606,358 $ 1,658,195 $ 2,454,583Net Income $ (1,411,220) $ (1,941,730) $ (1,452,710) $ 89,141 $ 1,819,074 $ 4,974,585 $ 7,363,748Net Income as % of Revenues -232.0% -66.0% -17.3% 0.6% 7.1% 14.4% 17.9%Capital Expenditures $ 1,200,000 $ 1,600,000 $ 2,000,000 $ 2,000,000 $ 2,000,000 $ - $ -Cash FlowNet Income $ (1,411,220) $ (1,941,730) $ (1,452,710) $ 89,141 $ 1,819,074 $ 4,974,585 $ 7,363,748Depreciation $ 150,000 $ 350,000 $ 600,000 $ 850,000 $ 1,100,000 $ 950,000 $ 750,000Capital Expenditures $ 1,200,000 $ 1,600,000 $ 2,000,000 $ 2,000,000 $ 2,000,000 $ - $ -Net Cash Flow $ (2,461,220) $ (3,191,730) $ (2,852,710) $ (1,060,860) $ 919,074 $ 5,924,585 $ 8,113,748Net Cash Position $ (2,461,220) $ (5,652,950) $ (8,505,660) $ (9,566,520) $ (8,647,446) $ (2,722,861) $ 5,390,887Terminal Value (x EBITDA) 5 $ (6,306,100) $ (7,958,650) $ (4,263,550) $ 4,844,270 $ 17,627,160 $ 37,913,900 $ 52,841,650Figure 2. Continued Expansion
  36. 36. Asia Renal Care Ltd. (Group E) 36 Referenceswww.dasglobal.comwww.OmnicomGroup.com, Joonhong and Kastenberg, W. E. (2000). “Overview of Nuclear Energy in the Asia/Pacific Region.” Department of Nuclear Engineering, and The Center for Nuclear and Toxic Waste Management University of California, Berkeley. Retrieved April 27, 2004 from the World Wide Web:, Tony. (2000, November 1). “Taiwan: More than just a nuclear controversy.” Asia Times. Retrieved April 27, 2004 from The Asia Times Homepage on the World Wide Web: Intelligence Agency (2003). The World Factbook 2003. Washington, DC: Author. Retrieved April 12, 2004 from, T. “Taiwan’s 1995 Health Care Reform.,” Health Policy 39 (1997): 225– 239.Chang, David. (2004). “Taiwan’s Country Report.” Retrieved April 19, 2004 from The Taiwan Commercial Law Offices; Global Advertising Lawyers Alliance on the World Wide Web:“Chen survives again.” (2004, March 23). The Economist Global Agenda. Retrieved April 27, 2004 from The Economist Homepage on the World Wide Web:, Tien C. (2004, January 18). “Our desire for comfort today risks danger later.” Taipei Times, pg. 8. Retrieved April 27, 2004 from The Taipei Times Homepage on the World Wide Web:
  37. 37. Asia Renal Care Ltd. (Group E) 37Country Reports on Advertising, Marketing, & Promotion Law Developments. (2002, Summer). Retrieved April 19, 2004 from The HLT Law Offices; Global Advertising Lawyers Alliance on the World Wide Web: Reports on Advertising, Marketing, & Promotion Law Developments. (2003, Spring). Retrieved April 19, 2004 from The HLT Law Offices; Global Advertising Lawyers Alliance on the World Wide Web:“Department of Health, Executive Yuan: Goals and Priorities for 2003.” Department of Health. Retrieved April 20, 2004 from The Department of Health, Republic of China Homepage on the World Wide Web:“Dialysis Becomes Financial Burden for Taiwan Insurance Program.” (2003, June 2). “Dialysis Becomes”, Northern Territory Regional. Retrieved April 12, 2004 from MdUSA database LexisNexis on the World Wide Web:, John. (2002, August 6). “Independence call by Taiwan risks war, warns China.” The Guardian. Retrieved April 27, 2004 from The Guardian Unlimited Homepage on the World Wide Web:,7369,769686,00.htmlHo, Jessie. (2004, January 14). “TAIWAN: Yam sees bright future for online adverts.” Taipei Times. Retrieved April 18, 2004 from The AsiaMedia Homepage on the World Wide Web:, Jessie. (2004, March 27). “Public expected soon to feel increasing energy costs.” Taipei Times, pg. 10. Retrieved April 27, 2004 from The Taipei Times Homepage on the World Wide Web:
