The Medical Group (TMG) offers management services to doctors in the healthcare industry. This presents a unique opportunity for skilled individuals who are aware of and experienced in accessing the profitable segment of government health programs. TMG is organizing traditional physicians into a management services organization, allowing them to retain their walk-in patients, double their Medicare reimbursement for walk-in patients, and secure a contract with Medicare. TMG also provides managed care access to Medicare HMOs through these physicians. The company has a competitive advantage in the Southern Texas healthcare market due to its proprietary database of physicians with large walk-in patient bases and a 20-year management contract with a medical group comprised of leading physicians. Startup development costs will fund a 12-month initial development period, with profitability expected thereafter.

Medical Services Management Business Plan Example

Company Summary

TMG was founded in July 1999 in Irving, Texas as a management service organization. It is a Texas Corporation with principal offices in Irving.

Medical Services Management Business Plan Example

TMG’s mission is to help physicians access more managed care revenue. The company’s strategy is to leverage its alliance with Denton County’s leading group of doctors and its expertise in the healthcare industry, walk-in market, and managed care. TMG has also formed strategic alliances with medical centers, which provide support and infrastructure services. The only risk TMG faces is developmental delays, but the company has made conservative assumptions in its operational budget to mitigate this risk. TMG has obtained start-up capital and is developing a physician network for Medicare managed care revenues. Through three years of research, TMG has compiled a listing of all physicians in Texas and their walk-in patient volumes. This knowledge has allowed TMG to secure seed development capital from hospital systems. TMG plans to expand into additional counties and utilize the Internet for billing and operations. In 1993, the Texas State Department of Health Services initiated a process to convert a majority of medical recipients in the state into a healthcare environment. This government intervention, combined with changes in the Medicare Act, has created an opportunity for TMG to provide managed care access to doctors for individuals with both Medicare and Medical health benefits.

Medical Services Management Business Plan Example

Market Analysis

The managed care industry is vital to the healthcare delivery system of the United States. Its parts include payors (HMOs), physicians (managed care entities like IPAs and MSOs), hospitals, and other providers.

Market Size

In Denton County, there are over 300,000 individuals with both Medicare and Medical coverage (walk-in). In the five Southern Texas Counties (Denton, Garland, Dallas, Plano, and Memphis), there are 330,000 walk-ins, and in the entire state, there are 650,000 walk-ins. Denton has 436,000 Medicare recipients. Currently, 17% of these recipients are in Medicare HMOs, and around 592,000 are not. About one-third (1/3) of the 592,000 are walk-ins. In Texas, there are 1.8 million Medicare recipients, with 27.22% currently in HMOs. That leaves 1.5 million Medicare members not in HMOs. Walk-ins make up one-third (1/3) of that total, or 650,000 eligible.

Customers and Target Markets

Doctors and the walk-in market

In Denton County, there are approximately 1.8 million medical recipients, of whom more than 200,000 are walk-in patients or individuals with both Medical and Medicare.

In Denton County alone, there are over 330 physicians with more than 100 walk-in patients in their practice base. This group, founded in the spring of 1999, has key officers who have walk-in patient levels exceeding 500.

Competitive Comparison

TMG does not believe there are any competitive threats to its development and penetration of the walk-in market in Southern Texas. This assessment is based on the following factors.

Competitive Edge

TMG has a significant competitive advantage over any entity attempting to penetrate the walk-in market.

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– Extensive customer list

– Qualified management team

– In-depth industry knowledge

– Solid business partnerships

Strategy and Implementation Summary

The company plans to use the Internet as a primary marketing channel. The Internet is growing in importance for buying and selling a wide range of products, including medical services. According to International Data Corporation (IDC), aggregate Internet commerce across industries was estimated to be $32 billion in 1998 and is projected to reach $425 billion by 2002.

The Internet provides an easy way to gather information and shop for the best deals in terms of price and attributes. Consumers can read reviews, compare models, and find vehicles that meet their needs. They can view, search, and screen for prices, features, and other important information. For retailers, the Internet increases sales volume and reduces marketing, advertising, and personnel costs per sale.

