week 5 (550)

DRAFT

Lithotripsy Service

Business Plan Proposal

Prepared by: Jimbob Smith

Date: September 21, 1877

This document is confidential and has been made available to the individual to whom it is addressed strictly on the understanding that its contents will not be disclosed or discussed with third parties.

Table of Contents/ Checklist

In general, all Business Plans should include the following elements to allow for a thorough analysis. Use this list as a guide to help you think about the types of items that should be included in your proposal. The detail/effort that goes into the development of any business plan should be commensurate with the project’s level of risk. Indicate yes/no as appropriate for an item if it has been included/excluded from your proposal.

YES	NO	CHECKLIST	PAGE NUMBER
X		I. Executive Summary	3
X		II. Project Description	4
X		III. Strategic Rationale	5
X		IV. Mission Discernment and Community Benefit	5
X		V. Industry and Technology Trends	6
X		VI. Market and Competitive Analysis	7
X		VII. Legal and Regulatory Analysis	10
X		VIII. Operational/HR/Clinical Considerations	11
X		IX. Risks, Alternatives and Contingencies	11
X		X. Financial Performance	12
X		XI. Implementation Plan	12
X		XII. Performance Measures	13
X		XIII. Appendices	13

I. Executive Summary

· Kent General Hospital is considering providing lithotripsy services on campus. The urologists have approached administration about their desire to have the services at the hospital.

· Kent General Hospital has committed their case numbers for a mobile route for CON purposes that provides services to Urban General and St. Mark’s Hospitals. The vendor is only considering adding Kent General Hospital to their route. Other service providers have approached Kent General Hospital as well.

· The area urologists have formed a joint venture with Maple Hill Hospital, Forest Hill Hospital, and National Kidney Stone Management under the company name of Kent Lithotripsy LLC. They have submitted a CON to replace existing unit to a mobile route. In addition they have submitted a similar CON for one of Forest Hill’s fixed units and are looking at options to add a third unit.

· Lithotripsy services would be provided in one of the hospital’s operating room. The vendor provides some staff and training.

· Three financial scenarios were considered that looked at volume at three different levels. Financially this service is profitable based on the three scenarios.

· Recommendation: Set up meeting with the urologists to discuss bringing this service to the hospital. At the same time, move forward with the CON application process to provide lithotripsy services at Kent General Hospital Health Care.

II. Project Description

· Kent General Hospital is considering whether to offer lithotripsy services at the hospital through the use of an existing mobile route vendor. The urologists that are on staff at the hospital have approached administration about wanting this service at the hospital. The scope of the project would be that Kent General Hospital would provide lithotripsy services at the hospital for one day every two weeks depending on volume levels. The unit will be moved in and out of one of the operating rooms at the hospital.

· The costs associated with providing the service varies from $1,200 $1,450 per procedure to the vendor and basic supplies and staffing. The charges from the vendors one of which has negotiated with Anderson Health while one provider has not. The negotiated price includes the need to do at least five cases per day for CON requirements and financially three cases per day. Kent General Hospital would have to seek CON approval to provide this service.

· The purpose of this proposal is to determine if Kent General Hospital should provide lithotripsy services. There is the potential for business growth with this service as well as a generator of revenue for the hospital. This would also strengthen the community perception of Kent General Hospital being the leader in kidney related health care issues.

· This proposed project would be an expansion of services provided by Kent General Hospital. This would be another step in the process of making Kent General Hospital a full service hospital. The service is basically a “turn-key” operation with the mobile route vendor coming in providing the service. The surgery department will be impacted the greatest if this project is implemented. There may have to be some adjustments in terms of scheduling rooms if lithotripsy is provided. Though this may not be a major issue once the two new surgical suites became operational early 2005.

III. Strategic Rationale

Strategic Fit

· Supports the mission by improving the health of our community.

· Assists the strategic direction of Kent General Hospital to become a premier healthcare system in west Michigan with a unique blend of primary and specialty care.

· Improve quality through increased referrals and greater integration between primary care and specialty care programs.

· Enhances financial stability.

· Many of the other member organizations within the Anderson Health System already provide this service and currently use one of the mobile route vendors that Kent General Hospital is considering.

· The hours the room is in use for lithotripsy can be counted as hours for CON Standards.

Stakeholder Impact

· Positive impact on patient satisfaction.

· Technologically superior to the current fixed unit that is currently in the community.

· Continuity of care between specialists and primary care physicians.

· The urologists on staff have approached Kent General Hospital about providing this service at the hospital.

· Need to credential physicians for lithotripsy.

· Vendor will provide some staff and will train hospital staff.

· No new staff will be required.

