University of Southern California
Marshall School of Business
MedSpace Business Plan[*]
Family. Sharing. Health.
15 August 2007
Julia Matusov
Page II
MedSpace, Inc. Business Plan
Page II
MedSpace, Inc. Business Plan©
Table Of ContentsExecutive Summary 1
Market Pain 1
MedSpace As a Solution 1
Why Now? Why MedSpace? 1
Financial Summary 2
Management Team 2
Business Concept 3
What is MedSpace? 3
Customers 4
Customer Benefits 4
Revenue Model 4
Distribution 4
Industry and Market analysis 5
Overview – Medical Record Management Industry 5
Overview – Personal Health Record Market 6
Barriers to Entry 7
Status and Importance of Technology 7
Purchase Process 7
Market Analysis and Target Market 8
Target Market Demographics 8
Social, Legal and Political Environment 9
Competition 9
Business Models and Profitability 10
Product Differentiation and Competitive Advantage 10
Proprietary Intellectual Property 11
Why Customers Will Use MedSpace Instead of the Competition 11
customer and marketIng Analysis 11
Summary 11
Customers 12
Our Target Customers NEED MedSpace! 13
Marketing – Family. Sharing. Health! 15
Entry Strategy 16
Pricing Strategy 16
Marketing Mix 17
Operations 17
Operating Philosophy 17
Exit Strategy 18
Inputs 18
HIPAA Compliance 18
Technology 18
Infrastructure 19
Facilities 19
Personnel 20
Timeline 20
Financial Overview 21
Summary 21
Funding 21
Customer Adoption and Assumptions 22
Management and organizational Structure 23
Founding Team 23
Roles and Responsibilities 23
Management Philosophy and Company Culture 24
Talent Gaps 24
Organizational Chart 25
Board of Advisors 25
Appendix I : Major Competitor Grid I-I
Appendix II : Focus Group Questionnaire II-I
Appendix III : Phases Of MedSpace Development III-I
Appendix IV : Initial Capital Investment Requirement IV-I
Appendix V : Pro-Forma Expenses V-I
Appendix VI : Pro-forma Revenues VI-I
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MedSpace, Inc. Business Plan©
Executive Summary
Market Pain
Language barriers lead to a significant increase in the probability of serious medical errors by impeding patient-physician communication.[1] This increased probability translates directly into sub-standard care and increased health problems for immigrants, irrelevant of socio-economic class. Simply put, if you do not speak English fluently and you go to the hospital in the United States, there is a 100% increase in the probability that something will go serious wrong.
While some hospitals provide translators, the responsibility for managing general health information often falls on a family member – the “family translator” – who is usually an adult or teenage child educated in the United States and fluent in English. These “family translators” are often overburdened trying to manage health information for their family, continue in their own careers, and meet the responsibilities to their spouses and children.
MedSpace As a Solution
MedSpace, Inc. (MedSpace) is a HIPAA-compliant, online personal health record service composed of three interrelated components:
1. Secure, easy-to-use, multi-lingual, subscription-based online personal health record (PHR) system which empowers users to record, track, and share their health information
2. Free social networking site, encyclopedia of medical and insurance terms, and external links to high-quality medical resources building trust and providing a sense of community
3. Multi-lingual “brick-and-mortar” service centers offering value-added services such as data entry and confidential medical document translation
MedSpace enables our customers to manage their family’s health information, share that information across language and geographic boundaries, and empowers the family to get healthy and stay healthy.
Family. Sharing. Health.
Why Now? Why MedSpace?
In 2005, President George W. Bush and Department of Health and Human Services (DHHS) Secretary Mike Leavitt put forward a mission which “would create a personal health record that patients, doctors and other health care providers could securely access through the Internet no matter where a patient is seeking medical care.” With the Bush-Leavitt mandate, the PHR market was established in the United States with a potential to serve 300+ million Americans.
While there are many vendors in the PHR market targeting aging Baby Boomers and sufferers of chronic diseases (e.g. diabetics), there is very little competition for the 35 million immigrants in the United States and their families. In contrast, MedSpace believes that these are the customers who can benefit the most from an online PHR that offers multi-lingual user interfaces, real-time translation, and collaboration tools enabling the sharing of information across time and geographic boundaries. MedSpace is looking at this niche as a profitable and sustainable entry into the PHR marketplace.