Medical Services Management Business Plan Example

Medical Services Management Business Plan Example

Sales Forecast
Year 1 Year 2 Year 3
Sales
Customers $250,000 $3,750,000 $10,750,000
Physician membership $325,000 $4,875,000 $15,875,000
Other services $500,000 $7,500,000 $18,500,000
Total Sales $1,075,000 $16,125,000 $45,125,000
Direct Cost of Sales Year 1 Year 2 Year 3
Customers $33,330 $500,000 $1,102,564
Physician membership $0 $0 $0
Other services $66,670 $1,000,000 $1,897,436
Subtotal Direct Cost of Sales $100,000 $1,500,000 $3,000,000

6.1 Marketing Communications

The key message associated with TMG’s services is affordability and reliability. TMG believes it can achieve success through a new promotional plan. The company’s plan includes:

  • Print advertising in the Irving News Express and the military newspaper distributed by Prime Time News.
  • An online presence through the development of a professional website.
  • Expansion of promotions into television advertising and the use of additional radio stations.
  • Advertising in medical journals and local magazines dedicated to the medical industry.

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Management Summary

The company’s management philosophy is based on responsibility and mutual respect. TMG maintains an environment that encourages productivity, respect for customers and fellow employees, and creative independence. TMG’s management is highly experienced and qualified. Key members of TMG’s management teams, their backgrounds, and responsibilities are as follows.

Mr. Michael Johnson, President and CEO.

Note: Background has been removed for confidentiality.

Board of Advisors

TMG utilizes Mr. Johnson’s extensive contacts in the Southern Texas market for an Advisory Board. As TMG develops, additional healthcare delivery executives will be invited to participate in the Board of Advisors.

Personnel Plan
Year 1 Year 2 Year 3
All Staff $256,522 $453,066 $608,696
Other $0 $0 $0
Total People 7 9 13
Total Payroll $256,522 $453,066 $608,696

Financial Plan

The company is raising funding to complete development through Year 2 of operation.

8.1 Important Assumptions

The following table presents assumptions necessary to the success of TMG.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 25.42% 25.00% 25.42%
Other 0 0 0

8.2 Break-even Analysis

The chart and table below outline the Break-even Analysis for TMG.

Medical Services Management Business Plan Example

Break-even Analysis

Monthly Revenue Break-even: $69,700

Assumptions:

– Average Percent Variable Cost: 9%

– Estimated Monthly Fixed Cost: $63,217

8.3 Projected Profit and Loss

The company is in the early stage of development, so initial projections have only been made on accounts that drive the income statement the most.

Medical Services Management Business Plan Example

Medical Services Management Business Plan Example

Medical Services Management Business Plan Example

Medical Services Management Business Plan Example

The provided text can be revised as follows:

—–edited text—–

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $1,075,000 $16,125,000 $45,125,000
Direct Cost of Sales $100,000 $1,500,000 $3,000,000
Other $38,000 $570,000 $600,000
Total Cost of Sales $138,000 $2,070,000 $3,600,000
Gross Margin $937,000 $14,055,000 $41,525,000
Gross Margin % 87.16% 87.16% 92.02%
Expenses
Payroll $256,522 $453,066 $608,696
Sales and Marketing and Other Expenses $382,000 $2,163,810 $3,366,850
Depreciation $8,400 $0 $0
Continued education $36,000 $517,500 $575,500
Utilities $3,600 $4,000 $4,500
Insurance $9,600 $20,000 $25,000
Rent $24,000 $25,000 $25,000
Payroll Taxes $38,478 $67,960 $91,304
Other $0 $0 $0
Total Operating Expenses $758,600 $3,251,336 $4,696,850
Profit Before Interest and Taxes $178,400 $10,803,664 $36,828,150
EBITDA $186,800 $10,803,664 $36,828,150
Interest Expense $0 $0 $0
Taxes Incurred $42,564 $2,700,916 $9,360,488
Net Profit $135,835 $8,102,748 $27,467,662
Net Profit/Sales 12.64% 50.25% 60.87%
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8.4 Projected Cash Flow

The cash flow projections are presented in the chart and table below.