IV. Mission Discernment and Community Benefit

· A mission discernment was not performed for this project. Lithotripsy services will be available for everyone in the community just as the other services provided by Kent General Hospital. It will provide a community benefit by being another service the hospital provides. The benefit for the patient is that they can be treated here at Kent General Hospital and not have to go to another hospital for services.

V. Industry and Technology Trends

· Extracorporeal shockwave lithotripsy is a process where high intensity sound waves are focused onto a point and coupled into the patient’s body. The stone is broken up into fragments by energy pulses, which makes it easier for the patient to pass. The patient lies on a treatment table in an operating room with an analgesic given to the patient. The procedure takes about 45 minutes depending the size and number of stones. During the procedure the patient is awake and fully responsive. This procedure is used in treating kidney stones, ureter stones, bile-duct stones, and gallstones. It is a non-invasive procedure. Most insurances cover lithotripsy services. The patient is then placed in the recovery room.

· Types of Mobile ESWL Systems:

Dornier Compact Delta

		Storz Modulith SLK

Features:

	Dual location via X-rays and ultrasound
	Alternate upper/lower table positions
	Three-dimensional in-situ X-ray location
	High-quality image information with minimum radiation exposure
	Real-time monitoring of the progress of treatment via ultrasound
	High-resolution image-intensifier TV chain

Source: United Medical Systems Inc.

· This investment would be a new service at Kent General Hospital.

· Services at the hospital would start off as one day every two weeks contingent on CON approval for the hospital and the mobile route provider if United Medical Systems / Henry Ford Mobile route is selected. Depending on volume levels services could be provided more often.

· Anderson Health has been contacted about this proposed project and has provided assistance in the areas of CON and what other member organizations are doing.

· St. Mark’s has been contacted for their experience with lithotripsy.

· Could utilize same mobile route provider.

· Vendor that St. Mark’s uses has negotiated contract with Anderson Health for charges per procedure.

Mobile route vendor may be able to provide external benchmarking information.

VI. Market and Competitive Analysis

· The service area is the same as the one used for strategic planning.

· Thirteen urologists who have privileges at Kent General Hospital.

· Nine of the physicians have privileges at both Kent General Hospital and Maple Hill.

· One physician has privileges at Kent General Hospital and Urban General.

· One urologist has privileges at all three hospitals.

· Two physicians have privileges only at Kent General Hospital.

· Within the service area of Kent General Hospital, based on zip codes, there are currently three hospitals that are providing lithotripsy services.

· St. Mark’s and Urban General Hospitals are part of a mobile route. They are the only two hospitals in west Michigan that are on the route. Both hospitals have use of the unit for one day a month for a total of ten (10) hours at each site. For both sites to gain approval from CON data from Kent General Hospital was committed to the proposals. The vendor for this mobile route is National Medical Systems Inc., which is based in Kentucky. Currently both sites are doing 10 - 14 procedures per day.

· Maple Hill Hospital currently owns a fixed lithotripsy unit. This unit is fully depreciated and is at least ten years old. Case levels at Maple Hill have not met the required 1,000 level per year to replace the unit under CON standards. Maple Hill has recently submitted a Letter of Intent to establish a mobile route as Great Lakes Mobile Lithotripsy, LLC. Buick Hospital and Maple Hill’s Paris Campus are the only hospitals to submit a LOI to serve as a host site for this unit. Maple Hill is having some difficulty getting the required case levels to meet the CON standards. Since they are already providing services in the service area Kent General Hospital could be a host site for their mobile route if they reach the threshold.

Potential Providers

· American Shockwave Services, Ltd., is a company based in California.

· Approached the urologists at Kent General Hospital about providing this service.

· Currently they do not provide services any where in the state.

· It is not known what the history of this company has been like.

· Physician ownership in the unit may have legal issue.

· Do not have CON approval in Michigan.

· Would need at least 100 procedure commitments from this service area.

· Contacted Kent General Hospital about services.

· Kent General Hospital cannot commit data.

· No longer considered an option by urologists or Kent General Hospital

· National Medical Systems

· Expanding mobile route.

· Area hospitals currently on route.

· Data is already committed for four more years.

· Have CON approval.

· Committed 2 days - 10 hours each per month for us on new route.

· Maple Hill Hospital

· Submitted Letter of Intent for mobile route.

· Looking for partners.

· Mobile route to replace fixed unit.

· Kent General Hospital cannot commit data.

