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Diabetes Center of Excellence
Mid Atlantic Medical Center
Team 7:
Scott Bankard
Anita Culler
Lisa Delphias
Rodney Dismuk...
Team 7 DiabetesCenterof Excellence
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Mid Atlantic Medical Center
Diabetes Center of Excellence
Executive Summary
Overview
...
Team 7 DiabetesCenterof Excellence
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Central to thisbusinessplan isa“buildvs.buy”analysis. A possible affiliationwiththe r...
Team 7 DiabetesCenterof Excellence
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Marketing strategy “Together…we can manage”
ProductStrategy:
Offeredserviceswill be d...
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Operations
Location: MAMC PhysiciansPavilion at1234 WellnessBlvd,Suite 5,Greenville,N...
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Key Performance Indicators Goal
Clinical
Percenttargetmarketdiabetestested 70%
Decrea...
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Financial Analysis
Recommendation
Basedon financial analysisandnon-financialconsidera...
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Overview of Advantages in Build vs. Joslin Buy Models
Build Model Joslin-Buy Model
Sp...
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Implementation Plan
"Buy Joslin" Implementation
Timeline Months Year
0 1-3 3-6 6-9
9-...
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Table of Contents
Business Description.................................................
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Operating Revenue and Expenses.........................................................
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Business Description
The Mid AtlanticMedical Center’sDiabetesCenterof Excellence wil...
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Marketing Plan
Industry Analysis
In 2004, the UnitedStatesspent 16 % of itsGDP on he...
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deathin2006 and a personwithdiabetes istwice aslikelytodie asa personof similarage w...
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Diabetes in Eastern North Carolina:
The problemof diabetesinEasternNorthCarolinaissi...
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The populationof the primaryservice areais737,463 and is expectedtogrow by2.6% annua...
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The diabetesprevalence dataforEasternNorthCarolinareveal notable disparitiesbyincome...
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be partnersin educational andcommunitybasedactivities. Locally,there are notanyother...
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individualcounseling. Additionally,thisfacilityparticipatesinthe Coastal CarolinasHe...
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Market ShareDistribution:
DEMAND AND VOLUME MODEL FOR DIABETES CASES
MID ATLANTIC ME...
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Market Share has beencalculatedusingthe standardmethodat MAMC usinghistorical inpati...
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2008, there were 38,566 admissions, 234,901 outpatientvisits,and95,229 emergency dep...
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DiabetesAdvisoryCouncil whichproducedthe “NorthCarolinaDiabetesPreventionandControl
...
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withbilling,coding,and
managementtocloselymonitor
progress.
CapitalizationRisk
Risks...
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Superiorcustomerservice will enhance all of MAMC’sservicesandmake MAMC the facilityo...
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Neurology,Ophthalmology,Urology,Dentistry,ObstetricsandGynecology,Podiatry,andPhysic...
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o Linkfor donations.
 Use of Media
o Local and regional TV ads
o Local and regional...
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Methods to Address Disparities
 AfricanAmericans
o Make contact withchurchesandothe...
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Marketing Financials
The table belowoutlinesthe expectedmarketingexpensesbasedonprom...
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Marketing Timeline
Marketing Timeline Tentative Work Schedule
1st
month
2nd
month
3r...
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Management and Organization
The DiabetesCenterof Excellence will be underthe corpora...
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The DiabetesCenterof Excellence will be locatedinthe PhysiciansPavilion at1234 Welln...
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of revenue,the center’scapacitywillbe constrainedbythe numberof patientsthatthe Endo...
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Otherequipmentnecessaryforthe centerwill includeexamtables,bloodpressure cuffs,therm...
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MID - ATLANTIC MEDICAL CENTER
Equipment Quantity Cost Subtotal Total
Rent10,11 3000 ...
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Tables 10 $ 269 $ 2,690 $ 2,690
Chairs 30 $ 70 $ 2,100 $ 2,100
Copy Machine16 1 $ 10...
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and Medicare,contractnegotiations withinsurance companieswill be crucial tomaintainf...
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refunds,monetarypenaltiesrangingfrom$15,000 to $100,000, andexclusionfromFederal
pro...
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The National Committee forQualityAssurance offersaccreditationthroughaDiabetes
Recog...
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Future expansion decisions will be basedonmonthlymonitoring of keyperformance indica...
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Employee Satisfaction 95%
ReferringPhysicianSatisfaction 95%
Exit Plan
Althoughitisc...
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Implementation Plan
"Buy Joslin" Implementation
Timeline Months Year
0
1-
3 3-6 6-9
...
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"Build" ImplementationTimeline Months Year
0
1-
3
3-
6 6-9
9-
12
12-
15
15-
18
18-
2...
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Financial Analysis
The proposedDiabetesCenterof Excellence will operateasa division ...
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INITIAL INVESTMENT - DIABETES CENTER OF EXCELLENCE
MID - ATLANTIC MEDICAL CENTER
Equ...
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Rolling stools 5 $ 140 $ 700 $ 700
Furniture30 1 $ 8,000 $ 8,000 $ 8,000
Tables 10 $...
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Basedon data fromthe JoslinAffiliatesPrograms, new affiliatesdemonstrate agreatertha...
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service area,weightedaverage reimbursementforeachservice wascalculatedandusedinthe f...
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70% of capacity. 100% capacity wouldbe realizedinyeartwo. A second Endocrinologist,f...
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NetIncome (Loss) and Cash Flows
Analysisof the cumulativenetincome (loss) (basedonop...
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Analysisof cashflowprojectionsrevealsthatneithermodelachievespositive cashflowsovert...
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ContributionMargin
Finally,ananalysisof the contributionmarginwasconducted. Thisanal...
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whatultimatelymake the Centerfinanciallyfeasible. Cautioniswarrantedbecause spillove...
Master's Thesis- Developed by  team at University of - Diabetes ...
Master's Thesis- Developed by  team at University of - Diabetes ...
Master's Thesis- Developed by  team at University of - Diabetes ...
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Master's Thesis- Developed by  team at University of - Diabetes ...
Master's Thesis- Developed by  team at University of - Diabetes ...
Master's Thesis- Developed by  team at University of - Diabetes ...
Master's Thesis- Developed by  team at University of - Diabetes ...
Master's Thesis- Developed by  team at University of - Diabetes ...
Master's Thesis- Developed by  team at University of - Diabetes ...
Master's Thesis- Developed by  team at University of - Diabetes ...
Master's Thesis- Developed by  team at University of - Diabetes ...
Master's Thesis- Developed by  team at University of - Diabetes ...
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Master's Thesis- Developed by team at University of - Diabetes ...

  1. 1. 1 Diabetes Center of Excellence Mid Atlantic Medical Center Team 7: Scott Bankard Anita Culler Lisa Delphias Rodney Dismukes 2009 UNC Chapel Hill HPMCapstone BusinessPlan 12/1/2009
  2. 2. Team 7 DiabetesCenterof Excellence 2 Mid Atlantic Medical Center Diabetes Center of Excellence Executive Summary Overview In the United States23.6 millionpeoplehave diabetes. Itisestimatedthatin2007 diabetescost$290 billionindirectandindirectcosts. Diabeteswasthe 7th leadingcause of deathin2006 and a person withdiabetesistwice aslikelytodie asa personof similarage withoutdiabetes. The problemof diabetesinEasternNorthCarolina(ENC) isevenmore significant. Diabetesisthe 5th leadingcause of death. The prevalence rate isapproximately10.5%,ascomparedto 8.7% forthe remainingNorth Carolinacountiesand7.8% forthe UnitedStates. Withinthe 10 countyprimaryservice areaof Mid AtlanticMedical Center(MAMC),thisequatesto77,075 patientswithdiabetes. In2007, diabetes mortalityforthe ENC 29 countypopulationwas38.6% greaterthan the restof the state and there were significantdisparitiesbetweenthe age-adjustedmortalityratesof non-white malesandfemales(57% and 53.2%), comparedto the white male andfemale ratesof 27.2% and21.2%. MAMC mustcarefullybalance missionand marginconsiderationswhendecidingthe directionthatwill bestserve the people of EasternNorthCarolina. The scope of the diabetesepidemicissuchthat inactioncouldleadtosignificantfinancial difficulties. Itisdifficulttoquantifythe full scope of the anticipateddemandthatthisepidemicwill place onthe MAMC. However,aproactive approachto treatingcomplex diabetesonanoutpatientbasiswill lessenthe costsdue tohospitalizationforthese patientsandshortenlengthsof stayforthose individualswhoare admitted. Giventhatthe payermix of the primaryservice areaisnot favorable forcostlycare,strategicactionto reduce the cost of diabetes care isrequired. Inaddition,aDiabetesCenterof Excellence strategicallypositions MAMCto take betteradvantage of likelyshiftstopayforperformance orpay for outcome reimbursementmodels beingproposedunderhealthcare reformlegislation. Creatinga DiabetesCenterof Excellence will offercomprehensivecare of complex casesof diabetesand preventivemanagementforpatientswith diabetesandpre-diabeticconditions ineasternNorth Carolina. The Centerwill offerservicesin endocrinology,nursingcase managementandeducation,and nutritioncounseling. A collaborative effortwill be developedtoimprovediabetespatientmanagement withmulti-specialtycare suchas physical/occupational therapy,prosthetic/orthotics,mental health, vascularsurgery,woundcare,optometry,and nephrology.
  3. 3. Team 7 DiabetesCenterof Excellence 3 Central to thisbusinessplan isa“buildvs.buy”analysis. A possible affiliationwiththe renownedJoslin DiabetesCenterinBoston,Massachusetts,anaffiliateof HarvardMedical School,wasexaminedfroma financial andstrategicperspective. Ona franchise model,the JoslinCenteroffersanaffiliationprogram, whichprovidestechnical assistance andconsultationforplanningandimplementingaDiabetesCenter of Excellence thatincludesthe use of the JoslinbrandinmarketingcampaignsandaccesstoJoslin- developedintellectual property,suchasprocedural guides,staff training,anddatamanagement. Alternatively,buildingthe center“inhouse”withMAMCresourcesandexpertise wasevaluated. Target Market The DiabetesCenterof Excellence will targetthe primaryserviceareawhich includesthe tencountiesin closestproximityto MAMC(Beaufort,Craven,Edgecombe,Greene,Lenoir,Martin,Nash,Pitt,Wayne, and WilsonCounties). The 10 primaryservice areacountiesaccountfor31% of the diabetesmortalities inEastern NorthCarolina. The Centerwill alsotargetnon-white malesandfemales,those withlower incomes,andlesseducationtoaddressthe disparitiesforthe disease inthisarea. Thisprogramwill focuson the adultpopulationwithplansforfuture expansionintothe pediatricmarketaswell. The followingare consideredMAMC’smajorcompetitorsfordiabetescare: 1- Minnie P.Stackhouse DiabetesCenter,LenoirMemorial HospitalinKinston 2- Wayne AreaDiabetesandEducationCenter, Wayne Memorial Hospital inGoldsboro 3- Wake Medical CenterineasternWake County 4- Duke Medical Center Barriers to Entry: The primarybarrier to entryisfinancinganew center. Anotherpotential barrierisinhiringan endocrinologistsince thereare onlyapproximately3,000 nationwide. However,the medicalschool affiliatedwithMAMChas an Endocrinologyfellowshipprogramandcouldbe a potential source of these specializedphysicians. Otherbarriersincludeneedingphysicianreferralsforreimbursementfor diabeteseducation. Keys Success Factors:  Brand establishmentof DiabetesCenterof Excellence and/orJoslinDiabetesCenter  Program developmentmeetingthe National StandardsforDiabetesSelf-Management education  Effective chronicdisease managementfocusingonprevention,early andon-goingscreening, education,andcollaborativecoordinationwithmulti-specialtycare  Establishmentof primarycare referral base andaffiliationswithlocal providersand organizations  Clinicfacilitiesthatare convenientandaccessibletothe targetmarket  Meetkeyperformance indicatorsestablishedbasedonnational andstate standards,suchas increasedscreenings,decreasedinpatientservices,anddecreasedmortalityrates
  4. 4. Team 7 DiabetesCenterof Excellence 4 Marketing strategy “Together…we can manage” ProductStrategy: Offeredserviceswill be developed intwophases.The initialphase istoestablishthe primary endocrinologyspecialty andpatienteducation components of diabetescare,aswell as establish collaborationbetweensecondarysupportservices suchaslabservices,pharmacy,prosthetics/orthotics, podiatry,andbehavioral health. The longtermgoalswill be tocreate a larger,all inclusive multi- specialtycenterthatwill allow patientstoobtainall theirmedical care inone clinicandto pursue multi- site expansionbyreplicatingthe model throughouthospitalsinthe greater29 countyservice area. PriceStrategy: Pricingwill be dictatedbycurrentreimbursementrates. Outpatientclinical visitswill be routinelybilled and reimbursed. Diabetescare supplies willbe setatmarketstandard pricesforself payor insurance reimbursement. Medications throughthe hospitalpharmacy will be chargedatreimbursable pricesplus co-pays. Place Strategy: The locationof the DiabetesCenterof Excellence willbe on the MAMC campuswithitsownentrance, propersignage,andlogodisplay.Thisiscritical because the majorityof all medical servicesprovidedin PittCountyare adjacenttothe medical center. Havingthe centeroncampuswill facilitatereferralsto the othermedical services. PromotionalStrategy: A multi-facetedstrategywithanannual budgetof $20,000 will be usedtopromote the DiabetesCenter of Excellence.The goalsof the promotional strategythatwillbe the measurementsof success are: 1. Establishname recognition 2. Increase markettonewpatients 3. Increase markettominoritypopulation 4. Increase numberof newphysicianreferrals 5. Increase community awarenessandinvolvementwithdiabetes General marketingeffortsalreadyavailableatMAMC, such as the website andmediaoutletswill be usedto introduce the Centerandbuildthe brand. A more targetedcampaign,includingdiabetes educationinformation,will be usedtoreachpatientswithdiabetesandspecificallythoseAfrican AmericanandLatinopatientsthatare consideredhighriskandforwhichthere are demonstrated disparitiesinhealthoutcomes. Finally,since thereare anestimated25% of people thatunknowingly have diabetesandof those NorthCaroliniansthathave diabetesonly 54% of have takena diabetes educationclass,there will be strategiestomarkettothe communityatlarge,throughsponsoring diabetesfundraisingevents,screeningevents,andworkplace partnerships.
