Your final assignment has two parts. Based on the case below and using the Excel spreadsheet located in the Books and Resources area for this Week, you will first prepare a business plan for a joint venture outpatient facility, and then prepare a 5-year financial projection for the venture.

ABC, a not-for-profit health system, has been experiencing a small, but steady decrease in market share over the last five years. ABC has been facing increased competition from three competing health systems in ABC primard secondary service markets, who have opened outpatient facilities in the service areas, and from two national drug store chains who have opened urgent care centers in their stores.

ABC has not opened any outpatient facilities; ABC officials have believed that these centers do not increase market share and just increase the existing cost of providing service. ABC's market survey has shown if it opens an outpatient center, 80% of the center's volume would come from its existing facility. Standing alone a new outpatient center looks like it would be profitable, but if you account for the system as a whole, the lost revenue from the existing facility causes the entire venture to be unprofitable. ABC would need to duplicate equipment and staff with only a minor increase in volume. Given these facts, ABC has not opened outpatient facilities.

With increased pressure from the competition over a five-years, ABC has seen its market share in its primary service area decrease by 7%, and by 12% in its secondary market. ABC knows it needs to meet this competition in the long run, even if there are short-term losses.

ABC has been approached by the major mall, which is located on the eastern border of its primary and secondary service area. With the downsizing of retail stores, the mall has 70,000 square feet available for rent. The mall operator has approached ABC to determine if ABC would have an interest in opening a healthcare facility in the available space. ABC staff believes the mall operator has also approached the other healthcare systems. The mall operators are willing to pay for the necessary renovations to convert the space from retail to medical and will charge ABC the cost of the renovations in its rent over 15 years.

If ABC moves ahead with the project, it will offer the following services at the location.

• Surgical Center
• Urgent Care Center
• Radiology Services:
  • MRI
  • CT Scan
  • Ultrasound
  • Diagnostic Radiology
  • Pet Scan

For the success of the project, ABC is considering a joint venture model that allows physicians to be owners of the venture. However, physician ownership will dilute the income earned by ABC. Also, as a joint venture, the venture must be established as a for-profit company, making it subject to federal and state taxes as a for-profit tax entity.

The Excel worksheet, which is present in this week's resources, shows the projected volume, revenue, and expenses for each service and the percentage of new volume versus the increased cost of expansion. ABC projects for every $1 of increased revenue from its existing facility ABC could reduce costs $0.50.

Instructions:

business plan for a joint venture (JV) between ambulatory physician medical groups and a multi-facility hospital system to provide primary care and outpatient services to members of the community. Please include the following information in your analysis:

What are the positive economic benefits for each organization to justify the venture? Are there any adverse effects on either organization for approving the JV? What financial metrics should the decision-maker consider before agreeing to the JV? Select any three financial metrics from the course material (i.e., strategic planning, capital budgeting, net present value, internal rate of return, or the payback period) and discuss the implications on each organization.

Additionally, please ensure that the design of the business plan contains the following components:

1. Executive Summary of the purpose of the Joint Venture
2. A Market or Competitive Analysis (Financial)
3. A description of the Service Lines for the JV