  38. 38. Asia Renal Care Ltd. (Group E) 38Medical Treatment Law. Department of Health – Laws & Regulations. Retrieved April 20, 2004 from The Department of Health, Republic of China Homepage on the World Wide Web: No=L01Radio & Television Act – The Motion Picture Law of the Republic of China. Retrieved April 20, 2004 from The Government Information Office Homepage on the World Wide Web:, Joy. (2004, February 4). “One patient cost government over NT$16m in 2002.” Taipei Times, pg. 2. Retrieved April 14, 2004 from The Taipei Times Homepage on the World Wide Web:“Taiwan Public Health Report.” (2003, December). Department of Health – Periodicals. Retrieved April 20, 2004 from The Department of Health, Republic of China Homepage on the World Wide Web:“Taiwan Risks Exist But Are Overstated.” (2004, March 29). FundSupermart. Retrieved April 27, 2004 from The FundSupermart Homepage on the World Wide Web:, Charles R. and Raymond, Mary Anne. (2000). “An analysis of product category restrictions in advertising in four major East Asian markets.” International Marketing Review, Volume 17, No. 3, pg. 287-304. MCB University Press, 0265-1335 manuscript. Retrieved April 16, 2004 from Villanova Homepage on the World Wide Web:
  39. 39. Asia Renal Care Ltd. (Group E) 39Yeh, C. “Overview of the National Health Insurance in Taiwan,” Paper Presented at the International Symposium on Health Care and Payment System Reform, June 23, 1997, Taipei, Taiwan.
  40. 40. Asia Renal Care Ltd. (Group E) 40 Asia Renal Care, Inc. Business Plan Market: Taiwan Appendices
  41. 41. Asia Renal Care Ltd. (Group E) 41Marketing/Economic Appendix A:(Blake, 2000)(Kopple, 2000).
  42. 42. Asia Renal Care Ltd. (Group E) 42GDP per capita in US$ purchasing power equivalents for the 10 richest nations in Asia(Woods, 2004)Total spending on health care per capita in purchasing power parity US$ for the 10 richestnations in Asia(Woods, 2004)
  43. 43. Asia Renal Care Ltd. (Group E) 43 Taiwan: Econom ic DataJun 20th 2003From the Economist Intelligence UnitSource: Country data 1999 2000 2001 2002GDP per head ($ at PPP) 21,200 22,740 22,590 23,420GDP (% real change pa) 5.42 5.86 -2.18 3.55Government consumption (% of GDP) 13.15 12.9 13.05 12.56Budget balance (% of GDP) -5.94 -4.49 -6.65 -6.6Consumer prices (% change pa; av) 0.18 1.25 -0.01 -0.2Public debt (% of GDP) 23.71 26.67 26.93 29.8Labour costs per hour (USD) 5.51 5.85 5.7 5.58Recorded unemployment (%) 2.93 2.99 4.58 5.16Current-account balance/GDP 2.91 2.88 6.37 9.14Foreign-exchange reserves (m$) 106,200 106,742 122,211 161,656NotesBudget balance (% of GDP) Percentage of fiscal-year GDP.Consumer prices (% change pa; av) Non-seasonally adjustedPublic debt (% of GDP) Percentage of fiscal-year GDP.Labour costs per hour For production workers. Includes pay for time worked, other direct pay (eg. holidayRecorded unemployment (%) pay), recent data derived from Most employer expenditures on Directorate-General of Budget, Accounting and Statistics. Non- seasonally adjusted.Copyright © 1995-2001 T he Economist Newspaper Group Ltd. All rights reserved.
  44. 44. Asia Renal Care Ltd. (Group E) 44 Taiwan Comparative Economic Indicators, 2003 Taiwan China Hong Kong US Japan GDP (US$ bn) 284 1,472 161 10,984 4,318 GDP per head (US$) 12,552 1,136 23,347 37,831 33,941 GDP per head (US$ at PPP) 24,500 5,153 27,543 37,831 28,086Consumer price inflation (av; %) -0.3 1.2 -2.6 2.3 -0.2Current-account balance (US$ bn) 25 32 22 -541 126 % of GDP 8.8 2.2 13.9 -4.9 2.9 Exports of goods fob (US$ bn) 143.0 436.1 225.9 714.5 447.1 Imports of goods fob (US$ bn) -119.6 -397.4 -230.3 -1,260.4 -346.6 (Economist Intelligence Unit, CountryData).