  5. 5. Team 7 DiabetesCenterof Excellence 5 Operations Location: MAMC PhysiciansPavilion at1234 WellnessBlvd,Suite 5,Greenville,NC Lease: 5 yearterm Hours: Monday throughFriday8:00 until 17:00 (medical care andeducationclasses) TuesdayandThursdayeveningsfrom18:00 until 20:00 (educationclasses) Saturdayfrom 10:00 until 14:00 (education classes) Staff: Endocrinologist,1FTE years1-2; 2 FTEs beginningyear3 Nurse Practitioner,1FTE Administrator,.5FTE RegisteredDietician,.5FTE years1-2; 1 FTE beginningyear3 RN Educator,.5 FTE years1-2; 1 FTE beginningyear3 Medical Assistant,.5FTE year 1-2; 2 FTE year 3; 2.5 FTE beginningyear4 Clerical,2FTE Initially,the space will include 3,000square feetwith a waitingroom;a 600 square footclassroom; space for the receptionists;6examrooms;and an administrativeareaforthe office managerandbilling office. Anadditional 2,000square feetwill be neededto upfitinyear3 to accommodate a second Endocrinologist. There will alsobe asmall, CLIA waived,in-house laboratorythatwill provide convenienttestingof critical labvaluessuchasHbA1C, bloodglucose,lipidpanelsandurinalysis. The Centerwill utilize the same Epic/Healthspanelectronicmedical recordandpatientscheduling systemasMAMC. Also,the Centerwill notneeditsownaccounting,inventory control,humanresource management,time clocks,oremail software forthissame reason. Planswill needtobe made forthe successful integrationof the MAMCsystemsinto the operationsof the DiabetesCenterof Excellence. Management The DiabetesCenterof Excellence will be underthe corporate umbrellaof MAMC,a non-profitentity. The Practice AdministratorandEndocrinologistwillreporttothe Vice Presidentof OutpatientServices. Clinical andextenderstaff willreporttothe Endocrinologist.The clerical staff will reporttothe Administrator. Evaluation The future developmentof the DiabetesCenterof Excellence hastwoavenuesforconsideration. First, isto expandthe servicesandcreate a centralizedmulti-specialtycenterwithprimaryandspecialty clinics,lab,pharmacy,podiatry, mental health, andothertherapyall underone roof. Second,isthrough the pursuitof multi-site expansionbyreplicatingthe model throughout affiliatedhospitalsinthe greater 29 countyservice area. Future expansion decisions will be basedonmonthlyevaluationof key performance indicators(KPIs).
  6. 6. Team 7 DiabetesCenterof Excellence 6 Key Performance Indicators Goal Clinical Percenttargetmarketdiabetestested 70% Decrease diabeticmortalityrate disparity 27% Percentof diabeticsrequiringemergencycare and re-hospitalizationwithin30daysof discharge 15% Percentof diabeticsreceivingscreenings: twoHbA1c tests 80% eye exams 80% cholesterolchecks 80% footexams 80% bloodpressure checks 80% Financial ContributionMargin 5% Payor Mix Optimization 70% Maximum Medicare/Medicaid Operational RecruitmentandTurnoverof personnel 100%/ 15% Volume Indicator- Follow-upAnnualized 3,581/2,595 Volume Indicator- Initial Annualized 935/678 WorkloadCapacitybyProvider 70% Yr 1; 100% Yr 2 Service PatientSatisfaction 95% Employee Satisfaction 95% ReferringPhysicianSatisfaction 95% Exit Plan If after twoyearsthe DiabetesCenterof Excellence doesnotmeet established milestones, the stepped growthplancan be delayed until KPIsare met. If performance continuesto lagexpectationsintothe fourthand fifthyears,MAMC mayconsidereliminatingthe productline,divestingthe service toprivate physicians,orallowingthe MAMC employedphysicianstobuy-outthe operation. If the Joslinfranchise model isadopted,the initialcommitmentwouldbe fora five yearperiod.
  7. 7. Team 7 DiabetesCenterof Excellence 7 Financial Analysis Recommendation Basedon financial analysisandnon-financialconsiderations, MAMCshouldproceedwith contracting withthe JoslinAffiliatesProgramtopurchase aJoslinfranchise DiabetesCenterof Excellence. Although the five yearNPV isexpectedtobe lowerthanthe BuildModel andthe paybackperiodissomewhat longer,the longtermfinancial outlookforthe Joslin-buyModel issuperior. The Joslin-buyModel’s cumulative netincome beginstoexceedthe BuildModel byYear3. In addition,due toincreased projectedvolume,the Joslin-buyModel projectspositive contributionmarginbeginninginYear2, where as the buildmodel doesnotachieve positive contributionmargin. The considerationof spillover revenue isanissue thatisadmittedlydifficulttoquantifyandtrace back to the Center. Withoutthe inclusionof spilloverrevenue inthe analysis,neitheroptionisparticularlyviablebasedsolelyon financial considerations. However,conceptually,the DiabetesCenterof Excellenceaddressesthe issue of emergingpatientswithdiabeteswhomaynotseekservicesorwhomaygo to competitors. In addition,fromastrategicperspective,Medicare islikelytobeginreimbursingata higherrate forquality performance indicators(suchasHgA1Clevels). Rapidlyimplementingastate-of-the-artDiabetesCenter of Excellence nowwillpositionMAMCto take advantage of thisshiftinreimbursement. Whenanalyzingnonfinancial,(mission)considerations,the Joslin-buyModel alsorepresentsthe best choice forMAMC. Beyondregional competitionconsiderations,partneringwithaworldrenowned program wouldgive MAMCa competitive advantage throughoutthe state. Several otherfactorswere alsoconsideredwhenmakingthisrecommendation. Financial Analysis Overview Build Model Joslin-Buy Model Start-up Costs $537,652 Franchise Fee $100,000 Annually Demand Projections Year 2 2,595 3,581 Reimbursement Equivalent OperatingRevenuesand Expense NetIncome (Loss) (5 Yr) $ (1,249,746) $(1,418,677) Cumulative Cashflows(5Yr) $(1,787,398) $(1,956,329) Contributionmargin(5Yr) $(336,155) $25,828 BreakevenVisits(5Yr Average) 4275 4717 SpilloverRevenue Analysis Cumulative NetIncome (Loss) (5Yr) $729,963 $668,944 Cumulative Cashflows(5Yr) $192,311 $131,292 Breakeven Visits (5 Yr Average) 2837 3130 Payback 4.1 4.5 NPV $68,026 $15,974 IRR 8.3% 4.6%
  8. 8. Team 7 DiabetesCenterof Excellence 8 Overview of Advantages in Build vs. Joslin Buy Models Build Model Joslin-Buy Model Speed of implementation  Riskiness of model Competitive Risk  Market Risk  Execution Risk  Capitalization Risk  Increased patient volumes  Recruitment and retention advantage  National name brand recognition  Adherence to standardized practice model and KPIs  Standardized Education  Experienced implementation of model  Ease of exit  Year Five Financial Projections (with Spillover Revenue) Revenue  Cumulative netincome  Cash flows  Contributionmargin  Payback  Breakeven  NPV 
  9. 9. Team 7 DiabetesCenterof Excellence 9 Implementation Plan "Buy Joslin" Implementation Timeline Months Year 0 1-3 3-6 6-9 9- 12 12- 15 15- 18 18- 21 21-24 3 4 5 Marketing Phase 1 JoslinMaterials Phase 2 Referrals Phase 3 Opening Phase 4 Post Opening Operations Board Approval SignLease Space Upfitted Purchase/Lease Furniture & Equipment TechnologyinPlace InventoryStocked JoslinPolicies&Procedures Implemented Recruitment ClinicAdministrator Endocrinologist#1 Endocrinologist#2 Nurse Practitioner OtherStaff Evaluation and Development Evaluate KPIs Monthly SteppedGrowthExpansion Evaluate Multi-siteExpansion
  10. 10. Team 7 DiabetesCenterof Excellence 10 Table of Contents Business Description.........................................................................................................................12 MarketingPlan.................................................................................................................................13 Industry Analysis...........................................................................................................................13 The Diabetes Problem...................................................................................................................13 Target Market: Eastern North Carolina.........................................................................................15 Competitive Analysis, ....................................................................................................................17 Strategic Position..........................................................................................................................21 Risk Assessment and Evaluation.....................................................................................................23 Risk with “Build” versus “Buy”.......................................................................................................24 Overall Objectives.........................................................................................................................25 Marketing strategy “Together…we can manage” ............................................................................25 Marketing Financials.....................................................................................................................29 Marketing Timeline.......................................................................................................................30 MarketingPerformance Monitoring...............................................................................................30 Management and Organization.........................................................................................................31 Operations Plan............................................................................................................................31 Technology Plan............................................................................................................................34 Recruitment.................................................................................................................................36 US Healthcare Reform and Reimbursement....................................................................................36 Regulatory Areas ..........................................................................................................................37 Social Responsibility......................................................................................................................39 Development, KPIs, and Evaluation................................................................................................39 Exit Plan.......................................................................................................................................41 Implementation Plan.....................................................................................................................42 Financial Analysis..............................................................................................................................44 Start-up costs ...............................................................................................................................44 Projected Demand........................................................................................................................46 Reimbursement............................................................................................................................47 Financial Outcomes.......................................................................................................................48
  11. 11. Team 7 DiabetesCenterof Excellence 11 Operating Revenue and Expenses..................................................................................................49 Net Income (Loss) and Cash Flows..............................................................................................50 Breakeven.................................................................................................................................51 Contribution Margin..................................................................................................................52 Spillover Revenue Analysis ............................................................................................................52 Cumulative Net Income (Loss) and Cash Flows............................................................................54 Breakeven with Spillover Revenue..............................................................................................55 Payback,NPV and IRR................................................................................................................56 Recommendation.............................................................................................................................57 Appendix A: Competitive Analysis..................................................................................................60 Appendix B: Demand and Volume Projection.................................................................................63 Appendix C: Payer Mix and Reimbursement ..................................................................................66 Appendix D: Build 5 YEARS Net Operating Income (Loss) ................................................................70 Appendix E: Joslin “Buy” 5 YEARS Net Operating Income (Loss).......................................................77 Appendix F: Breakeven Analysis with Operating Net Income...........................................................81 Appendix G: Build 5 Year Cumulative Net Income (Loss) with Spillover Revenue ..............................83 Appendix H: Joslin Buy 5 Year Cumulative Net Income (Loss) with Spillover Revenue .......................86 Appendix I: Breakeven Analysiswith Spillover Revenue.................................................................89 Appendix J: Payback, NPV, and IRRAnalysis...................................................................................91 Appendix K: Joslin Affiliated Programs Brochure.............................................................................93 Appendix L: White Paper Joslin Affliation .......................................................................................99 Appendix M: Joslin Affiliates Implementation Manual Table of Contents........................................ 106 Appendix N: Joslin Affiliate Manualsfor Medical Affiliate .............................................................. 107 Appendix O: Joslin StandardAffiliate Agreement.......................................................................... 108 Appendix P: Data Sources........................................................................................................... 136
  12. 12. Team 7 DiabetesCenterof Excellence 12 Business Description The Mid AtlanticMedical Center’sDiabetesCenterof Excellence will offercomprehensive care of complex casesof diabetes andpreventive managementforall patientswith diabetesandpre-diabetic conditions ineasternNorthCarolina. ThisDiabetesCenterof Excellence will be located onthe campus of MidAtlanticMedical Center(MAMC). It will complementthe currentlyoperatingdiabetesinpatient service atMAMC and the diabetesfellowshipprogram inthe affiliated medical school.ThisCenterwill be the firstof itskindin easternNorthCarolina,setting MAMCapart as a communityleaderby reshapingdiabeteshealthcare managementforthisgrowingpatientpopulation. The core components of the DiabetesCenterof Excellence will involve the developmentof aphased-in outpatientcenteratMAMC in itsownfacilitieson the medical centercampuswithaseparate entrance. The outpatientcenterwill initiallyofferservicesin endocrinology,nursingcase managementand education,andnutritioncounseling. Alongwiththese services,acollaborative effortwill be developed to improve diabetespatientmanagementwithmulti-specialtycare suchas physical/occupational therapy,prosthetic/orthotics,mental health,vascularsurgery,woundcare, optometry,and nephrology. As volume grows, the longtermgoal will be tobringall of these servicestogether“underone roof.” The missionof the DiabetesCenterof Excellence will be tosignificantlyimprove the qualityof life and mortality of patientswithcomplicated diabetesthroughexpertmedical care andtosignificantlyimpact the qualityof life of all diabetes patientsthroughhighqualitynutritionandself-managementeducation. Central to thisbusinessplan isa“buildvs.buy”analysis. A possible affiliationwiththe renownedJoslin DiabetesCenterinBoston,Massachusetts,anaffiliateof HarvardMedical School,will be examinedfrom a financial andstrategicperspective. The JoslinCenteroffersanaffiliationprogram, throughafranchise model,whichprovidestechnical assistanceandconsultationforplanningandimplementingaDiabetes Centerof Excellence. Thisprogramincludesthe use of the Joslinbrandinmarketingcampaignsand access to Joslin-developedintellectual property,suchasprocedural guides,staff training,anddata management. Alternatively,buildingthe center“inhouse”withMAMCresourcesandexpertise willbe evaluated. EstablishingaDiabetesCenterof Excellence,wouldfurtherthe MidAtlanticMedical Center’smissionof enhancing“thequalityof life forthe peopleand communitieswe serve,touch and support” by addressingthe tremendousneedthateasternNorthCarolinahasfortreatingand controllingthe devastatingeffectsof diabetes.Furthermore,thiscenterwilldemonstrate MAMC’scommitmenttothe valuesof innovation,teamwork,and excellence.
