Employed Medical Group

Business Plan

Donna Duval, FACMPE

August 13, 2018

This paper is being submitted in partial fulfilment of the requirement of the Fellowship in the American College of Medical Practice Executives

Contents

Project Summary .............................................................................................................. 2 

Executive Summary .......................................................................................................... 4 

Opportunity ............................................................................................................... 4 

Company ................................................................................................................................. 4 

Market Opportunity ................................................................................................................. 4 

Capital Requirements .............................................................................................................. 5 

Mission Statement ................................................................................................................... 5 

Management ............................................................................................................................ 5 

Competitors ............................................................................................................................. 5 

Company's Competitive Advantages ...................................................................................... 5 

Financial Projections ............................................................................................................... 6 

Financial Highlights by Year .................................................................................................. 6 

Organizational Plan .......................................................................................................... 7 

Summary ................................................................................................................... 7 

Mission .................................................................................................................................... 7 

Business Model ....................................................................................................................... 7 

SWOT Analysis ...................................................................................................................... 8 

................................................................................................................................................. 8 

Strategy ................................................................................................................................... 8 

Strategic Relationship ............................................................................................................. 8 

Key Stakeholders .................................................................................................................. 10 

Products & Services................................................................................................ 11 

Administrative Plan ................................................................................................ 11 

Milestones Table ................................................................................................................... 13 

Marketing Plan................................................................................................................ 14 

Overview .................................................................................................................. 14 

Market Analysis ...................................................................................................... 14 

Target Market ........................................................................................................................ 14 

Competition ........................................................................................................................... 14 

Market Trends ....................................................................................................................... 14 

Market Research .................................................................................................................... 15 

Marketing Strategy................................................................................................. 15 

Implementation of Marketing Strategy ................................................................ 15 

Financing ................................................................................................................. 16 

Financing Needed .................................................................................................................. 16 

Capital Needed ...................................................................................................................... 17 

Resource Cost Associated ..................................................................................................... 17 

Forecast.................................................................................................................... 17 

Pro Forma Projected Cash Flow Statement ........................................................................... 17 

Three Year Income Projection .............................................................................................. 18 

Projected Balance Sheet ........................................................................................................ 18 

Key assumptions ................................................................................................................... 19 

Net Profit (or Loss) by Year .................................................................................................. 19 

Innovative elements and expected business outcomes ................................................. 21 

Why and how does this innovated idea impact the health of your population and organization? ................................................................................................... 21 

What challenges did you encounter during this process and what did you learn? ....................................................................................................................... 21 

Appendix .......................................................................................................................... 22 

Personnel Table ..................................................................................................................... 22 

Project Summary

The intent of this document is to provide a framework for the development of an employed medical group.

As the healthcare landscape in our County continues to evolve, it is imperative for healthcare organizations to explore the option of employing providers. As providers find it more and more difficult to operate a medical group that is both efficient and profitable, they are searching for ways to eliminate the burden of running their own business while achieving greater security. As healthcare organizations find it more challenging to assist independent community physicians with recruitment and operations, they are searching for ways to secure long-term, mutually beneficial relationships through both partnerships and direct employment.

Within the County, our company has captured and maintained the dominant market share and is the community’s preferred healthcare partner. These include ownership in the local Independent Physician Association (IPA), contracting with the IPA, and purchasing both EMR and Billing services.

The makeup of the primary care market in the County predominantly consists of smaller independent groups that prefer not to align with the hospital system or other health systems in the

region. The IPA has contracts with over 180 providers in the County. Over the past few years, the local hospital has continued to build their medical group presence in our own county and our bordering Counties. Currently, hospital system employs 120 providers in bordering County and 39 Providers in town. A local independent multispecialty clinic is the only other non-affiliated Primary Care Group in town. They currently employ 22 Primary Care Providers.

The IPA has an excellent opportunity to develop an employed medical group which would further secure the primary care presence within the County. The challenge will be to create a viable group while maintaining positive relationships with the local independent primary care physicians, most of whom are shareholders of the IPA.

