Psychological Health Center Business Plan
Amesbury Psychological Center is a multidisciplinary behavioral health care practice that offers mental health and substance abuse services to the communities of the Merrimack Valley. Our focus is to provide cost-effective, quality treatment and maintain positive relationships with our clients, Anna Jaques Hospital (AJH), payors, associates, staff, and the community.
The market for behavioral health services is strong, as demonstrated by the growth the existing Center has experienced in the past two and a half years. Massachusetts has recently passed a mental health parity bill that will become effective in one month. This bill requires insurance companies to provide benefits for biologically based behavioral health disorders, similar to those for physical health disorders. This should support the projected growth. Currently, the Outpatient Psychiatric Center refers approximately four phone calls a day to other providers.
The key to success for this project includes:
- Transferring existing hospital behavioral health contracts to the Center.
- Credentialing clinicians promptly.
- Obtaining initial working capital.
- Contracting with clinicians at reasonable rates.
- Developing and implementing an effective billing and collection system.
- Listening to and meeting the needs of all customers.
- Obtaining a medicaid provider number.
The business plan provides a roadmap for sustaining growth, improving revenue collections, and increasing our profitability.
1.1 Objectives
Goal 1: Continuously develop, strengthen, and improve services offered by the Center.
– Strengthen the payor mix by developing and maintaining alliances with five major behavioral health managed care companies.
– Identify and develop alliances with three community human service and addiction agencies.
– Identify and foster alliances with eight community medical group practices.
– Transfer and/or hire 80% of staff two months before starting date.
– Implement a billing system two months before starting date.
– Improve the expected receipts rate by 40% over the previous year.
– Increase all services offered through the Center by 80% over the previous year.
– Arrange working capital for the initial phase of the turnkey venture.
Goal 2: Strengthen the Center’s commitment to excellence.
– Enhance customer service by offering three in-service trainings related to client satisfaction with treatment, accessibility, and staff-client interactions.
– Assess referral base satisfaction through a referral base satisfaction survey.
– Assess client satisfaction from three perspectives: accessibility, environmental factors, and treatment-related factors.
1.2 Mission
To promote the well-being of individuals and families in the Merrimack Valley community by providing accessible, quality mental health and substance abuse/addiction care for children, adolescents, adults, and their families. Emphasizing trust, respect, confidentiality, and compassion, we are committed to quality mental health care that is provided in collaboration with consumers’ overall health strategies and an array of medical services. We exist for the customer/client.
1.3 Keys to Success
– Secure working capital by start of project.
– Be profitable by the seventh month of the first fiscal year.
– Be cash flow positive by the seventh month of operation.
– Be affiliated with a well-respected community acute-care hospital.
– Establish managed care friendliness through cooperation, accessibility, and clinical focus.
– Increase community awareness of services provided by the Center.
– Ascertain a Medicaid provider number and develop an interim plan during the application phase.
– Foster staff commitment to excellence as evidenced by the Center’s growth and customer satisfaction.
– Provide accessibility and responsiveness to the needs of the Center’s customers.
– Function as an organization that is fluid, responsive, and willing to change to meet the frequent shifts of the behavioral health industry.
The Amesbury Psychological Center is a for-profit behavioral health company located in Amesbury, Massachusetts. It was founded through the privatization of an existing mental health center that was part of the Anna Jaques Hospital psychiatry program. The transfer of clients to the Center from the Outpatient Mental Health and Addiction Center was an effort to provide uninterrupted, continued quality services and expand the network of providers. The privatized center ensures continued access to quality, accessible mental health care in the Merrimack Valley area.
History
Although the Center is a new company, it is taking over the operation of an existing full-service mental health center. Prior to the privatization of the Outpatient Mental Health and Addictions Center, the Center was part of Anna Jaques Hospital’s Psychiatric Services Program, which offered inpatient and outpatient services. Currently, there are approximately 565 active cases and 233 inactive cases that use the Center’s services on an as-needed basis. The Center is located at the Amesbury Health Center, a facility owned by Anna Jaques Hospital. The Amesbury Health Center, formerly a city-owned community hospital, is a four-story brick building modified to accommodate a child inpatient unit and medical office spaces, including the mental health center.