  13. 13. Team 7 DiabetesCenterof Excellence 13 Marketing Plan Industry Analysis In 2004, the UnitedStatesspent 16 % of itsGDP on healthcare andit is estimatedthatthiswill climbto 20.3% by2019. Asthe rate of healthcare spendingcontinuestooutpace the growthrate of the GDP, stakeholderswill increasinglypursue strategiesfocusedoncostcontainmentwithoutcompromising qualityof care. There are several issuesthatwill affectthe future of the healthcare industry. The foremostissueisthe national debate regardinghealthcare reformanduniversal coverage. As nodefinitive decisionhas beenmade,the future of the healthcare structure and reimbursement systemisuncertainatthistime. There issome agreementon the adoptionof a nationallyinteroperable electronicmedical record(EMR) systeminan efforttodecrease medical cost,improve dataexchange andquality,andincrease transparency. Anotherimportantemerging trendisthe shiftof Medicare reimbursementtowardsprimarymedicine and paymentforoutcomes(performance). Otherpayersare beginningtofollow suit. The current reimbursementsystemisstructuredinsucha waythat medical care providersare incentivizedtodeliver additional interventionsandmore costlyprocedures. The systemprovidesreimbursementfor episodic care ratherthan preventivecare. Thisissue isconfoundedbythe lackof coordinationamongproviders and payers. Future healthcare reformsare likelytotargetthese issueswithmore payforperformance or pay for outcome modelsof reimbursement. Probablythe largest issue impactingthe healthcare industryis the BabyBoomerpopulation.78million people are poisedto beginextensiveutilizationourhealthcare system astheyage (US CensusBureau 2006). Underthe current reimbursementsystem, Medicare cannotremainfinanciallyviable. Additionally,the UnitedStatesfacesashortage of facilities,physiciansandotherhealthcare specialists. Finally,due tothe age range of the Baby Boomercohort,chronic diseaseslike diabeteswill be the main focusof attentionandresources. The Diabetes Problem 23.6 millionPeople,equivalentto7.8% of the populationinthe UnitedStateshave diabetes. It is estimatedthatin2007 diabetescost$116 billionindirectmedical costsandupto $174 billioninindirect costs,such as disability,workloss,andpremature mortality. Diabeteswasthe 7th leadingcause of
  14. 14. Team 7 DiabetesCenterof Excellence 14 deathin2006 and a personwithdiabetes istwice aslikelytodie asa personof similarage without diabetes. There are three mainclassificationsof diabetes,Type 1,Type 2, and Gestational. Five totenpercentof people withdiabeteshave Type 1diabetes,alsoknownasinsulindependentdiabetesorjuvenile-onset diabetes. Type 1 diabetescanonlybe treatedwithinsulin. The other90 to 95% of people with diabeteshave Type 2,whichisalsoknownas non-insulindependentdiabetesoradultonsetdiabetes. In manycases Type 2 diabetescanbe controlledwithahealthydiet,exercise,andmedication. Gestational diabetesoccursduringpregnancyandisa strong indicatorof future Type 2 diabetesdevelopment. A keyto havingpositive healthoutcomesforpatientswithdiabetesispatienteducationthatteaches healthylifestylesanddisease managementtechniques,suchasbloodglucose monitoringandself care. Table 1 Type 1 Type 2 Gestational AlsoKnownAs InsulinDependentDiabetes, JuvenileOnsetDiabetes Non-InsulinDependent Diabetes, AdultOnsetDiabetes PregnancyDiabetes Prevalence 5-10% 90-95% 40-60% develop diabetesinthe next 5-10 years RiskFactors Autoimmune, genetic,or environmental Olderage,obesity,family history, historyof gestational diabetes,impairedglucose metabolism, physical inactivity, race/ethnicity Obesity,family history,race/ethnicity Physiology Immune systemdestroys pancreaticbetacellsthat make insulinandregulate bloodglucose Insulin resistancecausescellsto use insulinimproperlyandthe pancreaslosesthe abilityto produce insulin Occurs during pregnancy Treatment Insulindeliveredthrough injectionsorpump.No knowncure or prevention Healthydiet,exercise,oral medications andsome insulin Healthydiet,exercise, oral medicationsand some insulin DiabetesinNorth Carolina: Diabeteswasdirectlyrelatedto2,150 deathsin2007 and resultedin18,251 yearsof life lost. From 1998 to 2007 there wasa 42% increase indiabetesdiagnoses. Itisalsobelievedthatforeachdiagnosed case there isone undiagnosedcase of diabetes. In2007, NChospitalsdischarged211,499 patientswith eitheraprimaryor secondarydiagnosisof diabetes. The average chargeswere $16,393 for primary casesand $20,803 forsecondarycases. The average lengthof stayforboth was5 days. Diabetes contributestomortalityviaheartdisease,stroke,andkidneyfailures. Diabetesnegativelyaffects qualityof life withamputations,kidneydisease andblindnessandcardiovasculardisease.
  15. 15. Team 7 DiabetesCenterof Excellence 15 Diabetes in Eastern North Carolina: The problemof diabetesinEasternNorthCarolinaissignificant. The EasternCarolinaUniversityCenter for HealthServicesResearchandDevelopmentreportedin2009 that diabeteswasthe fifthleading cause of deathinEastern NCand the fourthleadingcause of deathforboth male andfemale non- whites. Additionallyresearchcompletedbythe ECUResearchand Graduate Studiesdocumentsthe higherdiabetesprevalence rate forthe 29 northeasterncountiesof NC(ENC29) at approximately 10.5%, as comparedto8.7% forthe remainingNorth Carolinacounties(RNC71) and7.8% forthe United States. In 2007, diabetesmortalityforthe ENC29 populationwas38.6% greaterthan the restof the State. Diabetesisthe 5th leadingcause of deathinthe ENC 29 population,whichishigherthanthe RNC71 and the UnitedStatesas a whole (ranked7th leadingcause of death). Non-white malesandfemaleshadage- adjusteddeathratesof 57% and53.2%, respectively. Comparatively,the whitemale andfemalerates are 27.2% and21.2%. Thisdata affirms that the widelyreporteddisparityof diabetesbetweenracesis foundineasternNCas well. Target Market: EasternNorthCarolina The easternNorthCarolinamarketisdividedintotwomajorsegments,the ENC12 area isthe 12 southeasterncounties, andthe ENC29 area isthe 29 northeasterncounties. The twosubsections combinedare referredtoasthe ENC41 areaand encompassesthe geographical areaeastof Interstate 95. The ENC29 areais consideredtobe the full service areaof MidAtlanticMedical Center1 (MAMC); however,thisareaisalsosubdividedintoaprimaryservice areaanda secondaryservice area. The DiabetesCenterof Excellence willbe targetingthe primaryservice area,atleastinitially,which includes the tencountiesinclosestproximitytoMAMC (Beaufort,Craven,Edgecombe,Greene,Lenoir,Martin, Nash,Pitt,Wayne,andWilsonCounties). 1 Hospital facility namechanged by request
  16. 16. Team 7 DiabetesCenterof Excellence 16 The populationof the primaryservice areais737,463 and is expectedtogrow by2.6% annually,whichis lessthan the state wide estimateof 7.7% growth. The average medianfamilyincome is$38,781 as comparedto $46,355 for NorthCarolinaand the average unemploymentrate asof July,2009 was 12%, withhighestrate beinginEdgecombe Countywith16.3% andthe lowestrate being9.3% in Wayne County(EasternNorthCarolinaDatasetProjectn.d.).The racial mix of the populationis60.5% white, 36.2% African-American,and3.3%other. The Hispanicpopulationisgrowingsignificantlyinthe area. From 1990 to 2000 there wasa 270% increase inthispopulationaccountingforalmost28,000 people. The largestcountiesbypopulationare Pitt,156,081; Wayne,113,671; Craven,96,892; Nash,93,674; and Wilson,77,527. The 10 primaryservice areacountiesaccountfor31% of the diabetesmortalitiesin EasternNorth Carolina. From2000-2004, these countieshadanaverage age-adjusteddiabetes mortalityrate rangingfrom21.4 to 51.7 per100,000.
  17. 17. Team 7 DiabetesCenterof Excellence 17 The diabetesprevalence dataforEasternNorthCarolinareveal notable disparitiesbyincome, education,andrace/ethnicity. Disparitiesare seenbylow income households(<$25,000) reporting diabetesata rate of 11.7%, as comparedto a rate of 5.1% forhigherincome households. Those without a highschool educationreporteddiabetesatarate of 13.5%, comparedto highschool educationat 8.5% and college educationat5%. Also,diabetesisabouttwice asprevalentforAfricanAmericansasit isfor Whites(12.1% and 6.7%, respectively)2 (ECUResearchandGraduate Studies2009). Consideringthisdata,the specifictargetmarketforthe DiabetesCenterof Excellence will be the primaryMAMC service area. Researchindicatesthe 10county areahas a veryhighprevalence of diabeteswithalarmingdiabetesmortalities. Inaddition,focusingonnon-white malesandfemales, those withlowerincomes,andlesseducationwill alsoattempttoaddressthe disparitiesforthe disease. Initiallythisprogramwillfocusonthe adultpopulationwithplansforfuture expansionintothe pediatric marketas well. Otherfuture expansionpossibilitieswillinclude expandingoutside the 10county primarymarketsintothe additional ENC29 counties. Competitive Analysis3, Local competitors includephysiciansandothermedical facilities.Patientscanbe caredfor byprivate physiciansandmedical centerphysiciansand couldalsobe seeninthe countyhealthdepartments. These physiciansmaynotwantto refercomplex patientstoa DiabetesCenterof Excellence if they considerthe Centeradirectcompetitor. Itwill be importanttocreate allianceswithmanyphysician groups. The CountyHealthDepartmentshouldnotbe consideredasacompetitor,butcouldcertainly 2 (ECU Research and Graduate Studies 2009 3 see Appendix1Competetive Analysis
  18. 18. Team 7 DiabetesCenterof Excellence 18 be partnersin educational andcommunitybasedactivities. Locally,there are notanyothermajor medical facilitiesthatwouldcreate competition. Regional competitors are more likelytoinclude othermedical facilitiesinthe 29 countyregions; howeverMAMCis locatedina largelyrural regionwithlimitedmedical services.The otherseven facilitiesinthe MAMC parenthealthcare systemare muchsmaller andare not able to compete inthat respect. Theywould,however,be idealplacesforfuture expansionandcollaboration. These affiliated hospitalsofferonlylimiteddiabetesspecializedcare. Fourdo not promote anydiabetesspecific services.One,Albemarle Health,offersdiabetessupportgroupsandeducation.Twoothers,Chowan and OuterBanks,are currentlyofferingdiabetesself managementclinicswhichbeganfromthe CommunityCare PlanInitiative MAMChelpedcreate. Outside of the regioncoveredbythese affiliatedhospitalsare 21 counties. Nine of these have no hospitalsatall.Five of the remainingtwelve are notpromotinganyspecificdiabetesservices. Three, Camden,PerquimansandWashington,are alsoparticipatinginDiabetesself managementclinicsand Halifax hasitsownclinic. OnslowMemorial,acompetitortothe south,isonlyofferinga“KidsClub” supportgroup,but isin the planningstagesforanupcomingOutpatientNutritionProgramoffering diabeticeducation,weightmanagement,andhearthealth. There are three hospitalsinthisregionthatdoofferspecializeddiabetescare,twoof whichare in adjacentcounties. First,inLenoirCounty,LenoirMemorialhasa DiabetesCenterwhichin2008 receivedasignificantdonationandrecognitionfromacurrentNBA star andformerKinstonresident, JerryStackhouse. Thiscenterisalsosupportedthroughthe Duke Endowment.Thiscenteroffersa twelve monthprogramassistingwithself managementandbehaviormodification.RegisteredDieticians can be hiredforadditional consultations. Othercommunityservicesinclude anonsite WalkingTrack,an onsite medical supplycenter,andaCommunityDiabetesNutritionSeriesthatisalsoopentothe public. Second,WilsonMedical offers severalsupportgroupssuchasa monthlydiabeticsupportgroup, OvereatersAnonymous,andWeightandExercise SupportGroup.There isalsoa Wayne AreaDiabetes and EducationCenterwhichoffersanADA approvedself managementprogramwithindividualand groupeducationwithDieticiansandRegisteredNurses.Eighthoursof groupcounselingare offeredas well asa one hour assessment. To MAMC’s southeastonthe coast, CarteretGeneral Hospital,hascreatedasignificantfocuson diabetesforafacilityof itssize (135 beds).The CGHDiabetesLearningCenterisanADA approved facilityandoffersone totwohoursof initial counselingandassessmentwithnurse educatorsand dieticianeducator. Theyofferupto tenhoursof follow upeducation. The Centerservesasan informational resource forthe disease andself managementwithonlineinformationisalsoavailable. The diabetessupportgroupmeetsmonthlyandhome healthincludesdiabeticeducationwithanurse on call twentyfourhoursa day. The hospital alsoofferslapbandweightlosssurgery. To the southof MAMC’s regionisNewHanover,a769 bedfacility,whichpromotesaninterdisciplinary approach to diabetescare withadesignatedinpatientserviceline.Outpatientsare offerednutritionand
