leap business plan · leap business plan april 2017 private and confidential. contents executive...
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LEAP
BUSINESS
PLAN
April 2017
Private and Confidential
CONTENTS
EXECUTIVE SUMMARY
THE COMPANY
THE ENTITY
MISSION STATEMENT
VISION
GOALS
THE PURPOSE
PRODUCT AND SERVICES
SERVICES
SERVICE FEATURES
SERVICE BENEFITS
VALUE PROPOSITION
THE INDUSTRY
INDUSTRY PERFORMANCE
COST STRUCTURE BENCHMARKS
CAPITAL INTENSITY
TECHNOLOGY
REVENUE VOLATILITY
INDUSTRY OUTLOOK
INDUSTRY LIFE CYCLE
INDUSTRY REGULATIONS
BUSINESS LOCATIONS
COMPETITORS
THE MARKET
MARKET OVERVIEW
DEMAND DRIVERS
TARGET MARKET
COMPETITIVE EDGE
MARKETING STRATEGY
CONTENTS
THE OPERATIONS PLAN
EQUIPMENT
LOCATION
WORKING HOURS
ORGANIZATION STRUCTURE
STAFFING PLAN
BUSINESS STRATEGIES
SALES STRATEGY
DISTRIBUTION STRATEGY
CRITICAL SUCCESS FACTORS
THE FINANCIAL PLAN
SOURCES AND USES OF FUNDS
PROJECTED INCOME STATEMENTS
PROJECTED CASH FLOWS
KEY ASSUMPTIONS
THE IMPLEMENTATION PLAN
BACKDROP
NEXT STEPS
SHORT TERM MILESTONES
LONG TERM MILESTONES
ROAD AHEAD
EXECUTIVE SUMMARY
Government regulations and insurance requirements in America are quite
complicated, especially for healthcare industry. These complex procedures
require a team of professionals to stay on top of the industry and its changing
laws and regulations. Healthcare providers are forced to spend more and
more of the time involved in administrative paperwork instead of attending to
patients. The primary service providers in the industry feel the need to focus
on their core competency of providing care to their patients. To cater to these
needs, Specialized Utilization Management (SUM) was formed, in the State of
Florida. SUM provides services like utilization reviews, appeals, actuarial
services and inhouse training and consulting for companies in this industry.
SUM has an edge over its competitors in that, it has extensive knowledge and
experience in the areas of substance abuse, mental health and conducting
dual diagnosis and eating disorder. In addition to this, SUM offers flexible right
sourcing solutions to meet the varied needs of customers. SUM also offers in-
house training and consulting to help clients become more self-serving and
efficient. SUM will focus on the services that the competitors fail to provide. It
will constantly update the client with ongoing changes in the insurance
guidelines along with departmental improvement suggestions.
THE FINANCIAL SUMMARY OF THE BUSINESS IS
REFLECTED BELOW
Particulars Year 1 Year 2 Year 3 Year 4 Year 5
Revenue $350,000 $437,500 $546,875 $683,594 $854,492
Profits $147,280 $186,924 $262,850 $303,632 $422,800
Cash Balance $187,280 $374,204 $637,054 $940,686 $1,323,485
FINANCIAL
ANALYSIS
Net Present
Value (NPV)
$ 842,994
Internal Rate of
Return (IRR)
474%
Revenue
CAGR
25%
Profit
CAGR
30%
THE COMPANY
THE ENTITY
Specialized Utilization Management
(SUM) is an S Corporation
incorporated and registered in
Miramar, in the State of Florida, USA.
MISSION STATEMENT
“To provide premium service of
efficient and effective reviews to
maximize reimbursement, longer
authorize client stays, victoriously
improve the clients’ recovery,
increase clients’ facility reviews and
rating and maintaining compliance
with regulations and guidelines.”
VISION
The Company envisions to become
a market leader in the industry and
the go-to company for utilization
services and appeals in the
healthcare industry.
GOALS
The Company’s goals are:
• To penetrate the market within
the first few months of formation
• To gain considerable market
share within the first three years
of operations
• To be known as the most efficient
and effective solutions provider in
the industry
• To break-even in the first year.
THE PURPOSE
The amount of resources required to
effectively manage the utilization
review process is high. Care
providers must have an adequate
amount of staff that can compete
with insurance company resources.
The purpose of the business is to
enable companies to focus on their
core competencies and health care
providers to focus on providing care
while SUM can take care of
utilization reviews, appeals and
related services and make the
process hassle free for its clients.
PRODUCT AND SERVICES
SERVICES
SUM is a top tier service based business. The company’s top ranked team
consists of licensed and credentialed experts in Mental Health and Substance
Abuse industry. The company specializes in the Utilization Review technique
and performance with in-depth knowledge of its synergy components of:
Precerts’, concurrent reviews, Peer-to-Peers’, Panel reviews and appeal level’s
to collectively maximize days and approve the highest level of care for clients.
UTILIZATION APPEALS AUDITING 1 ON 1
CONSULTING
RIGHT
SOURCING
THE SERVICES PROVIDED BY SUM ARE:
• UTILIZATION REVIEW The company’s fully licensed clinical staff will regularly review
the relevant medical necessity criteria for the medical situation and maximize the
reimbursements authorizations for patients. The company will also use its networking
abilities and relationship with insurance companies to secure extended stays within the
facilities and ensure highest level of care.
