Business Plan for ABC Outpatient Facility

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Walden University *

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7100

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Medicine

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Apr 3, 2024

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Business Plan for ABC Outpatient Facility Executive Summary ABC, a not-for-profit health system, has lost market share over the past five years due to competition from other health systems and urgent care clinics. ABC may form a multi-facility outpatient center with ambulatory physician medical groups to innovate and compete. ABC's market evaluation predicts that 80% of an outpatient center's business would come from its existing facility, making this joint venture crucial. A standalone outpatient clinic loses money because the system loses money. In the face of increased competition, such an initiative must be evaluated for strategic and long-term benefits. The for-profit venture will provide surgery, urgent care, and radiology. This research will examine the joint venture's market, competitors, and services. The report will assess key financial metrics to establish the venture's feasibility and possible economic benefits for each business. With this joint venture, ABC may regain market share and rebrand as a forward-thinking, patient-centered healthcare provider. ABC may survive in the ever-changing healthcare sector with this unique method. II. Market or Competitive Analysis Healthcare providers are facing unprecedented challenges, including increased competition from alternative healthcare providers and urgent care centers. This section analyzes the current market and evaluates ABC's collaboration with ambulatory physician medical groups' pros and cons. ABC has lost market share over the past five years, according to recent market polls. This can be attributed to the heightened competition from three rival health systems operating in its primary and secondary service markets (Baker, 2001). Furthermore, a pair of nationwide pharmaceutical retail chains have established expeditious medical care facilities within the vicinity, augmenting the level

of rivalry. Consequently, ABC has faced pressure to engage in innovation and adjust to the evolving market conditions. The suggested collaboration presents a favorable prospect for ABC to recover its market share and enhance its competitive standing. ABC can expand its services and outreach by collaborating with ambulatory physician medical groups to offer primary care and outpatient services to community members. In addition, the establishment of a joint venture has the potential to assist ABC in sustaining its significance and standing as a prominent healthcare provider within the locality (Porter & Teisberg, 2006). Notwithstanding, there exist plausible hazards linked to engaging in a collaborative enterprise with ambulatory physician medical groups. As an illustration, the formation of a joint venture could potentially result in a reduction of the revenue generated by ABC. Additionally, the joint venture would need to be structured as a profit-oriented entity, thereby rendering it liable to federal and state taxation. Moreover, the duplication of equipment and staff by ABC would result in only a marginal increase in volume, rendering the venture seemingly unprofitable. Notwithstanding the aforementioned risks, the potential advantages of the collaborative enterprise surpass the potential hazards. The proposed joint venture is expected to enhance the scope and coverage of ABC's services, thereby facilitating the restoration of its market share and bolstering its competitive position vis-à-vis other healthcare providers (Baker, 2001). Furthermore, the collaborative enterprise has the potential to bolster ABC's standing as a cutting-edge and progressive healthcare organization. The suggested collaborative enterprise presents a distinctive occasion for ABC to adjust and contend in a swiftly evolving healthcare milieu. ABC can enhance its competitive standing and offer cost-effective healthcare services to the local populace by collaborating with

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ambulatory physician medical groups. Although there exist potential hazards linked to the enterprise, the potential advantages surpass the potential risks. III. Service Lines for the Joint Venture The new outpatient facility proposed by ABC and ambulatory physician medical groups will offer surgical, urgent care, and imaging services. The urgent care center will treat acute injuries and illnesses, while the surgical center will execute numerous surgeries. MRI, CT, ultrasound, PET scans, and diagnostic radiology will be offered at the medical center. The surgical center's procedures are estimated to cost 5,000 dollars for the first three years, 6,000 dollars for the next three years, and 8,000 dollars for the last four years, totaling ten years. ABC's surgical performance and market analysis inform these estimates. The surgical center's demand is likely to rise due to rising outpatient surgery demand. General, orthopedic, ophthalmological, and urological surgeries can be performed at the surgical facility. Appendectomy, hernia repair, and gallbladder removal are examples of general surgery. Orthopedic surgery offers joint replacements, rotator cuff repair, and spinal surgeries. Cataract, corneal, and LASIK surgery are ophthalmologic procedures. Prostate, kidney stone, and bladder surgery are urologic surgeries. The joint venture can meet regional demand for outpatient surgical services by offering many treatments. Radiology center procedures are expected to reach 11,250 in the first year, 12,500, 13,750, and 15,000 in the next three years, 17,500, 18,750, 20,000, 21,250, and 22,500 in the last two years. These forecasts reflect the region's expanding radiology demand and ABC's radiological services. The radiology center will provide diagnostic and treatment services. Diagnostic radiology uses X-rays, CT scans, and MRIs. Therapeutic radiology will treat cancer with radiation. The

