AutoSave OFF n A ABC ... w- HSA 403 Case Study v2020 - Saved to my Mac Home Insert Draw Design Layout References Mailings Review View Table Design Layout ? Tell me Share Editing Comments Arial v 12 A A Aa Ap EV EVEVEE AaBbCcDdEe AaBbCcDdEe AaBbCcDc AaBbCcDdEE AaBb( AaBbCCDdEE Paste BI Uvab X X|A LA Norma No Spacing Heading 1 Heading 2 Title Subtitle Styles Dictate Editor Pane DER Q Re: New Engagement: Middle County Medical PC As you know, I have held several meetings with Middle County Medical PC (MCMPC) over the last few weeks to discuss a possible engagement. On January 20, 2023, we concluded our discussions and Lehman Health Care Consulting is under contract with MCMPC. Our task is to assist them with a significant strategic management challenge. The narrative that follows presents the situation that our client faces. Our assignment appears at the conclusion of the narrative. Middle County Medical PC Introduction 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. 3 Middle County Medical PC 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 Page 1 of 10 3953 words English (United States) Focus + 152%AutoSave OFF n A ABC ... w- HSA 403 Case Study v2020 - Saved to my Mac Home Insert Draw Design Layout References Mailings Review View Table Design Layout ? Tell me Share Editing Comments Arial v 12 A A Aa Ap EV EVEVEE AaBbCcDdEe AaBbCcDdEe AaBbCcDc AaBbCcDdEE AaBb( AaBbCCDdEE Paste BI Uvab X X A LA Norma No Spacing Heading 1 Heading 2 Title Subtitle Styles Dictate Editor Pane DER Q Middle County Medical PC 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 create 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. 3 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 nhucicians wore older and ready to retire: none of tham wore willing to call Page 1 of 10 3953 words English (United States) Focus 0/7CIAutoSave OFF n A ABC ... w- HSA 403 Case Study v2020 - Saved to my Mac Home Insert Draw Design Layout References Mailings Review View Table Design Layout ? Tell me Share Editing Comments Arial v 12 A A Aav A 24 T AaBbCcDdEe AaBbCcDdEe AaBbCcDc AaBbCcDdEE AaBb( AaBbCCDdEE Paste BI Uvab X X|A LA Norma No Spacing Heading 1 Heading 2 Title Subtitle Styles Dictate Editor Pane DER Q 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. Current Situation 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 3 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 m mont of the lahnunh's Withone Community to the County in nannintent Page 2 of 10 3953 words English (United States) Focus TO270AutoSave OFF n A ABC ... w- HSA 403 Case Study v2020 - Saved to my Mac Home Insert Draw Design Layout References Mailings Review View Table Design Layout ? Tell me Share Editing Comments Arial v 12 A A Aa Ap 24 T AaBbCcDdEe AaBbCcDdEe AaBbCcDc AaBbCcDdEE AaBb( AaBbCCDdEE Norma No Spacing Heading 1 Heading 2 Title Subtitle Styles Dictate Editor Paste BIUvab X x A DAY Pane DER Q 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% 3 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 2.85 Household: Page 3 of 10 3953 words English (United States) FocusAutoSave .DFF Q B HSA 403 Case Study v2020 7 Saved to my Mac Home Insert Draw f" v Arial Page 3 of 10 3953 words Design [13 Layout References v A\" A\" Aav xxi AvvAv English (United States) Mailings Review View TableDesign Layout 9 Tell me i5 share Editing D Comments AaBchDdEe AaBchDdEe AaBchoc AaBchDdE AaBb( AaBchDdEe > M \\g g Normal N0 Spacing Heading 1 Heading 2 Tilie Subtitle Styles DiC'i'E Editor Pane 3w 4 5 6 . . 