• APPEALS SERVICES SUM offers expert claims appeals services, assuring clients
receive the maximum allowable reimbursement for their medical practice facility. The
company’s professionals are proficient in handling RAC Appeals, redeterminations with
MAC, reconsiderations with QIC and in responding to denied insurance claims in a
timely fashion with the accuracy defined by the insurance providers.
• ACTUARIAL SERVICES SUM provides a comprehensive range of actuarial services to
health insurers and other stakeholders in the health insurance industry. The company’s
actuaries work closely with physicians, which ensures that the actuarial analyses are
not limited to applying actuarial techniques but are complemented with clinical insight
and an understanding of the healthcare delivery system. The company’s experienced
peer reviewers bring extensive experience of working in both developed and
developing health insurance markets.
SUM helps clients with plan pricing and design, reserving, financial reporting, claim
experience and financial analysis and regulatory compliance. In addition, the company
provides actuarial services like rating, reserving, data reporting, product development,
funding projections & budgeting, claims liability projections, pricing and plan design,
valuations, cost studies, plan testing and terminations and more.
Healthcare exchange product and pricing, Medicare advantage product pricing and
Stars optimization, private exchange strategic modeling, large-employer cost
benchmarking, large-employer product design, small-group performance optimization
and customer lifetime value metrics are also provided by SUM.
PRODUCT AND SERVICES
SERVICE FEATURES
THE FEATURES OF THE SERVICES OFFERED BY SUM ARE:
• FREE CONSULTATION The Company will offer free consultation to prospective
clients interested in knowing about the services provided by SUM and how it is likely
to benefit them.
• TRIAL PERIOD The Company’s services will include a trial period for clients to get a
picture of the services provided and its impact on their business. It will also help them
chalk out customization requirements and ensure more effective solutions.
• CUSTOMIZED OFFERINGS SUM will provide services customized to the requirements
of every client.
• TRAINED STAFF SUM has a fully licensed clinical staff to provide services to its
clients. The staff are knowledgeable in the industry, it laws and regulations, are skilled
in recognizing and advising the right services and are experienced and trained in
providing the varied services in the industry.
• REGULAR UPDATES SUM understands the need for regular updates in this industry
due to the nature of the service. Hence, the company will provide regular updates to
clients, to ensure they are on the same page and help them take timely decisions.
SERVICE BENEFITS
THE BENEFITS THAT THE CLIENTS DERIVE BY ENGAGING SUM ARE:
• Improving revenue collection rates.
• Minimizing administrative costs.
• Reducing denied claims and coding errors.
• Ensuring patients receive appropriate levels of care.
• Maintaining full compliance with the fluid regulatory environment.
• Benefitting from the most up-to-date technology.
VALUE PROPOSITION
The Company’s passion stems from patients who are voiceless and need a
devoted advocate who comprehends the administrative and clinical side of
mental health and substance abuse.
Producing maximum days and the highest level of care along with time
management is the value proposition of SUM. In addition, providing a
management consulting service, focused on our clients’ most critical issues
involving strategy, transformation and operation. Sum provides a package
solution product that is influential in merging and or transitioning from
outsourcing into bringing the service in house.
THE INDUSTRY
INDUSTRY PERFORMANCE
MEDICAL CASE MANAGEMENT
SERVICES INDUSTRY –
UTILIZATION REVIEW
Utilization management is the biggest
segment of the Medical case
management services industry in the
US, accounting for 59.6% of the total
revenue of the industry.
PRODUCTS AND SERVICES
SEGMENTATION (2016)
59.6%Utilization
management
28.5%Vocational
rehabilitation
11.9%Catastrophic case
management
Total $6.6bn
source:www.ibisworld.com
Utilization management evaluates
proposed ambulatory care to determine
the appropriateness, frequency,
duration and setting of care. Utilization
management processes include injury
review; diagnosis and treatment
planning; contacting and negotiating
treatment requirements; determining
appropriateness of treatment
parameters; and providing additional
treatment if needed. Traditional
utilization management functions are
precertification, concurrent review and
retrospective review.
Precertification is the process of
determining eligibility and collecting
information prior to inpatient
admissions and selected ambulatory
procedures. Concurrent review
encompasses activities that take place
during inpatient and outpatient
treatment. Retrospective review
pertains to the assessment of services
after treatment has been performed.
During the past five years, the use of
utilization management has grown as a
way for companies to control expenses
related to rising medical costs. In
addition, technological advances in
predictive modeling and other methods
of data analysis will further increase the
popularity of utilization management in
the next five years.
THE KEY SNAPSHOT OF THIS
INDUSTRY IS AS SHOWN IN
THE FIGURE BELOW:
Revenue
$6.6bn
Annual
Growth 11-16
2.8%
Annual
Growth 11-16
2.1%
Profit
$808.5m
Wages
$1.8bn
Business
7,851
THE INDUSTRY
MENTAL HEALTH AND
SUBSTANCE ABUSE CLINICS IN
THE US
More Americans are seeking treatment
for mental health issues, and care is
shifting to outpatient settings. At the
same time, Medicare and private
insurance coverage for mental health
and substance abuse is improving.
Government funds, including Medicare,
Medicaid and other programs, account
for about twothirds of revenue in the
Mental Health and Substance Abuse
Clinics industry. Greater government
funding directed toward mental health
and substance abuse over the past five
years is expected to result in average
annual revenue growth of 4.7% to $18.7
billion in 2016.
This includes estimated growth of 3.2%
in 2016, driven by an expansion of
private health insurance under the
Patient Protection and Affordable Care
Act (PPACA). The industry also
benefited from funding from the
Substance Abuse and Mental Health
Service Administration (SAMHSA).