—–end of edited text—–

Medical Services Management Business Plan Example

Pro Forma Cash Flow Review:

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $0 $0 $0
Cash from Receivables $868,500 $13,234,000 $39,554,302
Subtotal Cash from Operations $868,500 $13,234,000 $39,554,302
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $500,000 $0 $0
Subtotal Cash Received $1,368,500 $13,234,000 $39,554,302
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $256,522 $453,066 $608,696
Bill Payments $616,643 $7,004,661 $16,269,509
Subtotal Spent on Operations $873,165 $7,457,727 $16,878,205
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $500,000 $2,000,000 $8,000,000
Dividends $0 $0 $0
Subtotal Cash Spent $1,373,165 $9,457,727 $24,878,205
Net Cash Flow ($4,665) $3,776,273 $14,676,097
Cash Balance $245,335 $4,021,608 $18,697,706

8.5 Projected Balance Sheet Review:

Projected Balance Sheet

The table below provides TMG’s projected balance sheet for 2000-2002.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $245,335 $4,021,608 $18,697,706
Accounts Receivable $206,500 $3,097,500 $8,668,198
Other Current Assets $5,000 $5,000 $5,000
Total Current Assets $456,835 $7,124,108 $27,370,903
Long-term Assets
Long-term Assets $500,000 $2,500,000 $10,500,000
Accumulated Depreciation $8,400 $8,400 $8,400
Total Long-term Assets $491,600 $2,491,600 $10,491,600
Total Assets $948,435 $9,615,708 $37,862,503
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $57,599 $622,125 $1,401,258
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $57,599 $622,125 $1,401,258
Long-term Liabilities $0 $0 $0
Total Liabilities $57,599 $622,125 $1,401,258
Paid-in Capital $850,000 $850,000 $850,000
Retained Earnings ($95,000) $40,835 $8,143,584
Earnings $135,835 $8,102,748 $27,467,662
Total Capital $890,835 $8,993,584 $36,461,245
Total Liabilities and Capital $948,435 $9,615,708 $37,862,503
Net Worth $890,835 $8,993,584 $36,461,245

8.6 Business Ratios Review:

Business Ratios

The following table contains important business ratios for the offices and clinics of medical doctors industry, as determined by the Standard Industry Classification (SIC) Index code 8011, Offices & Clinics of Medical Doctors.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 1400.00% 179.84% 5.90%
Percent of Total Assets
Accounts Receivable 21.77% 32.21% 22.89% 10.00%
Other Current Assets 0.53% 0.05% 0.01% 50.50%
Total Current Assets 48.17% 74.09% 72.29% 60.80%
Long-term Assets 51.83% 25.91% 27.71% 39.20%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 6.07% 6.47% 3.70% 39.80%
Long-term Liabilities 0.00% 0.00% 0.00% 14.10%
Total Liabilities 6.07% 6.47% 3.70% 53.90%
Net Worth 93.93% 93.53% 96.30% 46.10%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 87.16% 87.16% 92.02% 0.00%
Selling, General & Administrative Expenses 74.72% 36.91% 30.81% 57.10%
Advertising Expenses 6.14% 6.05% 2.77% 0.40%
Profit Before Interest and Taxes 16.60% 67.00% 81.61% 2.00%
Main Ratios
Current 7.93 11.45 19.53 1.37
Quick 7.93 11.45 19.53 1.12
Total Debt to Total Assets 6.07% 6.47% 3.70% 53.90%
Pre-tax Return on Net Worth 20.03% 120.13% 101.01% 6.90%
Pre-tax Return on Assets 18.81% 112.35% 97.27% 15.00%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 12.64% 50.25% 60.87% n.a
Return on Equity 15.25% 90.09% 75.33% n.a
Activity Ratios
Accounts Receivable Turnover 5.21 5.21 5.21 n.a
Collection Days 57 37 48 n.a
Accounts Payable Turnover 11.71 12.17 12.17 n.a
Payment Days 27 16 22 n.a
Total Asset Turnover 1.13 1.68 1.19 n.a
Debt Ratios
Debt to Net Worth 0.06 0.07 0.04 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $399,235 $6,501,984 $25,969,645 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.88 0.60 0.84 n.a
Current Debt/Total Assets 6% 6% 4% n.a
Acid Test 4.35 6.47 13.35 n.a
Sales/Net Worth 1.21 1.79 1.24 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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Appendix