radiology center will offer ultrasonography for non-invasive imaging. The clinic will also offer PET scans for cancer detection. Urgent care center procedures are expected to rise from 31,250 to 37,500 to 50,000 during the next four years. These projections reflect the region's rising urgent care demand and competition from other healthcare providers. Urgent care will treat acute injuries and diseases. These services will treat minor ailments like colds and flu, injuries like cuts and sprains, and diagnostics like lab testing and X-rays. The urgent care center will relieve emergency rooms and hospitals by offering economical, high-quality care. The new outpatient facility will offer surgical, urgent care, and imaging services from the proposed joint venture. These services will meet regional outpatient care demand and boost ABC's competitiveness. The joint venture can help ABC maintain its regional leadership by providing high-quality, affordable healthcare to the community. IV. Financial Implications of the Joint Venture for Each Organization The Joint Venture outpatient facility's financial predictions show huge losses in the first few years. Without the impact on the main facility, the Surgical Center is anticipated to lose $20,019,580 in Year 1, $20,378,497 in Year 2, and $20,745,132 in Year 3. For the first three years, the Radiology Center expects losses of $32,270,438, $32,555,346, and $32,840,150. In Years 1–3, the Urgent Care Center is expected to lose $47,200,930, $48,125,261, and $49,069,260. The Joint Venture outpatient clinic will lose $99,490,948, $101,059,104, and $102,654,542 in the first three years. The major facility, the Surgical Center, is expected to lose $23,107,080 in Year 1, $23,558,622 in Year 2, and $24,020,661 in Year 3. For the first three years, the Radiology Center expects losses of $34,281,375, $34,856,753, and $35,447,643. For the first three years, the Urgent Care Center is expected to lose $48,978,274, $49,955,925, and $50,954,844. The Joint Venture outpatient clinic will lose $106,366,729, $108,371,299, and $110,423,148 in the first three years. The venture loses money for 10 years straight.

The Joint Venture offers several economic benefits for each organization, even when financial predictions show large losses in the first ten years (Harrison, 2006). ABC may enter a booming market and compete with regional healthcare systems and urgent care facilities through the Joint Venture. The Joint Venture can also increase ABC's market share and diversify its revenue streams, lowering its dependence on the main facility. The Joint Venture also improves patient care and happiness. The Joint Venture allows ambulatory physician medical organizations to grow and reach more patients. The Joint Venture allows them to cooperate with a recognized hospital system and boost their regional profile (Harrison, 2006). The Joint Venture also allows ambulatory physician medical groups to share the costs and benefits of managing an outpatient clinic. The Joint Venture may harm both organizations. As co-owners, the ambulatory physician medical groups may dilute ABC's outpatient facility income. ABC's financial risk may increase if the Joint Venture requires large upfront financing. The Joint Venture may take time and resources from ambulatory physician medical groups' core business. The Joint Venture may increase regulatory and legal concerns for ambulatory physician medical groups. ABC will also gain market share from the ambulatory physician medical group-multi-facility hospital system joint venture. The joint venture will earn large income over the next decade despite the costs, confirming its long-term viability. To establish joint venture feasibility, net present value, internal rate of return, and payback time financial indicators must be considered (Al-Mazroei et al., 2020). The net present value (NPV) of future cash inflows and outflows determines a project's profitability. A positive NPV suggests profitability, while a negative NPV indicates loss. The joint venture's NPV is negative for the first three years, indicating that it won't be viable. From year four to year ten, the joint venture's NPV is still not positive, showing long-term loses. Another financial indicator that gauges project profitability is the internal