INDUSTRY REVENUE
-4
-2
0
2
4
6
8
8 10 12 14 16 18 20 22
% c
han
ge
Year
THE INDUSTRY
MENTAL HEALTH AND
SUBSTANCE ABUSE CENTERS IN
THE US
Over the five years to 2017, awareness
and acceptance of mental health and
substance abuse illnesses rose, which
drove revenue for the Mental Health
and Substance Abuse Centers industry
to grow at an annualized rate of 5.2%
during the five-year period. In 2017
alone, revenue is expected to grow
4.4% to $16.3 billion as the Patient
Protection and Affordable Care Act
(PPACA) enters its third year of more
complete implementation, providing
more people with access to healthcare
and improving coverage for mental
health and substance abuse services.
As society becomes more
knowledgeable about addiction, more
people have sought treatment. In
addition, drug offenders are
increasingly being sent to treatment
programs rather than to jail. In contrast
with these demand increases, many
industry operators are experiencing
profitability pressure because Medicaid
funding has been volatile and operating
costs (particularly wages) are on the
rise. As a result, despite the
nondiscretionary nature of industry
services, revenue growth slowed in 2011
and 2012, due to massive state budget
cuts for mental health services, which
resulted in the treatment of fewer
patients. In response, some operators
have consolidated and adjusted to the
population’s changing needs.
INDUSTRY REVENUE
0
2
4
6
8
10
9 11 13 15 17 19%
ch
an
ge
Year
THE INDUSTRY
COST STRUCTURE BENCHMARKS
• PROFIT PROFIT margins for the Medical Case Management Services industry
are expected to average 12.3% of revenue, measured by earnings before interest
and taxes. This margin represents an increase compared with 2011, when profit
was 9.4% of revenue for the average company in the industry. However, profit
margins vary depending on a company’s scale and type of organization. Nonprofit
companies, which make up 8.0% of operators, tend to have much lower margins
compared with the industry’s average. Decreasing unemployment and increasing
corporate profit have since increased claims volumes of cost containment,
particularly in the case of workers’ compensation claims. As a result, over the five-
year period, industry margins have increased.
• LABOR AND CAPITAL Labor expenses, including wages and fringe benefits,
are the industry’s largest expense. In 2016, wages as a share of revenue averaged
26.9% for companies in the industry. This share is only a slight decrease compared
with 2011, largely due to operators cutting labor costs prior to 2011. Wages have
been on the rise as a result of labor shortages in the healthcare sector, which has
pushed up average wages. Industry operators commonly employ registered
nurses as case managers, although some companies also employ doctors for
complex or catastrophic injuries. In addition, companies also have employees for
supervisory, sales, medical bill analysis and administrative support roles.
Depreciation averages 1.8% for companies in the industry. Capital investment is
largely for central building facilities and software development. Depreciation
expenses have risen marginally over the past five years as a result of increased
expenditures on software development. Companies are increasingly using voice
over internet protocol technology for communicating using the internet rather
than traditional analog systems. Furthermore, companies are continuing to adopt
automated data capture processes for paper and electronic claims documents in
order to improve productivity and processing speed.
• PURCHASES Purchases are the industry’s second largest expense and are
expected to account for 16.7% of revenue for the average company in the
industry. Generally, companies must purchase general office supplies and fuel.
There is a high level of transportation for medical case management, given that
employees typically travel to healthcare facilities, homes and workplaces in order
to work with patients. Over the past five years, fuel expenses have fallen
significantly for companies, causing a decrease in purchase costs as a portion of
revenue. Rental expenses for buildings and equipment average 5.1% of revenue for
industry operators. Utilities are a relatively minor expense and are expected to
average 1.5% of revenue for companies. These costs have remained relatively
constant over the past five years.
THE INDUSTRY
CAPITAL INTENSITY
The Medical Case Management
Services industry exhibits a low
level of capital intensity; for every
dollar spent on labor, industry
operators invest about $0.07 in
capital improvements. Capital
investment is largely made for
central building facilities and
software development. The low
level of capital intensity is due to
the highly personalized nature of
industry services tailored to a
client’s particular needs, thus
leading to high labor costs. Each
case manager follows a multi-step
process of assessment, planning,
coordination and evaluation of
health and social services to meet
client needs. Insurance-based case
management is a labor-intensive
practice typically provided by
telephone.
TECHNOLOGY
On the heels of changes in
technology that have impacted data
sharing and integration, operators in
the industry are expected to
implement further technological
changes. Rising healthcare costs
have increased demand for data
driven analytics and plan-modeling
software. The use of data analysis is
to help employers identify the cost
drivers of their employees, track
their conditions and measure how
effectively they stay medically
compliant to standards of care.
Workers’ compensation payers can
use the data to determine the
specific loss prevention or medical
management services that would
benefit them most and develop
strategies to influence better
compliance with standards of care.
CAPITAL INTENSITY
Capital units per labor unit
0
0.1
0.2
0.3
0.4
0.5
Economy Life Science Medical CaseManagement
Service
Dotted line shows a high level of
capital intensity
SOURCE: WWW.IBISWORLD.COM
REVENUE VOLATILITY
The Medical Case Management
Services industry has a moderate
degree of revenue volatility. Over
the five years to 2016, industry
revenue is expected to fluctuate an
average 2.7% each year. Industry
revenue grew steadily over the five-
year period, with the exception of a
temporary 1.4% dip in 2014, which
increased revenue volatility slightly.