The reason for the IPA to pursue physician employment is multifaceted. Over the past few years, the IPA has evaluated the demographics of the provider community in the area. The data shows that of the current independent primary care providers, there are eight who are over 60 years old and 12 who are in the 55-59 year old range. We have also noticed that over the past 5-7 years, as physicians retire they are replacing themselves with mid-level providers. While we know this is a national trend, if we continue in this fashion, within 10 years the County will be comprised of predominantly mid-level primary care providers. We are finding that small independent practices can no longer afford the cost to recruit and establish a new physician in their practice.

Executive Summary

Opportunity

Company

The Independent Physician Association, Inc. (IPA) is a physician owned company originally founded in 1994 by local physicians to negotiate contracts with insurance companies and purchase cell phone service for the providers. Currently the IPA has close to 180 independent providers in private practice. The IPA still negotiates commercial, state and federal contracts for the local providers.

Originally founded in 1994 Independent Practice Association, Inc., recently combined the health plans and services under one name. These include Medicare Advantage, Medicaid CCO, Independent Physician Association and eHealth Services.

In 2007, IPA formed a services company which has partnered with an EHR company to provide a low cost EHR system to local physicians. The company offers EHR Support and Training, Revenue Cycle Management, and Chronic Care Management Services.

The Employed medical group will be a subsidiary entity company of the IPA. This entity will be structured as a Limited Liability Company (LLC). The employed medical group’s goal is to achieve success through optimal clinic size.

The employed medical group’s goal is to form a six-provider Primary Care Provider clinic located in the community. The county population is 86,352, the median age is 47, and median household income is 37,867. https://www.census.gov/quickfacts/fact/table/josephinecountyoregon/PST045217

The three potential employment tracks for the employed medical group are adding new providers to the community, working acquisition, and retirement acquisition. This unique model can bring new providers to the community, keep local small practices in business and extend the potential retirement age of providers a few more years.

Market Opportunity

As the available physician pool shrinks nationwide, recruitment in general has become more challenging.

Physicians are looking for the security of an employed medical group. Many of them still have the need to run a business, be in control, and have input in day-to-day decision making. In an employed setting, one key to success is obtaining maximum physician buy-in. There are multiple ways to achieve this buy-in, including allowing physicians to have a seat at the decision-making table, asking them for input when change is needed, treating them like a business partner versus an employee, and sharing responsibility when appropriate.

The graph below shows the median age of the local providers is 50. As the providers continue to age and the economics of maintaining a medical practice grows, this is a perfect opportunity for the employed medical group to help our providers.

Capital Requirements

The employed medical group will not be seeking funding. The IPA will be sponsoring the employed medical group.

Mission Statement

The IPA is a physician-led organization leading the way to better healthcare for Oregon and its people, with a range of plans designed to meet the state’s diverse communities and their health needs.

The mission statement of the IPA and employed medical group is "Working together to provide quality, cost-effective healthcare for our communities".

Management

The IPA Board of Governors will ultimately be responsible for the activities of the medical group. It will be necessary to create a medical group Board of Governors. The employed medical group will also have a Medical Director and Clinic Manager.

Competitors

There is a hospital owned physician group with 12 primary care providers on staff and one multi-specialty physician owned clinic with 21 primary care providers in the community.

The hospital has high turnover in the primary care clinics. The multi-specialty clinic primary care providers are also facing retirement age.

Company's Competitive Advantages

While there are other healthcare entities in the community, the IPA has the support of 180 local providers looking for alternative models to help succeed financially and continue to provide quality, cost-effective healthcare. The Medical Group will be able to provide centralized services that the IPA has already in place, such as; Human Resources, Information Technology, Accounting, Building Maintenance, Electronic Health Record, and Revenue Cycle Management.

2

7

9

76

12

6

2

30‐34 35‐39 40‐44 45‐49 50‐54 55‐59 60‐64 65‐69

2018 IPAPCPs by Age

Financial Projections

Based on our goal of starting the clinic with three physicians, the net charges after the adjustments for the first year is $918,471, with a 20% increase over the next three years.

The salary for the physicians is based on the MGMA 2017 Provider Compensation Western Geographic section Median income and local competition of $225,000. The first year there are recruiting costs and startup costs of the new practice. In the beginning, there will be a clinic manager, two or three medical assistants and a receptionist.

Since at least one or two providers will be in the working or retirement acquisition models, there will be the assumption that most of the patients will follow the providers.

The anticipation is that year three will be the break-even point.

