Asia Renal Care targets Taiwan dialysis market

Asia Renal Care Ltd. (Group E) 1

Asia Renal Care, Ltd.

Taiwan Business Plan

Group E

Carolina Anon

James V. Decker

Andrew P. Olsen

Mark E. Reed

University of Maryland University College


Table of Contents

Topic Page

Executive Summary ………………………………………………………… 3–4
Group

The Business ……………………………………………………………… 5 – 6
Carolina Anon / Mark Reed

The Proposed Operation …………………………………………………… 6 – 13
James Decker

Market Analysis …………………………………………………………… 13 – 19
Carolina Anon

Marketing Plan …………………………………………………………… 19 – 22
Andrew Olsen

Promotion …………………………………………………………………… 22 – 25
Andrew Olsen

Risks …………………………………………………………………………… 25 – 26
Group

Finances ……………………………………………………………………….. 26 – 35
Mark Reed

References ……………………………………………………………………… 36 – 39
Group

Appendices (Separate Attachment) …………………………………………… 1 – 39
Group

 Marketing/Economic Appendix A: ..…………………………… 2–6
 Marketing Analysis and Plan Appendices B – E: …………….. 7 – 15
 Medical Treatment Law Appendix F: …………………………. 16 – 19
 Porter Grid Appendix G: ………………………………………. 20 – 23
 Promotion/Advertising Regulations Appendices H – I ………. 24 – 29
 Marketing Agency Appendix J: ………………………………. 30
 Department of Health Regulations Appendix K: .……………... 31
 Department of Health Goals & Priorities Appendix L: ………. 32 – 33
 Risk Appendix M: …………………………………………….. 34 – 35
 Finance Appendix N: …………………………………………. 36 – 39


Executive Summary (Group)

Asia Renal Care Ltd. (ARC) mission is to provide high-quality dialysis care in Taiwan.

An experienced management team with dialysis expertise from both Asia and the United States

will lead ARC. ARC would be the first U.S. dialysis-company to enter Taiwan and will leverage

the best practices in management and renal care to build the strongest competitive dialysis care

network. ARC selected Taiwan because of its infrastructure, health care coverage, prevalence

rate and the fact that kidney problems continue to rise dramatically. ARC’s goal is to target renal

care candidates throughout Taiwan. The company will be operating at 75% capacity by year

three and full capacity by year five and open three Renal Care Centers in the first year alone.

ARC will generate revenue by providing renal patients state of the art dialysis treatment and

facilities and superior service. ARC also plans to acquire, consolidate, and improve other dialysis

facilities in Taiwan.

ARC intends to use an array of print, online, radio and television ads to bring awareness

to our service and with the assistance of Diversified Agency Services (DAS), ARC will be able

to reach their target market effectively. These mediums will allow ARC to optimize their

message while promoting within the rules and regulations regarding medical ads set forth by

Taiwan’s laws. In addition, DAS will have an essential role in ARC’s public relations by

attaining necessary partnerships with medical facilities and physicians, lobbying the Department

of Health (DOH) and reaching out to employers and employees.

Taiwan like any market has numerous risks that ARC will have to face. Specifically,

kidney disease and the number of patients requiring dialysis in Taiwan has been steadily on the

increase dialysis treatment is becoming a heavy financial burden on Taiwan’s insurance program.

Currently the Bureau of National Health Insurance must pay more than NT$23.6 billion for


renal dialysis. There has also been the risk of some unethical medical facilities placing patients

on renal dialysis prematurely in order to increase their own revenues. The risk to ARC is that as

the cost of providing this service continues to increase, so will the pressures on the government

to curtail coverage or reimbursement, directly affecting ARC revenues. Other additional risks are

Taiwan’s tense relationship with China and Taiwan’s lack of sufficient domestic energy sources.

These risks can all have a negative affect on ARC’s long term position in Taiwan.