The increasing corporate profit and
decreasing unemployment of the
past five years increased demand
for industry services. However,
revenue volatility is moderated by
steady funding for medical claims
management services provided by
Medicaid funding, which typically
experiences a lower degree of
volatility.
THE INDUSTRY
INDUSTRY OUTLOOK
The Medical Case Management
Over the five years to 2021, revenue
for the Medical Case Management
Services industry is forecast to rise
at an average annual rate of 2.1% to
an estimated $7.3 billion. Key
provisions of the Patient Protection
and Affordable Care Act (PPACA)
are expected to expand the role of
medical case managers, a factor
that will support industry growth
over the next five years. Moreover,
declining unemployment over the
five-year period is also expected to
boost demand for case
management services for worker’s
compensation claims.
INDUSTRY REVENUE
-12
-8
-4
0
4
8
8 10 12 14 16 18 20 22
% c
han
ge
Year
INDUSTRY LIFE CYCLE
The Medical Case Management
Services industry is in the mature
stage of its life cycle. Industry value
added, which measures the
industry’s contribution to the overall
economy, is projected to rise at an
average annual rate of 1.8% over the
10 years to 2021. Over this same 10-
year period, GDP is forecast to rise
at an annualized rate of 2.2%;
therefore, the industry is growing
slower than the economy, a key
indicator of its mature life cycle
stage. Moreover, the size of the
Medical Case Management Services
industry is expected to decline
slowly. Over the 10 years to 2021,
the number of companies operating
in the industry is estimated to fall at
an average annual rate of 0.5% to
7,564 companies. Over the past five
years, merger and acquisition
activity has increased as major
players consolidate market power,
which is a sign of a mature industry.
In addition, there has been a steady
level of technological innovation on
the part of medical case managers.
Industry operators are continuing to
adopt new technologies to improve
communication with clients,
including voice over internet
protocol services, as well as greater
use of electronic systems to
manage client records and medical
billing and predictive analytics to
assist employers and payers.
THE INDUSTRY
INDUSTRY REGULATIONS
Case managers are subject to
federal, state and local regulations,
as well as employer policies, which
govern all aspects of case
management practice, including
client privacy and confidentiality
rights. Case managers are
responsible to work within the scope
of their licensure. Certification
requirements A case manager’s
educational level in a specific
discipline varies from a
paraprofessional to a professional
trained in the field of nursing, social
work, vocational rehabilitation or
mental health. The institution’s
scope of practice determines case
management roles and
responsibilities that require different
educational backgrounds and
competencies. Case managers
generally hold a bachelor’s degree in
nursing, psychology, counseling or
other subjects. Some individuals
earn a master’s degree in health,
human or education services or a
related field. Most companies
require certified case managers to
have foundational knowledge of
social work principles and
procedures. Typically, case
managers are registered nurses, but
they also may be another type of
healthcare professional. For
example, a nurse case manager
must acquire clinical expertise and
in-depth knowledge of the
healthcare system’s regulations and
financing mechanisms. An increasing
number of state programs are
requesting certification for case
managers, according to the
Commission for Case Manager
Certification. There are several
programs that offer certification
credentials recognized at the
national level, including Certified
Case Manager (CCM) and Care
Manager Certified (CMC). To receive
credentials, candidates must obtain
experience in providing case
management services and pass a
case management certification
examination to prove they
understand case coordination,
follow-up services and advocacy.
However, in the states that do not
require licensure or certification,
case managers must have a
baccalaureate or graduate degree in
social work or another health or
human services field from an
accredited institution, as well as
supervised field experience. In
addition, case managers need to
adhere to the National Association
of Social Works Code of Ethics and
the Board of Behavioral Sciences
regulations.
CONFIDENTIALITY AND CLIENT
PRIVACY Prior to the
implementation of case
management services, case
managers have to obtain client
consent regarding privacy rights
and practices. Case managers need
to demonstrate up-to-date
knowledge of applicable laws and
regulations concerning privacy,
confidentiality and protection of
client medical information. Case
managers need to inform their
clients about proposed processes
and services, benefits and costs of
such services, alternatives to and
potential risks of the proposed
services and right to refuse services.
Additionally, industry operators
comply with the code of ethics that
underlie their professional
credentials.
THE INDUSTRY
BUSINESS LOCATIONS
IBISWorld estimates the location of medical case management services
providers to largely reflect the distribution of the population, general
employment and insurance coverage levels. Other factors include the age
distribution of the population; the number of work-related accidents; and state
and local government healthcare policies. Regions with the largest share of
industry operators are the Southeast (accounting for 28.7% of
establishments), the Great Lakes (15.0%), the West (14.6%), the Mid-Atlantic
(13.0%) and the Southwest (12.5%). These regions also account for the largest
share of the total US population. The location of medical case management
services providers is also strongly correlated with health insurance costs and
coverage rates, particularly workers’ compensation insurance. The Southeast
is expected to account for about 23.0% of workers’ compensation and
property and casualty (P&C) insurance funds. At the same time, the Southeast
and Mid-Atlantic regions are expected to account for relatively high shares of
GDP and total employment, as well as total workers’ compensation and P&C
insurance funds. The Mid-Atlantic region has a relatively higher market
penetration due to the greater proportion of economic activity undertaken in
this region and the number of large companies operating within it. Health
insurance costs and coverage rates differ among states due to state
regulations and employment and union statistics. For example, in
Massachusetts, each individual is required to have insurance and companies
are largely forced to offer health coverage to their employees. In contrast, the
Mid-Atlantic and Great Lakes regions have lower unemployment levels than
the national average because these regions have stronger unions, which offer
better employee-benefit programs and retirement benefits.