The outpatient center originally operated as a psychopharmacology center at Anna Jaques Hospital before moving to the Amesbury Health Center in 1995. In 1998, the center expanded to offer psychotherapy services, including individual, couple, family therapies, and specialized groups. It also obtained licensing to offer specialized addiction services. Since 1996, the number of visits has continued to grow, and the projected number of units of service for 2000 is 5,700.
2.1 Company Ownership
The Center is a privately-owned sub-chapter S corporation solely owned by its principal operator, John Nestor, Ph.D., M.P.A. It has been chartered and the name has been reserved with the Secretary of State’s office.
Start-up
Requirements
– Legal: $2,000
– Stationery etc.: $400
– Insurance: $500
– Rent: $900
– Redecorating and signage: $2,500
– Staff Training: $2,000
– Other: $700
Total Start-up Expenses: $9,000
Start-up Assets
– Cash Required: $101,000
– Other Current Assets: $5,000
– Long-term Assets: $0
Total Assets: $106,000
Total Requirements: $115,000
Start-up Funding
Start-up Expenses to Fund: $9,000
Start-up Assets to Fund: $106,000
Total Funding Required: $115,000
Assets
– Non-cash Assets from Start-up: $5,000
– Cash Requirements from Start-up: $101,000
– Additional Cash Raised: $0
– Cash Balance on Starting Date: $101,000
Total Assets: $106,000
Liabilities and Capital
– Liabilities
– Current Borrowing: $0
– Long-term Liabilities: $50,000
– Accounts Payable (Outstanding Bills): $0
– Other Current Liabilities (interest-free): $0
Total Liabilities: $50,000
– Capital
– Planned Investment
– Direct Owner Investment: $65,000
– Investor 2: $0
– Other: $0
– Additional Investment Requirement: $0
Total Planned Investment: $65,000
– Loss at Start-up (Start-up Expenses): ($9,000)
Total Capital: $56,000
Total Capital and Liabilities: $106,000
Total Funding: $115,000
2.2 Company Locations and Facilities
The Center is located in Amesbury, Massachusetts, and has been in the same location since 1996. It is easily accessible by automobile or public transportation and has ample parking. The Center has its own entrance on the south side of the building, ensuring moderate privacy and confidentiality. It occupies approximately 2,200 square feet with nine clinical offices and group rooms, a reception area for children and adults, a small staff kitchen and bathroom, and a business/intake office. The offices are handicapped accessible. Leasing arrangements are in process, and the Center will ask the hospital to subsidize rent for the first two years to ensure the success of the project.
Services
The Center provides an array of mental health and substance abuse services to individuals, couples, and families of all age ranges. Services include psychopharmacology, psychotherapy, substance abuse programs, and contracted mental health services. Treatment is tailored to the needs of the individual and guided by an individualized treatment plan.
3.1 Service Description
There are four components of the Center that interact closely with each other and with the consumer’s primary care physician when appropriate. Treatment at the Center recognizes the totality of the individual in their life situation, including multiple dimensions from biomedical to spiritual and external relationships. The components of the Center are:
– Psychopharmacology: Provided by licensed psychiatrists and certified nurse specialists. This service stabilizes presenting symptoms and facilitates a return to the person’s previous level of functioning. Rates are contracted.
3.2 Competitive Comparison
The Center differentiates itself by providing prompt and accurate information, good communication, and shared treatment philosophy. Services are accessible, cost-effective, and customer-directed. The Center emphasizes customer focus and stands out in terms of environment and managed care friendliness.
3.3 Sales Literature
At the time of this writing, the Center’s logo, brochure, business cards, and advertising are in development. The focus will be on selling the Center’s perceived qualities and intangibles.
3.4 Fulfillment
Fulfillment will be provided by the philosophy and principals of the business, including customer focus, quality treatment, professional expertise, compassion, trust, and hard work.
3.5 Future Services
To sustain growth and capacities, the Center must continuously strengthen customer relations and identify ongoing needs. The Center will monitor industry trends and focus on creative problem-solving solutions for service delivery and reimbursement strategies.
Market Analysis Summary
In this age of health care reform and increased use of contracts with health maintenance organizations, preferred provider organizations, and other groups, the demand for behavioral health care providers continues to decline. Customer service becomes a critical factor as managed care companies drive referrals within the industry. The Center has identified several behavioral health payors with a strong foothold in the Merrimack Valley area.