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rate of return (IRR). IRR compares project profitability to other investment opportunities. The joint venture's IRR is negative, again showing a long-term loss. Project payback is the time it takes to return initial investment. A shorter payback period makes the project more feasible by recovering the initial expenditure sooner. The joint venture's does not have a payback period, based on data estimates for the next ten years, making the project not be feasible. Finally, a collaborative venture between ambulatory physician medical groups and a multi- facility hospital system will help ABC reclaim market dominance. Despite the costs, the joint venture will still not generate significant revenues, making it a not viable. To establish joint venture feasibility, net present value, internal rate of return, and payback time financial indicators must be considered. According to data forecasts for the next 10 years, the joint venture's NPV is negative for the first three years but still does not become positive from year four to year ten, showing long-term loses. The joint venture's IRR suggests long-term loses. The project is possible but will result in loses. V. Recommendations Market analysis, service lines, and financial metrics can be used to advise decision-makers on the joint venture between ambulatory physician medical groups and a multi-facility hospital system. The joint venture will not be successful for the first ten years and the NPV, IRR, and payback period financial measures show long-term losses. Regaining market share and entering a new market will require significant investments and increased cost of procedures. Second, decision-makers should emphasize surgical center service line development. Surgical center procedures will be in high demand during the next decade, making them profitable if costs are increased. To attract more patients and improve the surgical center's reputation, decision-makers should invest in advanced

surgical equipment and technology (Fache, 2020). The joint venture might also work with surgical center experts to create new surgical techniques to attract more patients and boost its reputation. Thirdly, decision-makers should investigate insurance company partnerships to boost joint venture revenue. By covering patients' bills, insurance companies can boost the joint venture's revenue. The joint venture can negotiate advantageous insurance rates to boost revenue and reputation as a high-quality healthcare provider. Fourthly, decision-makers should establish a marketing strategy to promote the joint venture and attract new patients. Local media can help the joint venture promote its services. The joint venture can also work with local community organizations to deliver healthcare to marginalized communities, boosting its social responsibility. Finally, decision-makers should anticipate and plan for joint venture startup obstacles. Physician ownership may dilute ABC's income. To protect ABC's revenue, decision-makers can negotiate a reasonable revenue-sharing arrangement with physicians (Fache, 2020). Malpractice lawsuits might damage the joint venture's brand and earnings. Decision-makers can work with legal professionals to reduce malpractice lawsuit risk. A joint venture between ambulatory physician medical groups and a multi-facility hospital system can create significant money over time but only if the correct strategies are applied. Decision-makers should prioritize surgical center service line development, cooperate with insurance companies to increase income, design a marketing plan, and analyze potential problems and solutions. These suggestions can help the joint venture become a successful healthcare provider, reclaim market share, and expand into other markets. VI. Conclusion A joint venture between ambulatory physician medical groups and a multi-facility hospital system to provide primary care and outpatient services to the community is not viable and might not

benefit both organizations. Market study suggests the joint venture can help ABC reclaim market share and expand into new markets but the data shows the venture may incur significant losses. While the surgical facility, radiology center, and urgent care center have high demand, the project's financial metrics—NPV, IRR, and payback period—indicate long-term losses. Physician ownership could dilute ABC's income and malpractice lawsuits could damage the joint venture's reputation and revenue. Thus, decision-makers must carefully consider these challenges and devise solutions. According to the recommendations, decision-makers should emphasize surgical center service line development, cooperate with insurance companies to increase revenue, design a marketing plan, and analyze potential problems and solutions. The joint venture can succeed, attract more patients, and build a socially responsible healthcare reputation by following these suggestions. By using ambulatory physician medical groups and the multi-facility hospital system, the joint venture can improve community care. The joint venture can offer more convenient, accessible, and cheap primary care and outpatient services than competing healthcare systems and urgent care centers. Modern surgical equipment and technology can help the joint venture attract more patients and build its reputation as a high-quality healthcare provider. However, the long-term losses prove the project is not viable unless the recommendations are followed.

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References Porter, M. E., & Teisberg, E. O. (2006). Redefining Health Care: Creating Value-based Competition on Results . Baker, L. C. (2001, April 1). Measuring competition in health care markets. PubMed Central (PMC). https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1089203/ Harrison JP (2006). The impact of joint ventures on U.S. hospitals. J Health Care Finance. Spring;32(3):28-38. PMID: 18975730. Al-Mazroei, A., Bener, A., & Arif, M. (2020). Joint venture healthcare system as common practice in developing countries: Game changing on assessing health services. International Journal of Preventive Medicine . https://doi.org/10.4103/ijpvm.ijpvm_507_18 Fache, N. H. M. (2020, November 16). Pros and Cons of Medical Practice Joint Ventures. Physicians Practice . https://www.physicianspractice.com/view/pros-and-cons-medical-practice-joint- ventures

Business Plan for ABC Outpatient Facility

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