Asia Renal Care is looking for external agencies to contribute start-up and short term

working capital in two stages for entry into Taiwan. Start-up capital requirements are $400,000

per clinic, with three clinics opened in year one and four additional clinics in year two, for total

initial infrastructure costs of $2.8 million. In addition to this start-up capital ARC is seeking two

years of working capital for daily operations, totaling $2.8 million. At the end of year two ARC

will seek an additional $3.9 million in expansion and working capital for further expansion in

Taiwan and to continue operations until the breakeven point, forecasted to occur in year four.

Total external financing for operations until positive cash flows, net of capital expenditures,

which occur in year five are $9.5 million.


The Business (Reed/Anon)

Asia Renal Care (ARC) is a startup company whose mission is to provide high quality

dialysis care to patients suffering from end stage renal disease (ESRD), a chronic condition

which requires lifetime treatment. ARC’s primary business will be dialysis for patients, but in

the interest of providing one-stop ESRD care for patients, ARC will also provide counseling

services, dietician services and world class medical and nursing care. ARC will provide these

services through a nationwide chain of dialysis clinics, closely associated with medical facilities

and hospitals in major markets. ARC will develop a large customer base for these clinics by

working closely with nephrology doctors, who will be encouraged to refer patients to ARC

clinics. This strategy of targeting doctors as patient referrers is a key element of ARC’s plan for

operations.

ARC’s partnership with industry leaders in their field will help ARC to provide a wide range

of kidney dialysis related services including:

 Hemodialysis - A procedure for removing body waste and extra fluid directly from the

blood using an artificial kidney machine.

 Continuous Ambulatory Peritoneal Dialysis - an out patient form of dialysis that gives

patients more flexibility in treatment.

 Continuous Cyclic (or Automated) Peritoneal Dialysis - a machine assisted dialysis

treatment performed during the patient’s sleeping hours.

 Urea Reduction Ratio Testing - shows the success rate of dialysis and the effectiveness of

the dialysis treatments.

 Counseling Services – helping patients learn how to manage their condition for optimal

health


 Dietician Services – helping patients manage dietary requirements for ESRD

As the first step in their expansion in the Asia Pacific market, ARC plans to expand into

Taiwan – the most expansive renal dialysis market in Asia and the second largest in the world,

following only the United States. To help fulfill their strategy in Taiwan, ARC has enlisted U.S.

based strategic partners. The San Francisco based Satellite Dialysis Centers is their operating

partner in the United States. Satellite’s strong reputation for high-quality dialysis services is

compatible with ARC’s reputation for excellence.

ARC brings a wealth of experience in operating and managing dialysis clinics learned in

the most competitive dialysis market, the U.S. Initial executive staffing in Taiwan will be a

Chief Executive Officer with experience managing dialysis clinics in both the U.S. and abroad, a

Chief Operating Officer with similar experience in the U.S. market, and a Regional Specialist

with extensive experience in the Taiwan dialysis market. ARC will draw other clinic staffing

from the pool of available local workers, with additional training provided by ARC and its

affiliated U.S. companies.

ARC has chosen to expand into Taiwan for several reasons. The primary reason for

overseas expansion is that the U.S. market is too competitive, with the majority of the market

share going to large, highly competitive chains of dialysis clinics. These clinics provide

excellent care at a price, lowered by economies of scale, which ARC can’t hope to match as a

startup company. The dialysis market is quite different overseas, however, with clinics

providing lower quality care with much lower profit margins. ARC believes they can bring skills

and techniques learned in the U.S. market to Taiwan and quickly build a chain of clinics far

superior to the native offerings, at a price equal to or lower than competing clinics. Working


relationships with U.S. clinics and universities will help ARC provide employee and doctor

training that will make ARC the envy of Taiwan dialysis clinics.

Proposed Operation (Decker)

The ARC business plan will focus exclusively on the target country of Taiwan.