  19. 19. Team 7 DiabetesCenterof Excellence 19 individualcounseling. Additionally,thisfacilityparticipatesinthe Coastal CarolinasHealthAlliance,a unique alliance of tensoutheasternhospitalsinNCandone SouthCarolinafacility.ThisAlliance collaboratesandcoordinatesoutpatientdiabeticeducationandsupportgroupsthroughouttheirregion and has itsowninformative website. To MAMC’s west,are several large medical centersthatseeminglystrive tocontinuallyexpandtonew areas.Two are academicmedical centersaffiliatedwithhighlyrankedmedical schools.Wake Med, whichisonlytwocountiesaway,iscurrentlyspreadthroughoutWake County,andhasalsoentered JohnstonCounty. Thisfacilityisable toattract manyof the rural customersthatlie inbetweenWake Med and MAMC. They offerinpatientandoutpatientservicesandeducationspreadover3,6, and 12 months. Duke Medical and UNC Healthcare are bothexpandingintoadjacentcountiesandcurrentlyare notin MAMC’s market,but due to theirsize andreputationtheydoattractcustomerswillingtotravel. Inthe area of diabetescare,Duke offersinpatientand outpatientservices andutilizesateamapproachto diabetescare.There isan AdultEndocrine andDiabetesClinic,whichutilizescertifieddiabetesnurse educators (CDEs) and holdsamonthlydiabetessupportgroup. Additionally,clinical researchtrialsare conducted. Recently,Duke Endocrinologywasrankedtwenty-secondinthe US. Duke has expandedto areas of WesternandnorthernWake Countywhichcouldattract some of MAMC’s westerncustomers. UNC Healthcare also utilizesateamapproach andhas a DiabetesCenterrunby UNC School of Medicine physicianswithEndocrinology fellows. The UNC-CHDiabetesProgram includesprimarycare provider clinicvisits,telephone follow-up,mid-levelproviders(PharmDandNP) for specializedvisits, registered dieticiansbyappointments orwalk-ins,andself-managementclasses whichare provided twice amonth. UNC was recentlyawarded recognitionbythe NationalCommittee forQualityAssurance (NCQA) for theirDiabetesPhysicianRecognitionProgram(DPRP). External locationsincludeChathamCounty, Lee County,andwesternWake County,none of whichtypicallypullfromMAMC’smarketat thistime. CompetitivePosition: For DiabetesCare,MAMC’smajorcompetitorsare: 1 Minnie P.Stackhouse DiabetesCenter,LenoirMemorial HospitalinKinston 2 Wayne AreaDiabetesandEducationCenter, Wayne Memorial Hospital inGoldsboro 3 Wake Medical CenterineasternWake County 4 Duke Medical Center
  20. 20. Team 7 DiabetesCenterof Excellence 20 Market ShareDistribution: DEMAND AND VOLUME MODEL FOR DIABETES CASES MID ATLANTIC MEDICAL CENTER Conversion Factor (accountingfor unwillingness to seek care,likely complex casereferral,and estimate outpatient market share)1 5% Population 2 Prevalence 3 Annual Incidence4 Diagnosed Diabetes Demand New Care5 Demand Follow up6 Adjusted New Care Adjusted Follow up Inpatient Market share7 Service Area (by county) Beaufort 46035 11.3% 5.9% 5202 2716 2486 136 124 33.5% Craven 96892 9.6% 5.9% 9302 5717 3585 286 179 9.0% Edgecombe 52682 12.7% 5.9% 6691 3108 3582 155 179 16.9% Greene 20677 10.9% 5.9% 2254 1220 1034 61 52 61.1% Lenoir 56826 11.8% 5.9% 6705 3353 3353 168 168 16.1% Martin 23398 13.5% 5.9% 3159 1380 1778 69 89 30.2% Nash 93674 10.4% 5.9% 9742 5527 4215 276 211 7.6% Pitt 156081 8.1% 5.9% 12643 9209 3434 460 172 91.3% Wayne 113671 11.1% 5.9% 12617 6707 5911 335 296 8.0% Wilson 77527 11.3% 5.9% 8761 4574 4186 229 209 11.8% Totals 737463 77075 10.5% of 10 county population
  21. 21. Team 7 DiabetesCenterof Excellence 21 Market Share has beencalculatedusingthe standardmethodat MAMC usinghistorical inpatient volumes. Thoughoutpatientmarketshare datawouldbe muchpreferred,itisnot available. Barriers to Entry: The primarybarrier to entryisfinancinganew center. Anotherpotential barrierisinhiringan endocrinologistsince thereare onlyapproximately3,000 nationwide. However,the medicalschool affiliatedwithMAMChas an Endocrinologyfellowshipprogramandcouldbe a potential source of these specializedphysicians. Otherbarriersincludeneedingphysicianreferralsforreimbursementfor diabeteseducation. Some physicianswill view areferral asa potential lossof core business. Overall, there are no insurmountablebarrierstocreatingaDiabetesCenterof Excellence. Keys Success Factors:  Brand establishmentof DiabetesCenterof Excellence and/orJoslinDiabetesCenter  Program developmentmeetingthe National StandardsforDiabetesSelf-ManagementEducation  Effective chronicdisease managementfocusingonprevention,earlyandon-goingscreening, education,andcollaborativecoordinationwithmulti-specialtycare  Establishmentof primarycare referral base andaffiliationswithlocal providersandorganizations  Clinicfacilitiesthatare convenientandaccessibletothe targetmarket  Meetkeyperformance indicatorsestablishedbasedonnational andstate standards,suchas increasedscreenings,decreasedinpatientservices,anddecreasedmortalityrates Strategic Position Company Strengths: To quote Dr. Cook4 ,directorof the newHeartInstitute atMAMC, "We have a commonmission:to change the healthof North Carolinainthe next20 years," 5 . MAMC hasdemonstrateditsservice and leadershipinNCbybecomingalevel 1trauma centerandby addressingthe majorneedsof the communitythroughitsestablishmentof aHeart Institute andCancerCenter. The medical centerhasset itself apartfromcompetition byofferingregionally unique servicessuchasthe hyperbaricchamberand bariatricsurgery. Overthe past three years, MAMC has made headlinesinareas of Gammaknife surgery,ALStreatment,bariatricsurgery,andwoundhealing. Financially,the healthsystemisingood standingandin 2008 hadpositive earningsof $37 milliononoperatingrevenue of $772.4 million. In 4 Name changed for anonymity 5 (Ryals 2009)
  22. 22. Team 7 DiabetesCenterof Excellence 22 2008, there were 38,566 admissions, 234,901 outpatientvisits,and95,229 emergency department visits). MAMC has recognizedthe needtoenhance diabetescare byofferingspecializeddiabetesinpatient services. At the communitylevel,the MAMChas showngeneroussupportof the CommunityBenefits and HealthInitiativesGrantsProgram whichformed collaborative effortswithfiveaffiliatedhospitals and tenspecificinitiatives. Inline withthe medical center’svalueof educationandleadership,MAMC participatesintwopartnershipsthatincrease diabetestraining. Since primarycare physicians manage over90% of patientswithdiabetes,aone yeardiabetesfellowshipforprimarycare physicians was established withfundingfromthe Duke Endowment -EasternandAHEC,withtrainingprovidedby MAMC’s affiliated medical schoolphysicians. Additionally,apartnershipwithNCDiabetesPrevention and Control providesaone weeklongintensive trainingprogramfordiabeteseducatorsandother diabeteshealthcare providers.Thistrainingcoversdiabetesstandardsof care and treatmentoptions and has trained550 healthcare workers. MAMC has a unique opportunityto change the healthof NorthCaroliniansby creatingaDiabetesCenter of Excellence andofferingcomprehensiveoutpatientdiabetescare forthe mostcomplex cases.Manyof MAMC’s previouslyestablishedservice deliverylines,suchbariatricsurgery,WoundHealingCenter, behavioral healthservices,MAMCHeart Institute,HealthSteps6 ,andhome health,couldbenefitfrom spillovereffectsfromthe establishmentof aDiabetesCenterof Excellence. Collaborative effortscould easilybe establishedandall service lineswouldbe enhanced. Market/Industry Opportunities: The DiabetesCenterof Excellence isahuge opportunitytomake a significantdifference inthe livesof easternNorthCarolinians.The AmericanDiabetesAssociationestimatesthat25% of patientswith diabetes are notaware theyhave the disease andthat20% of Americansare at riskfordeveloping Type 2 diabetes.NCdiabetes.orgreportsthatfrom1995 to 2003, North Carolinianshada78% increase in diabetesprevalence.SpecificallyinPittCounty,diabetesisthe fifthleadingcause of premature mortality. Outof the ENC29 countytargetmarket,10 countiesaccountfor 40% of the diabetes mortalitiesinEasternNorthCarolina;Bertie,Gates,Halifax,Hertford,Hyde,Martin,Northampton, Wayne, Lenoir,andGreene. Finally,asreportedbythe NorthCarolinaDepartmentof Healthand Human Services,only54%of NorthCarolinianswithdiabeteshave takenclassesonhow tomanage their condition. Inthe primaryservice marketforMAMC, thistranslatesinto35,454 potential new patients. Thisdata demonstratesaremarkable needforthese servicesandunderscoresMAMC’sfocuson improvingthe livesof those ineasternNorthCarolinians. The state of NorthCarolinahas recognizedthisneedaswell andhascreatedseveral initiatives specificallyfordiabetes. One majorinitiative wasatenmonthlongsummitledbythe North Carolina 6 rehabilitation and intervention program of diet, exerciseand lifestylechanges - has been used primarily for cardiovascularpatients and pulmonary patients,but could easily reach outto diabetic patients
  23. 23. Team 7 DiabetesCenterof Excellence 23 DiabetesAdvisoryCouncil whichproducedthe “NorthCarolinaDiabetesPreventionandControl StrategicPlan2005-2010,” whichwaslabeledasa “call to action” forthe state From a financial standpoint,the costsof diabetes(directandindirectcare andexpenses) are enormous. The ADA estimatesthatin2007 diabeteshadan economicimpactof $290 billiondollars.Of this,direct medical costsaccountedfor$116 billion. 50% of those costs were due todiabetesrelated complications,27%of expenseswere forexcessmedical costs,and23% were spentongeneral diabetes care. Indirectcostsformissingworkandlossof productivityisestimatedtobe $58 billionin2007 and showedanamazing32% increase in5 years. Risk Assessment and Evaluation Risk Build Option Joslin buy Option Market Risk Risksthat marketwill not respondor is overestimated 1. Market riskis minimal giventhe large needfordiabetescare. 2. It isprojectedthatthe facilitywill not be able to meetthe initial demand 3. Have strong Marketinginvolvement for the firstfew years. WithJoslinmarketingsupport and resources,the marketriskis minimizedevenmore. Theirexpertiseisinenteringnew marketsforcommunity hospitals. Competitive Risk Risksthat competitors will enterthe marketor repositiontheirservices. The main competitive riskwouldbe if the maincompetitorsbuiltasatellite centerinour county.However,thisrisk islowfor several reasons. 1. MAMC isin a central area that drawspeople frommanyof the surroundingcountiesforavarietyof servicesandshouldnotexpect much competitioninthisarea. 2. The settingispredominatelyrural. 3. The payer mix ispredominately Medicare/Medicaid. 1. Joslinisinvolvedwith ongoingcompetitive analysis and can assistwith monitoringthissituationand advisingacompetitive strategy.Much of thiswould be done before Joslinagrees to a partnership. 2. It wouldbe more difficultto compete withthe Joslin name and experience. ExecutionRisk Risksof inefficienciesin managingthe roll out and growth of the project Executionriskwouldbe aconcernas thisprojectisdeveloped.Propersteps wouldbe to 1. Involve hospitalpersonnelwho have experience instartupprojects 2. Involve currentdiabetesinpatient care givers 3. Have regularstrategicmeetings Joslin‘sbusinessmodel isto completelysupportthe executionof diabetescenters and will provide aclear advantage here inminimizing the executionrisk.Affiliation bringsestablishedoperational manualsandstrategies.
  24. 24. Team 7 DiabetesCenterof Excellence 24 withbilling,coding,and managementtocloselymonitor progress. CapitalizationRisk Risksthat costshave beenunderestimatedor income overestimated. In orderto minimize thisrisk,the budgetshave beenconservatively estimated.A highdemandisexpected and startup includes aconservative staffingplan Joslinoffersexperience and expertiseonfinancial needsand wouldminimize capitalization risk. Risk with “Build” versus “Buy” Central to thisbusinessplanisthe decisionwhetherto“build”or“buy”the Center. The firstoptionis to buildthe DiabetesCenterof Excellence,usinginternal resourcesforplanning,development, implementation,andmonitoring,whilehiringconsultantstosupplementMAMCexpertise. The second optionisto become anaffiliate of the nationallyrecognized,JoslinDiabetesCenter. Thisfranchise model withthe JoslinCenterincreasesthe financialinvestmentforMAMC,but significantlyreducesthe executionandcapitalization risksintermsof initiatingaqualityprograminlesstime andwithless humancapital resourcesthanthe “build”scenario. Joslinwill assistwithrecruitmentof Endocrinologists,trainstaff,establishpoliciesandprocedures,facilitatethe marketingplan,andhold the organizationaccountable throughextensivemonitoringandevaluationmetrics. Inaddition,the JoslinAffiliate Programhasbeenshowntoincrease referralsfromsecondaryandtertiarysourcesby 38% beginninginthe secondyearof operation,furtherreducing financial andmarketing risks. DefinitionofStrategicPosition: Creatinga DiabetesCenterof Excellence wouldfurther MAMC’smissionof enhancing“the qualityof life for the people andcommunitieswe serve,touchandsupport”byaddressingthe tremendousneedthat easternNorthCarolinianshave incontrollingthe devastatingeffectsof thisdisease. Furthermore,this centerwoulddemonstrate MAMC’scommitmenttothe valuesof innovation,teamwork,andexcellence. MAMC’s strategicpositionistoprovide acomprehensive model of diabetescare that createsa new standardin easternNorthCarolina. Thismodel of care will require alarge coordinatedeffortto combine andenhance servicesthatare currentlybeingprovidedinadisjointedmannerthroughoutthe medical center. The goal isto make the deliveryof complexdiabetescare more convenientand accessible. MAMCwill be distinguishedfromcompetitorsbyusinginnovationandcoordinationto significantlyaddressthe alarmingdiabetesprevalence andincidence trendsineasternNorthCarolina.