Financial Highlights by Year

Organizational Plan

Summary

Mission

The employed medical group project will allow the providers in the community to continue to achieve quality care and cost effective healthcare. It will take approximately three years to reach its optimal goals and financial breaking point. The first year, the group will hire one new physician employee, one working acquisition physician and one retirement acquisition physician. By the third year, the goal would be to employ six providers with a revolving evolution that some providers will retire and new providers will be added to the group.

Business Model

Three Potential Employment Tracks:

For the purposes of this proposal, Acquisition is defined as:

• The IPA may assume the existing lease, if appropriate. The IPA will likely not purchase any buildings.

• The IPA may purchase usable equipment and furniture, if needed. Any purchase would be at Book Value.

• The IPA may purchase providers medical records. • The IPA may employ provider’s staff, as needed. Those staff that IPA did not need would

be terminated by the provider prior to acquisition.

New Providers

As the health system evaluates the addition of an employed medical group, integration of newly graduated providers is necessary to ensure the longevity of the group. These providers are typically searching for an employment option and are not considering independent private practice. As with the other options, setting expectations will be paramount.

Acquisition of Existing Community Provider Planning to Continue Working

In some situations, providers that are tired of running a business prefer an employment option. They may still have many years to practice. This option will offer them an alternative to consider. In this option, ideally, they would move to the new medical clinic. From a health organization’s perspective, an acquisition of a community provider can be very attractive.

Acquisition of Existing Community Provider planning to Retire

As our provider community ages, employment has become an attractive option for many providers. In the past, they either joined one of the hospitals or the VA to finish off their career. In this option, we are proposing that the provider remain in their existing clinic and the provider and their appropriate staff be transitioned to the IPA. The IPA will likely rebrand the entire office. The IPA will reserve the right to recruit providers to this site. The pros are that the patients know where to find their provider, the provider is in a known environment and the upheaval is minimal. Ideally, the medical group will make all expectations abundantly clear (i.e. work hours, hours of the clinic, staffing, rebranding and compensation). They come with a built-in patient base and the infrastructure needed to operate a clinic.

Before any medical group acquisition, it is recommended that an extensive discussion and evaluation period take place to determine what their true motives are, their fit with the health organization, and if they are a match with the organization’s values. Expectations of both parties should be abundantly clear.

SWOT Analysis

Strategy

The objectives for the first year of operation include:

• To create a new employed medical group that would employ one new physician, one existing physician in the community and one physician that will be ready to retire in the next five years

• Recruit a new physician to the community • To create a medical clinic that will serve the community’s need for more primary care • To provide high quality care to patients in the community • The employed medical group will strive to meet and achieve Quality Measures that

include MIPAs, APMs and PCPCH

The objective for the second and third year include:

• Recruit new providers to the employed medical group • To maintain high quality care and serving the needs of the community • Break-even point at year three

Strategic Relationship

As a health organization, leveraging your ability to centralize services makes financial sense. When incorporating a medical group, evaluate how to best integrate the group into the IPA

organization shared services. While much of the medical group business operations are the same, there are some nuances that can create problems. The following outlines each of the shared services and the potential issues.

Human Resources

Tasks include hiring, reference checks, benefits administration, HR support to manager, and support to staff.

• If the rules or policies are different than IPA, the HR department will need to be well versed in the differences.

• When physicians call about their benefits, the HR department will need to be responsive. • When there is an HR issue with a provider, the HR department needs to be prepared to

handle it. These can be particularly delicate. • We will need to decide if the HR department will have input into the development of the

physician agreement.

Information Technology

Tasks include computer support, security support, and password administration.

• Clinics will utilize the IT department for their day to day computer support.

Accounting

Tasks include paying clinic expenses and researching issues for clinics.

• In many instances, the vendors that clinics use are different than the organization. Quite often they are very small companies and require a faster turnaround time on their payments.

• It will be important for the accounting department to set up processes with the clinics for appropriate processing of invoices and bills.

Payroll

Tasks include payroll processing and assisting staff with payroll issues.

• Due to the 8:00 AM to 5:00 PM, Monday through Friday schedule, the payroll processes are much simpler in a clinic. Payroll, however, must be well versed in physician compensation and the issues that may arise.

Finance

Tasks include budget development, financial reporting, capital budgets, Pro Forma development and general analysis.

• Finance staff must be able to communicate with physicians at a level the physician will understand.

