Business plan development and implementation

Cardio Center Business Proposal

This business plan outlines the structure, goals and financial aspects of creating a new cardiac catheterization lab and heart treatment center in central Florida. It will be called "CardioCenter," and extend its message of expert urgent cardiac care within a 25-mile radius. It will cover how such a center should be built, what are its fundamental goals, and how it can compete against established centers in the area.

The goal of the new cardiac catheterization center is to provide services to primary care physicians and first-level cardiologists, and to provide faster and more-targeted services to patients who require catheterization and may not be close enough to a major catheterization center.

Mission of the New Center

The mission of this center will be twofold: (1) provide round-the-clock emergency catheterization diagnostic and interventional capabilities to patients who are not close enough to such a center today, and (2) to help those patients, post-catheterization, to live more healthy lifestyles and comply with their treatment regimens in order to improve their prognoses.

Strategies of CardioCenter

Within central Florida, centered around Orlando, there are three major heart centers with round-the-clock facilities available for cardiac catheterization. These centers advertise their availability, and can tout their ability to improve patients' outcomes by improving "door to balloon" time down to less than 60 minutes. Such a strategy of rapid catheterization has been shown to significantly improve the morbidity and mortality of patients (Bradley, 2006). Although many existing facilities have attempted to adapt their workflow to improve "door to balloon time," many have not, as the structural and schedule changes involved in a general-care hospital pose difficulties. The strategy at CardioCenter will be to provide a dedicated structure and staff to be able to offer round-the-clock service and world-class treatment to patients who are brought to the center.

The other key part of the strategy is to locate CardioCenter far enough away from the major Orlando Centers in order to create a "catchment" area for patients who may not be within 60 minutes of "balloon time" from the time the ambulance picks them up at their home. By locating CardioCenter in the Ocala area, we will be the sole center within a 75-mile radius with a complete cardiac catheterization facility and 24-hour service. That means that those who live within Ocala (population 48,000) and Marion County (population 316,000) will have better access to CardioCenter than to the Orlando-region healthcare centers (U.S. Census Bureau, 2006). Not only can we offer better service, but we can do so in a center of population that is growing faster than almost any other county in the United States (U.S. Census Bureau, 2006).

Mission Statement

The mission of CardioCenter is to provide the best cardiac care in central Florida. We expect to complete this mission through our dedication to one goal: cardiac care. Although many of the Orlando-area centers have extensive cardiac treatment facilities, we will benefit the patient by being set up entirely to treat cardiac emergency cases, and the post-MI care that is needed by patients. Our unique and sole focus should benefit patients by providing (1) staff which has greater experience than anywhere else in the region in treating the specific diseases we are responsible for, and (2) facilities which expedite the patient from the door to the cath lab, and insure that the patient receives dedicated, focused care during his/her stay, and (3) post-AMI care that is second-to-none in providing in-center and outpatient support to insure that the patient and his/her family sticks with their prescribed regimens and improves their chances.

Vision Statement

Our vision statement is: "Time is Heart Muscle." The ability to diagnose patients quickly and get them to treatment makes all the difference in their subsequent morbidity and mortality.

Organizational Structure

Most hospitals are organized to treat a number of varied patient conditions, from obstetrics to cancer treatment to Emergency Room treatment. While many hospitals have erected cardiology centers, they do not have the dedicated staffing and physical structures that are needed to optimize cardiac care. Most hospital structures and personnel are scattered throughout the institution. In a typical general hospital, the organization responds in the following ways to the admission of a suspected heart attack patient in the Emergency Room:

Unless the patient is suffering massive coronary event, there could be a waiting period before a physician or nurse sees the patient and makes a first diagnosis.

A generalist resident (or sometimes an intern) receives the patient. In many cases, the patient and/or his/her family may need to complete billing paperwork before visiting with a physician.

The physician may order tests to determine whether or not the patient has had a cardiac event. At the same time, a nurse may be asking the patient or his/her spouse about the patient's previous medical history.

The blood is drawn and sent either to a small lab within the ER, or, more commonly, to the central laboratory. It can take up to half an hour to determine whether or not the patient's Troponin, Myoglobin and CK-MB results are elevated. It may also take that long for a physician to review the patient's EKG to determine if there is an ST elevation or other heart anomaly that is indicative of a heart attack.

If the patient is older than 65, the physician may have elected not to deliver clot-busting drugs because of a concern about hemorrhagic stroke (Neuhaus, 1995); for that reason, the patient may have suffered inadequate treatment for longer than 60 minutes before any thrombolytic drug was delivered.

In a center with a 24-hour staff prepared for cardiac catheterization, the on-call interventionalist may be called for a consult with the on-duty ER physician. A decision would be made at that time to send the patient up to the cath lab to perform an angiogram, and perhaps an angioplasty if it is indicated. Note that the cath lab is generally on a different floor, and many times in a different part of the hospital.

The patient is wheeled up, prepared, and brought in for cathing. It may take up to 10 minutes for the staff to arrive, the access to the femoral artery to be completed, and the introducer and guidewire to be threaded up around the aortic arch and into the cardiac arteries.

The average time, even in a well-equipped and prepared center like that used in this example, might be over 60 minutes. (Majid, 2005). In fact, the average reported door-to-balloon time is 100 minutes, with great variation.

Our Mission Statement is our guiding principle: If "Time is Muscle," then we must do everything possible to short-circuit this unacceptably long time from door to balloon time, and do everything we can in our organization and structure to insure that patient care comes first.

The organization for suspected AMI should be as follows:

The ambulance driver is alerted to a possible AMI. Upon arriving at the site, the EMT crew makes a preliminary assessment that the patient may have suffered or be suffering an ACS event. The EMT tending to the patient communicates by phone or telemetry with CardioCenter's dedicated EMT-interface nurse, who takes down as much information as possible and alerts the staff in "Receiving" (not ER) that a potential AMI patient may be arriving.

Upon arrival, the patient and/or spouse or close family member is asked about their previous cardiac history and primary care physician. At that point, the EMT-interface nurse contacts the primary-care physician or cardiologist in order to alert them to the possibility of an ACS event, and to take any relevant information.

An immediate, bedside panel of cardiac enzymes is run on the patient for four cardiac enzymes: CK-MB, BNP, Troponin I and Myoglobin. The results are generated in less than 3 minutes. The experienced nurse interprets the results and communicates them to the cardiologist, or the cardiologist reviews that data immediately.

Upon preliminary diagnosis that the patient is suffering an AMI event, the patient is wheeled a short distance (on the same floor) to a cardiac cath prep room, where the patient is administered valium, then a local anesthetic, before being wheeled into the cardiac cath room. The staff, already alerted to the possible arrival, is on hand and ready for the cut-down.

The patient is cathed and angiogram performed within a few minutes. If the patient requires a stent or balloon angioplasty, the physician is fully-qualified to perform the angioplasty right then.

The patient is delivered to CICU, where an on-staff cardiologist takes over and assures that the patient's vital signs are followed as needed. This includes on-going monitoring of the patient's EKG, cardiac enzymes, PCO2 and other results that can indicate whether or not the patient is undergoing a secondary event.

If needed, the interventionalist can converse with a cardiac surgeon (who is on staff, but may not be on site) about the potential need for bypass surgery. The cardiologic specialists can communicate using the latest web-based angiogram communication tools, which allow them to be looking at the same images at the same time (images which can approach 400 MB per patient angiogram) and make a determination about the treatment course for the patient.

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.