  25. 25. Team 7 DiabetesCenterof Excellence 25 Superiorcustomerservice will enhance all of MAMC’sservicesandmake MAMC the facilityof choice for patientsandproviders. Overall Objectives Basedon national andstate standards,we will establishfive mainobjectives. 1. Annuallydemonstrate a5% increase inthe percentage of individualsin the targetmarketwho are testedfordiabetesandpre-diabeticconditions. 2. Annuallydemonstrate a5%decrease inthe disparityof diabeticmortalityratesbetweenwhites and nonwhites. 3. Annuallydemonstrate a5%decrease inthe percentage of diabeticswhoare requiring emergencycare andhospitalizations. 4. Annuallydemonstrate a5%increase inthe percentage of diabeticswhoreceive two HbA1Ctests a year. 5. Annuallydemonstrate a5%increase indiabeticsandpre diabeticswhoreceivespecialized diabetescare exams,suchasfootexams,eye exams,andbloodpressure andcholesterolchecks. Marketing strategy “Together…we can manage” ProductStrategy: People withdiabeteswanta partnership. Theywantthe convenienceof “one stopshopping”and superiorquality. The servicesbeingofferedwill be developed intwophases.The initial phase isto establishthe primary medicalandeducation components of diabetescare andestablishcollaboration betweensecondarysupportservices. The longtermgoal will be tocreate a larger,all inclusive multi- specialtycenter. Initialphase: 1) Establish the core primary medical andeducation componentswhichinclude an Endocrinologist,a Nurse Practitioner,aNurse Educator,a Registered Dietician,and Nurse Case Managerto monitor and buildrelationshipswithpatients. 2) Alongwiththese services,acollaborativeeffortwillbe developedbetweensupportingservicesto improve patientmanagementwithmulti-specialtycare.These keysupportservicesinclude preventativeservicesandcomplication services. Preventative servicesincludeGeneral Practitioners,additionalEndocrinologists,labservices,pharmacy,prosthetics/orthotics,podiatry, and behavioral health. Also,patientswithcomplexdiabeteswill encountercomplicationsandneed coordinationof these additional services.These complicationserviceswill includeCardiology,
  26. 26. Team 7 DiabetesCenterof Excellence 26 Neurology,Ophthalmology,Urology,Dentistry,ObstetricsandGynecology,Podiatry,andPhysical Therapy. Long Term Goal: Create a centralizedmultispecialtycenterwithprimaryandspecialtyclinics,lab,pharmacy,podiatry, mental health,andothertherapies. In addition, pursue amulti-siteexpansionbyreplicatingthe model throughouthospitalsinthe greater29 countyservice area. Thismultisite expansion wouldextendaccess to qualitydiabetescare inthe greatertarget market,therebyhavingawidespreadimpactonthe objectivesof the organization. Throughthese services,thisCenter willmeetmanyof the patient’sneeds.Functionally,MAMC will meet theirneedswithspecializeddiabetescare andby offering collaboratingservices.Thiswill alsopositively impactthe patients overallfinancial situation. The patientwillexperienceincreasedsavingsand increased productivity. Receivingservicesatthe centerwill resultinfewer office visits due toreduced complications,fewerco-pays,lessmedication,lessexpensive hospitalizations,andlesstime awayfrom work.Freedomwill be gainedthroughconvenience of receivingservicesinone,central location,with ample parking. Multiple appointmentscanbe setona coordinatedschedule tosave additional time. Emotionally,thiswill provide afeelingof partnershipandasense of ownershipoverthisdisease, creatinga feelingof beinghealthierand alsoimprovingtheirqualityof life. Patientscanfeel confident that these serviceswill be availablebecause of the strongreputationthatalreadyexistsat MAMC. PriceStrategy: Pricingwill be dictatedbycurrentreimbursementrates. Outpatientclinical visitswill be routinelybilled and reimbursed. Diabetescare supplieswillbe setatmarketstandard pricesforself payor insurance reimbursement.Medications throughthe hospital pharmacy willbe chargedatreimbursable pricesplus co-pays. Place Strategy: The locationof the DiabetesCenterof Excellence willbe onsite of the MAMC campuswithitsown entrance,propersignage,andlogodisplay.Thisiscritical because the majorityof all medical services providedinPittCountyare adjacenttothe medical center. Havingthe centeroncampuswill facilitate referralstothe othermedical services. PromotionalStrategy: Methods Currently Offeredat MAMC  Website: o Work withMarketingdepartmentandITto identifykeywordsforrecognitionbyvarious searchengines. o Create a Service Line linktoDiabetesCenterwebpage. o Have unique areasforvisitors,currentpatients,andphysicians. o Have diabeteseducationmaterialsavailable onlineaswell aslinkstoadditional resources. o Have linksforregional diabetesspecial eventsandsupportgroups.
  27. 27. Team 7 DiabetesCenterof Excellence 27 o Linkfor donations.  Use of Media o Local and regional TV ads o Local and regional radioads o Promotional billboard o Local and regional newspaper Methods to Reach Patients with Diabetes  DiabetesCenterof Excellence brochure availableinhouse invariouskeyareassuchas cardiologyservices,nephrology,etc. Also,take tolocal home healthsupplystoresandmajor pharmaciesfordisplay.  Newpatientorientationpacket  Refrigeratormagnets  Email listserve availableforeducation,eventpromotion,andreminders. Cost: Email free,text messagingservice,standardpostage pricestothose withoutinternetaccess.  Pointof service suchas waitingroomTVsto promote otherservicesoffered –“DiabetesHealth Network”service byContextMedia. Thisservicebroadcastsdiabetesspecificeducational information(http://www.diabeteshealthnet.com) hascustomizablefree TV services,literature, and productsamplingoptions. Contentcanbe customizedfordemographicpopulation segmentsandcan alsopromote the customer’sbrand. Contentupdatedmonthlyandcustomer has control overcontent. Free withcommitmentforquick statusupdate monthly.  Glucometerswiththe centerlogo/phonenumbergiventodischarginginpatientsandout patients  Basedon diabetesresearchdata,specificmarketsegmentshave specificdifficultiesinmanaging theirdiabetesandtherefore require specificstrategies. Please refertothe table 2 Table 27 Group Whites AfricanAmerican Hispanics Women Difficulty Managing diet Gettingexercise Measuringblood glucose withhome meter Checkingblood sugar levelsand eatinghealthy Strategy Material showing whiteseating healthymeals Material showing African-Americans exercisingand beingactive Material showing Hispanicsusinga home glucometer Multi cultural womenusing glucometersand eatinghealthdiets 7 Misra, Ranjita, and Julie Lager."Ethnic and gender differences in psychosocial factors, glycemiccontrol,and quality oflife among adulttype 2 diabetic patients." Journal of Diabetesand itscomplications (Elsevier) 23 (2009):54-64.
  28. 28. Team 7 DiabetesCenterof Excellence 28 Methods to Address Disparities  AfricanAmericans o Make contact withchurchesandother communitybasedorganizations o Place diabetescare andeducation(DCE)brochuresinhairsalonstotarget women makinghealthcare decisionsfortheirfamilies o ProjectPower,afaithbased educational outreachprogramtargetingAfricanAmericans  Latin Americanmarket o National Alliance forHispanicHealth o National Institute of Diabetes&Digestive &KidneyDiseases o Univision o ADA Spanishbrochure “Por tu Familia” Methods to Reach Care Providers/Physicians  AllianceswithphysicianssuchasGeneral Practitioners,Endocrinologists, inthe area  Focuson two largestphysiciangroups  Promotional brochure andpromotionalitemsalongwith“DiabetesCenterof Excellence branded”orderingpad,takentophysicianoffices. Initial appointmentswillbe setupwitheach physicianinthe twomajorphysiciangroups. Office staff will be invitedtoCenterOpenHouse eventandinitial appointmentswill alsobe setupwithoffice staff groups.  Meetwith current diabeteseducatorsandhealthdepartment  Create a monthlyNewsletter  InvitationstoOpenHouse  Creating promotional items o DiabetesCenterof Excellence brochure o Computermouse padswithlogogiventoPhysiciansandoffice staff Marketing to Community at Large  Identifylargestemployergroupsinthe areaandsurroundingareasand schedule screening eventstobe heldonwork site duringemployee workinghours  Participate inmajorregional communityeventsforeitherscreeningeventsand/orforvisibility and promotion.  Encourage businessestocreate workplace initiativesandthendisplayaccomplishmentsatthe DiabetesCenter. Educate businessesonthe benefitsandcostsavingsof healthyemployees. Collaborate withhealthdepartmentand/orstudentsinschool of PublicHealth.  Become involvedinDiabeticeventsandencourage participationinlocal region o ADA StepOut walkto FightDiabetes o ADA Tour de Cure o Annual March event- AmericanDiabetesAlert o Diabetescampsforkids o Annual Juvenile DiabetesWalk
  29. 29. Team 7 DiabetesCenterof Excellence 29 Marketing Financials The table belowoutlinesthe expectedmarketingexpensesbasedonpromotional items/events listed above forthe firstyearof operationof the DiabetesCenterof Excellence. Promotion Budgetaccount/EstimatedCost Website maintenance absorbed inIT budget absorbed Radioads 28 spotsfor 30 secondads duringprime time $2266 Billboard $1000/month X 5months $5,000 Newspaperads $250/month for12months- (2x montheveryothermonth) $4800 Diabetesbrochure 1000 brochures $3200 Pens $0.63 X 1000 pens $630 Ordering pads $1.00 X 1000 $1000 RefrigeratorMagnets $0.59/each x 1000 $590 Email listserv Free- absorbedintocurrentexpenses absorbed Pointof service TVs Free- withmonthlystatusupdates $0 Varietyof ADA brochuresandweb Average $5.00/ forpack of 25; 5 typesx 500 $500 OpenHouse event Reception $2000 Meetingwithphysiciansandstaff Promotional itemscosts absorbed Screeningevents Usingstaff RNs and clerical staff 1 event/6wks absorbed Local outreachand marketing Centeradministratorandclerical salary absorbed TOTAL Marketing For firstyear $19,986 JoslinOption:  If Joslinaffiliationisundertakenthere will be arequiredminimumof $20,000 budgetedfor marketing.  Joslinrequiresthe use of theirpre createdlogos,signageandbrochures.
  30. 30. Team 7 DiabetesCenterof Excellence 30 Marketing Timeline Marketing Timeline Tentative Work Schedule 1st month 2nd month 3rd month 4th month 5th month 6th month 7th month 8th month 9th month 10th month 11th month 12th month 13th month 14th month 15th month 16th month Establish Website Create and Print Brochures Develop Radio and tv ads Explore point of service TVs for waiting rooms Develop and order promotional items Schedule physician visits Create guidelines for monthly newsletter Schedule community events Order Invitations to open house Distribute Brochures Meet with local diabetes educators Meet with diabetes personnel in local health dept Establish Physician Relations Begin Billboard campaign Begin initial Television ads Contact large local businesses Contact community based orgs Run opening television ads Run opening radio Open House event Run initial Newspaper ad Continue billboard Newspaper Distribute promotional items Brochures available for patients Continue updating listserv for patients and providers Run radio and tv ads Follow up contact with Physicians and educators Run community screening events Run events in large local businesses Phase1:Develop MarketingMechanismsPhase2:Establish referralbase Phase3: Opening events Phase4:Post openingmarketing Phase 2 Phase 1 Phase 4 Phase 3 Marketing Performance Monitoring Goal MarketingObjective Performance Metric Establishname recognition Measure numberof individualsinthe target market whohave heardof Diabetes Centerof Excellence 100 quarterlyrandomtelephone surveysinthe tencountyregion Increase markettonew patients Measure numberof patientswhoare beingtreatedforthe firsttime. Documentcurrent10 county population totals. Documentnumber of initial diabeticpatienttestin- house,andcommunityscreening programs. Calculate the percentage of the community. Have nurse documentprevious treatmentstatusoneveryinitial visit. Strive fora 10% increase in new encounterseverymonth. Strive fora quarterlypositive increase inthe percentage of the 10 countycurrent populationswho have beentestedfordiabetesor pre diabetes. Increase marketto minoritypopulation Monitornumberof non-whiteswho seektreatmentandeducation. Demonstrate amonthlypositive increase innon-whitepatient encounters Increase numberof new physicianreferrals Monitorphysicianreferrals Demonstrate amonthlypositive increase innumberof physicians whohave referredpatients Increase community awarenessand involvementwith Diabetes Monitornumberof communityevents and occupational screeningsfeaturing the DiabetesCenter. Demonstrate anannual 50% increase innumberof eventsand screenings.