Purchasing

Tasks include the purchasing of office and medical supplies, equipment, and capital equipment.

• Clinics typically have little storage space. As such, they have a smaller amount of supplies on hand. This requires that purchasing adjust to a faster turnaround time for

clinic supplies. It can cause great angst when a physician comes out of a room and can’t obtain the supplies they need to treat a patient.

Building Maintenance

Tasks include building maintenance, repairs and equipment repair.

• The health organization needs to decide as to who will maintain the clinic buildings. • When clinic equipment fails, the health organization will need to decide if the items will

go to an outside vendor or be repaired by internal staff.

Marketing and Branding

Tasks include public relations, marketing, events, advertising, and internal materials.

• The health organization would need to determine if they will market the medical group as a separate entity or incorporate them into the company wide marketing campaign. Mixing the two methods can confuse the public.

Electronic Health Records

EHR services will be provided by eHealth Services. This will include local training, support and hosting for Prime Suite, a certified and integrated EHR. Our local EHR experts will help navigate the providers through the implementation of the EHR and provide continued support and ongoing training. Normal EHR rates will apply

Revenue Cycle Management/Billing Service

Revenue Cycle Management/Billing Services will be provided by eHealth billing services. This will include accounts receivable management, charge posting, payment posting, claims management, patient collections, insurance collections and customer service. Normal billing rates will apply.

In general, the IPA must properly prepare the support service departments for the addition of a medical group. There may be a need to add additional staff to support departments.

From an accounting perspective, many health organizations charge their employed medical groups for the shared services they utilize. It appears on the monthly financial statement as “shared services allocation.” From a psychological standpoint, this allows the health organization to feel that the medical group is fairly contributing for the services they utilize. The allocation methodology for each of the shared services listed above may differ. Examples are:

• Payroll may be calculated based on total percent of medical group FTEs compared to total health system FTEs.

• Accounting functions may be calculated based on total medical group accounts payable or invoices compared to the health system accounts payable or invoices.

• Information Services may be calculated based on total medical group devices versus total health system devices.

In each case, the IPA would need to develop a methodology that was fair and equitable to both the medical group and shared service departments.

Key Stakeholders

Internal Key Stakeholders: Board of Governors, Chief Executive Officer, Chief Financial Officer, Chief Operations Officer, Director of Provider Development, Medical Director, Clinic

Manager, Providers, the employees from Employed Medical Group, and employees that will offer services though the IPA.

External Stakeholders: Patients, Patient’s Families, Vendors, Medicare, Medicaid, Insurance Companies and the community.

Decision Makers: The IPA Board of Governors will ultimately be responsible for the activities of the medical group. There will be an Employed medical group Board of Governors. However, day to day decisions will be decided from the Medical Director and Clinic Manager with policies and procedures set in place to help direct these decisions.

Products & Services

The employed medical group will provide primary care for all ages, as well as providing multiple procedures to create a complete health care solution. The charge master schedule will be based on local market prices, highest contracted insurance rate to determine the percent of local Medicare fee schedule.

The employed medical group will maintain privacy according to HIPAA security rules. All patients will be welcome. The employed medical group will hold no prejudice to race, creed, color or socioeconomic status.

The employed medical group will provide the following services, among others:

• Primary Care – Employed medical group is the patient’s main source for medical care, providing continuity and integration of health care services.

• Preventive Services – Routine health care that includes screenings, physicals, patient counseling to prevent illness, diseases and other health care problems.

• Chronic Care Management – Non-face-to-face services provided to Medicare beneficiaries who have multiple (two or more) significant chronic conditions.

• Healthcare Screenings – Employed medical group will provide and/or schedule routine screenings for; Breast Cancer, Colorectal Cancer, Diabetes, High Blood Pressure, High cholesterol, osteoporosis, Overweight and obesity and Prostate cancer.

• CLIA Waived Laboratory Services – Employed medical group will provide a draw station and will do some basic CLIA waived tests such as: Glucose, Hemoglobin A1C, Hematocrit, Lipid Panels, ALT, AST, Pregnancy Tests and Urinalysis

Administrative Plan

One area that has historically created conflict between health organizations and their medical groups is decision making. While decision making seems obvious to the health organization leadership, it is usually confusing to medical group leadership and the employed providers. Ideally, the health organization will create a decision-making matrix prior to launching the medical group. The matrix should be continually fine-tuned as the medical group grows and matures.

