Cardio Center Business Proposal This essay

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Note that the organization at CardioCenter is significantly different than that of a cardiology center at an Orlando-area medical center in several key ways:

The communication between the EMT's and the EMT-focused nurse begins well before it does at the generalist hospital, saving minutes upon entry of the patient.

There is no delay for billing information or to find the appropriate physician. They have already been alerted and are on standby

There is immediate testing for key cardiac enzymes at the point where the patient is admitted -- no delay while the blood sample is sent to the central lab.

There is little time lost from the diagnosis of potential AMI to wheeling the patient into the (nearby) cath lab.

The surgeon and interventionalist are able to communicate day or night using the latest tools to generate and share high-resolution images and make diagnostic and therapeutic calls on the spot.

It has already been established that small changes can make a big difference in patient outcomes after AMI events (Majid, 2005). By creating a focused center, CardioCenter can obviate all the factors that delay treatment and, in some cases, worsen the potential outcome of the patient. While location is important, particularly to those in and around the Ocala area who have no access to a full-time cardiac center, organization is even more important to insuring that patients are treated expeditiously.

Financial Structure

The average reimbursement by CMS for a patient angioplasty in Florida is about $12,000 for the hospital, and an additional $2,000 to the interventional cardiologist. If a stent is employed, the CMS reimbursement is currently $2,200. Since drug-eluting stents cost $2,200 on average, the total revenue, net of stents, for one stent implantation is $12,000. Since most patients receive about 1.6 stents, the hospital will "lose" 0.6 times $2,200, or about $1,400, for every stent-implanted patient. Despite this "loss," the total operation is quite profitable to the hospital.

Our expectations of patient volume and procedures is based on an analysis of the patient population in Florida, the number of "target" patients expected in the greater Ocala/Marion County area, and the resultant number of angioplasties, angiograms and cardiac bypass surgeries expected to be performed. In addition, we have estimated the number of additional CMS charges and the actual profit to CardioCenter to be generated by each patient who undergoes one of these procedures. These include everything from co-morbidities to follow-on patient care.

The basic reimbursements are as follows:

Angiogram: $2,200 per patient, with a materials cost (unreimbursed) of $500), and a resultant gross margin of $1,700. The physician reimbursement is additional to, and separate from, the hospital's reimbursement. That means a total of $8.8 million for angiograms.

Angioplasty: $12,000, as detailed above. Note that about 1/2 of patients undergoing angiograms will then devolve into an angioplasty. That means a total revenue of about $14 million for angioplasties to the hospital, net of fees to the interventional cardiologist.

Cardiac bypass (CABG) procedures: Note that of the patients who do not undergo angioplasty after an angiogram, about 1/2 will later undergo CABG. The reimbursement to the hospital for a CABG is about $25,000 per patient, with additional physician reimbursement fees. Although the patient must stay a non-reimbursed 4 days in the hospital on average, there are few additional medical device costs. The gross margin to CardioCenter is therefore estimated to be about $20,000 for each CABG. That means gross revenues of $25 million for CABG, net of fees to the anesthesiologist and cardiac surgeon.

Given the above, we expect to perform 4,000 angiograms per year, resulting in 2,000 angioplasties and 1,000 CABG operations, for a total revenue from these three operations of $47 million. Additional reimbursement will bring our revenues to $70 million in the third year of operation. We expect to have a total of 30 beds and a staff of 40, which means that the overall operation can be quite profitable for the institution. Further details can be provided upon request.

In order to build this facility, we will need $50 million. That is based on the actual experience of Medcath (NYSE: MDTH), which has built 14 such centers around the United States (Medcath, n.d.). Another element used by Medcath will also stand us in good stead: they generally involve the investment of many of their participating physicians; this includes cardiologists, but also primary care physicians, nursing staff and others. By tying in the staff in an economic way, there are some advantages to insuring that the organization is focused on profitability, as well as providing the best possible care to its patients.

Debt Policy

Since CardioCenter will not require a proof of ability to pay upon admission from most patients, we recognize that the center may lose some revenue due to accepting patients without necessary health insurance. We expect to deal with this in two ways: (1) we have provided for an assumption that 10% of all admitted and treated patients will have no health insurance, and that CardioCenter will therefore be obliged to foot the entire bill for their care. We will similarly expect the interventional cardiologists and surgeons on staff to accept this assumption and forego their fees for these patients. (2) We will arrange with Marion County to accept a given number of indigent and/or uninsured patients per year, not to exceed 5% of our total admissions. We will also care for these patients at our full expense, and expect the physicians to do the same.

Given the high cash flow anticipated from this investment, we expect to finance 80% of the capital investment through bank and mortgage debt. We expect to demonstrate ample debt capacity to repay notes and mortgages.

Assumptions for Growth of the Business

CardioCenter will reach its capacity in the third year of operation. We have chosen the Medcath model, which has demonstrated such growth over the previous ten years. Given our location in a high-growth area, the relative age and heart condition of our population, and the unique position that CardioCenter will have in Marion County, the assumption of capacity by the third year is realistic. We have provided for 1/2 of capacity the first year and 2/3 in the second, and have budgeted ample reserves to insure that we can reach capacity in three years.

Governance Model

CardioCenter will be structured as a profit-making facility, with shareholders being primarily the medical staff and local community members. This will be a stockholder-owned company, rather than a partnership. We feel that stock ownership will provide significant protection to investors, and give us the ability to develop ESOP's and incentive stock options for employees and stakeholders. We will have a Board of Directors composed of Marion County political luminaries, physicians and locally-prominent businessmen from outside the healthcare sphere. We will have a CEO who is hired and reports to the Board.

Possible Mergers and Acquisitions

We do not anticipate any mergers in the first three years of operations. Given our presence in a fairly underserved community, and the relative distance to major cardiac centers in Orlando, there are no clear merger candidates nearby. Over the longer term, we expect to look at possible acquisitions of cardiac satellite centers in other underserved areas in Central Florida.

Personnel Needed

-flight staff (physicians and others) are highly sought-after. We are fortunate in that there are many staff currently at Orlando-area medical centers who live within a short driving distance of the planned Ocala center. In addition, the low cost of living and attractive living conditions make for a good place to bring staff. We expect to use a nationwide recruiting firm to bring in a core of physicians and nurses, and to hire a top-flight head physician with a significant reputation.

Benefits will include generous moving allowances, sign-on bonuses, and significant stock ownership and incentive plans. We will cover all medical insurance through a third-party, but consider offering our own HMO with general-hospital partners in the area. Vacation and sick-pay will be commensurate with Orlando-area medical centers. Holidays will be the same as well.

Although hospitals pay bonuses on a regular basis, we expect that the stock incentives will prove even more attractive as CardioCenter makes a lot of money and demonstrates dramatic growth.

We expect to contract to an outside service (a PEO, or Professional Employment Organization) to assure the same level of service and benefits as much larger corporations. We also expect to outsource childcare management with an on-site facility for parents who need to have their children nearby during their working day or night.


The average cath lab performs 1,200 caths (angiograms plus angioplasties) per year (IMS, 2007). We expect to perform 2,000 caths per lab per year, but will have a third cath lab for expansion. We expect to complete this higher volume through efficient cath lab utilization and six-sigma practices (Veith, 2007).…[continue]

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