The Center’s primary customers are self-payors, Medicare, Medicaid, and managed care companies. HMOs provide insurance for approximately 51% of the population within the service area. There is an abundant supply of behavioral health providers/institutions in the Merrimack Valley and Southern New Hampshire. To obtain and maintain a foothold in the market, the Center must provide optimal, accessible, quality customer service.
4.1 Target Market Segment Strategy
To survive and grow, the Center must market its services aggressively. Referrals are primarily driven by managed care companies, Medicare and Medicaid, indemnity products, and self-payors. Focusing on and identifying the needs of these referral sources is critical for growth.
4.1.1 Market Trends
Trends in health care reengineering and managed health care will continue, but change will be less dramatic than in the past decade. Mental health parity laws should improve utilization and reimbursement rates. Managed care organizations are starting to review provider compensation packages with the intent of increasing rates.
4.1.2 Market Growth
The Center has experienced significant growth in the past three years. There is no reason to indicate that this will change. The Center is currently referring out four to five phone calls per day, and appointment wait times are significant. Adding staff and creative scheduling can positively impact the bottom line.
4.1.3 Market Needs
Children and adolescent services are in high demand. The Center’s services address these needs, and there is significant population growth projected in the area over the next decade.
4.2 Service Business Analysis
The behavioral health care industry consists of inpatient programs, residential and partial programs, outpatient group practices, and solo practices. The Center focuses on multidisciplinary group practices, both public and private.
4.2.1 Main Competitors
The Center’s main competitors are other outpatient group practices in the area.
In conclusion, the Amesbury Psychological Center aims to continuously develop, strengthen, and improve its services by fostering strategic alliances, enhancing customer service, and prioritizing customer satisfaction. The Center’s mission is to provide accessible, quality mental health and substance abuse care, emphasizing trust, respect, confidentiality, and compassion. To succeed, the Center focuses on securing working capital, being profitable, and functioning as a responsive, customer-focused organization.
Staff availability for RFPs and RFQs.
Strategies to Thwart Competition:
– Develop reputation for quality services.
– Respond to referral source needs.
– Respectfully respond to consumers.
– Develop niche markets.
– Continuum of services available.
– Child/adolescent psychopharmacologist availability.
– Increase visibility of and procedures offered by the Center.
– Strong referral base from AJH physicians.
Arbour/HRI Counseling:
Arbour/HRI Psychological Center is a moderate-size, for-profit mental health center that offers services to children, adolescents, and adults. It was recently acquired by Arbour Mental Health Systems. They have invested in refurbishing their facility for geropsychiatry. Their payor mix includes Medicare, Medicaid, self-pay, and MCOs.
Strengths:
– Size
– Good downtown location
– Resources
– Affiliations
– Geropsychiatry partial hospitalization program
– Community respectability
Potential Impact of Strengths:
– Part of a large system
– Strong referral base
– Programming/outreach home-based legal services
Strategies to Thwart Competition:
– Develop reputation for quality services.
– Respond to referral source needs.
– Respectfully respond to consumers.
– Develop niche markets.
– Continuum of services available.
– Child/adolescent psychopharmacologist availability.
– Increase visibility of and procedures offered by the Center.
– Strong referral base from AJH physicians.
Harris Street Associates:
Harris Street Associates is a multidisciplinary group practice that provides mental health services in Newburyport and Haverhill. It was established by local psychiatrists and psychologists. Their payor mix includes MCOs and some indemnity programs. They were recently purchased by H.E.S. but will be closing on October 30, 2000.
Harborside Psychological Center:
Harborside Psychological Center is a multidisciplinary mental health group practice located in Newburyport, Massachusetts. They recently added pharmacology to their services, which previously focused on psychotherapy for children, adolescents, and adults. Their payor mix includes MCOs and EAPs.
Strengths:
– Size
– Good downtown location in Newburyport
– Resources
– Community respectability
– Multidisciplinary composition of the Center
Weaknesses:
– Not close to public transportation
– Not widely known to the public
– Limited psychopharmacology time
Potential Impact of Strengths:
– Strong referral base with MCOs
Strategies to Thwart Competition:
– Develop reputation for quality services.