· See the following tables:

SWOT Analysis

Provider	Strengths	Weakness	Opportunities	Threats
Maple Hill Hospital Have fixed looking at mobile route	· Have a fixed unit currently · Local provider · Physicians perform procedures there currently · Submitted Letter of Intent for mobile route	· Older fixed unit · Struggling to meet CON standards for replacement · Cannot commit data to their mobile route · Cannot currently do all types of stone procedures with fixed unit · Could not provide services for four years	· Provide lithotripsy services · Collaboration with Maple Hill · Have a say in what Maple Hill does with the mobile unit · Financial · One step closer to full service hospital	· Do not get enough commitments for CON replacement · Market share would be shrunk since Kent General Hospital could not provide services for a few years · May take a back seat to Maple Hill’s wants · Physicians might be upset with who the provider is
American Shockwave Mobile route not in Michigan	· Started relationship with physicians · Newer equipment	· No presence in Michigan currently · No CON · Struggling to get hospitals on board · Perceived issues of past legal troubles · Cannot commit data to their mobile route · Could not provide services for four years	· Provide lithotripsy services · One step closer to full service hospital · Increase market share · Perform procedures that cannot be done at Maple Hill · Financial	· Cannot get CON approval · Changes in Stark regulations · Market share would be shrunk since Kent General Hospital could not provide services for a few years · Maple Hill gets approved for mobile route and this one does not
National Medical Have mobile route in Michigan	· Have a mobile unit/route · Looking to expand route · Past experience with Anderson Health · St. Mark’s is on current route · MIBD data committed to their route for four more years · Only new hospital they are considering is Kent General Hospital · Newer equipment	· Current route at full capacity · May not be able to get ideal scheduling days for services	· Provide lithotripsy services · One step closer to full service hospital · Perform procedures that cannot be done at Maple Hill · Increase market share in this area · Could start after CON approval · Financial	· Physicians might be upset with who the provider is · Maple Hill gets approval for their unit · Do not get approval to expand route

This review of competitors is two fold. One of the tables looks at the potential providers of the lithotripsy services via the mobile route and compares them. The second table looks at area hospitals that currently provide this service in our market.

Service Providers

	Maple Hill Proposed	American Shockwave	National Medical
	Mobile	Mobile	Mobile
Name of equipment	Not determined	Physician choice suggested HealthTronics LithoTron	Dornier Compact Delta or Storz Modulith SLK
Features of equipment	Not determined	Not determined / not known	· Dual location via X-rays and ultrasound · Alternate upper/lower table positions · 3-D in-situ X-ray location · High image w/min radiation exposure · Real-time monitoring of pt treatment via ultrasound · High-resolution image intensifier TV chain
Other services	Not determined	· One technologist to operate equipment · Tech assistant · Electrode · Maintaining of mobile equipment	· Engineer to set up calibrate and test equipment · Certified Tech to assist in the operation of equipment · Engineer to break down equipment
Cost per procedure	$1,450 per	$1,500 – 1,800 Government insurance $500- 600 Hospital is paid other insurance	$1,200
Number of procedures needed to do per day	Not determined	Not known	3 to provide service 5 to keep CON
Length of Agreement	Not determined	3 years	5 Years

Hospitals Currently Who Provide Lithotripsy Services

	Maple Hill	Urban General	St. Mark’s
Type of unit	Fixed	Mobile - Mayo Route	Mobile - Mayo Route
Age	10 years or older	New	2001 or new depending on which unit
Water bath	Yes	No	No
Service provider	Self	National Medical – Dornier unit	National Medical – Dornier unit
Performed services	Kidney stones	Kidney, ureter, bile-duct stones and gallstones	Kidney, ureter, bile-duct stones and gallstones
Kent General Hospital physicians have privileges	Yes 10	Yes only 2	No
Charges	$5,000 – 7,000 estimate	$5,000 – 7,000 estimate	$7,065
Use of machine	24 hours 7 days a week	10 hours once a month	10 hours once a month

VII. Legal and Regulatory Analysis

· The CON Standards for lithotripsy was approved at the March 9, 2004 and are effective June 4, 2004.

· Kent General Hospital would not meet the standards for a fixed unit.

· Potential mobile route host site.

· Non-substantive application

· Would need to meet the following section in standards:

· “Section 3. Requirements for all applicants proposing to initiate a urinary extracorporeal shock wave lithotripsy service

Sec. 3. (1) An applicant proposing to initiate a UESWL service shall demonstrate

each of the following:

(c) The proposed UESWL service shall be provided at a site that provides, or will

provide, each of the following:

(i) On-call availability of an anesthesiologist and a surgeon.

(ii) On-site Advanced Cardiac Life Support (ACLS)-certified personnel and nursing personnel.

(iii) On-site IV supplies and materials for infusions and medications, blood and blood products, and pharmaceuticals, including vasopressor medications, antibiotics, and fluids and solutions.