DISTRIBUTION OF ESTABLISHMENTS VS. POPULATION
0
10
20
30
%
Establishments Population
THE INDUSTRY
THE INDUSTRY
COMPETITORS
THE PRIMARY COMPETITORS OF THE COMPANY ARE:
RELIABILL SOLUTIONS
ReliaBill Solutions is a relatively new boutique billing company formed in 2014 and
located in south Florida. They specialize in medical billing, utilization review, and
collections in the substance abuse, mental health, and laboratory industries. In
addition to these services, the company provides accounting services with its
QuickBooks integrated Accounting and Posting services.
ELEVATED BILLING SOLUTIONS
Elevated Billing Solutions is a Utah based company founded in 2011. The company
helps centralize a rehabilitation facility’s billing services. They specialize in
management of insurance company communications so clients can continue to focus
on providing care.
The company offers three services which include verification of benefits, claims
processing & management, and utilization review management. Under the verification
process, a team thoroughly verifies potential patients’ benefits and seeks to return
the verification within 30-45 minutes so no added delay is experienced when getting
a patient into the client’s program/facility. The claims processing & management is
about accuracy and speed. The company submits all claims utilizing advanced
processing software. This allows them to ensure they are filed efficiently and
correctly the first time. The utilization review management team advocates for the
client’s patient to receive the maximum authorization possible while the client’s
facility receives the maximum reimbursement.
Elevated Billing Solutions’ efficient approach to third-party insurance billing allows
their client’s facility to operate as intended.
THE INDUSTRY
COMPETITORS
THE PRIMARY COMPETITORS OF THE COMPANY ARE:
MCMC LLC
MCMC LLC is an established company in Massachusetts, having been around for
almost two decades. It is a leading national managed care services company
headquartered in Quincy, MA with primary processing centers located in Los Angeles,
Danbury, Clearwater, Overland Park, Mineola, Canonsburg, Nashville and Houston.
MCMC offers a full suite of managed care services to the Workers’ Compensation,
Group Health, Auto-No Fault and Disability markets. In addition, MCMC also offers
managed care services to other entities including the ERISA, FELA, FLMA, General
Liability, Longshore and Texas Nonsubscriber markets.
Their services reduce medical costs while their innovative technology solutions like
Zebra increase efficiencies for clients. Unlike other managed care service companies,
MCMC offers clients a flexible service model which allows program customization
including sourcing or leasing options, and bundling or unbundling of services. This
model provides clients a strategic alternative to match their individual operating
structure.
AUTHORIZED RECOVERY
Authorized Recovery has registered nurses and clinicians on staff with an extensive
background in the field of substance abuse and mental health. Obtaining the highest
level of care and maximum days in treatment for each case is crucial. Which is why
having knowledge of the insurance requirements and criteria is an important role in
what we do day to day. Their team makes sure clients are in compliance with the
utilization criteria of each payer.
The company has long-term relationships with the insurance providers which enables
them to extend that relationship to healthcare facilities. They provide tailored services
to clients. Services offered to the client are periodic licensing reviews and compliance,
establishing a utilization review program for new facilities, pre-certification,
concurrent utilization reviews, chart reviews, appeals, management consulting and
evaluation etc.
Authorized Recovery has registered nurses and clinicians on staff with an extensive
background in the field of substance abuse and mental health.
THE MARKET
MARKET OVERVIEW
The market for businesses in this industry include healthcare centers and
clinics. The company focuses on providing its services to Mental Health and
Substance Abuse Billing Companies. The performance of these companies
depend on the market performance of the Mental Health and Substance
Abuse Clinics and Centers. The market overview of those clinics and centers
are discussed below.
• Mental Health and Substance Abuse Clinics: Establishments with medical
staff who primarily provide outpatient services related to the diagnosis and
treatment of substance abuse and other mental health disorders.
• Mental Health and Substance Abuse Centers: establishments that primarily
provide residential care and treatment for patients with mental illnesses,
drug addiction and alcoholism.
DEMAND DRIVERS
THE KEY EXTERNAL DRIVERS OF DEMAND FOR THIS MARKET ARE:
• FEDERAL FUNDING FOR MEDICARE AND MEDICAID: County, state and federal
funding of Medicare and Medicaid, combined with reimbursement levels, affect the
affordability of mental healthcare as well as demand for industry services. Medicare
and Medicaid generate more than one-third of industry revenue. Federal funding
for Medicare and Medicaid is expected to increase during 2016. Medicare decisions
on reimbursement rates for existing procedures affect the profitability of mental
health and substance abuse treatment providers. Although federal funding for
Medicare and Medicaid is expected to increase during 2017, uncertainty relating to
potential cuts poses a threat to the industry.
• NUMBER OF PEOPLE WITH PRIVATE HEALTH INSURANCE: People covered by
private health insurance typically use healthcare services more frequently. Private
insurance makes up 11.3% of industry revenue; therefore, an increase in coverage
boosts demand for industry services. In addition, government initiatives toward
mental health parity, where insurance covers mental health comparably to other
illnesses, promote demand. The number of people with private health insurance is
expected to increase during 2016, representing a potential opportunity for the
industry. According to the Substance Abuse and Mental Health Services
Administration, nearly 50.0% of adults who have unmet needs for treatment for
mental health problems report cost or insurance issues as barriers to treatment.
