Background

You must have heard of various health care companies (HMOs, MCOs, IPAs, etc.) filing for Bankruptcy.  You also must be aware that in California the Department of Managed Health Care (DMHC) issued emergency regulations implementing the first phase of SB 260 legislation.   SB 260 establishes solvency standards for physician organizations bearing financial risk. We understand from reliable sources that 60% of IPA’s will not meet state requirement.

How does this effect you and what implications will there be for your organization.  I am sure I will receive different answers from every executive.  One of the answers is that of “concerns” for many executives.  Concern as to the viability, opportunities and uncertainties that we all face. 

Do you feel the “financial pinch” every-so-often when you review the financial statements?  Do you ever ponder upon the opportunities “if I could spin off this department and share services with similar entities!”?  How about  “I wish I could lower the cost of this department by sharing services” or last (but not least) “I would sure like to own part of a services organization and have it process all my… what will I do if that (expensive) key manager leaves…)

Did you engage a management company for your MSO.  Do you need your management company or can you perform certain functions and contract for others?  We can assist you in this evaluation.

GMA's solution

We all understand that we have limited amount of financial resources and time.  We also know that extensive savings can be realized by mergers, acquisitions and joining co-ops (realizing economies of scale). Being too busy in operating our own organization, we just set aside making decisions or analyzing these extremely important concepts and opportunities.  We reach plateaus and comfort levels and consequently don't make time to strategize.   At time we don't have the expertise   in-house to either strategize nor perform the evaluations.  Contacting current competitors or unknown organizations is delicate.  When searching for JV partners and potential merger/acquisition candidates, you want maintain anonymity until a phase in the search or negotiations is reached.

This is where GMA steps in.  We are those professionals that understand the intricacies of healthcare.  GMA is the bridge between your organization and those potential opportunities We are also the resource for writing business plans, marketing, or sales plans securing venture capital or a business loan streamlining accounting and audit processes engineering and technical help, legal advice.

The concept is simple.  Your company and GMA combined make up all the pieces of the puzzle.  Yes, the puzzle is all the pieces necessary for a company to have stability, structured growth and to understand opportunities and risks. The ability to move swiftly, adapt to changing market demands is becoming extremely important as well as strategic for corporate survival.  The synergistic effect of combining resources equates to considerable saving of time and money.

Our proposal:

A-     STRATEGIC PLAN DEVELOPMENT

1.      A senior consultant from GMA will meet with your CEO or other high-level  

      decision maker/s.

2.      Let GMA understand what your concerns and needs are.   

3.      Let GMA understand your strengths and weaknesses

4.      Let GMA develop a strategic plan for your company.

B- ANALYSIS FOR SHARED/ALTERNATIVE SYSTEMS

This program is challenging and rewarding.  Here is the scenario.  Company A, has a fully functional Claims Adjudication System (CAS).   The CAS department has 30 claims personnel, 30 computers and printers, a supporting Information Technology System (ITS) which employees a staff of 5.  Approximately 45% of the costs are fixed, the balance are variable.  Let us assume that there are 6 similar companies that duplicate the same systems.  This duplication seems inefficient and costly (remember the Software licensing fee for all software?).  Let’s look at the numbers (please refer to exhibit A)!  Merging the ITS department for 6 companies may save approximately $1,300,000 per year.  There should also a considerable amount of savings in the Claims and other departments such as Eligibility, Authorization and let’s not forget the Information System Dept. 

The results of joining operations are amazing and sizable. 

How can this association/merger be structured?  Here is one way.  GMA will:

1.      Visit and review the 6 companies providing adjudication services 

2.      Review the 6 different computer software systems to determine which

         is more suitable for service bureau services.

3.      Prepare financial projections of a merged service organization.

4.      Present the findings to the various management.

5.      Present and obtain “ownership” in the concept and the projections.

6.      Ownership potential (just one model)

6.1      New company developed

6.2       The “best” adjudication selected system sold or placed in new corporation 

            as a capital contribution

6.3       Each of the 6 companies makes a capital contribution equal to the average

            number of claims processed.  Don’t worry the bank will 

            finance this venture!

6.4       The services are billed to the partners/shareholders at cost plus a return on

            investment (ROI) of let’s say 10%

6.5     The adjudication can now be sold to other entities  at cost plus profit.

Other ideas after the initial venture!

Merge or purchase other similar companies for cash, debt and stock.  This may be accomplished with private financing such as a private placement or bank financing.

What else can happen with the new expanded company… Go public?  This will be up to the shareholders, and possible!  (Remember Bill Gates working from his garage?).

You may ask yourself, if this works can I do this with Credentialing and other departments.  Everything is possible after you answer the question of the feasibility. 

What is this going to cost you?  Insignificant and minimal as compared to the great opportunities and rewards.

Other ideas?

Naturally, outsourcing is always a great option reducing (should) operating costs significantly.  Remember that outsourcing is like "renting". Investing in a company with others to provide the service is like "owning".  Providing outsourcing to others should increase value in both companies, the outsourcer and outsourcee,  increasing profits for both.  Outsourcing will allow your company to concentrate on your "core" business.  GMA can provide outsourcing directly for certain services such as finance and accounting.  For services that we do not offer, we can contact various TPA and negotiate a favorable contract.  The analysis would include comparison of the various companies that are analyzed.  It will also include income statement projections for your company, post outsourcing.  More on outsourcing.  

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