The risk to the health organization if the matrix is not created is a struggle for power and control. If the health organization is not clear on the decision-making authority, physicians will make assumptions regarding their authority. In cases of community medical group acquisitions into the employed medical group, there is a great deal of angst over who has the power because the community medical group is use to making all decisions for themselves. They typically feel that they are more equipped to make decisions, regardless of the impact or the cost to the organization.

Example of a medical group decision making matrix (not a complete list):

 

In order to achieve physician buy-in to the decision-making matrix, it is important to keep the matrix very simple. As soon as it becomes complex, the physicians believe that the health organization is trying to retain all power, and their buy-in is lost.

Organizational Chart 

 

Operation Plan

The employed medical group will be located in the new IPA medical building on the North end of town. The location is ideal and will help strengthen the brand name of the IPA.

The employed medical group will have flexible hours 7:30 - 6:00 PM Monday through Thursday, and 7:30 -5:00 pm on Fridays. The clinic will be opened on Saturday mornings 8:00 - noon. The clinic will always be opened to walk in patients. These hours are important to patients to provide easy access to their providers.

The employed medical group will be in the new building, with a modern clean sleek look. It will be a friendly and peaceful place for the patients. Patients will feel comfortable coming into the clinic.

To maintain accessibility and profitability, the physician’s goal is to have a panel size of 1200, approximately seeing 15 - 18 patients per day.

A possible roadblock for the employed medical group is for the new physician to grow their patient panel in the first year. The existing providers on retirement or working acquisition that are moving their practice to the employed group should be able to maintain the panel size and patients per day.

As the available physician pool shrinks nationwide, recruitment in general has become more challenging. Within an employed medical group, recruitment has its own set of challenges. With the employed medical group model, new providers will have a mentor. It will be imperative that, in the recruiting process the new providers love the community and its surroundings.

Below will outline the key milestones for the employed medical clinic's success.

Milestones Table

Milestone Due Date Who's Responsible

Sign lease on new office August 01, 2018 CFO

Recruitment of Providers August 01, 2018 Director of Provider Development

Hire Medical Director August 01, 2018 COO/CEO

Purchase Medical Equipment September 01, 2018 CFO/Medical Director

Hire Clinic Manager September 01, 2018 Provider Development Director

Purchase Furnishing September 01, 2018 CFO

Credentialing and Contracting with Insurances October 01, 2018 Clinic Manager

Branding and Marketing October 15, 2018 Branding Director

Purchase Medical Supplies November 01, 2018 Clinic Manager/Medical Director

Purchase Office Supplies November 01, 2018 Clinic Manager

Hire Staff November 12, 2018 Clinic Manager/HR

Train Staff December 03, 2018 Clinic Manager

Install and Train EHR December 03, 2018 Clinic Manager/eHealth Services

Open House December 18, 2018 Provider Development Director/Clinic Manager

Opening Day January 02, 2019

 

Marketing Plan

Overview

The IPA branding already is familiar to the community, so the Employed medical group will continue with the same branding. However, the focus will be emphasizing the Primary Health Care Services that will be offered by the clinic. It will be important to focus on familiarity of the established physicians joining the group from the community, along with the excitement of a new provider joining the group.

Market Analysis

Target Market

The employed medical group target market will be all patients in the community that have Medicare, Medicaid, Commercial and the uninsured.

Data USA reports that in 2016, Josephine County had a population of 84,063 with a growth rate of 0.78%. There is a 1 to 86 primary care clinician-to-patient ratio. The average Medicare reimbursement per patient is $6,694.

The Oregon Health Authority reported that in 2017 Josephine County had 28,290 patients enrolled in a managed care plan and 30,539 that were eligible for the Oregon Health Plan (Medicaid Patients). Source: OHA/DHS DSSURS data warehouse: DateLoad = 06/6/2017.

Professional Research Consultants did a Health Needs Assessment in 2016 that showed that, in Josephine County, 7.2% of the population ages 18-64, lacked insurance. The same assessment reported that 40.5% had difficulty accessing healthcare in the past year.

Competition

There are two major competitors in the county one hospital based and one multispecialty group. The increasing providers leaving the county and preparing for retirement creates a great potential for meeting the goals of the clinic.

