Memorandum: To: CC: From: Date:9/21/16 Re

Memorandum
To:
Durham Regional Hospital Board of Directors
CC:
North Carolina Community Hospitals
From:
___________________
Date:9/21/16
Re:
HealthONE, LLC Business Plan
EXECUTIVE SUMMARY
HealthONE, LLC (HealthONE) is a North Carolina based start-up
company offering consulting services to community hospitals wishing to align
themselves with the principles of Accountable Care Organizations (ACOs).
The firm operates within a 350-mile radius of Research Triangle Park (RTP) in
order to work with hospitals that do not have the resources, time or
knowledge in the principles of an ACO system but desire more education; or,
have made the decision to become part of an ACO system. HealthONEs
service offerings are generally arranged in three basic steps (education,
readiness, and implementation) with the ultimate goal of a fluid transition to
an ACO system. The business proposal brought forth by HealthONE is very
thorough, professional and convincing. The plan narrowly defines the
companys target customer and shows in a clear manner how they intend to
market, manage and operate their business. The financial benefits positive
Net Present Value (NPV), positive Internal Rate of Return (IRR) and a short
1
pay-back period are also appealing. HealthONE has a feasible plan that
the Board should seriously consider funding.
Mission Statement
The mission of HealthONE is to assist community hospitals to deliver
better health care, improve health of communities, and achieve both at
lower costs.
MARKET ASSESSMENT
Ta r g e t
M arket
Com m u
n it y
h o s p it a l
s
u n a ffi li a
t e d w it h
la rg e
academ i
c
c e n te rs
in ru r a l
a re a s
Fin a n c ia
l ly
d is tre s s
ed
h o s p it a l
s
S m a ll t o
m e d iu m
s iz e d
h o s p it a l
s
In d u s t r y
A n a ly s is
C u rre n tl
y, 70
p e rc e n t
of
h o s p it a l
le a d e r s
b e l ie v e
t h e ir
in s t it u t i
o n c o u ld
be a
p a rt o f
an ACO
w it h in
th e n e x t
fi v e
y e a rs
G e o g rap h
ic
L o c a t io n
C e n t r a ll
y
lo c a te d
( R a le ig h
D u rh a m
) in s id e
its
ta rg e t
m a rke t
o f N o rth
C a ro lin a
B a r r ie r s
to E n try
L im ite d
s ta r t-u p
re s o u rc e
s ( i.e .
hum an
c a p ita l)
M i ld l y s a tu ra te
d
m a rke t
( i. e .
Q u o ru m
&
P re m ie r
e)
C o m p e t iti
ve
A n a ly s is
P r im a r y :
C o m p re
h e n s iv e
& n ic h e
c o n s u lt i
n g fi r m s
Seconda
r y:
m e rg e rs
o f la rg e
h e a lt h
c a re
s y ste m s
In c re a s i
ng
in t e re s t
fo r A C O s
The market assessment shows that HealthONE is uniquely positioned to take

advantage of the new opportunities created by health care reform and the
current ACO industry. The lack of small, local health care consulting firms
with ACO knowledge provides an excellent opportunity for HealthONE to
develop a dominant presence locally and regionally.
MARKETING PLAN
HealthONEs marketing strategy is unique. The company uses a twoprong approach to marketing its services: inside sales and outside sales.
Inside sales include cold-calling, web site traffic and follow up efforts.
Outside sales include speaking engagements and free educational sessions
for hospitals / physician groups. There are two stages to the marketing plan
and HealthONE did not make their intentions for this very clear. Therefore, I
assume the purpose is to show that their marketing tactics have different
goals. The first stage focuses on HealthONE establishing itself as the
regional experts on ACO formation through intensive public exposure.
Stage twos goal is to have prospective clients contacting them rather than
HealthONE aggressively seeking clients. Although the direct words are
missing, understanding that marketing techniques come in different stages
and methods shows mature thoughtfulness. Overall, it is a solid plan.
However, it would be helpful to understand the costs of these marketing
activities to better understand financial feasibility.
FINANCES
HealthONEs financial analysis looks promising. Because this is a startup company, it would have been helpful to understand how they derived
their numbers. Providing results from best practices would make the
finances more legitimate. Financial snapshot:
Financial Consideration
Start-up Loan: $300,000
Note
Will come from two sources: partner
contribution ($250,000) and a small
3
business loan ($50,000)

Having a large percentage of benefits
will provide a competitive edge and
ensure employees are satisfied
The office suite will allow HealthONE
to pay a price that is scalable with
the number of square feet needed to
house all of the employees as the
company grows
Will not display a positive cumulative
cash flow until after year 4 because
of the initial debt taken on at startup. This is a relatively short amount
of time. Realizing a negative net
income of roughly ($50,200) in year
1, HealthONE is projected to be in
the black beginning in year 2. Cash
flow analysis forecasts positive
results.
Staffing Budget: 5 FTE; benefits

are 15% of total annual salary
Operating Budget: Office suite
prices on a scale ranging from
$50,400.00 paid at the end of
year 0 to $177,120.00 at year 5
Cash Flow
Positive Net Income (in years): 2
Pay-back period: 4.08
NPV: $69,889
IRR: 15%
IMPLEMENTATION
HealthONE will develop gradually over the course of five years into a
medium sized full-fledged consulting firm with 19 employees, serving 34
clients. They clearly show that the development of the company will occur in
three phases:
I.
II.
III.
Start-Up Formation (initial six months): get feet on the ground