(iv) On-site general anesthesia, EKG, cardiac monitoring, blood pressure, pulse oximeter, ventilator, general radiography and fluoroscopy, cystoscopy, and laboratory services.

(v) On-site crash cart.

(vi) On-site cardiac intensive care unit or a written transfer agreement with a hospital that has a cardiac intensive care unit.

(vii) On-site 23-hour holding unit. “

Source: Michigan Department of Community Health Certificate of Need Section

· Kent General Hospital and the mobile route service coordinator would have to both apply for CON approval.

· Kent General Hospital does meet the standards and would get approval from CON.

· Antitrust, anti-kickback, and federal Stark regulations lithotripsy is not one of the services that would be considered a Stark violation for physicians to refer to where the physician has a financial relationship with the service. The argument is that either the patient has a stone or not. Could change in the future and have an impact on those providers who took advantage of the opportunity.

VIII. Operational/HR/Clinical Considerations

· The services would fall under the direction of the surgical management team. Staffing issues vary depending on the service provider. Most of the providers provide technologists for the unit. The providers will demonstrate that their employees are certified to operate the units. Kent General Hospital would ensure that the physicians are qualified to use equipment and have privileges. Training would be provided to staff on the equipment. Existing staff potentially could be shifted to the service the days it is provided at Kent General Hospital. This is done at to both St. Mark’s and Urban General Hospitals.

· In addition to staff, supplies are another consideration. The supplies used are similar to the supplies that are currently already available within the hospital. Mercy General’s information was reviewed to see if there were any special requirements for supplies. It appeared that there was not.

· The unit needs to be located in an operating room that has lead lined doors and windows. Operating room #5 would meet this requirement.

· The procedures and hours can be used for CON purposes to help maintain required CON levels. This is important since Kent General Hospital is adding to new rooms in December.

· For the service to continue at Kent General Hospital the mobile route vendors will need to average so many procedures at each location to keep their CON. One of the vendors has mentioned they would need to have at least five procedures per day to keep their CON.

IX. Risks, Alternatives and Contingencies

· Kent General Hospital risk would be selecting a service provider that cannot get enough commitments for a mobile route.

· Kent General Hospital not having enough cases to meet the required numbers for the route provider. However based on the projections and other hospital’s performances it is a very small risk.

· The physicians’ response to the hospital’s selection of a vendor may be a risk. The physicians have been in contact with one provider who could be different than the provider the hospital chooses. It is not known if the physicians and the vendor talked about physician investment into their service or not. If the true intent of the physicians is to have the service provided at Kent General Hospital the provider should not be a major issue.

· In looking at alternatives to not doing lithotripsy things would basically remain the same as they currently are in the market with Maple Hill and Urban General providing services. Kent General Hospital numbers would still be committed for the next fours years to the mobile route that Urban General and St. Mark’s are on without any benefit to Kent General Hospital. A risk would be the physicians would be upset that Kent General Hospital did not begin lithotripsy services and shift more of their patients to the other hospitals that do currently provide lithotripsy.

X. Financial Performance

· Three financial models were completed for this service. The information including an explanation of assumptions is enclosed. The three projections are based on the physician loyalty work that was completed by the Tiger Group, St. Mark’s experience, and full capacity of service.

· In each of the models based on procedures the service was profitable (76,878 – 139,778 depending on which scenario is used).

· No major costs in terms of construction or renovation of existing facilities.

· American Shockwaves financial information in their contract would pay the hospital a flat fee of $500 or $600 depending on the service provided for non-governmental payers. For governmental payers they are requesting a flat rate of $1,500 - $1,800 depending service from the hospital. Based on the numbers of cases in each of the models this would have a negative impact on the revenue for the hospital.

· National Medical Systems charges a flat rate of $1,200 for each procedure no matter what type of service or who the payer is.

· See the appendix for more in depth information on the financials including assumption explanations.

XI. Implementation Plan

Aug 04

Sept 04

Oct 04

Nov 04

Dec 04

Jan 05

Feb 05

Mar 05

April 05

May 05

June 05

July 05

Aug 05

Sept 05

Oct 05

Develop Business Plan

x

Present to Administration

x

Meet with Surgery

x

Meet with Physicians

x

Get Internal Approvals

x

Select Vendor

x

Submit CON

x

CON Approval

x

Physician Credentialing

X

Staff Training

X

Provide Services

x

Measure and Evaluate

x

XII. Performance Measures

· Financially profitable will be measured on routine basis

· Meet expected number of cases, will be tracked on routine basis.

· Patient and physician satisfaction with the program.

XIII. Appendices

· Financial Models

· Maximum capacity

· Projections based on Mercy General’s numbers

· Worse case capacity