Business Plan Development

1. Business Plan Development 11/17/2006

2. Who Are We (UMHC)?

3. Who Are We? • Department of External Affairs • Strategic Planning • Planning and Business Development • Planning & Data Analysis • Physician Support Services • Employer Support Services • Physician Recruitment • PR, Marketing, Web Communications • UMHC Contracting • Managed Care, VA, etc.

4. Today’s agenda • Course Description • Purpose of Business Planning • Steps in Business Planning • Business Plan Elements • Exercises • Wrap up and call it a week!!

5. Course Description • Developing a successful business plan/proposal • Purpose of planning • Types of plans • Business planning process at UMHC • Essential elements of business plan • Tools to assist with data collection/analysis • Participants in planning process • Making the case to executive leadership • Hands-on experience in developing business plan • Relate this to other types of business plans

6. Purpose of Planning • To develop organizational direction / goals • Consistently communicate organization’s goals (so everyone is going the same direction) • Financial/Capital Planning & Budget Process • Facilities • Equipment • Workforce - recruitment/retention of physicians and staff • Business Development • Program Integration • Center of Excellence Development

7. Pieces of One Puzzle – Strategic Plan Strategic Plan Budget Operational Plan Business Plans Financial Plan

8. Strategic Plan (5-10 years) Financial/ Capital Plans (3-5 years) Financial Budgets (1-2 years)

9. Strategic Plan • Objective: Defines ideal future vision for organization • 5-10 year focus (although in health care, 10 years is really too far into the future) • Guiding principle is defined by mission/values • Prepare for opportunities and threats • Demographic shifts • Increasing demand for care • Consumer awareness • Shortage of specialists and other health professionals • Cost of malpractice insurance • Costs of providing service (facilities/technology) • Competition • Capital markets • Governmental programs

10. Financial/ Capital Plans • Objective: To develop departmental financial plan that supports long term objectives of organization as identified in strategic plan (3-5 year focus) • Enables fiscal cycle budget development • Ensures budget process supports operational and business planning • Capital • Facilities • Equipment • Recruitment (Clinical, Administrative, Support)

11. Operational/ Tactical Plans • Objective: Plan for allocation of resources and department development (1-3 year focus) • Provides structure for financial/capital plans and budget development • Need to incorporate • Business plan objectives • Recruiting plans (workforce plans) • Financial and capital plans • Impact on other departments/ areas • Implementation Plan/ Time line

12. Business Plans • Objective: Define specific services/ programs that support operational and strategic plans • Plan to allocate resources for specific objectives, focus on key points/ strategies, prepare for specific opportunities/threats • Includes operational and financial plans specific to that business plan • Such plans must align with strategic plan as well as departmental, operational and financial plans

13. Moving on…. Business Planning

14. Business Planning – General Process • Define Product/Service • Involve the right people • Develop business plan/ business case • Strategic Impact • Market Analysis/ Impact • Financial Analysis/ Impact • Programmatic Analysis/ Impact • Marketing Plan • Evaluation/ Contingency Plan • Present plan and be prepared! • Presentation of written document • Unanticipated questions

15. Business Planning – Resources • Straight to the Source • Administrative and Clinical Leads • Clinical Staff including physicians, nurses, etc. • Administration including directors and department managers • Other internal resources (Analyzer, IDX, DKD, etc.) • Literature • Advisory Board • AHA, MHA, HFMA, ACHE • Centers for Disease Control (CDC) • Centers for Medicare and Medicaid Services (CMS) • Professional Organizations (ACS, etc.) • Journals (Modern HealthCare, HFMA, etc.) • Market Data • HIDI (MHA) • Thomson Medstat Market Expert (Solucient) • UHC • Advisory Board

16. UMHC Business Planning Process - Steps • Submit idea to Planning and Business Development • Planning Team reviews/develops business case or business plan as necessary • Clinical & administrative leads identified to work with Planning Team • Representatives from Business Development, Marketing, Planning & Data Analysis, Hospitals and Clinics Administration, Finance, SOM, UP • Executive Leadership reviews case/plan for approval • Time frame depends on complexities of each plan • Imaging center – 1 month • Cancer center – 10 months

17. Business Plan Types/ Examples • Clinical Service Line Development • Major service lines as identified in strategic plan incl. surgery, cardiovascular, neurosciences, oncology, orthopaedics • Includes planning for facilities, recruitment, equipment, etc. • Clinical program specific plans • Digestive Diseases Center at Fairview (new) • Orthopaedics Institute (new but expanding service) • Cancer Center (new/expanded) • Imaging Center – next to HyVee (new) • Women’s Health Center (new) • Air Ambulance Program (expansion) • Bariatrics Program (new) • Medical bariatrics (expansion of new program)

18. Business Plan Types/ Examples • Non-clinical/ Other • Coffee Kiosk • Food Court • Patient “Food on Demand” Service • VIP Services • Valet parking program • Internet café • Patient Education Resource Center • Call Center • Developing a guest house for patient families • Purchasing new equipment

19. Business Plan Types/ Examples • Facility Plans • New • Expansion • Renovation • Capital Equipment (program-specific) • New • Replacement • Physician Recruitment • Must be part of workforce plan • New • Succession