Growth (seven months to four years): become a recognized leader
Expansion Out of State (five+ years): grow to a larger service area
This implementation timeline appears reasonable and attainable to meet

stated goals. If reach has been overestimated however, several
opportunities exist for them. HealthONE smartly added exit plan options
ranging from merging with a larger consulting firm to giving up existing
intellectual capital.
4
STRUCTURE
Much of HealthONEs business plan surrounds their 3- Step Service
Approach: educational workshops, readiness assessments, and
implementation services. This structure allows for customization for clients
who approach HealthONE at varying degrees of stages and understanding.
Through a combination of data analytics, benchmarking, and organizational
culture assessments, HealthONE provides direction for accountable care
strategy design.
Management & Organization
HealthONE will initially consist of five equal partners. Each will be
responsible for one of five branches of the firm; Operations, Marketing,
Finances, Research and Development, and Technology. This is helpful
information for clients because it lists what areas of expertise are available.
One piece of concern in this section is that it seems the organization chart
was left out of the main body of the plan even though it is referenced as
being in there.
STAFFING
HealthONEs staffing model makes sense: as you build upon your client
base, build upon your infrastructure and workforce. Therefore, HealthONE
proposes five full-time equivalents (FTEs) in the first year with projected
increases in subsequent years. Years two through five will see an increase in
staffing as they bring in an additional three analysts per year (a steady 1:5
analyst/client ratio) as well one manager per year beginning in year three.
5
These numbers are not arbitrary. Rather, HealthONE based its estimates on
the Bureau of Labor and Statistics report for business analysts and
consultants in North Carolina. Since human capital (benefits and fixed
salaries) makes up the majority of HealthONEs expenses, it will be
imperative that they revisit these projections in the event that their client
base does not grow as expected.
INNOVATIVENESS AND FEASIBILITY

Catering to the needs of the community and being proactive in the
changing health care landscape are ingredients for success. HealthONE is an
innovative solution that aligns with this mentality. They created an
appealing plan that adheres to the interests of executive decision makers
including financial incentives and reduced fragmentation. Although
HealthONEs business plan clearly displayed the benefits of their services for
health care organizations, it would have been nice to see how patients
benefit. My experience has taught me that displaying a proposal from the
patient point of view will create greater buy-in. For example, HealthONE
could have considered what other outcome metrics would be affected by
their services such as a hospitals patient satisfaction and perceived quality
scores.
OVERALL IMPRESSION
I am overall extremely impressed with the professionalism and
comprehensiveness of this proposal. It seems as if HealthONE thought of
every piece that makes a successful business plan: Balanced Scorecard,
6
SWOT analysis, Internal Performance and External Benchmark Metrics,

Sensitivity Analysis, etc. I was mostly impressed with the implementation
timeline listing goals and business strategies it was very well mapped.
There were few typos. One notable slip up was in the Evaluation and
Outcome Measures section where they mention there are five categories of
internal performance when in fact there are only four.
CONCLUSIONS AND RECOMMENDATIONS

HealthONEs business proposal displays the following advantages:
Advantages
Fulfills market needs: allows hospitals to be proactive in regards to

reform of the current health care delivery model instead of reactive to
change
Focuses on individual needs of community health care providers
Offers a pragmatic solution to one of the most recent and innovative
health care trends

Financial stability
Therefore in conclusion, I would recommend to the Board of Directors that

HealthONEs business proposal be funded and actively pursued. An ACO
provides an opportunity for enhanced coordination of patient care as a
means of both improving the quality of care and controlling health care
costs. This means better health care, better health, and reduced costs.
Therefore, it would behoove Durham Regional Hospital to partake in this
growing health care trend through the services offered by HealthONE.

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Memorandum

Durham Regional Hospital Board of Directors

North Carolina Community Hospitals

HealthONE, LLC Business Plan

The market assessment shows that HealthONE is uniquely positioned to take

business loan ($50,000)

Staffing Budget: 5 FTE; benefits

Start-Up Formation (initial six months): get feet on the ground

This implementation timeline appears reasonable and attainable to meet

INNOVATIVENESS AND FEASIBILITY

SWOT analysis, Internal Performance and External Benchmark Metrics,

CONCLUSIONS AND RECOMMENDATIONS

Fulfills market needs: allows hospitals to be proactive in regards to

health care trends

Therefore in conclusion, I would recommend to the Board of Directors that

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