Financial Summary
Figure 1: MedSpace Monthly Revenue Scenarios
MedSpace, Inc. will be established as a C Corporation in the State of California during 2007. Based on a conservative customer adoption rate, the maximum initial capital investment is expected to be $730K, with a $360K contingency reserve. With the expected customer adoption rate, the Company will be consistently cash-flow positive in Month 19 and break-even on the initial capital investment in Month 25.
After 36 months of operation, the Company is expected to earn $300K - $500K monthly revenue with ~$200K in recurring monthly expenses. By this time, Company will hold assets 5 – 10 times the initial investment and should be conservatively valued at $20M - $30M using a 10x revenue multiplier. The Company will be developed as a going-concern, but positioned for strategic acquisition.
Management Team
MedSpace, Inc.’s initial management team will be composed of four highly-qualified individuals with the passion, drive, and network appropriate to launch the business:
Geoffrey M Phillippe(Chief Executive Officer) / 10 years experience in technology development and technology project management at a number of hardware design companies
§ MBA, University of Southern California (2007)
§ Graduate Certificate in Technology Commercialization, University of Southern California (2007)
§ B.S. in Electrical Engineering, M.I.T. (1995)
Julia Matusov
(Chief Techical Officer) / 7 years experience in e-commerce, internet infrastructure, and program management
§ MBA, University of Southern California (2007)
§ PMP certified (2003)
§ B.A. in Psychology and Public Health, UC – Berkeley (2000)
Chief Medical Officer / Chairman of the Department of Obstetrics and Gynecology at a top-level New England medical school
§ Master of Health Care Management, Harvard School of Public Health (2007)
Chairman,
Board of Advisors / Instructor, Health Care Management Program, Department of Health Policy and Management, Harvard School of Public Health
Business Concept
What is MedSpace?
MedSpace is a HIPAA-compliant, online personal health record service composed of three interrelated components:
- Secure, easy-to-use, multi-lingual, subscription-based online personal health record (PHR) system which empowers users to record, track, and share their health information and that of their loved ones
- Free social networking site, encyclopedia of medical and insurance terms, and external links to high-quality medical resources building trust and providing a sense of community
- Multi-lingual “brick-and-mortar” service centers offering value-added services such as data entry and confidential medical document translation
While there are many products in the PHR market targeted towards aging Baby Boomers and sufferers of chronic diseases (e.g. diabetics), there is very little competition for the 35 million immigrants in the United States and their families. However, these are the customers who can benefit the most from an online PHR that offers multi-lingual user interfaces, real-time translation, and collaboration tools enabling the sharing of information across time and geographic boundaries.
Figure 2: MedSpace Web Portal
(designer’s mock-up) /
Figure 3: MedSpace Service Center
(artist’s rendering)
MedSpace will grow in four phases as follows:
§ Phase 1 – launch the MedSpace Online web portal and PHR system
§ Phase 2 – offer real person customer service through telephone and “live chat”; grow the brand name through consumer education and marketing activities
§ Phase 3 – open the first MedSpace Service Center to support walk-in and appointment-based customer service
§ Phase 4 – expand the brick-and-mortar services and consumer education activities to other urban centers
Customers
The target customers of MedSpace are the 5 – 10 million U.S.-educated adult children of first- and second- generation immigrant families upon whom relatives often rely to translate and manage their health information. Secondary customers will be non-English speaking immigrants (initially Spanish, Mandarin and Russian speaking) who can use the multi-lingual MedSpace web portal to view and manage their medical information.
MedSpace will reach these customers through grass roots outreach efforts focusing on medical information interpretation, family records sharing, translation services and family empowerment. MedSpace will begin with outreach efforts in the ethnically-diverse and demographically-expanding Los Angeles area. Although the web portal is universally available, the Company will look to expand its “brick and mortar” service centers to other culturally-diverse urban centers throughout the United States (e.g. Chicago, New York, San Antonio, Miami).