Strategic business objectives:

Construct the highest quality dialysis facilities in Asia and sell premium services.

Operational locations:

One of the core customer components of Asia Renal Care is to provide clients with

convenient access to facilities. Reducing the travel time spent going to and from ARC facilities

will help alleviate some of the disruption caused by thrice weekly dialysis. In most cases this

will allow a client to maintain close proximity to their familiar medical environment, creating a

satisfied customer. Initially ARC will be offering services at three facilities in Taiwan. These

will include the following locations: Hsin Ren Hospital, Hsin Fu Hospital and the Chai-En Clinic.

During year two, operations will open at the Fuxing Hospital, Yao-Ming Hospital, Hsin Chuang

Hsin Ren Clinic and the Hong Deh Clinic. After the third year ARC will consider expanding

further into other areas of Taiwan, including: Teh Chuan Hospital, Jian-Ren Hospital, An-Hui

Clinic, Ya-Tai Clinic, Shin-Yang-Min Hospital, Tzu Yu Clinic, Chung Kwang Hospital, Young-

Ming Hospital, Hua-Shi Clinic, Tung Ning Clinic and the Kuo-Cheng Clinic.

ARC will form a committee consisting of local employees from all levels to evaluate the

state of renal care coverage in Taiwan. This committee will issue a status report biannually

which conveys recommendations for future expansions and enhancements to existing facilities.

This committee will interact with executive management and facility designers to provide current

data and qualified opinions on operational locations.


Facilities:

Each facility constructed by ARC will have a consistent floor plan, which will allow for

optimum use of space while creating a highly efficient working environment. These facilities

will be located in close proximity to major hospitals and clinics. The design will be such that

ARC can easily expand them with only minimal structural changes. ARC will either own or

lease the facilities depending on a structured formula used to evaluate the economical sense of

property ownership versus renting.

Management and policies:

ARC will work with local hospitals, clinics and doctors within a specified region. A key

goal for long-term success will be the development and implementation of solid client

contracting from the medical sector to ARC. Also critical to this contracting model is building

partnerships with government and private insurance agencies, so the insurance company will

place ARC as their vendor of choice for renal care. As incentive for doing so the insurance

company will receive a reduced fee for services. Additionally ARC will cater to the doctors in

Taiwan, with the understanding that their referrals could help the business.

Staffing plans:

ARC will recruit a well trained technical medical staff and administrative employees.

Roles will include Nurses, Doctors, Trained Renal Dietician, Facility Management, Finance and

Accounting, Staff Recruiting and Development, Centralized Purchasing, Equipment

Maintenance, Payroll Services, Billing and Legal Department. ARC executive headquarters will

be located at one central office location in Taipei. Purchasing, payroll, human resources and

other non-site specific roles will be at this office location. Below is an outline of the required

positions and quantities needed:


Total Employees: Year 1 = 23
Year 2 = 39
Care Facility Personnel: 1 Doctor 2 Nurses 1 Administrative
Roving Facility 1 Technician 1 Dietician
Personnel:
Warehouse Personnel: 1 Driver 1 Inventory manager 1 Shipping &
Receiving clerk
Central Office Personnel: 2 Executive 1 Human Resources
1 Accounting 1 Legal 1 Training

Regulations and licensing issues:

Our code of business conduct in Taiwan will abide by local and customary business

policies and practices. On-site technicians and local area vendors will maintain all dialysis and

lab equipment on a regular preventative maintenance schedule. The ARC executive office will

manage state inspected calibration certificates, board training certificates and health care service

permits. Quarterly reviews will ensure all centers are kept current and not in violation.

Logistics:

All products used in the ARC facilities will be stored, stocked and delivered from a

central warehouse in Taipei. ARC will keep replacement and service parts for dialysis

equipment at this location and monitor inventory and status of the branch facilities via computer.