– Respond to the needs of referral sources.
– Respond and demonstrate respect to consumers.
– Develop niche markets, especially with children and adolescents.
– Continuum of services available.
– Availability of child/adolescent psychopharmacologist.
– Increase visibility of and procedures offered by the Center.
– Strong referral base from physicians practicing within the AJH health care system.
Market Segmentation:
The Center offers psychotherapy, pharmacology, substance abuse/addiction treatment, and behavioral health contracts. These services are provided to all age groups through individual, couple, family, and group modalities. Some customers use only one service at a time, while others use a mix of services simultaneously.
Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Psychotherapy 6% 5,784 6,793 7,374 7,846 8,348 9.61%
Psychopharmacology 0% 3,911 5,184 6,282 6,282 6,282 12.58%
IOP 0% 898 898 988 988 988 2.42%
B H Contracts 5% 0 0 2,000 2,000 2,000 0.00%
Other 0% 0 0 0 0 0 0.00%
Total 13.56% 10,593 12,875 16,644 17,116 17,618 13.56%
Strategy and Implementation Summary
The Center will focus its market activities on two market areas: the communities of Merrimack Valley, and Southern Hew Hampshire. Services will include psychotherapy, psychopharmacology, and substance abuse/addiction services.
The target customers are the consumers of mental health services, including individuals, couples, families, and groups. The breakdown is approximately 50% adults and 50% children, adolescents, and families. The second target customer is the payors, who are responsible for referrals and authorizations.
Sales Strategy
The Center’s sales strategy will target potential purchasers and referral sources of our services, including Managed Care Companies (5-6). Our niche marketing approach will be linked to our sales strategies.
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The following chart and table depict the Center’s forecasted sales. During the first year, we expect a yearly growth rate of approximately 100% from the previous fiscal year. Existing associates will remain with the Center, and several associates from a closed center will join us and bring at least sixty percent of their current caseload with them. The Center is in the process of negotiating with Harbor Schools to provide mental health services, resulting in 3,300 additional units of service. The sales forecast is also based on the assumptions that we meet projected staffing patterns, managed care contracts are transitioned to the Center without difficulty, and a Medicaid provider number is obtained without complications.
Operationally, the Center is prepared to handle growth. Support staff is in place, as are other necessary environmental resources. The immediate problem would be to transfer patients from one center to another. Through a planned transition program being driven by the therapists, it should occur without too much difficulty or confusion.
The chart and table depict a modest 18% growth rate for the second year, and a 23% growth rate for the third year. The second year growth rate will be the result of adding additional therapy hours. The third year growth will be a result of adding therapy contracts. We are in the process of negotiating with Harbor Schools to provide on sight therapy services.
Sales Forecast:
Table:
+—————————+———-+———-+———-+
| Sales | Year 1 | Year 2 | Year 3 |
+—————————+———-+———-+———-+
| Unit Sales | | | |
| Psychotherapy | 5,784 | 6,792 | 7,374 |
| Psychopharmacology/MD | 2,520 | 3,264 | 3,950 |
| Psychopharmacology/CNS | 1,391 | 1,920 | 2,332 |
| Addictions/3 hr IOP | 310 | 310 | 450 |
| Addictions/1hr IOP | 588 | 588 | 538 |
| Contracts | 0 | 0 | 2,000 |
| Other | 0 | 0 | 0 |
| Total Unit Sales | 10,593 | 12,874 | 16,644 |
| | | | |
| Unit Prices | Year 1 | Year 2 | Year 3 |
| Psychotherapy | $59.52 | $59.52 | $59.52 |
| Psychopharmacology/MD | $40.92 | $40.92 | $40.92 |
| Psychopharmacology/CNS | $32.55 | $32.55 | $32.55 |
| Addictions/3 hr IOP | $77.19 | $77.19 | $77.19 |
| Addictions/1hr IOP | $22.32 | $22.32 | $22.32 |
| Contracts | $0.00 | $0.00 | $59.52 |
| Other | $0.00 | $0.00 | $0.00 |
| Sales | | | |
| Psychotherapy | $344,264 | $404,260 | $438,900 |
| Psychopharmacology/MD | $103,118 | $133,563 | $161,634 |
| Psychopharmacology/CNS | $45,277 | $62,496 | $75,907 |
| Addictions/3 hr IOP | $23,929 | $23,929 | $34,736 |