The number of people with private health insurance is expected to increase during
2017, indicating a potential opportunity for the industry.
• POPULATION: Mental disorders are common in the United States. According to the
National Institute of Mental Health, about one in four adults (26.2% of Americans
aged 18 and older) suffer from a diagnosable mental disorder in any given year.
Additionally, the need for mental health services increases as the population ages.
The US population is expected to increase in 2017.
THE MARKET
• NUMBER OF ADULTS AGED 20 TO 64: The majority of people who use mental
health and substance abuse clinics are 25 to 44 years old. This age group makes up
about 59.0% of the industry’s market; as it grows, so does demand for industry
services. The number of adults aged 20 to 64 is expected to increase slowly during
2016.
• NUMBER OF ADULTS AGED 65 AND OLDER: As people age, they are more prone
to develop health conditions that require a physician’s attention. Therefore, as the
number of senior citizens increases, the need for medical services and, therefore,
third-party claims processors grows. The number of adults aged 65 and older is
expected to grow over 2016.
• PER CAPITA DISPOSABLE INCOME: As per capita disposable income rises, people
are more capable of affording industry services, which boosts demand. Out-
ofpocket payments account for about 8.0% of Mental Health and Substance Abuse
Clinics industry revenue. Per capita disposable income is expected to increase
during 2016. Moreover, out-of-pocket payers make up 13.4% of the Mental Health
and Substance Abuse Center’s market. Therefore, as disposable income increases
and people can better afford the cost of treatment, demand will also rise. Per
capita disposable income is expected to increase during 2017.
PER CAPITA
DISPOSABLE INCOME
-4
-2
0
2
4
6
10 12 14 16 18 20 22
% c
han
ge
Year Year
FEDERAL FUNDING FOR
MEDICARE AND MEDICAL
-10
-5
0
5
10
15
20
10 12 14 16 18 20 22
% c
han
ge
• FEDERAL FUNDING FOR SOCIAL SERVICES: Industry operators also benefit from
the Substance Abuse and Mental Health Service Administration (SAMHSA).
SAMHSA is an agency of the Department of Health and Human Services that
provides assistance in mental health and the prevention and treatment of
substance abuse to states, tribes, organizations and other public or nonprofit
private entities. An increase in funding for SAMHSA positively influences industry
demand. In 2016, funding for SAMHSA is expected to increase slowly, representing
a potential threat to the industry.
THE MARKET
• NUMBER OF PHYSICIAN VISITS: Demand for medical claims processing services
comes from doctors’ offices and other healthcare providers. As the number of
physician visits grows, the number of insurance claims rises and trickles down to
create demand for the industry. The number of physician visits is projected to
grow in 2016, representing a potential opportunity for the industry.
NUMBER OF PHYSICION VISITS
-10
-5
0
5
10
10 12 14 16 18 20 22
% c
han
ge
Year Year
NUMBER OF PEOPLE WITH
PRIVATE HEALTH INSURANCE
-4
-2
0
2
4
6
10 12 14 16 18 20 22
% c
han
ge
TARGET MARKET
The target market for the company is treatment facilities and offices, mental
health and substances abuse companies as well as industry marketers.
The number of Clinics in the mental health and substance abuse industry is
highly fragmented. There are an estimated 10,146 companies operating in the
industry. The majority of companies in the industry are nonprofit
organizations, though forprofit firms make up an estimated 35.0% of the
industry.
According to the 2011 National Survey on Drug Use and Health, produced by
the Substance Abuse and Mental Health Services Administration (SAMHSA),
for individuals receiving outpatient mental health services, 34.5% of individuals
reported that the majority of the cost was covered through private health
insurance; 26.2% of adults receiving outpatient care paid for the service
themselves, while 19.4% of individuals covered the cost with public health
insurance. The majority of adults receiving outpatient care services paid
between $100 and $5,000 for care; 38.4% paid between $100 and $500, while
31.3% spent $501 to $5,000 on out-ofpocket costs. According to SAMHSA, the
average outpatient treatment cost for substance abuse was $7,415 per
admission. The majority of outpatient facilities are located in metropolitan
areas, in order to improve access to facilities for a higher share of individuals.
According to SAMHSA’s 2011 National Survey on Drug Use and Health, 1.9
million individuals received inpatient mental health services, while 14.9 million
received outpatient care services.
THE MARKET
COMPETITIVE EDGE
SUM has an edge over its competitors in that, it has extensive knowledge and
experience in the areas of substance abuse, mental health and conducting
dual diagnosis and eating disorder. In addition to this, SUM offers flexible right
sourcing solutions to meet the varied needs of customers. SUM also offers in-
house training and consulting to help clients become more self-serving and
efficient.
SUM will focus on the services that the competitors fail to provide. It will
constantly update the client with ongoing changes in the insurance guidelines
along with departmental improvement suggestions.
COMPETITIVE EDGE
SUM has an edge over its competitors in that, it has extensive knowledge and
experience in the areas of substance abuse, mental health and conducting
dual diagnosis and eating disorder. In addition to this, SUM offers flexible right
sourcing solutions to meet the varied needs of customers. SUM also offers in-
house training and consulting to help clients become more self-serving and
efficient.
SUM will focus on the services that the competitors fail to provide. It will
constantly update the client with ongoing changes in the insurance guidelines
along with departmental improvement suggestions.