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Sales Forecast
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales
Customers 0% $10,000 $10,000 $15,000 $15,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000
Physician membership 0% $10,000 $15,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000
Other services 0% $15,000 $20,000 $25,000 $40,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000
General Assumptions
1 2 3 4 5 6 7 8 9 10 11 12
Plan Month 1 2 3 4 5 6 7 8 9 10 11 12
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 30.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%
Other 0 0 0 0 0 0 0 0 0 0 0 0
Pro Forma Profit and Loss
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales $35,000 $45,000 $70,000 $85,000 $105,000 $105,000 $105,000 $105,000 $105,000 $105,000 $105,000 $105,000
Direct Cost of Sales $3,333 $4,000 $5,333 $7,334 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
Other $2,500 $2,500 $2,500 $2,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500
Total Cost of Sales $5,833 $6,500 $7,833 $9,834 $13,500 $13,500 $13,500 $13,500 $13,500 $13,500 $13,500 $13,500
Gross Margin $29,167 $38,500 $62,167 $75,166 $91,500 $91,500 $91,500 $91,500 $91,500 $91,500 $91,500 $91,500
Gross Margin % 83.33% 85.56% 88.81% 88.43% 87.14% 87.14% 87.14% 87.14% 87.14% 87.14% 87.14% 87.14%
Pro Forma Cash Flow:

Cash Received:

Cash Received

Cash from Operations

Cash Sales: $0

Cash from Receivables: $0, $1,167, $35,333, $45,833, $70,500, $85,667, $105,000

Subtotal Cash from Operations: $0, $1,167, $35,333, $45,833, $70,500, $85,667, $105,000

Additional Cash Received

Sales Tax, VAT, HST/GST Received: 0.00%, $0

New Current Borrowing: $0

New Other Liabilities (interest-free): $0

New Long-term Liabilities: $0

Sales of Other Current Assets: $0

Sales of Long-term Assets: $0

New Investment Received: $0, $500,000

Subtotal Cash Received: $0, $1,167, $35,333, $545,833, $70,500, $85,667, $105,000

Expenditures:

Expenditures from Operations

Cash Spending: $21,375, $21,377

Bill Payments: $1,381, $41,405, $41,027, $46,948, $57,532, $59,586, $59,773, $65,023, $59,586

Subtotal Spent on Operations: $22,756, $62,782, $62,404, $68,325, $78,909, $80,963, $81,150, $86,400, $80,963

Additional Cash Spent:

Sales Tax, VAT, HST/GST Paid Out: $0

Principal Repayment of Current Borrowing: $0

Other Liabilities Principal Repayment: $0

Long-term Liabilities Principal Repayment: $0

Purchase Other Current Assets: $0

Purchase Long-term Assets: $25,000, $50,000

Dividends: $0

Subtotal Cash Spent: $47,756, $87,782, $87,404, $93,325, $128,909, $130,963, $131,150, $136,400, $130,963

Net Cash Flow: ($47,756), ($86,616), ($52,071), $452,508, ($58,409), ($45,296), ($26,150), ($31,400), ($25,963)

Cash Balance: $202,244, $115,629, $63,558, $516,066, $457,657, $412,361, $386,211, $354,811, $328,848, $302,698, $271,298, $245,335

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