| Addictions/1hr IOP | $13,124 | $13,124 | $12,008 |
| Contracts | $0 | $0 | $119,040 |
| Other | $0 | $0 | $0 |
| Total Sales | $529,712 | $637,372 | $842,225 |
| | | | |
| Direct Unit Costs | Year 1 | Year 2 | Year 3 |
| Psychotherapy | $35.71 | $35.71 | $35.71 |
| Psychopharmacology/MD | $28.64 | $28.64 | $28.64 |
| Psychopharmacology/CNS | $19.53 | $19.53 | $19.53 |
| Addictions/3 hr IOP | $13.12 | $27.02 | $27.02 |
| Addictions/1hr IOP | $4.91 | $6.47 | $6.47 |
| Contracts | $0.00 | $0.00 | $35.71 |
| Other | $0.00 | $0.00 | $0.00 |
| Direct Cost of Sales | | | |
| Psychotherapy | $206,558 | $242,542 | $263,326 |
| Psychopharmacology/MD | $72,183 | $93,481 | $113,128 |
| Psychopharmacology/CNS | $27,166 | $37,498 | $45,544 |
| Addictions/3 hr IOP | $4,068 | $8,376 | $12,159 |
| Addictions/1hr IOP | $2,887 | $3,804 | $3,481 |
| Contracts | $0 | $0 | $71,420 |
| Other | $0 | $0 | $0 |
|Subtotal Direct Cost of Sales| $312,863 | $385,701 | $509,057 |
+—————————+———-+———-+———-+
To effectively compete, the Center must define its value-added benefits in meeting and exceeding the needs of customers: consumers, staff and associates, payors, consultants, and referral sources. Customer needs drive our value-added philosophy and marketing strategy.
5.3 Competitive Edge
Our competitive edge lies in our associates and staff affiliations. They spread our proposition, "our mission is to meet/exceed customer’s expectations." Our affiliations with Anna Jaques Hospital and other medical group practices enable easy interaction with a strong referral base. Hard work, integrity, accessibility, experience, quality service, and customer satisfaction contribute to our competitive edge. When customers call the Center, they directly reach a person, not a voicemail message.
Targeted marketing of our services is crucial for growth. Our strategies include an emphasis on customer-driven, quality service, building relationships, focusing on five behavioral health payors, and identifying and building a niche market. Marketing tools encompass direct mail, print and audio advertising, public speaking, and relationship building with managed care corporations and individuals.
5.4.1 Promotion Strategy
Multiple strategies will promote the Center, with a focus on selling the Center throughout the process. Promotions include participation in activities related to treated disorders at the center (e.g., National Depression Screening Day).
5.4.2 Positioning Statement
Our goal is to enhance the Center’s image and reputation by being responsive, accessible, and providing quality treatment. Building relationships will cultivate our image with case managers and network managers of managed care organizations.
5.4.3 Pricing Strategy
The pricing of services provided by the Center is market-driven. Our fee structure is based on surveys of existing MCOs and other payors. To operate profitably, cost monitoring and control are imperative. We strive to obtain the highest price within the competitive range by showcasing our service as superior to competitors. Creative bundling is an example of this.
5.5 Strategic Alliances
Strategic alliances are crucial for selling more services and strengthening relationships with customers. A strong alliance with Anna Jaques Hospital is essential, along with building relationships with referral networks and medical groups within the Anna Jaques System and the surrounding community.
Management Summary
The Center’s organizational structure follows a shared services model. The founding president/director has significant experience in the human service and behavioral health industry, guiding the management philosophy of open-book management, shared responsibility, and mutual respect.
6.1 Organizational Structure
The founding president/director will manage the company. The shared service model relies on relationships to set the direction of the Center. An advisory board comprising leaders in behavioral health, managed care, organizational dynamics, and a consumer will provide guidance. The advisory management group, consisting of the Center’s staff, will regularly review financial structures, customer relations, and formulate growth, marketing, and sales goals. A customer relations committee will brainstorm ideas and plan activities to enhance customer satisfaction. Here is the organizational chart:
Amesbury Psychological Center
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