  31. 31. Team 7 DiabetesCenterof Excellence 31 Management and Organization The DiabetesCenterof Excellence will be underthe corporate umbrellaof MidAtlanticMedical Center (MAMC),a non-profitentity, andhave the followingorganizationalstructure: Board of Trustees Corporate Executives VP, Outpatient Services Physician Director Diabetes Center of Excellence Administrator Diabetes Center of Excellence Physician Extenders Nursing and Clinical Staff Administrative Staff Corporate Structure of Mid Atlantic Medical Center (MAMC), including Diabetes Center of Excellence Employeeswill include aCenterAdministrator. Thispersonwill be coordinatingmanyof the startup tasksincludingoverseeingthe up-fitof the facility, workingwith the marketingstaff toassistand supplementthe marketingplanimplementation, coordinatingnew staff training,and developing operationsoptimization forthe center. A mediansalaryforthispositionaccordingto MAMC salary scaleswill be $72,000, howeverdue tothe small start upsize of the Center;thiswill initiallybe ahalf FTE position. Otherkeyemployeeswill be the Endocrinologisthiredfordirectpatientcare withsalaries expectedtobe $205,800. Due to the limitednumberof trained Endocrinologistsnationwide andthe importance of these physicians inthe successof the DiabetesCenterof Excellence,itwillbe critical to recruitstrategicallytofill the positionswithlong-term, qualityfocusedphysiciansthatwill be committed to servingthe missionof the organization. If the JoslinAffiliateProgramsmodel ischosen,the Joslin Centerwill assistwiththisrecruitment. Alsoincludedin the initial organizational staffingmodel are a nurse practitioner,anurse educator, registereddietician, medical assistants,and clerical personnel. Operations Plan
  32. 32. Team 7 DiabetesCenterof Excellence 32 The DiabetesCenterof Excellence will be locatedinthe PhysiciansPavilion at1234 WellnessBlvd,Suite 5, Greenville,NC, acollectionof medical officebuildingsonthe campusof MAMC. Facilitieswill be leasedfora 5 yearterm. The locationof the Centerwill be convenientwithitsownentrance,parking, and visible signage withdisplayedlogos. The hours of operationwill be MondaythroughFriday8:00 until 17:00. Duringthese timesthe center will offertwomainservices;diabetescare providedbythe endocrinologist,nurse practitioner,and medical assistants,anddiabeteseducationclasses. Additionaleducationclasseswill be offeredTuesday and Thursdayeveningsfrom18:00 until 20:00 andon Saturdayfrom 10:00 until 14:00. The space will includeawaitingroom;a classroom; space for the receptionists;6examrooms;a small, specialty,in-houselaboratory;andanadministrative areaforthe office managerandbillingoffice. The Centerwill utilize the existingelectronichealthrecordatMAMC, so medical recordsstorage will notbe required. The Centerwill have twopublicandone staff restroom. Initially,the Centerwill lease 3,000 square feetof office space tobe utilizedandstaffedbyone Endocrinologistandone Nurse Practitioner. The space layoutandlease language will be designedforfuture growthsothatan additional adjacent 2,000 square feetcanbe up-fittedbyyear3 to accommodate a second Endocrinologist. The followingstaffingmix forthe clinicwill be utilizedduringthe firstfiveyearsof the Center’s operation andisindependentof the “build”vs.“buy”decision. However,the “build”vs.“buy”decision doeshave implicationsforthe start-upresourcesforthe Center. If MAMC choosesto “build”itsown Centerof Excellence,itwill require more internal corporate resourcesandexternalconsultingresources as well. The “buy”model includesJoslinconsultantsandresourcesthatwill reduce the needforinternal expertiseandincrease the qualityandtimelinessthatthe programcan be developed. Staff Endocrinologist Salary + Fringe 205,800$ 1 FTE 209,916$ 1 FTE 419,914$ 1 FTE 428,313$ 1 FTE 436,879$ 1 FTE Nurse Practitioner 93,309$ 1 FTE 9,175$ 1 FTE 97,079$ 1 FTE 99,020$ 1 FTE 101,001$ 1 FTE Center Administrator 36,000$ .5 FTE 36,720$ .5 FTE 37,454$ .5 FTE 38,203$ .5 FTE 38,968$ .5 FTE Registered Dietician 23,920$ .5 FTE 24,398$ .5 FTE 48,806$ 1 FTE 49,782$ 1 FTE 50,778$ 1 FTE RN Educator 35,000$ .5 FTE 35,700$ .5 FTE 71,414$ 1 FTE 72,842$ 1 FTE 109,299$ 1.5 FTE Medical Assistant 20,904$ .5 FTE 41,808$ 1 FTE 84,452$ 2 FTE 107,045$ 2.5 FTE 109,186$ 2.5 FTE Clerical 60,528$ 2 FTE 61,739$ 2 FTE 62,973$ 2 FTE 64,233$ 2 FTE 65,517$ 2 FTE Subtotal Salaries 475,461$ 419,456$ 822,092$ 859,438$ 911,628$ Benefits at 24% 114,111$ 100,669$ 197,302$ 206,265$ 218,791$ Total Salaries & Benefits 589,572$ 520,125$ 1,019,394$ 1,065,703$ 1,130,419$ Year 5Year 4Year 3Year 2Year 1 The projectedvolume forthe DiabetesCenterof Excellence willbe dependentuponthe decisionto “build”or “buy,”because basedoninformationfromconsultationwiththe JoslinAffiliatesProgram,the implementationof Joslin-buymodelwouldincrease new referralsby38%. Duringthe firstyear of operationthe patientvolumeforbothscenariosisprojectedtobe 4,345. Volume isprojectedto increase forthe “build”scenarioto6,207 and9,216 patentsinyearstwo and three andto 7,306 and 10,026 for the “buy” model inthe same timeframe. Demandforthe servicesisdifficulttoprojectsoa conservative approachwillbe followedintermsof initial staffing. Formedical care,the primarysource
  33. 33. Team 7 DiabetesCenterof Excellence 33 of revenue,the center’scapacitywillbe constrainedbythe numberof patientsthatthe Endocrinologist and the Nurse Practitionercantreataccordingto MGMA benchmarkdata. In additiontodirectmedical care,the centerwill provide patienteducationandnutritioncounseling. Critical tothis service willbe the 600 square footeducational classroomwhere the groupeducation sessionswillbe conducted. Groupdiabeteseducationhasbeenshownto have equal orslightlygreater outcomes inimprovingknowledge,BMI,health-relatedqualityof life,attitudes,andHbA1c,as comparedto individual diabeteseducation.8 Therefore,the focusongroupeducationwillallow for more efficientandcost-effective methodsinthe deliveryof diabeteseducationprograms. The office environmentwill be focusedonmaximizingeducational opportunitiesfor the patientduring everyencounterpointinthe visit. The waitingroomwill be equippedwith atelevision displaying HealthiNationeducational videosaboutdiabetescare. Uponcheckinginto the clinic,patientswillbe referredtothe educational roomthatwill be staffedbyqualifieddiabeteseducatorsforconvenient access fortheirgeneral questions. There will be educational materialsinthe formof printedmaterials and a webaccesskioskfor patient’spersonalresearch. There will alsobe anareato displaysample diabetesproducts,suchasnewtypesof glucometers,durablemedical equipment,aswell asproducts like shoesforpeople withdiabetesandservicessuchasdiabetesnutritional options. There will be asmall,in-house laboratorythatwill provideconvenienttestingof critical labvaluessuch as HbA1C, bloodglucose,lipid panelsandurinalysis. There are CLIA waivedmachinessuchasthe CholestechGDX,the CholestechLDX,andthe ClinitekStatusAnalyzerthatwill allow thispointof care testingwithoutsubjectingthis“inhouse”laboratorytothe regulationandinspectionrequirementsof CLIA.9 Foradditional more extensive laboratorywork,the Centerwill be able todraw bloodfrom patientswithinthe office andcourierthe specimentothe main medical centerlaboratoryfor processing. 8 Rickheim, Patti L, Weaver, Todd W., Flader,Jill L., Kendall,MD, David M., “Assessment of Group Versus Individual Diabetes Education”, Diabetes Care, 2002: 269-274. 9 MedCompare, Retrieved from http://www.medcompare.com/jump/729/Point-of-Care-(POC)-Diagnostics-and- CLIA-Waived-Testing.html on October 16, 2009.
  34. 34. Team 7 DiabetesCenterof Excellence 34 Otherequipmentnecessaryforthe centerwill includeexamtables,bloodpressure cuffs,thermometers, scales,otoscopes,glucometers,pulseoximeters,stools,computers,desks,office chairs,acopymachine, a fax machine,andtelephones. The educationalcenterwill include tables,chairs,computer,LCD projector,soundsystem,andascreen. The waitingroomwill include furniture andawide screenHDTV. As a whollyownedandoperateddivisionof MAMCmanyof the aspectsof businessstartup are simplified.  Insurance forthe facility,includingbusinessliability,worker’scompensation,and $1million/$3millionmedical malpractice limitswill be providedthroughthe self-insuredfundof MAMC.  MAMC employeebenefitstoinclude health,dental,lifeanddisabilityinsurance coverage,healthcare and childcare reimbursementaccounts,pensionand401k, tuitionreimbursementandpaidtime off benefits.  Accessto Group PurchasingVendorsthatprovide discountedmedical suppliesandequipment throughCardinal Healthandoffice supplydiscountsthroughStaples.  Facilitymaintenance will be providedbyMAMCmaintenance staff.  Regulatorycompliance assistance will be provided throughMAMCRiskManagementandCompliance Departments.  Technologysupport will be providedthroughMAMCon-site ITDepartment. Technology Plan Many of the technologydecisionswill be dependentuponexistingtechnologyand/orsupportresources alreadyestablishedwithinMAMC. Forinstance,the Centerwill utilize the same Epic/Healthspan electronicmedical recordand patientschedulingsystemasMAMC. Also,the Centerwill notneedits ownaccounting,inventorycontrol,humanresource management,timeclocks,oremail software forthis same reason. The necessaryequipmentandlicensingrightstoallow the use of these productsinthe Centerwill be obtained. Computers will be needed foreachworkstationwithaccesstothe internetandprinters/scanners/faxes. A computerwill alsobe neededforthe patientkioskinthe patienteducationroom. There willneedto be telephonespurchasedforthe Centerthatwill be compatible withthe existingMAMCtelephone system. Atleastfive dedicatedphone lines will be necessary forthe Center’suse. Othermain considerationswill be pre-planningandwiringduringthe up-fitof the office space toaccommodate the future expansioninthe facilityandthe successfulintegrationof the MAMCsystemsintooperationsof the DiabetesCenterof Excellence. INITIAL INVESTMENT - DIABETES CENTER OF EXCELLENCE
  35. 35. Team 7 DiabetesCenterof Excellence 35 MID - ATLANTIC MEDICAL CENTER Equipment Quantity Cost Subtotal Total Rent10,11 3000 $ 15 $ 45,000 $ 7,500 Remodel12 3000 $ 115 $345,000 $345,000 Network infrastructure13 $119,900 $119,900 $119,900 Computers4 10 $ 15,000 $ 15,000 $ 15,000 Printers 2 $ 359 $ 718 $ 718 Phone system4 $ 6,000 $ 6,000 $ 6,000 Overhead paging4 1 $ 2,400 $ 2,400 $ 2,400 Time Clock4 1 $ 4,000 $ 4,000 $ 4,000 Lab Equipment14 $ 3,060 $ 3,060 $ 3,060 Bariatric ExamTables 5 $ 1,687 $ 8,435 $ 8,435 Integrated Wall Transformer Set 5 $ 850 $ 4,250 $ 4,250 Bariatric Scale 1 $ 429 $ 429 $ 429 Pulseoximeters 2 $ 325 $ 650 $ 650 Glucometers 5 $ 70 $ 350 $ 350 60” HDTV 1 $ 1,000 $ 1,000 $ 1,000 DVD Player 1 $ 70 $ 70 $ 70 LCD Projector 1 $ 1,000 $ 1,000 $ 1,000 Desks 2 $ 800 $ 1,600 $ 1,600 OfficeChairs 5 $ 300 $ 1,500 $ 1,500 Rollingstools 5 $ 140 $ 700 $ 700 Furniture15 1 $ 8,000 $ 8,000 $ 8,000 10 Rent estimate provided by the projects department at Pitt County Memorial Hospital (mid rangeof $13.50-17.00 per squarefeet). Square footage estimate based on consultation with Joslin Diabetes Center 11 Assumed rent payment x 2 months while remodeling; annual rate/12 x 2 months 12 Midrangeestimate from the projects department at Pitt County Memorial Hospital $80-150 per squarefoot 13 Network infrastructureprojections based on consultation with PittCounty Memorial Hospital ITdepartment. 14 Lab equipment projections based on consultation with McKesson