Market Trends

The market trends show improvement over the past decade regarding access to primary care in our service area. However, there is also data to show that the providers in the county are reaching the retirement age. Merritt Hawkins Physician Access Index Metrics and Data by State reports that Oregon has met the primary care need by 56.3%, physicians planning to retire in the next 1-3 years at 17% and overworked or overextend physicians at an 81.1%. The goals of the Employed medical group and three physician employment tracks will extend the retirement years for the physician and will be encouraging for physicians that are burned out and overworked.

Market Research

 

 

 

Marketing Strategy

The clinic will already have a familiar brand recognition, all clinic materials, and documents will be branded by the IPA branding department.

The marketing budget is under the shared services with the IPA. The total shared services budget is 30% of the annual income. Since the IPA has its own branding/marketing services, websites, social medial brochure, patient handouts are included in the services. The cost of the local newsletter and e-edition are items that the IPA already buys in bulk for the IPA members.

Implementation of Marketing Strategy

The following items will be part of the marketing strategy:

• Website with links to patient portal and education • Social Media Presence; Facebook, Instagram and Snap Chat • Chamber of Commerce

• Local e-edition newspaper • Local newsletter • Community Involvement • Employed Medical Clinic Brochure

The IPA will sponsor two open houses for the employed medical group, one for patients and one for the IPA Shareholders. The open house for the patients will be health fair and a time to meet the providers and staff. That evening a cocktail party will be hosted for the IPA shareholders including specialists, and ancillary providers.

A letter with a brochure will be mailed to the existing providers patients introducing the new medical clinic.

Financial Plan

Financing

Financing Needed

While the healthcare organization will be supporting the medical group’s financing for the first two to three years, the goal is by year three to be at a break-even point.

The following are some of the specific ways to budget for a clinic:

Production Budgeting

A medical group should budget based on two methods market-based for new physicians and historic-based for established physicians.

When budgeting for new physicians, consider market data (local or MGMA), current need in the market, and the experience of the physician. A budget for a physician straight out of school would be much more conservative than a budget for a 20-year physician relocating to the community.

When budgeting for an established physician, it’s necessary to consider their historical production data. It’s also necessary to determine if the physician’s production is ramping up, stabilizing, or declining at the end of his career. Another technique that works well is to directly ask the physician to commit to a specific production number for the following year. It creates greater buy-in to the process and result. Adding a set percentage increase to a physician’s production and telling him about it after the fact is a recipe for failure.

When budgeting for physicians that have been acquired from the community, request their prior production data. Consider change in ownership, location changes, and their motives for joining the medical group.

Expense Budgets

Expense budgets should be developed in conjunction with the clinic manager, medical director and the IPA CFO. Historical data should be reviewed and changes for the following year be made based on information known about recruitment, expansion and changes.

Complete Budgets

After a draft budget is completed, it should be presented to the clinic physicians, and then the medical group board for approval.

Buy-in and support from the health organization CFO is critical to the success of the medical group. On an ongoing basis, the health organization CFO and the medical group Medical Director/Clinic Manager team should present financial data to the physicians, both on a clinic level and as the larger medical group. The more the providers know about the financial health of the organization, the more they will try and help the group maintain financial stability. The information should always be presented in a simplistic graphic format that can be easily understood by non-financial people.

Capital Needed

The first two years, the IPA will need to provide the capital for the employed medical group. The estimated loss to the IPA is $630,000.

Resource Cost Associated

Resource costs will include recruitment packages and the startup costs of opening a new medical practice, besides the normal day to day business of running a clinic. The opportunity cost will be high for the first few years of the employed medical clinic, but the opportunities to increase access for the patients, keep physicians that are burned out practicing medicine, and prolong retirement for local physicians, the IPA feels the investments are worth the efforts.

Forecast

Pro Forma Projected Cash Flow Statement

2019 2020 2021

Net Cash Flow from Operations

Net Profit ($500,916) ($150,069) $213,069

Depreciation & Amortization

Net Cash Flow from Operations ($500,916) ($150,069) $213,069

Net Cash Flow from Investing & Financing

Cash at Beginning of Period $0 ($500,916) ($650,985)

Net Change in Cash ($500,916) ($150,069) $213,069

Cash at End of Period ($500,916) ($650,985) ($437,916)

Three Year Income Projection

2019 2020 2021

Revenue

Medical Revenue $815,921 $1,089,600 $1,502,700

Capitation Revenue $102,550 $134,400 $134,400

Total Revenue $918,471 $1,224,000 $1,637,100

Gross margin $918,471 $1,224,000 $1,637,100

Gross margin % 100% 100% 100%

Projected Balance Sheet

2019 2020 2021

Cash ($500,916) ($650,985) ($437,916)

Total Current Assets ($500,916) ($650,985) ($437,916)

Total Assets ($500,916) ($650,985) ($437,916)

Paid-In Capital

Retained Earnings ($500,916) ($650,985)

Earnings ($500,916) ($150,069) $213,069

Total Owner's Equity ($500,916) ($650,985) ($437,916)

Total Liabilities & Equity ($500,916) ($650,985) ($437,916)

 ($2,000,000)

($1,500,000)

($1,000,000)

($500,000)

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

YEAR   1 Y EAR   2 Y EAR   3

BREAK EVEN ANALYSIS 

Net Revenue Expenses Botton Line

Key assumptions

Net Profit (or Loss) by Year

Statements

Projected Profit and Loss 2019 2020 2021

Revenue $918,471 $1,224,000 $1,637,100

Direct Costs

Gross Margin $918,471 $1,224,000 $1,637,100

Gross Margin % 100% 100% 100%

Operating Expenses

Salaries & Wages $901,720 $928,771 $956,636

Employee Related Expenses $180,344 $185,754 $191,327

Medical Supplies $20,000 $20,000 $20,000

Office Supplies $12,000 $12,000 $12,000

Purchased Services $5,000 $5,000 $5,000

Billing Services $36,739 $48,960 $65,484

EHR $40,464 $40,464 $40,464

Admin Allocation (HR, Accounting, Payroll, Marketing, IT )

$30,000 $30,000 $30,000

Rent $69,120 $69,120 $69,120

Utilities $14,000 $14,000 $14,000

Other Expense $20,000 $20,000 $20,000

Sign on Bonus and Moving Expenses

$90,000

Total Operating Expenses $1,419,387 $1,374,069 $1,424,031

Operating Income ($500,916) ($150,069) $213,069

Interest Incurred

Depreciation and Amortization

Income Taxes $0 $0 $0

Total Expenses $1,419,387 $1,374,069 $1,424,031

Net Profit ($500,916) ($150,069) $213,069

Net Profit / Sales (55%) (12%) 13%

Balance Sheet – Can only produce projected Balance Sheet at this time

Financial Statement Analysis – Since Financial Statement Analysis evaluates the past, current and projected performance of the company, this is unable to be provided at this time

Business Financial History – There is no history to report at this time

Innovative elements and expected business outcomes

Why and how does this innovated idea impact the health of your population and

organization?

The employed medical group will provide better access to the patients in the county. Currently, when providers are burned out and overworked they move out of the area or retire at an early age. This plan will allow the providers to continue to practice medicine without the day-to-day stress and financial burden.

What challenges did you encounter during this process and what did you learn?

The challenges that came about when creating the employed medical group business plan, were when a target group of IPA shareholders were brought together to discuss the plan. There were some concerns of whether this clinic be competition to their existing practices and why they would want to invest money in a practice that would be their competitor. Once the information was presented with the employment tracks and the information on the aging physician community, there was a more accepting attitude towards the plan.

I have learned a lot about the statistics of our healthcare community as a whole. I have also learned more about market plans, and financial statements. This project was and will be a great opportunity for our community to help the burnout and stress of the independent providers.

What steps to put in action?

The next steps to put the employed medical group in action is to present to the Board of Governors and receive final approval. There are already providers that would like to participate in the retirement acquisition and the working acquisition. The recruitment process can begin as soon as approval is received.

Employed Medical Group

22

Appendix

Personnel Table

2019 2020 2021

Referral Coordinator $31,200 $32,136 $33,100

Front Desk $31,200 $32,136 $33,100

Medical Assistant (3) $112,320 $115,689 $119,160

Clinic Manager $52,000 $53,560 $55,167

Physicians (3) $675,000 $695,250 $716,109

Totals $901,720 $928,771 $956,636