7 * 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-ve (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-ve 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-ve (75) and over age cohort. Diabetes, CHF, COPD, and stroke accounting for most illness aficting this group. Many individuals in this age cohort have , w more than one chronic disease. : AutoSave OFF n A ABC ... w- HSA 403 Case Study v2020 - Saved to my Mac Home Insert Draw Design Layout References Mailings Review View Table Design Layout ? Tell me Share Editing Comments Arial v 12 A A Aa Ap AaBbCcDdEe AaBbCcDdEe AaBbCcDc AaBbCcDdEE AaBb( AaBbCCDdEE Paste BI Uvab X X A LA Norma No Spacing Heading 1 Heading 2 Title Subtitle Styles Dictate Editor Pane DER Q 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 complete 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. 3 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. Page 4 of 10 3953 words English (United States) Focus TO270AutoSave OFF n A ABC ... w- HSA 403 Case Study v2020 - Saved to my Mac Home Insert Draw Design Layout References Mailings Review View Table Design Layout ? Tell me Share Editing Comments Arial v 12 A A Aa Ap EVEVEV AaBbCcDdEe AaBbCcDdEe AaBbCcDc AaBbCcDdEE AaBb( AaBbCCDdEE Paste BI Uvab X x |A LA Norma No Spacing Heading 1 Heading 2 Title Subtitle Styles Dictate Editor Pane DER Q 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 3 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 Page 4 of 10 3953 words English (United States) Focus 0/7 CIAutoSave .DFF Q B HSA 403 Case Study v2020 7 Saved to my Mac Home Insert Draw Design Layout References E" v Arial v 12 Pasteg ngvabxzx' Avviv p 1 Page 5 of 10 3953 words [I3 English (United States) Mailings v AA AV Aav A0 Review View Table Design Layout 9 Tell me i55hare Editing AaBchDdEe AaBchDdEe Aa BchDc AaBchDdEs Aa B b( AaBch Dd Es Normal N0 Spacing Heading 1 Heading 2 Title Subtitle 1 2 3/ A s 6 EV (heme clinical outcomes. The hospital had to move quickly to address these issues. Ultimately, they signed a management contract with CRMC. After six months [MG returned to this hospital. IMG sent a strong message to the health care community. IMG has inuence 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 ofthe County (Good Sisters Health System). Whatever opportunity may exist is tempered by IMG's major complexjust 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 ofce 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 signicant 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. ' 1 Focus D Comments >QQ Styles Dictate Editor Pane llVlG stopped admitting the 'Wicker's Hospital in Sullivan County. IMG would not poor no AutoSaVe O or; Q B HSA 403 Case Study v2020 7 Saved to my Mac Home Insert Draw Design Layout References Mailings Review View Table Design Layout 9 Tell me a share aming CI Comments ['H v Arial v 12 v AA AV Aa v 150:2 V EE V 3E v E E 9i 1T AaBchDdEe L AaBchDdEe AaBchDc AaBchDdEs AaBb( AaBchDdEe > Q Q g Paste Q Q Dictate Styles Pane AutoSaVe 0 OFF Q B HSA 403 Case Study v2020 7 Saved to my Mac Home Insert Draw Design Layout References Mailings Review View Table Design Layout 9 Tell me a Share aming CI Comments in, Arial v 12 v A\" AV A v A 1: v 1: v 'a: v E E Al 1T ' 0 L v a o ._ ._ .. z AaBchDdEe AaBchDdEe AaBchDc AaBchDdEs AaBb( Aaabcwdse > M V Paste v 7 v p v A v t; v v v Normal No Spacing Heading1 Headingz Title Subtitle Styles Dictate Editor 6? B I g ate x2 x A _ t- 4' _ . Pane r' 1 . X 1 2 3m A 5 6 ., 7 El :: E} Q ,.-..V_..:- .. ..,, a- _'.. _' .. s. a. of this program, the scal.- Reguired 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 conrm 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 brieng 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 specic 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. Cc: Senior Partners Page 10 of 10 3953 words III.3