20. Primary Elements of Business Plan • Executive Summary • Definition of Product/ Program/ Service • Strategic Impact/ Analysis • Market Impact/ Analysis • Financial Impact/ Analysis • Programmatic/ Operational Impact • Marketing Plan • Evaluation/ Contingency Plan

21. Primary Elements of Business Plan • Executive Summary (do last) • Summary • Definition of Project/ Proposal • Critical success factors • Advantages/ Disadvantages • Strategic Impact • Market Impact • Financial Impact • Programmatic/ Operational Impact • Recommendations/ Next Steps

22. Primary Elements of Business Plan • Definition of Product/ Service • Objective/ What will this product/service accomplish? • Is this a unique product/service in market? • Mission/Vision contribution • Competitive advantage • Services included • What will be required to get it done? • Capital • Resources • Equipment • Staff • Space/Facilities

23. Primary Elements of Business Plan • Strategic Impact • Fit with organizational direction/ mission/ vision as identified within strategic plan? • Defined as Strategic or Maintenance Investment? • How are other services impacted? Will there be required investment? • Ancillaries • Complementing specialties

24. Primary Elements of Business Plan • Market Impact/ Analysis • Trends - National/ Regional/ State/ Local • Target market • Who’s your consumer? • Geographic area • Demographics – age/sex, etc. • Organization’s market position • Inpatient market share • Is this a new and unique product/service in market? • Competition • Projections/ Volume Growth • Opportunities/ Threats • Market potential volume growth • Organization’s potential volume growth

25. Primary Elements of Business Plan • Financial Impact/ Analysis • What is financial impact to… • health system? • member hospitals? • physicians? • Pro Forma Financial Statements • Assumptions* • Scenarios - best, real, worst case • Income and cash flow statements • Source of funds: Development, Bonds, Borrow, Investors/ Joint ventures • Financial indicators: Payback, ROI, Breakeven, Net Present Value • Start up costs • Real estate • Facility • Capital equipment • Recruitment

26. Primary Elements of Business Plan • Financial Impact/ Analysis – Assumptions* • Payer mix • Volume projections • Market share • Incidence/ Prevalence rates • “Willingness to seek service” rates • Inflation factors • Collection rate • Reimbursement trends • Third party payers

27. Primary Elements of Business Plan • Programmatic/ Operational Impact • Management & Organizational Plan • Organizational structure/ Ownership • Management - Clinical/ Administrative • Job descriptions • Compensation • Staffing • Job descriptions • Compensation • Productivity standards • Management Policies/ Procedures • Recruitment/ Selection • Training/ Development

28. Primary Elements of Business Plan • Programmatic/ Operational Impact • Resource/ Operational Plan • Internal Environment Analysis (organization) • How is service provided now? • GAP analysis (what’s missing?) • Cannibalization Factor • Interaction with other departments/ clinics/ programs/ services • Location/ Building/ Space • Equipment • Hours of operation • Patient care flow • Operations flow • ITS and telecomm needs • Scheduling/ Billings/ Collections • Implementation time line

29. Primary Elements of Business Plan • Marketing Plan • Market Definition • Geographic service area • Demographics • Age, sex, etc. • Payer mix • Target audience • Referring physician vs. patient • Internal vs. external • Media/ Public Relations/ Communications Plan • Press releases, brochures, articles • Advertising • Print • Direct mail • Radio • Television • Internet

30. Primary Elements of Business Plan • Evaluation and Contingency Plan • Critical implementation milestones • Review criteria and dates • Outcomes and Performance/Variance analysis • Deactivation plan (if necessary) • Appendices • Floor plans • Policies/ Procedures • Job descriptions • Productivity standards • Other supporting documents

31. Questions to Ask for Business Plans • Does the idea/ proposed project … • support organizational vision, mission and goals? • avoid duplication of programs, services, facilities? • avoid cannibalization of current volumes? • include cost‑effective utilization of resources? • require capital investment? require new space? • have clinical relevance? (for clinical programs) • respond to customer needs currently not being met? • facilitate/enhance integration of programs/services?

32. Questions to Ask for Business Plans • Does the idea/ proposed project … • meet community need? • is there potential to increase market share? • achieve an acceptable rate of return on investment? • help to improve the quality of services? • help to develop collaborative relationships with constituencies? • help to enhance an environment that supports and encourages professional growth and development? • meet regulatory approval (if necessary)?

33. Business Plan Mistakes • Putting it off • Cash flow casualness • Idea inflation • Fear and dread • Vague goals • One size fits all • Diluted priorities • Overstated growth projections Source: Junior Achievement Entrepreneur Center

34. Other Mistakes • Cannibalization not addressed • New versus reassigned business • Too much data and not enough information • Not involving the right people • UMHC • University Physicians • School of Medicine • School of Health Professions • Implementation • No Contingency Plan

35. How Does It All Come Together? • Strategic Plan is master blue print • Financial/ Capital Plan • Can the goals identified in strategic plan be achieved? • Aligns with SOM and Hospital budgets • Aligns with operational, business, strategic plans • Operational Plans • What needs to be done to meet strategic plan goals? • Business Plans • What specific programs will support strategic plan?

36. How Does It All Come Together? Enterprise Strategic Plan Business Plans Business Plans Business Plans Departmental Operational Plans Execution & Evaluation Financial/ Capital Plans Financial Budgets

37. A Final Thought…………. Some men see things as they are and say why….. I dream of things that never were and say why not? ~George Bernard Shaw