In addition, MedSpace’s core values – Family. Sharing. Health. – and community outreach will enable the Company to provide services to a wide swath of all Americans looking to better manage their personal health information and seize control of their medical
Customer Benefits
MedSpace’s services and products directly address the challenges faced by the customers, and offer multiple, valuable benefits:
§ easy and secure access to both their medical records and the medical records of family members, traditionally maintained on paper by numerous doctors,
§ multilingual PHR system with records maintained in different languages
§ more control over the medical records of their aging and/or non-English speaking parents
§ enhanced ability to manage and maintain medical billing information
§ access to a network of medical translators
By providing access to relevant information, self and family medical records, MedSpace seeks to become a central medical resource for the immigrant community, empowering consumers to facilitate the management of their family’s health, and saving time and money.
Revenue Model
MedSpace will earn the majority of its revenues through customer subscriptions to the PHR system. Since the transaction cost per account is minimal, customer subscriptions will be highly profitable. MedSpace will initially price its value-added products and services at a “cost plus” level to ensure that they are break-even, and will adjust the pricing model to earn greater profits after the brand name has been established.
Distribution
MedSpace customers will access the personal health record and medical information system through an internet portal http://www.medspaceonline.com . The critical care access point for physicians will be http://emt.medspaceonline.com . In addition, MedSpace central office will connect customer to a network of multi-lingual support staff. MedSpace will grow in a viral fashion through grass roots advocacy efforts, public health promotions, TV/magazine advertising targeting specific immigrant communities, online advertising, sponsored search and sponsored links.
Industry and Market analysis
Overview – Medical Record Management Industry
When you go to a doctor's office, the first thing you see is rows of filing cabinets. …those could easily be digitized and made portable so that a person could literally carry their medical history on a USB flash drive.
– Craig Barrett, Chairman of Intel Corp. (January 27, 2007)
Figure 4: PHR Market Funnel
The Electronic Medical Record (EMR) sector is a $1.2B segment of the overall Healthcare Information Technology industry (Figure 4) which is expected to grow 400% over the next 8 years[2]. Patient-owned, electronic Personal Health Records (PHRs) are an important market within this sector which has significant growth potential.
Within the last 10 years, the cost efficiencies demanded by managed care and new government regulation (e.g. HIPAA[3]) have mandated the development and adoption of Electronic Health Record (EHR) systems. Physicians, health plans, and hospitals have been forced to fundamentally change the manner in which they store and track patient information. The integration of PCs into the daily operations of hospitals, clinics, and physician practices has facilitated the adoption of PC-based EHR systems which use the Internet and hospital Intranets to store, track, and transfer patient records.
Each time that a patient gets medical care of any sort – from the renewal of an existing prescription to a major surgery – there are four key players who are part of the process in generating and maintaining medical information:
1. Physicians – generate and review patient medical information (e.g. charts, prescriptions, notes, X-rays) to assess conditions, provide diagnoses, recommend care, and monitor progress/recovery
2. Hospitals/Clinics/Physician Practices – maintain patient medical records in either a paper or electronic format and forward bills for services rendered to health insurance companies (e.g. HMOs, PPOs) and patients for payment
3. Health insurance companies – review procedures and services rendered to patients, pay on approved claims, and bill patients for deductibles/co-payments
4. Patients – track their own medical conditions, request services from physicians and hospitals, review bills from health insurers and hospitals for services rendered, and track health expenditures for tax deduction purposes
Figure 5 on page 6 shows how information flows from the hard-copy patient medical record (blue) to the EMR (green) and billing systems (yellow). There are two important caveats to this information flow, though:
§ The vast majority of information is manually transferred between these systems.
§ The deployment and efficient integration of EMR systems across hospitals, clinics, and physician groups is well below 50%. This means most of these organizations are still using “manila folder” filing mechanisms.
The dashed arrows represent information flow channels which are still under development by the market and for which there is great potential, but limited use.
Figure 5: Transfer of Medical Information across EMR – PHR Systems
Overview – Personal Health Record Market
The concept of an electronic Personal Health Record (PHR) is not new, but an evolution of the paper-based patient record keeping practices of the past. While patients have been able to marginally maintain the status quo of record keeping practices, a number of factors have caused the “manila folder” file systems to break down: