MCMPC is facing a unique situation in a market that has evolved significantly. It is in Orange

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MCMPC is facing a unique situation in a market that has evolved significantly. It is in Orange and Sullivan Counties. It faces a significant challenge. How will it compete effectively in a market where health care is dominated by one enterprise, Innovative Medical Group (IMG)? IMG has broad strategic approaches that give it a significant market share and an alignment with the major county hospital, County Regional Medical Center (CRMC). It successfully launched an Accountable Care Organization. Its bargaining power, negotiating leverage and financial strength give it significant competitive advantages

MCMPC is a fifty (50) physician group practice with fifteen offices and 350 employees. They have physicians covering twenty (20) different specialties and subspecialties, but not every specialty/subspecialty. The Middletown location is their largest and busiest. The group was formed in 1984 by Dr. Scott Balko. Dr. Balko is a board-certified ER physician who had been Chief of Emergency Medicine at Bolton Hospital (Bolton Hospital has merged with Darien Hill Hospital creating CRMC) for ten years. He decided to leave the hospital and an Urgent Care Center serving the Middletown community. MCMPC provides urgent, primary and many specialty services. For period 1997 to 2017, its annualized visits grew by eight percent (8%). Revenues reached $35 million in 2017 and the group was consistently profitable. In 2018, annualized visits plateaued, and profits fell. Covid 19 created addition financial woes. Dr. Balko told us that the practice had an operating loss in 2022. Dr. Balko and the group's Board of Directors realized that MCMPC needed to act quickly.

The group had cash reserves. Dr. Balko began buying medical practices from a variety of locations in Orange and Sullivan Counties These practices were small group practices. The physicians were older and ready to retire; none of them were willing to sell to IMG. Dr. Balko and his team closed some of these offices consolidating the practices at other locations. These actions paid off as visits increased and so did revenue. The practice may be profitable in 2023. However, Dr. Balko and the Board are still concerned. They feel that they have not addressed the clinical and financial available opportunities. The provide care for many chronically ill populations. The recent practices that they purchase provided these patients.

In the last fifty years people from NYC relocated into Orange and Sullivan Counties. They came for more affordable housing, reasonable taxes, and good schools. These new residents still look to the city for employment, entertainment, and services. There is a significant migration of County residents to the city for health care. At a recent County Chamber of Commerce Breakfast, the CRMC CEO identified that fifty percent (50%) of the hospital's potential patient base are leaving the community to acquire certain hospital related services closer to NYC, or within the NYC itself. In recent years, Montefiore Medical is actively competing for these potential patients.

Orange County is MCPMC primary service area. This county is becoming as diverse as NYC creating potential unique market niches. Most notable is the large Jehovah's Witness community that is in the surrounding towns and villages within ten (10) miles of MCMPC's base of operations. In 2013, the Jehovah's Witnesses announced that they were selling their headquarters in the Dumbo area of Brooklyn. They relocated all their operations to Orange County. It is likely that many members of this community their as well. This group attractive is because t they have some form of private insurance or Medicare. However, their religious beliefs make them a challenge. Expertise in Bloodless Surgery is an absolute necessity to serve them. No one in the County is a provider or linked to a direct provider for bloodless surgery.

The movement of the Jehovah's Witness Community to the County is consistent with general trends. The County's population continues to grow, clearly demonstrated in the Table below:

Year	Population	Unemployment
2015	299,000	3.7%
2016	341,000	3.4%
2017	369,000	3.6%
2018	372,000	3.7%
2019	376,000	3.8%
2020	377,000	4%
2021	379,000	5%

Population:		Income Data:
* White Population:	285,721
* Black Population:	27,601	*Avg. House Value:	$144,500.00
* Hispanic Population:	39,738	* Avg. Household Income:	$52,058.00
* Asian Population:	5,157	* Avg. Persons Per Household:	2.85
* Hawaiian Population:	123	* Median Age:	34.70
* Indian Population:	1,205	* Median Age (Male):	33.40
* Other Population:	13,962	* Median Age (Female):	35.90
* Male Population:	170,965
* Female Population:	170,402

Demographic data reveals potential opportunities. The number of school age children in the county has increased. So has the number of adults 35-64 years of age and seniors over the age of seventy-five (75). The only age cohort that decreased is the 18-34 years of age. The education level of the County's children has also improved with high school graduation rates reaching over sixty percent (60%) and eighty-three percent (83%) of high school graduates going to college. Poverty rates vary, with the largest concentration of poverty in the County's three cities including Middletown; the poverty rate exceeds twenty-five percent 25% in these areas.

The Orange County health status reveals valuable information. The improved mortality rate improved over the last ten years. Also notable is that accidents are the leading cause of death for children. For young adults (18-45) the leading cause of death is accidents followed by cancer. The leading cause of death for adults forty-five (45) and over is cancer and heart disease. These two medical conditions account for two thirds of the deaths in this cohort. Pediatric diabetes (both types) is on the rise particularly in the areas of the County that have the highest poverty rates. Chronic disease is also on the rise in the seventy-five (75) and over age cohort. Diabetes, CHF, COPD, and stroke accounting for most illness afflicting this group. Many individuals in this age cohort have more than one chronic disease.

Orange County health care provider community has changed significantly. Consolidation is the new reality. This service area is no longer dominated by small group practices. Today there is one dominant provider, IMG. The consolidation of the acute care segment complete with the merger of Bolton and Darien Hill Hospitals creating CRMC. The construction of the new CRMC facility in Middletown now and the new modern hospital is operating smoothly. It is notable that the new CRMC is located close to IMG's Middletown operation. CRMC is closely aligned with IMG.

IMG is a large integrated medical group with twenty-five (25) locations in four (4) NYC metro area counties and Manhattan. IMG has over two hundred physicians and 1100 employees. In 2010 and 2011 IMG opened two new facilities including a 120,000 square foot center in the southern portion of the county. This location is across the street from the recently closed Darien Hill Hospital. It added twenty physicians and 175 employees for this center alone. IMG opened its own Ambulatory Surgery Center just outside of Middletown, and CRMC is a minority partner in the venture. At the groundbreaking Dr. Martin Schwartz, CEO for IMG, commented that the center would help reduce the number of IMG patients who go to NYC. Dr. Schwartz said that approximately one third of IMG patients went to NYC for Ambulatory Surgery. The new Center is doing just that. Fewer IMG patients are going into the city for the treatment that they can receive at this Center.

IMG has revenues of almost $300 million and is very profitable. IMG's financial statements are strong. IMG has had easy access to capital (we do not have their financial statements - just their financial ratios). Its broad strategy and structure, providing almost every specialty and subspecialty services, means that it can hold onto its patients. It has withstood anti-trust challenges by small group practices.

It is remarkable how quickly IMG became the dominant health care provider in this area. Dr. Martin Schwartz is IMG's founder and CEO. He is a board-certified oncologist. He trained at Memorial Sloan Kettering. IMG was a small Oncology group run by Dr. Schwartz. He sensed changes coming to health care in the 90's. Dr. Schwartz took a sabbatical from the group. He was accepted to the Harvard Business School and completed an MBA. He returned to the group with a strategic/business plan to create the largest medical group in the county. He used his newfound knowledge in both strategy and finance. Dr. Schwartz transformed an oncology practice into the dominant all-inclusive health care provider in the region. He is a sophisticated executive with a gift for strategy. Dr. Schwartz remains a physician deeply committed to quality. IMG physicians are either Board Certified or Board Eligible. Board Eligible physicians must become Board Certified within five years of joining the practice. Approximately forty percent (40%) of the medical staff had academic appointments at medical schools before joining the practice. IMG can recruit physicians for many areas of the country and around the world.

IMG has offices that are located along Route 17. They have offices in Sullivan, Rockland, and several locations in Manhattan. Their bargaining power and geographic locations give them favorable rates with MCOs and insurers, and influence with the local hospitals. Dr. Schwartz does not hesitate to exercise their bargaining power. In 2006 IMG stopped admitting the Wickers Hospital in Sullivan County. IMG would not poor clinical outcomes. The hospital had to move quickly to address these issues. Ultimately, they signed a management contract with CRMC. After six months IMG returned to this hospital. IMG sent a strong message to the health care community. IMG has influence they will use it.

There is a perceived opportunity in the southeastern corner of the County. Darien Hill Hospital Division of CRMC closed and left this area. Several health care providers see this departure as an opportunity to gain market share in this community. These include new providers who are either trying to establish a presence (Urgent Excel opening Urgent Care Centers) or increase their market share in the southern portion of the County (Good Sisters Health System). Whatever opportunity may exist is tempered by IMG's major complex just across the street from the closed Darien Hill Hospital. IMG has a large presence now. In addition to medical office, it also offers an Ambulatory Surgery Center. Good Sister's entry into this region creates a possible relationship with our client.

MCMPC is experimenting in a limited venture with Good Sisters Health System in this part of the County. Good Sister operates in the northwestern corner Rockland County. It also has a small hospital in the Southern Orange County. MCMPC has opened an office near Rockland County. Good Sisters provided a cardiologist to practice at this site. Dr. Balko is using this venture to evaluate whether an alliance with this system makes sense. There will be more discussion on this issue in the section entitled, Strategic Partnerships.

Leadership is a significant issue for MCMPC. Dr. Balko is an excellent physician who is deeply committed to his patients. He often works sixty (60) hour weeks. He continues to work the late shift. Often, he is the last person to leave. He will unlock the doors and see patients who arrive in the parking lot. He will get out of his car if need be. It is important to note that none of the other physicians emulate this behavior.

Dr. Balko dislikes the administrative side of his position. Although he recently hired an experienced health care executive as the COO, it is not clear if this individual will have any real authority. Dr. Balko does not attend staff meetings or have any formalize structure for managerial decisions. He can and does act decisively; the purchases of physician practices and the experiment with Good Sisters are examples of such behaviors. He routinely gives Tuesday and Friday afternoons, after 3:30 PM for administrative matters. Lately it seems that Dr. Balko may have lost his enthusiasm for the business aspects of the practice. The new COO for the practice may help address this issue.

The new COO is Maxine Smit. She could make a significant difference to this practice. Does she have real decision-making authority? Ms. Smith has over fifteen years' senior management experience with medical group management. She inherits a management staff that is mixed at best. The group has a CFO, Director of HR, Director of IT/Physician Recruitment and a Director of Operations. None of these individuals possess any significant decision-making authority. The Director of Operations was Dr. Balko's secretary when he was Chief of Emergency Medicine at Bolton Hospital. She is deeply committed and extremely loyal to Dr. Balko. Her decision-making is questionable. She tends to screen Dr. Balko from issues that need resolution. Ms. Smith is trying to address this reality. The Director of Operations is struggling with her new reporting relationship to Ms. Smith. Recently Ms. Smith shared with me in confidence that she is also concerned about the culture of the practice and the decision-making process in general. Planning for the long term is non-existent. The practice is reactive rather than proactive. The practice does not view debt as a tool to build and grow. Ms. Smith also had many comments about the operations and clinical deficits in general.

MCMPC staff members are generally caring, responsive and accommodating. The informality of the organization has not been perceived positively by many in the community. Staff members do not have a uniform and people often work in their jeans and sport shirts. No one takes charge other than Dr. Balko. Physicians work in their areas and are not seen looking beyond their own silo. This aspect of the practice will be a significant issue if the Practice is serious about the Medical Home. The primary office can be sloppy at times. The office is cleaned when Dr. Balko or Ms. Smith makes rounds.

MCMPC still gets disgruntled former patients from IMG. These individuals report that IMG is a cold organization. Many people feel like a number, without a personal relationship with any individual in the practice. The "rules are the rules," with little latitude for diversion from the policy and procedure. This alienating to small group of former patients. However, IMG created a practice that offers everything under the sun. It's easy to get the needed medical care. It is likely that this small migration of patients may disappear.

MCMPC's current strategy appears to be the creation of a broad-based clinical entity. They continue to want to compete with IMG head-on. This may have been an effective strategy thirty (30) years ago when IMG was less dominant in the market. MCMPC recognizes that it lacks specialist and subspecialist. It cannot offer the broad services that will allow it to hold onto its patients. MPMPC is not able to recruit local specialist or subspecialist. These MDs are either affiliated with IMG or are winding down their practice and preparing to retire (some of them say that making a deal with Dr. Balko is difficult - you can't seem to get him to close the deal anymore).

MCMPC is now considering health care entities outside of the County for affiliations. It hopes that they will provide specialist and subspecialist physicians. MCMPC also seems stuck in some of its thinking. Dr. Balko still has not absorbed the current reality when considering potential hospital partners. People in the County will travel to specialist and hospitals in other nearby counties and NYC. Even CRMC is adapting to this reality as it explores possible relationships with a hospital system from NYC. A partnering with a hospital could make sense for MPMPC. It might support the development of a unique market niche and increase market penetration.

Strategic partnerships are very possible. In this situation both parties (MCMPC and the potential hospital partner) can realize gains. MPMPC offers their location and access to their patients A hospitals may be able to gain access to resources, competencies, most notably specialist and subspecialists. There are two active suitors: Good Sisters and Riverside Hospital and Medical Center

Good Sisters has a relationship with MCMPC. The joint venture is in the southern part of the County. It is a chance to evaluate potential benefits and working together. Good Sister has some issues that MCMPC should consider. These include financial weakness, negative customer perceptions and the turnover in the CEO position. The hospital Board of Directors seems interested in collaborating with MCMPC. There are persistent rumors that a NYC hospital system will be acquiring this hospital. This could impact future joint activities.

Riverside Hospital and Medical Center is very interested in MCMPC because of its location and a particular market niche. Riverside Hospital and Medical Center located in NJ and the NYC metropolitan area, has expressed interest in collaborating with MCMPC. Riverside is known for its Bloodless Surgery Program, among other services. It serves a considerable number of Jehovah's Witnesses. On any given day, approximately fourteen (14%) percent of the hospitals inpatient beds are filled with Jehovah's Witnesses. The hospital believes that a presence in the Middletown community will help increase this patient population.

Riverside is the only hospital in the area the currently offers bloodless surgery. They are willing to connect MCMPC to an Orthopedics and Urology Group (two important specialties that MCMPC currently lacks) to help improve service at MCMPC. Dr. Balko has some concern about this relationship since this hospital is a one-hour drive from the MCMPC office. Riverside just completed a major renovation and has a state-of-the-art physical plant. It does face major competition from NJ University Medical Center, which is the dominant tertiary care provider in its region. NJ University is successfully competing with the academic medical centers in the urban center and is extremely successful. They are fully integrated and offer every specialty and subspecialty. They do not perform bloodless surgery nor appear to have any interest in this area. Riverside is making this market niche an important part of their strategy.

Comparative clinical data is present below.

Clinical Data (Source: www.medicare.gov; Hospital Compare update 12/2013)

30-Day Death Rate from a heart attack at the hospital, risk adjusted - US National rate is 16.1 %

Riverside Hospital and Medical Center is better than Average.

Good Sisters is at the National Average

% of Surgery patients given an antibiotic at the right time before surgery

US Average 85%

Riverside 94%

Good Sisters 84%

% of Surgery Patients given the right kind of antibiotic

US Average 92%

Riverside 76%

Good Sisters 97%

% of Surgery patients whose antibiotics were stopped at the right time

US Average 83%

Riverside 88%

Good Sisters 90%

% Of all Heart Surgery patients whose blood glucose is kept under good control after surgery

US Average 86%

Riverside 90%

Good Sisters 92%

% of Surgery patients who had hair removed from surgical area, but not with a razor

US Average 95%

Riverside 87%

Good Sisters 99%

% of Surgery patients whose MD ordered treatments to pr3vent blood clots

US Average 82%

Riverside 91%

Good Sisters 77%

% Of patients who got treatment at the right time to help prevent blood clots

US Average 79%

Riverside 72%

Good Sisters 82%

Other information for Consideration:

Length of Stay

Riverside is better than or at the National LOS average.

Good Sisters is worse than the National LOS average, perhaps by as much as 2 days.

Statistics:

	2017	2018	2017	2018
Hospital	Riverside	Riverside	Good Sisters	Good Sisters
Admissions	18,545	20,095	21,915	20,024
Patient Days	87,639	93,072	131,490	120,144
ER Visits	38,298	41,558	62,721	65,818
Outpatient/Ancillary/Surgery	412,626	472,237	460,820	434,118
Outpatient Cancer visits	43,665	51,754	17,129	15,762
Surgeries	12,274	13,495	19,352	18,005

Additional Considerations

Affiliations

Riverside is freestanding although is part of network affiliated with one of NYC's academic medical centers.

Good Sister's is part of the Mid-Atlantic Catholic Health System, which includes health care providers in NY, NJ, Pa, Delaware, and Maryland, with Revenues of over $1.0 Billion. The entire system is struggling from a financial perspective. Health care experts assume there will be closures of some facilities and/or reductions in beds at some of their hospitals. Good Sister's may be up for sale.

Affordable Care Act

The Affordable Care Act offered potential opportunities for growth as well. IMG took advantage of the Account Care Organization provision. With the large number of patients and financial resources, this action made sense for them. Other provisions of the law create new revenue streams for medical practices willing to take responsibility for chronically ill individuals. The Medical Home provisions seemed relevant for MCMPC. Nearly two thirds of the Medicare patients that the practice treats have two chronic illnesses. The Medical Home payment system includes a patient per day (PPD) fee and a traditional fee for service reimbursement methodology. The PPD's focus is on care coordination and other interventions designed to reduce hospitalizations. Dr. Balko was extremely interested in this option.

MCMPC implemented Medical Home successfully. They increased early intervention and prevention programs. Patients enrolled in this program were hospitalized less often compared to when said patients were not in this kind of program. Medical Home was profitable initially; as the PPD was reduced, profitability fell. With the potential elimination of this program, the fiscal.

Required Deliverables

The task at hand is to develop a strategy for MCMPC. Should it continue to try competing head on with IMG? Should it consider carving out market niches and focus on them? Some members of the Board have suggested that MCMPC sell itself to IMG. Dr. Balko will not accept this alternative. He becomes angry when this becomes an item for discussion and refuses to consider this option. It is likely that there is bad blood between him and Dr. Schwartz. Staff will neither confirm or deny this and refuses to discuss this all together.

Lehman Health Care Consulting (LHCC) task is to develop a strategic plan for MCMPC - a road map to growth in this unique service area. As part of this assignment, LHCC groups will write several briefing memos to the managing partner, who is working directly with the Doctor Balko. You will use the Situation Analysis model for several parts of your analysis, do a review of potential partners and consider the potential positive impact of Value Based Competition (Porter 3 & 4) and The Affordable Care Act for our client. Mr. Katz will give you and your group specific assignments.

A Ten (10) page report will be delivered to the Managing Partner and the Senior Partners on a date to be determined. The report will incorporate all the memos, fully integrated into a well-organized report. The last part of the report is for you to recommend what MCMPC should do to grow. Please present options considered and why you rejected them. Please note that the Managing Partner shared the Michael Porter article with Doctor Balko. Doctor Balko likes the concept of Value Based Competition (which will be presented to you in a few weeks) and providing care across the continuum. He wants our work to include this concept. Dr. Balko wants to go into 2016 with a fresh direction, so we have some time to assess the situation and develop a plan that makes sense.

can they make decisions to effectively recruit and retain costumers

can they find the opportunity to create a competitive advantage