THE MARKET
MARKETING STRATEGY
The marketing strategy that the company will adopt to create awareness
about the services provided and promote themselves will be as below:
• WEBSITE: The company will have a simple and user friendly website with quality
content. The content will include a clear description of the services provided by the
company along with a helpline for browsers to clarify their queries immediately.
The content will be search engine optimized to ensure that people or companies
searching for such services are lead to the company’s website. Further, the website
will have the contact details of the company and a clear call to action.
• B2B MARKETING: SUM will adopt a customized B2B marketing strategy to reach
the target market. A social media presence is inevitable in today’s day and age.
Hence, the company will make its presence felt in the popular websites used by
target client companies like LinkedIn, Craigslist etc.
• MARKETING SPECIALIST: The company will outsource a part of the marketing
to a marketing specialist who knows the job and can help the company
concentrate on its core competencies while promoting the services.
• PRINT MEDIA: The company will advertise in print media like newspapers and
magazines, distribute flyers and pamphlets and ensure the timing and placement
of the advertisement is right, to reach the maximum number of readers.
• IN-PERSON MARKETING: The company will also adopt in-person marketing
techniques like going to prospective client companies and explaining the services
and offers provided by SUM. This is more likely to generate leads since a direct in-
person contact with the client has a greater impact and an element of trust.
THE OPERATIONS PLAN
EQUIPMENT
The company will purchase the usual equipment to run an office, like; laptops,
fax machines, telephones, printers etc. along with other stationary and
consumables. The company will also have an internet service to conduct the
daily operations of the business. These are very important for the company,
since most of the work delivery happens through phone or internet.
LOCATION
SUM is located at 2540, SW 85 Terrace, Miramar, Florida 33025. The company
requires only a small work space, since a lot of work delivery happens online
or through telephone.
WORKING HOURS
The company will have a five day working week (Monday to Friday) with a
nine hour working day from 9 AM to 6 PM.
ORGANIZATION STRUCTURE
The organization structure of the company is as reflected in the chart below:
CEO Senior Review
Manager
Assistant Review
Manager
THE OPERATIONS PLAN
STAFFING PLAN
The staffing plan of the company is as reflected in the table below:
PARTICULARS YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
DESIGNATION
CEO 1 1 1 1 1
Senior Review Manager 1 1 1 2 2
Assistant Review
Manager 1 2 2 3 3
SALARY PER ANNUM PER PERSON
CEO $50,000 $52,500 $55,125 $57,881 $60,775
Senior Review Manager $35,000 $36,750 $38,588 $40,517 $42,543
Assistant Review
Manager $25,000 $26,250 $27,563 $28,941 $30,388
Total Salaries $110,000 $ 141,750 $ 148,838 $ 225,737 $ 237,024
BUSINESS STRATEGIES
The company will adopt the following business strategies to provide optimum
solutions to clients and at the same time attain business viability:
• NETWORKING: Network with health care providers, insurance companies,
substance abuse and mental health clinics and centers, billing companies etc. to
promote the company’s services and penetrate the market.
• TECHNOLOGY ACQUISITION: Acquire the proposed technology solution; and
takeover existing software documentation.
• STAFFING AND TRAINING: Build a team of well qualified and experienced service
providers and motivate employees by giving industry-level compensation in order
to enhance employee retention.
• MARKETING: Create awareness about the company, penetrate and capture the
market and achieve a good market share.
• DEPLOYMENT: Deploy solutions in line with customer requirements and develop
technically feasible solutions to resolve client needs.
THE OPERATIONS PLAN
SALES STRATEGY
The company will convert its marketing efforts into sales leads through a
welldefined sales strategy. SUM will offer 60 day trial period to its clients to
have a realistic idea about the services provided by the company and whether
it suits them. The trial period will be with no obligation or commitment.
At the end of the 60 days the client will get the satisfaction in the form of
smooth delivery of transactions, increase authorized days with maximize profit
gains. This will ensure retention of customers into full time clients.
DISTRIBUTION STRATEGY
SUM will use the facilities EMR system to produce live time reviews, along with
generating daily spreadsheet outcome and any schedule in-house/ remote
meetings to discuss progress.
THE OPERATIONS PLAN
CRITICAL SUCCESS FACTORS
THE KEY SUCCESS FACTORS IN THIS BUSINESS ARE:
• ABILITY TO VARY SERVICES TO SUIT DIFFERENT NEEDS: Operators that can
successfully add service offerings are more likely to have steady streams of
revenue.
• ABILITY TO EDUCATE THE WIDER COMMUNITY: Medical case managers
advocate for recognition, prevention and elimination of disparities in accessing
high quality care at the service-delivery, benefits administration and policy-making
levels.
• ACCESS TO THE LATEST AVAILABLE AND MOST EFFICIENT TECHNOLOGY AND
TECHNIQUES: Having the latest available technology enables industry operators to
stay connected with their clients and improve data collection by automating the
process.
• AUTOMATION - REDUCES COSTS, PARTICULARLY THOSE ASSOCIATED WITH
LABOR: Automation reduces costs, particularly those associated with labor. These
cost efficiencies are particularly important for third-party administration
enterprises, because these entities’ services are labor intensive.
• ACCESS TO HIGHLY SKILLED WORKFORCE: Attaining highly qualified and
specialized personnel is increasingly important, since Medicare claims increase in
volume as the population ages.
• UNDERSTANDING GOVERNMENT POLICIES AND THEIR IMPLICATIONS: Claims
processors must have an understanding of Medicare, Medicaid and private health
insurance regulations and compliance, and understand the effect of these on billing
and payments.