  36. 36. Team 7 DiabetesCenterof Excellence 36 Tables 10 $ 269 $ 2,690 $ 2,690 Chairs 30 $ 70 $ 2,100 $ 2,100 Copy Machine16 1 $ 100 $ 100 $ 1,200 Fax Machine 1 $ 100 $ 100 $ 100 Total $537,652 Recruitment The UnitedStatesfacesa shortage of physicians,nurses,andotherhealthcare specialists. Recruitment of Endocrinologists will pose achallengegiventhe factthatthere are only3,000 nationwide. However, the medical school affiliatedwithMAMChas an Endocrinology Fellowship Programandcouldbe a potential source of these specializedphysicians. Asa contingencyplan,if asecondendocrinologist cannot be recruited,anotherphysicianextendercouldbe recruitedtoworkunderthe leadphysician. Utilizingthe Joslinfranchise model wouldhave asignificantpositive impactonrecruitmentasthe Joslin Centerhasa wide recruitingnetworkandattractingtalentwouldlikelybe easierwiththe nationally recognizedbrand. US Healthcare Reform and Reimbursement Possiblythe riskiestaspectof thisplanisthe currenthealthcare reformdebate and reimbursement problemsinthe U.S.healthcare system. Withthe currenteconomicdecline andprojectedMedicare financial insolvency,there isawidespreadefforttodecrease medical cost,improve dataexchange,and improve transparency. There isalsoashiftof Medicare reimbursementtowardsprimarymedicineand an increasedinterestinoutcomesreimbursementasopposedtothe traditional fee forservice model that incentivizesproceduresandepisodiccare ratherthan preventativecare. Inan efforttoaddress healthcare costs,resource constraints,andqualityissues,chronicdiseaseslike diabeteswillbe aprime focusof attentionandresources. A DiabetesCenterof Excellence will strategicallypositionMAMCto take advantage of thisshiftinfocusand shiftto outcomesbasedreimbursement,byprovidingdiabetes educationservicesandservingascritical referral avenue forprimarycare professionalswhoare strugglingtotreat complex casesof diabetes. Giventhe demographicsof the MAMC service region,itisprojectedthatthe majorityof reimbursement for the centerwill come fromMedicare andMedicaid. The remainingportionof will come from commercial insurance andself pay. Because of the low reimbursementratesinvolvedwithMedicaid 15 Waitingroom chairs,to seat30, coffee tables,end tables (higher end products) 16 Assume leaseof $100 per month
  37. 37. Team 7 DiabetesCenterof Excellence 37 and Medicare,contractnegotiations withinsurance companieswill be crucial tomaintainfinancial feasibilityof the center. Seekingpremiumreimbursementunderpilotprojectstatusorpay for performance onagreeduponhealthmetricswillbe the mainfocusof these contractnegotiations. Regulatory Areas The followingregulatoryareasare identifiedasmostsignificanttothe DiabetesCenterof Excellence: CLIA,OSHA,Anti-kickbackandStark,HIPAA,andARRA andHITECH. Althoughthe resourcesof the MAMC compliance departmentwill be of valuableassettothe Center,itwill be importantforthe staff of the Centertounderstandthe regulationsandtheirimpactonthe business. The Centerwill need policiesandproceduresinplace foreachof these regulationsandwill needongoingstaff trainingto ensure compliance. CLIA: The Clinical LaboratoriesImprovementAmendmentsof 1988 developedcomprehensive,quality standardsfor laboratorytestingtoensure the accuracy,reliabilityandtimelinessof patienttestresults regardlessof where the testwasperformed. UnderCLIA there are three levelsof classification: 1) highlycomplex,2) moderatelycomplex,and3) waived. Bothhighlyandmoderatelycomplexlaboratory testingrequiressignificantoversightfromCLIA. To addressthisregulation,the centerwill applytobe a CLIA waivedlaboratory,the Center willbe able toavoidunnecessarygovernmental regulationwhile offeringbasicCLIA waivedlaboratorytestingthatisconsideredsosimple andaccurate the likelihoodof erroneousresultsare negligible.The Certificate of Waiverisvalidfortwoyearsandthe cost is$150.00.17 OSHA: The Occupational SafetyandHealthAdministrationwasestablishedin1971 to preventworkplace injuries,illnesses,andfatalities. OSHA requiresstandardsfor bloodborne pathogens, hazard communications, ergonomics,and emergency preparednesswithwhich medical centersmustcomply and on whichtheymusttraintheirstaff annually. OSHA penaltiescanrange upto $70,000.18 To addressthisregulation,the centerwill abide bythe hospitalpolicyandproceduresalreadyinplace. Anti-kickbackand StarkLaws: The Anti-kickback Lawisa criminal lawthatdoesnot allow physicianstoacceptincentivestoinduce referralsforfederallyreimbursedpatients.There are criminal penaltiesupto$25,000, five yearsin prison,civil penaltiesupto$50,000, and exclusionfromFederal programs. The Stark Law addressesphysicianself-referralsforMedicare andMedicaidpatients. The intentof the lawis to prohibitphysiciansfromreferringpatientstoentitieswithwhichtheyora familymemberhasa financial incentivetodoso. Asa civil statute,violationscouldresultindenial of payment,required 17 CLIA Website, Retrieved from http://wwwn.cdc.gov/clia/default.aspx on October 16, 2009. 18 OSHA Website, Retrieved from http://www.osha.gov/as/opa/osha-faq.html on October 16, 2009.
  38. 38. Team 7 DiabetesCenterof Excellence 38 refunds,monetarypenaltiesrangingfrom$15,000 to $100,000, andexclusionfromFederal programs19,20 . To addressthisregulation,the centerwill abide bythe hospitalpolicyandprocedures alreadyinplace. HIPPA: The HealthInsurance PortabilityandAccountabilityActof 1996 requirescoveredentitiestoestablish policiesandprocedurestoprotectthe privacyof individuallyidentifiable healthinformation,suchas limitsandconditionsonthe usesanddisclosuresof suchinformation.Italsogivespatientsrightsover theirhealthinformation,includingrightstoexamineandobtainacopy of theirrecords,andto request corrections. Coveredentitiesare requiredtokeepHIPPA records,aswell aseducate staff. HIPPA is policedbythe Office of Civil Rightsandviolationscanimpose penaltiesupto$10,000 perviolation21 . To addressthisregulation,the centerwill abide bythe hospitalHIPPA policyandproceduresalreadyin place includingstaff orientationandtraining. ARRA and HITECH Act: The HITECH Act expandsthe reachof HIPAA ina three keyways: 1) Expansionof dataand security requirementstobusinessassociatesof coveredentities,2) Increasedbreachrequirementstoinclude notificationof Departmentof HumanServicesandaffectedpatientswithin60daysand to mediaoutlets if breach occurs forover500 patients,and3) Strengthenedenforcementmeasureswithcriminal penaltiesand/orcivilpenalties 22 . See Table3below. Table 3 Violation Penalty per Violation Maximum per Year Reasonable cause,notwillful neglect $1,000 Reasonable cause,corrected $25,000 $250,000 Reasonable cause,uncorrected $50,000 $1,500,000 Accreditation: There are twomainaccreditationprogramsthe DiabetesCenterof Excellence will pursue. These designationsare consideredcritical tothe Center’sstrategicpositionof providingdiabetescare “excellence.” In addition,meetingthe ADA standardsforeducationprogrammingisarequirementfor reimbursementforthese services. 19 Stark Law Website, Retrieved from http://starklaw.org/ on October 16, 2009. 20 Watnik,Robbi-Lynn. “Antikickback versus Stark: What's the Difference?” HealthcareFinancial Management, March,2000. 21 HIPPA Website, Retrieved from http://www.hhs.gov/ocr/privacy/psa/enforcement/index.html on October 16, 2009 22 Bentley, Lora. “HITECH Act Ramps up HIPAA ComplianceRequirements,” IT Business Edge, 2009,April 3.
  39. 39. Team 7 DiabetesCenterof Excellence 39 The National Committee forQualityAssurance offersaccreditationthroughaDiabetes RecognitionProgram. Itisa voluntaryprogramdesignedtorecognize physiciansandotherclinicians, whouse evidence-basedmeasuresandprovide excellentcare totheirpatientswithdiabetes.Chart reviewwillassessqualitymeasuresforHbA1c control, bloodpressure control,LDLcontrol,eye exams, etc. The cost of thisaccreditationwill be approximately$1,000.23 The AmericanDiabetesAssociationoffersan EducationRecognitionProgram(ERP) that assesseswhetherapplicantsmeet the NationalStandards forDiabetesSelf ManagementEducation.The applicationfee forasingle primary site is$1,100.00.24 Social Responsibility The DiabetesCenterof Excellence isbeingestablishedtomake animpacton the critical problemof diabetesin easternNorthCarolina. Thisisa majorhealthcare needinthe communitythatisnotbeing adequatelyaddressed. Throughthe designandavailabilityof services,aswell ascommunity involvement,the Centerwill helpleadthe communityto significantlyimprovediabeteshealth. In addition,all membersof the Center’sstaff will be expectedtobe ambassadorsof the Center’smission withinthe community. The Centerwill focusstrategiestoaddressthe disparitiesindiabetescare and mortality,suchas reachingoutto AfricanAmericansandLatinosthroughcommunitychurchesand organizations. The communitywill be engagedthroughemployerandcommunityhealthinitiatives,as well aslarge communityeventssuchasdiabetesfundraisers,awarenesswalksanddiabetescamps. Througheffective implementationof the businessplan,the Centerwillrealize successinimproving diabeteshealthinthe community. Thiswill be measuredbythe overall objectivesof increaseddiabetes testing,increasedscreeningsforpatientswithdiabetes,reducedneedforemergencycare and readmissions,anddecreaseddiabetesmortalityrate disparities. Development, KPIs, and Evaluation For future developmentof the DiabetesCenterof Excellence there are twoavenuesforconsideration. First,isto expandthe servicesandcreate a centralizedmulti-specialtycenterwithprimaryandspecialty clinics,lab,pharmacy,podiatry, mental health, andothertherapyall underone roof. Second,isthrough the pursuitof multi-site expansionbyreplicatingthe model throughouthospitalsinthe greater29 countyservice area.The second avenue will expandaccesstoqualitydiabetescare inthe greatertarget market,therebyhavingagreaterand more widespreadimpactonthe objectivesof the organization. 23 NCQA Website, Retrieved from http://www.ncqa.org/tabid/139/Default.aspx on October 16, 2009. 24 American Diabetes Association Website,Retrieved from http://professional.diabetes.org/recognition.aspx?cid=57995 on October 16, 2009.
  40. 40. Team 7 DiabetesCenterof Excellence 40 Future expansion decisions will be basedonmonthlymonitoring of keyperformance indicators(KPIs). Key Performance Indicators Goal Clinical Percenttargetmarketdiabetestested 70% Decrease diabeticmortalityrate disparity 27% Percentof diabeticsrequiringemergencycare and re-hospitalizationwithin30daysof discharge 15% Percentof diabeticsreceivingscreenings: twoHbA1c tests 80% eye exams 80% cholesterolchecks 80% footexams 80% bloodpressure checks 80% Financial ContributionMargin 5% Payor Mix Optimization 70% Maximum Medicare/Medicaid Operational RecruitmentandTurnoverof personnel 100%/ 15% Volume Indicator- Follow-upAnnualized 3,581/2,595 Volume Indicator- Initial Annualized 935/678 WorkloadCapacitybyProvider 70% Yr 1; 100% Yr 2 Service PatientSatisfaction 95%
  41. 41. Team 7 DiabetesCenterof Excellence 41 Employee Satisfaction 95% ReferringPhysicianSatisfaction 95% Exit Plan Althoughitisconsideredalowriskdue to the demonstratedneedof the targetmarket,if aftertwo yearsthe Diabetes Centerof Excellence doesnotmeetthe milestonesexpected,the steppedgrowth plancan be delayed untilKPIsare met. If performance continuestonotmeetexpectationsintothe fourthand fifthyears,MAMC mayconsidereliminatingthe productline,divestingthe service toprivate physiciansorallowingthe MAMCemployedphysicianstobuy-outthe operationif theyare interestedin developingthe service outside the MAMCumbrella. If the Joslinfranchisemodelisadopted,the initial commitmentwouldbe forafive yearperiod,withreassessmentatthattime.
  42. 42. Team 7 DiabetesCenterof Excellence 42 Implementation Plan "Buy Joslin" Implementation Timeline Months Year 0 1- 3 3-6 6-9 9- 12 12- 15 15- 18 18- 21 21- 24 3 4 5 Marketing Phase 1 JoslinMaterials Phase 2 Referrals Phase 3 Opening Phase 4 Post Opening Operations Board Approval SignLease Space Upfitted Purchase/Lease Furniture & Equipment TechnologyinPlace InventoryStocked JoslinPolicies&Procedures Implemented Recruitment ClinicAdministrator Endocrinologist#1 Endocrinologist#2 Nurse Practitioner OtherStaff Evaluation and Development Evaluate KPIsMonthly SteppedGrowth Expansion Evaluate Multi-siteExpansion
  43. 43. Team 7 DiabetesCenterof Excellence 43 "Build" ImplementationTimeline Months Year 0 1- 3 3- 6 6-9 9- 12 12- 15 15- 18 18- 21 21- 24 3 4 5 Marketing Phase 1 Materials Phase 2 Referrals Phase 3 Opening Phase 4 Post Opening Operations Board Approval SignLease Space Upfitted Purchase/Lease Furniture & Equipment TechnologyinPlace InventoryStocked ConsultantContracted PoliciesandProceduresDeveloped Recruitment ClinicAdministrator Endocrinologist#1 Endocrinologist#2 Nurse Practitioner OtherStaff Evaluation and Development Evaluate KPIsMonthly SteppedGrowth Expansion Evaluate Multi-siteExpansion
  44. 44. Team 7 DiabetesCenterof Excellence 44 Financial Analysis The proposedDiabetesCenterof Excellence will operateasa division of MidAtlanticMedical Center, (MAMC). The purpose of thisfinancial analysisistodetermine if MAMCshouldbuildthe Diabetes Centerof Excellence withinternalexpertise orutilize afranchise businessmodel to“buy”the Center throughthe JoslinAffiliatesProgram. Inadditiontofinancial projections,other factorswillbe weighed inthe final recommendation includingrisk andfulfillmentof the MAMCmission. Many aspectsof the buildvs.buyfinancial decisionwill be discussedinthissection,aswell asanalyses of operatingincome andspilloverrevenues. The followingtable summarizesthe areastobe examined and the organizationof the Financial Analysis. Start-up costs MAMC will provide the requiredstart-upresourcesthroughthe capital budgetingprocess. Itisnot anticipatedthatMAMC will seekoutsidefunding forthisproject. The start-upcostswill be the same whetherMAMC decidestoplanandbuildthe Centerwithinternal resourcesorpurchase the Joslin franchise. Thisisbecause planningresourcesare notincludedininitial costswhencompletingabuild vs.buy comparative analysis,eventhoughthisisasignificantservice providedunderthe JoslinAffiliates Program. Thus,an initial start-upcostforeitheroptionis projectedtototal $537,652. The majorityof these costs,$345,000, involve remodelingthe existingoffice space tomeetthe needsof the Center. Additionally,$119,900 is projectedtobe neededtoupgrade thisspace toallow connectiontoMAMC’s data mainframe andEMR. Financial Analysis Section Overview Build Model Joslin-Buy Model Start-up Costs  Demand Projections  Reimbursement  OperatingRevenuesand Expense NetIncome (Loss) andCash flows   Breakeven   Contributionmargin   SpilloverRevenue Analysis Cumulative NetIncome (Loss) andCashflows   Breakeven with Spillover Revenue   Payback, NPV, and IRR  
  45. 45. Team 7 DiabetesCenterof Excellence 45 INITIAL INVESTMENT - DIABETES CENTER OF EXCELLENCE MID - ATLANTIC MEDICAL CENTER Equipment Quantity Cost Subtotal Total Rent25,26 3000 $ 15 $ 45,000 $ 7,500 Remodel27 3000 $ 115 $345,000 $345,000 Network infrastructure28 $119,900 $119,900 $119,900 Computers4 10 $ 15,000 $ 15,000 $ 15,000 Printers 2 $ 359 $ 718 $ 718 Phone system4 $ 6,000 $ 6,000 $ 6,000 Overhead paging4 1 $ 2,400 $ 2,400 $ 2,400 Time Clock4 1 $ 4,000 $ 4,000 $ 4,000 Lab Equipment29 $ 3,060 $ 3,060 $ 3,060 Bariatric Exam Tables 5 $ 1,687 $ 8,435 $ 8,435 Integrated Wall Transformer Set 5 $ 850 $ 4,250 $ 4,250 Bariatric Scale 1 $ 429 $ 429 $ 429 Pulse oximeters 2 $ 325 $ 650 $ 650 Glucometers 5 $ 70 $ 350 $ 350 60” HDTV 1 $ 1,000 $ 1,000 $ 1,000 DVD Player 1 $ 70 $ 70 $ 70 LCD Projector 1 $ 1,000 $ 1,000 $ 1,000 Desks 2 $ 800 $ 1,600 $ 1,600 Office Chairs 5 $ 300 $ 1,500 $ 1,500 25 Rent estimate provided by the projects department at Pitt County Memorial Hospital (mid rangeof $13.50-17.00 per squarefeet). Square footage estimate based on consultation with Joslin Diabetes Center 26 Assumed rent payment x 2 months while remodeling; annual rate/12 x 2 months 27 Midrangeestimate from the projects department at Pitt County Memorial Hospital $80-150 per squarefoot 28 Network infrastructureprojections based on consultation with PittCounty Memorial Hospital ITdepartment. 29 Lab equipment projections based on consultation with McKesson
  46. 46. Team 7 DiabetesCenterof Excellence 46 Rolling stools 5 $ 140 $ 700 $ 700 Furniture30 1 $ 8,000 $ 8,000 $ 8,000 Tables 10 $ 269 $ 2,690 $ 2,690 Chairs 30 $ 70 $ 2,100 $ 2,100 Copy Machine31 1 $ 100 $ 100 $ 1,200 Fax Machine 1 $ 100 $ 100 $ 100 Total $537,652 Projected Demand The potential demandfordiabetesservices ineasternNorthCarolinawascarefullyassessed. Although abundantdata isavailable fordiabetes incidence andprevalence,there isalackof reliabledata concerningthe outpatientdemandfordiabetesservices. Thisis partly due tothe fact that patients with diabetes frequentlyhave manyco-morbidillnesses forwhichtheyare beingtreated;forexample, vascularcomplications,renal failure,andheartdisease. Treatmentfordiabetesmaynotalwaysbe designated throughthe primarydiagnosis. To addressthese problemsof estimatingoutpatientdemand,projectionswereinitiallymade basedon incidence andprevalence dataandinpatientmarketshare inthe primaryservice area. A 5% conversion factor wasappliedtothisdata. Thisconversionfactorwasusedto make a conservative estimate based on three issues. First,toconvertinpatientmarketshare tooutpatientmarketshare,itwasassumed that outpatientmarketshare wouldbe muchsmaller,butproportional tothe inpatientmarketshare. Second,thisconservativerate wasused basedon the understandingthatonlyasmall proportionof all patientswithdiabetes inthe primaryservice areawill requirethe expertiseof an Endocrinologist. A large numberof these patientswillcontinuetoseektreatmentfromtheirprimarycare providers,and onlythe more complex caseswill be referredtoanEndocrinologist. Finally,giventhatanestimated50% of all people withdiabetes inPittCountyhave notreceiveddiabeteseducation,itisbelieved thatmany people withdiabetessimplywillnotbe seekingtreatmentdespitetheirdiagnosis. Thus, the 5% conversionfactorisa conservative,but realisticestimate of patientsthatwoulduse the DiabetesCenter of Excellence. The total projectedvisitswerederivedfromthe assumptionthateachnewlydiagnosed patientwouldbe seenforaninitial visitandthree follow upvisitsperyear. RefertoAppendixB, Demandand Volume Projection. 30 Waitingroom chairs,to seat30, coffee tables,end tables (higher end products) 31 Assume leaseof $100 per month
  47. 47. Team 7 DiabetesCenterof Excellence 47 Basedon data fromthe JoslinAffiliatesPrograms, new affiliatesdemonstrate agreaterthan 38% increase innewreferrals,primarilycomingfromsecondaryandtertiaryservice areas,indicatingthe affiliatesare pullingpatientstothe programfroma widergeographicarea. Thus,whenprojecting volume forthe Joslin-buymodel,the original figureswere adjustedtoreflectthisincrease forYear2 and goingforward. Anotherissue tobe addressedwas staff capacity. Inorderto make a faircomparison,the staffing patternfor the build andbuymodelsisequivalentandconservative. Withthe lackof soliddemand data, a careful rampup is prudent. However,the potentialdemandforservices mayexceedthis conservative staffingplanforboththe buildandbuyoption. Therefore,capacity constraintsbasedon the total numberof patientsthatcouldbe seenbythe endocrinologistandnurse practitionerinagiven yearwere builtintothe models32 . See Appendix DandE for capacity constraintsbuiltintothe Buildand Joslin-buyfinancial models. Reimbursement To determine reimbursement,the 2009 Medicare reimbursementrates were used asabase. Third party andother payerrateswere calculatedasa percentage of thisrate. Reimbursementasa percentage of Medicare wasestimatedasfollows;forBlue Cross/BlueShield,135%,Medicaid,95%, commercial insurance,100%,other,100%, andself pay,170%. Using the payermix forthe primary 32 Based on 2008 data from Medical Group Management Association (MGMA)
  48. 48. Team 7 DiabetesCenterof Excellence 48 service area,weightedaverage reimbursementforeachservice wascalculatedandusedinthe financial projections. Reimbursementfornurse practitionerservices wasestimatedas 85% of the physicianrate. See AppendixCforthe complete model forreimbursement. Medical Services Reimbursement33 Wted Avg Med Reimburse (Physician)34 Wted Avg Med Reimburse (NP @ (85%)35 Education Reimbursement7 Wted Avg Hrly Reimburse 8 99204 New Patient, Level 4 visit $149 $126 97802 Med nutr - initial - 15 min $124 99214 Est. Patient, Level 4 visit $97 $82 97803 Med nutri - subsequent - 15 min $108 Facility Reimbursement 97804 Med nutri - group - 15 min $55 99204 New Patient, Level 4 visit $121 $102 G0108 Self-manage Ed, individual, 30 min $46 99214 Established Patient, Level 4 visit $74 $63 G0109 Self-manage Ed, group, per 30 min $24 Financial Outcomes The financial analysiswasbasedonequivalentstaffingmodelstoensure afaircomparisonforthe build vs.buy financial decision. Financial projectionsforboththe BuildandJoslin-buy Models werebasedon a ramp up of productioninyearone,withthe Endocrinologistandthe Nurse Practitionerfunctioningat 33 2009 Medicarereimbursement usedas a baseand other payer rates calculated as a percentage oftheMedicarerates 34 Inpatient payer mixed used to weight thereimbursementand calculateanaveragereimbursement for each service 35 NP reimbursement @ 85%ofphysician feeschedule
  49. 49. Team 7 DiabetesCenterof Excellence 49 70% of capacity. 100% capacity wouldbe realizedinyeartwo. A second Endocrinologist,functioningat 70% capacity, isprojectedto be addedinyear three to meet increasingpatientdemand due to marketinganda buildingreputation. Full productioncapacity forthe secondEndocrinologist is anticipatedtobe achievedinyearfour. Operating Revenue and Expenses For boththe BuildandJoslin-buyModels,revenue isgeneratedfromclinical andeducationalservices providedatthe Diabetes Centerof Excellence. Neithermodelachievespositive netoperatingincome withinfive years. The yearlyfranchise fee,whichisadjustedtothe CPIeachyear,accounts for the differencesinexpensesforthe twomodels,whilethe Joslin-buyModel generatesmore operating revenue due tothe projectedincrease involume of 38% for Year2 and beyond.
  50. 50. Team 7 DiabetesCenterof Excellence 50 NetIncome (Loss) and Cash Flows Analysisof the cumulativenetincome (loss) (basedonoperatingrevenuesandexpensesonly) showsa financial lossineachof the five yearsof operationforboththe Buildandthe Joslin-buyModels. See Appendix Dforthe BuildModel NetIncome (Loss) andAppendix Eforthe Joslin-buyModel NetIncome (Loss).
  51. 51. Team 7 DiabetesCenterof Excellence 51 Analysisof cashflowprojectionsrevealsthatneithermodelachievespositive cashflowsoverthe five yearperiodwhenonlyconsideringoperatingrevenue. Duringyearsone throughthree,the Joslin-buy Model islosingmore moneythanthe BuildModel. Thisreversesinyearsfourandfive. Forthe cumulative cashflowsoverthe five yearspan,the Joslin-buyModel lossestotal $169,931 more thanthe BuildModel. Year 0 1 2 3 4 5 "Build" Model Net Cash Flow s $ (537,652) $(286,268) $ (155,625) $ (228,454) $ (277,177) $ (302,221) Cumulative Cash Flows $ (537,652) $(823,920) $ (979,545) $(1,208,000) $(1,485,177) $(1,787,398) Joslin "Buy" Model Net Cash Flow s $ (537,652) $(386,268) $ (250,535) $ (249,698) $ (253,259) $ (278,917) Cumulative Cash Flows $ (537,652) $(923,920) $(1,174,455) $(1,424,153) $(1,677,412) $(1,956,329) Breakeven The numberof patientsrequiredtoachieve aneutral annual netincome (loss) foreachmodel was calculated. The volume of patientsneededtoachieve the breakevenpointbasedonoperatingrevenue alone wouldfarexceedthe capacityof boththe Centerandthe providers. (Seecapacityconstraintsin modelsinbothAppendixDandE). See Appendix Fforthe detailedBreakevenAnalysiswithOperating NetIncome.
  52. 52. Team 7 DiabetesCenterof Excellence 52 ContributionMargin Finally,ananalysisof the contributionmarginwasconducted. Thisanalysiswasbasedonvariable annual supplycostsand the stepvariable salaryandbenefitscosts,comparedtooperatingrevenue. Thisanalysisshowsthatthe Joslin-buyModel providesapositive contributionbeginninginYear2 due to the projectedincrease involumethroughthismodel. The BuildModel,however,doesnotachieve a positive contributionoverthe five yearperiod. Year 1 2 3 4 5 "Build" Model Contribution Margin $(141,750) $(6,487) $(28,093) $(72,386) $(87,440) Joslin "Buy" Model Contribution Margin $(141,750) $1,604 $ 56,754 $ 60,805 $ 48,416 Spillover Revenue Analysis The financial analysisthusfarhasincludedonlyoperatingrevenue,nottakingintoaccountspillover revenuesthataDiabetesCenterof Excellence are likelytogenerate forMAMC. While significant spilloverrevenue isprojected,nocannibalizationcostsare predictedfromanycurrentlyoperating MAMC programs. Spilloverrevenuemustbe assessedwithcaution,butthese downstreamrevenuesare
  53. 53. Team 7 DiabetesCenterof Excellence 53 whatultimatelymake the Centerfinanciallyfeasible. Cautioniswarrantedbecause spilloverrevenues are generallydifficulttocalculate andthe allocationof these revenuescanbecome problematic. The same revenue maybe counted by manydifferentdepartments andprograms insuch a way that problemscanarise inassessingthe true netgainfor the medical center. Spilloverrevenue fromthe DiabetesCenterof Excellence wouldinclude referralstoMAMC laboratories, specialtycenters(radiology,cardiology,mentalhealth,rehabilitation),and forhospitalization. Projectionsforthese revenueswere made basedonconsultationwiththe JoslinAffiliatesProgram management,whichhashadover20 yearsof experience increatingprogramswithpositivefinancial outcomes. Whenthe spilloverprojectionsare includedwiththe operatingrevenue,bothmodelsdemonstrate positive netincome beginninginYear2. The Joslin-buyModel outperformsthe BuildModel by $469,896 overthe 5 year period. See AppendixGfor the BuildModel withSpilloverRevenue and Appendix Hforthe Joslin-buyModel withSpilloverRevenue.

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