  45. 45. Asia Renal Care Ltd. (Group E) 45 Marketing Analysis and Plan Appendix B:Prevalence of ESRD: Prevalence of ESRD, by age(International Comparisons…, 2002)
  46. 46. Asia Renal Care Ltd. (Group E) 46(Blake, 2000) The prevalence figure has actually risen to 1,449 pmp and an additional 1,476 peoplejoined the ranks of renal dialysis patients in 2002, which was the worlds highest annual growthrate (Renal Dialysis…, 2003). It is believed that this has been attributed to the good quality oflocal renal dialysis that has prolonged the life of many patients.
  47. 47. Asia Renal Care Ltd. (Group E) 47 Appendix C:Incidence of ESRD:(International Comparisons…, 2002)
  48. 48. Asia Renal Care Ltd. (Group E) 48Incidence of ESRD, by age:(International Comparisons…, 2002) A high percentage of Taiwans population is dying from kidney-related problems and theneed for dialysis continues to increase. There are a variety of reasons doctors have determinedhave lead to this problem. Taiwan has a relatively high percentages of patients with diabetes andhigh blood pressure and that Taiwan patients tend to use excessive amounts of medication thatcontain nephrotoxins. People over the age of 65 with high blood pressure and hyperazoturia andwho have suffered from diabetes for more than 10 years tend to be potential nephrologicalpatients needing regular dialysis treatment (Kuo, 2004). Along with the higher number of casesof high blood pressure and diabetes among the old, there has also been an increased consumption
  49. 49. Asia Renal Care Ltd. (Group E) 49of western-style fast food that has resulted in a large number of overweight youngsters and theyare more likely to develop kidney problems later. (Wu, 1998). A majority of dialysis patients in Taiwan are senior citizens and there has been somepositive research that showed the benefits of dialysis treatment for the elderly. Elderly kidneyfailure sufferers on dialysis treatment live just as long as younger patients and in some caseseven longer. Patients that were 70 or older with renal failure were 71% more likely to survive atleast a year, compared with 63% for younger patients (“Age no barrier…,” 2000). Theimportance of this research shows that age should not be a barrier for dialysis patients.
  50. 50. Asia Renal Care Ltd. (Group E) 50 Appendix D:Percent Distribution of Prevalent Dialysis Patients, by Modality(International Comparisons…, 2002)
  51. 51. Asia Renal Care Ltd. (Group E) 51Distribution of dialysis patients by modality (hemodialysis (HD) and peritoneal dialysis (PD)) inselected countries in Asia.(Woods, 2004)(Blake, 2000)
  52. 52. Asia Renal Care Ltd. (Group E) 52Distribution of Prevalent Dialysis Patients Prevalent Dialysis Patients, by Age(International Comparisons…, 2002)
  53. 53. Asia Renal Care Ltd. (Group E) 53 Appendix E:Transplant Rates(International Comparisons…, 2002) Between 1993 and 1997, there were 784 kidney transplants were carried out in Taiwanand on average one out of every 159 kidney dialysis patients has needed a kidney transplant,compared with one out of every 229 dialysis patients in Japan (Wu, 1998). As renal diseasecontinues to rise, kidney transplants may be more common in Taiwan.
  54. 54. Asia Renal Care Ltd. (Group E) 54 Medical Treatment Law Appendix F: Medical Treatment Law: Medical Treatment Establishments – General Provisions Article 11 Medical establishment equipped with medical wards to accommodate patients are hospitals and establishments with only outpatient services are clinics. Medical facilities setup for non-direct medical diagnosis purposes such as medical insurances by physicians are considered as other medical establishments. Clinics mentioned previously are permitted to set up 9 observatory beds to the maximum. Facility standards of medical establishments are to be set by the central health government office. Article 11.1 Two or more clinics established at a single location, utilizing common facilities but executing separate outpatient services are considered joint clinics. The central health office determines the management regulations of such clinics. Article 12 Establishment or expansion of hospitals can apply for construction license under the relevant construction law after obtaining permission from the health government offices. Article 13 Commencement of medical treatment establishments, abiding by the left regulations, should apply, approbate and registered by the local municipality or county (city) health offices and obtain practice license: Applicant of Applicant of Applicant of juridical private public medical person’s medical medical treatment establishment or other treatment establishment medical establishments establishme should be its attached to other juridical nt should be representative. corporations by law should the be the juridical person physician involved. Article 14 Application and change of medical treatment establishment names should be limited to approbation of the local municipality or county (city) health government offices. Principles of name application and change are to be determined by the central health government office.