• ACCREDITATION FROM AUTHORITATIVE SOURCE: Medical claims processors
must possess a license to operate as the middlemen between insurance companies
and physicians.
• HAVING A GOOD REPUTATION: Establishing a positive reputation of providing
quality services, and efforts to maintain a relationship with clients, are vital for
success because case managers are responsible for client privacy and
confidentiality.
• PROXIMITY TO KEY MARKETS: Industry operators tend to locate in highly
populated areas and areas with a large number of businesses because injured
workers are more likely to use medical case management services.
THE FINANCIAL PLAN
SOURCES AND USES OF FUNDS
THE SOURCES AND USES OF FUNDS ARE GIVEN BELOW:
PARTICULARS AMOUNT ($)
USES OF FUNDS
Office Setup $2,000
Staff Salaries $20,000
Assets $5,000
Marketing & Promotions $7,000
Start-up Operating expenses $4,000
Working Capital $2,000
Total $40,000
SOURCES OF FUNDS
Debt $40,000
Total $40,000
USES OF FUNDS
5%
50%
12%
18%
10%
5%
Office Setup
Staff Salaries
Assets
Marketing & Promotions
Startup Opex
Working Capital
THE FINANCIAL PLAN
PROJECTED INCOME STATEMENTS
THE PROJECTED INCOME STATEMENTS ARE GIVEN BELOW:
PARTICULARS YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
Revenue 350,000 437,500 546,875 683,594 854,492
Total 350,000 437,500 546,875 683,594 854,492
Manpower Cost 110,000 141,750 148,838 225,737 237,024
Administration Cost 1,000 1,050 1,103 1,158 1,216
Rent & Utilities 30,000 31,500 33,075 34,729 36,465
Professional and Legal 2,500 2,625 2,756 2,894 3,039
Power & Fuel 2,500 2,625 2,756 2,894 3,039
Repairs and
Maintenance 400 420 441 463 486
Marketing 17,500 21,875 27,344 34,180 42,725
Interest 2,000 2,000 2,000 2,000 2,000
Total 165,900 203,845 218,312 304,054 325,993
Net Profit before
taxes 184,100 233,655 328,563 379,540 528,499
Tax @ 20% 36,820 46,731 65,713 75,908 105,700
Net Profit after taxes 147,280 186,924 262,850 303,632 422,800
Amounts in USD
THE FINANCIAL PLAN
PROFITABILITY CHARTS
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue $350,000 $437,500 $546,875 $683,594 $854,492
Profit $147,280 $186,924 $262,850 $303,632 $422,800
Cash Balance $187,280 $374,204 $637,054 $940,686 $1,323,485
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
THE FINANCIAL PLAN
PROJECTED CASH FLOWS
THE STATEMENT OF PROJECTED CASH FLOWS IS GIVEN BELOW:
PARTICULARS YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
Revenue 350,000 437,500 546,875 683,594 854,492
Debt 40,000
Total 390,000 437,500 546,875 683,594 854,492
Manpower Cost 110,000 141,750 148,838 225,737 237,024
Administration Cost 1,000 1,050 1,103 1,158 1,216
Rent & Utilities 30,000 31,500 33,075 34,729 36,465
Professional and Legal 2,500 2,625 2,756 2,894 3,039
Power & Fuel 2,500 2,625 2,756 2,894 3,039
Repairs and
Maintenance 400 420 441 463 486
Marketing 17,500 21,875 27,344 34,180 42,725
Corporate taxes 36,820 46,731 65,713 75,908 105,700
Interest 2,000 2,000 2,000 2,000 2,000
Principal - - - - 40,000
Total 202,720 250,576 284,025 379,962 471,693
Opening Balance - 187,280 374,204 637,054 940,686
Surplus 187,280 186,924 262,850 303,632 382,800
Closing Balance 187,280 374,204 637,054 940,686 1,323,485
Amounts in USD
THE FINANCIAL PLAN
Revenue is
assumed to
grow at 25%
YoY
Debt interest is
projected at 5%
per annum,
with a single
bullet
repayment at
the end of the
fifth year.
Manpower
costs are in line
with the
staffing plan
discussed
earlier.
All other
expenses are
projected to
increase at 5%
per annum.
KEY ASSUMPTIONS
THE KEY ASSUMPTIONS BEHIND THE PROJECTIONS ARE:
THE IMPLEMENTATION PLAN
BACKDROP
The success of the business plan lies
in how well the implementations
strategies have been planned and
laid out. This section of the business
plan discusses the key milestones –
short term and long term, which are
required for implementing the
business plan.
NEXT STEPS
THE NEXT STEPS ARE AS BELOW:
• Register the entity
• Obtain funding
• Scout for office space
• Recruit staff
• Put processes and procedures in place
Initial marketing
SHORT TERM
MILESTONES
THE SHORT-TERM MILESTONES
ARE:
• Business networking and partnerships
• Print marketing collateral
• Build a website highlighting the
competencies
• Acquire clients
• Execute projects
LONG TERM
MILESTONES
THE LONG-TERM MILESTONES
ARE:
• To retain existing customers
• To continue to expand customer base
• To create brand loyalty and repeat
business
• To capture significant market share
• To improve processes continuously
ROAD AHEAD
With increased importance of
focusing on the core competence,
the outsourcing of non-core
activities like utilization review and
appeals will improve and the
opportunities for SUM is bound to
increase manifold. The company will
capitalize on this trend and increase
its market share by expanding its
reach of the target market.