ARC will balance clients between facilities while maintaining a short travel distance for

persons receiving treatment. The same will apply for staff personnel, with personnel moving

between facilities as demand requires or to relieve other employees for vacation, sickness or

personal days.

Product and customer support:

Customer and product support will backed by a talented group of individuals charged

with achieving defined organizational goals. ARC will maintain their own customer support


staff, fluent in both, Mandarin and Taiwanese. A detailed computer based client information

system will allow continuous monitoring of quality and provide a basis for improvement. The

central office will provide on-going training to each facility. The technical department and

medical equipment vendors will inform ARC employees of new product enhancements and

technical issues and solutions to keep everyone up to date. ARC will require that vendors

participate in staff training and provide round the clock (24hr.) on-call service to all facilities.

ARC Balanced Scorecard

Financial Perspective
Objectives Measures Targets Initiatives
Profitable Growth Market Share Increasing market Sales Blitz
share
Market Promotion
Sales from new 10% annual sales
customers from new customers Insurance &
Hospital Contracting
Sales from new Clinic sales match
clinics ramp-up targets
Cost Reduction Net income per 5% annual increase Monitored Care
clinic Management Policy

Net income per 5 % annual increase Targeted Cost
employee Containment
Asset Utilization Return on IRR > 30% Financial Growth
investment Evaluation Planning

Revenue growth Clinics follow ramp- Quarterly Review
up, long term 10%
annual growth Stability Index

Customer Perspective


Superior Service New Patient growth 10% annual patient Quality Staff & Service
growth (initial
growth to match Equipment Excellence
ramp-up)
Convenient Care
Patient Satisfaction 90-100%
Satisfaction Safety & Reliability
Physician & Growth in number of 10% growth in Customer Care
Healthcare referring physicians number of referring Program
Partnerships physicians
Quarterly Open House
Repeat referrals 20% of new patients
from current Bi-Annual Speakers
referrers
Performance Surveys
Physician 90-100%
satisfaction Satisfaction Reference Program

Internal Perspective
Development of Market Share & Become Taiwan’s Clinic and Company
Taiwan’s Market Revenue Growth top Renal Care Evaluation Program
Provider
Renal Care Increased Patient Cost, Quality, &
Market Leader Capacity Strong Customer Service Leadership
Base
Provide Highest Physician & Customer Customer Integration
Quality Service Satisfaction Key Accounts Program

Innovation & Learning Perspective

Maintain Superior Competence & Industry Respect as Investments in
Technology & Facilities Awareness of Market Leader Superior
(R&D) Technology Equipment &
Facilities
Employee Training Renal Care Univ.
Employee & Referrer Satisfaction surveys Consistent Quality Employee Training
Satisfaction Coverage at all & Feedback
Levels
Retention Referrer and Invest in Facilities
Employee retention


Improved Small Group/Team Embraced Company Quarterly Team
Communication of Understanding Strategy Meetings &
ARC’s Strategy Training
Overall Employee
Knowledge ARC Evaluation
Meetings &
Training

ARC plans to use a Balanced Scorecard (BSC) to implement the aggressive goals needed

to carve out a successful operation in Taiwan. By using this technique the company will be able

to provide the highest quality dialysis operation in Taiwan and give customers a premium service.

Employees will benefit from this approach by having a clear understanding of the strategic plans

and goals of the organization. Using the BSC enables ARC to measure the performance of the

company accurately, keeping on target with a consistent strategy across the board. The four key

aspects of the BSC are below.

Financial – For the financial segment ARC will be focusing efforts on achieving

profitable growth, cost reduction and asset utilization. ARC will balance this drive with the

realization the investors need some return in the near-term. ARC will give specific attention to

the financial segment of the BSC to ensure they are maintaining and advancing goals. A strong

emphasis on sales, canvassing the market through the use of direct calling with hospitals and

physicians, gaining contracts with insurance organizations both State and private, coupled with

general service promotion will let ARC meet the aggressive growth goals. ARC will also

monitor cost reductions at facilities and investment returns on a quarterly basis, evaluate and

communicate them throughout the company.

Customer - ARC will convey knowledge to their customers, ensuring their understanding

of the unique and superior service capabilities offered by the state-of-art ARC facilities and

experienced staff. By communicating clearly these benefits ARC will strive to develop


physician and hospital relationships that will spawn referral business and lead to annual dialysis

contracts. Satisfaction surveys and secured annual contracts will provide the means to judge

success.

Internal - ARC will be focusing their internal efforts on quickly expanding the client base

within the respective regions; creating business for dialysis facilities and creating a demand for

new facilities. The company will gauge success by evaluating performance in the overall

development of Taiwan’s market, becoming the renal care market leader and providing the

highest quality service.

Learning & Growth - To offer customers the highest quality dialysis services ARC will

need to maintain a high level of expertise in the field. A continual learning program for all

employees will help ensure the staff is up to date on all current practices and proficient with the

operation of their on-site dialysis equipment, drugs and other related patient care products. ARC

will also need to build a consistent referral business (key to quality internal communication), and

hold focus on clearly conveying to employees the status, direction, market trends and strategic

changes. Survey feedback on training and service will monitor success, while quarterly team

meetings provide a forum in which employees can judge the organization and their own

individual contributions to the goals of the BSC.

Market Analysis (Anon)

Taiwan Economy

Taiwan is currently the 17th largest economy in the world, in terms of Gross Domestic

Product, and also ranks highly in terms of growth in competitiveness. In 1991 Taiwan’s GDP per

capita was US$8,992 but by 2003 it reached approximately US$18,000 (CIA, 2003). Real

growth in GDP has averaged about 8% during the past three decades. Exports have grown even


faster and have provided the primary impetus for industrialization. The latter half of the

twentieth century saw Taiwan make a successful transition from an agricultural based economy

into a sophisticated high-tech electronics based one. For many years higher value added

industries have driven this economic growth. Because of its conservative financial approach and

its entrepreneurial strengths, Taiwan suffered little compared with many of its neighbors from

the Asian financial crisis in 1998-99. In terms of overall economic structure in 1999 (as a

percentage of GDP), agriculture accounted for only 2.31%, industry for 37.37%, and services for

52.55% indicating the predominance of service industries (CIA, 2003).

Taiwan has a dynamic capitalist economy, and along with their expected entry into the

WTO, there has been a gradual decrease in restrictions governing investment and foreign trade

by government authorities. Taiwan is also relaxing restrictions on the foreign ownership of

professional services, such as the healthcare field, though there are no immediate plans to

remove the restrictions entirely. Generally speaking, the need to comply with WTO rules and

standards may reduce some of the risk in doing business in Taiwan. Things will be fairer and

more transparent and predictable (currency fluctuations excluded) and less corrupt. Technically,

there will be better protection for intellectual property rights though enforcement still lags behind

other developed nations. While the playing field will be more level these developments will also

attract more competitors than ever before in all industries. Taiwan has introduced incentives to

attract foreign professionals to Taiwan (longer-stay more flexible work visas, tax exemptions)

and to encourage multinational firms to set up regional headquarters in Taiwan. See Appendix A

for further information.

Taiwan Healthcare System


Taiwan has taken measures to control rising healthcare costs, reflected in a public health

budget that increases by 4% per year. Most significantly, in March of 1995, Taiwan’s Bureau of

National Health Insurance (BNIH) implemented a National Healthcare Insurance (NHI) by

integrating three separate insurance programs – Labor Insurance, Government Employee

Insurance, and Farmer Health Insurance – and by expanding the program to cover the remaining

43% of the uninsured population. Currently, this program insures nearly 97% of the Taiwanese

civil population of 22.6 million people (Chaing, 1997). By 1998, the total expenditures of the

Bureau of National Health Insurance represented a 34% increase in total health care expenditures

per enrollee. Outpatient expenditures account for more than two thirds of total health care

expenditures and the rate of outpatient expenditures is increasing much faster than that of

inpatient expenditures. Within outpatient expenditures, the rate of increase of visits is much

higher than price per visit. The rapid growth of health care expenditures is attributable to three

institutional factors including low demand-side cost sharing, the lack of referral system, and,

most importantly, the fee-for-service (FFS) payment system, otherwise known as the

reimbursement system.

Taiwan’s 100% health care reimbursement has met with some resistance but not in a

manner that would prove harmful to ARC’s mission in Taiwan. Health Minister Chen Chien-jen

recently expressed disagreement with the idea of using national health insurance payments to

subsidize offshore Taiwan kidney-transfer patients instead of Taiwan-based clinics. One of his

main reasons was that the Taiwan government could not find out if offshore Taiwan kidney-

transfer patients got their new kidneys legally, therefore putting the government in the position

of possibly paying for something that was obtained illegally. A second concern was the idea that


coverage for offshore medical treatments are for emergency-related treatments only, and kidney

transfers do not fit into that category.

Overall, NHI has a 75% customer satisfaction rating. The increase in satisfaction is

largely due to the removal of financial barriers to health care, such as reimbursement measures,

for those newly insured and full coverage extended to chronically ill patients. Health care

providers have noticed an increase in their average income due to the guaranteed payments under

NHI. Under the reimbursement system, providers or physicians have enjoyed substantial

financial return from NHI. However, as a result of NHI’s reimbursement policies, the plan faces

health care costs which increased at a rate of nearly 19.6% annually. However, the overall

percentage of health care expenditures to gross domestic product in Taiwan is at a relatively low

5%, especially when compared to many Western countries. This would seem to indicate that the

new system has been a success.

Taiwanese People and Renal Dialysis Treatment

Taiwan’s population of 22.6 million experienced a comparatively slow growth rate of

0.65% in 2003 (CIA, 2003). The population has 9.3 % over 65 but with the population growth

lagging Taiwan will become one of the fastest aging populations, necessitating increased

healthcare (CIA, 2003). The current life expectancy is 74 years for men and 80 years for women

(CIA, 2003). As discussed previously, the quickly aging populations of Asia have made them

the largest market of dialysis patients in the world with 32% of the worldwide total. For Taiwan

this means a total expense for dialysis therapy estimated to be about NT20 billion in 2002

(“Dialysis Becomes”, 2003).


Dialysis Patients by Area (2002)

26% North America
32%
Latin America

Europe/Middle
East/Africa
11%
Asia Pacific

31%

The utilization of healthcare is dependent upon acceptance by patient and family, and

faces barriers such as mistrust of medical professionals, money, saving face, and family

responsibilities. The fact that for these reasons Asians and Pacific Islander Americans are less

likely to see a physician impacts the success of prevention programs, such as those offered by

ARC (Chen, 1994). However, people’s health is the most valuable possession in the Eastern

civilization, which contributes to a greater demand for healthcare. Also, the NHI system has

eased any financial barriers to seeking healthcare.

Prior to 1990, studies of the health status of Asians and Pacific-Islanders as a whole

suggested a lower risk for death and disease (Huff & Kline, 1999). However, newer studies see a

trend towards poorer health status in general, especially among those that live in poverty. In

many cases the degree to which they have adopted the culture and behaviors of Western society

impacts their health status as well. Comparisons of illness patterns show an increased rate of

kidney disease as well as various cancers.

In Taiwan, the occurrence of patients who need renal dialysis is approximately 1,449 per

million inhabitants or approximately 32,500 people. This is the second highest figure in the

world in percentage terms and the highest growth rate (“Dialysis Becomes”, 2003). This puts

Taiwan in the top position by a wide margin in the Asian market, far ahead of Hong Kong with


850 patients per million inhabitants and China with 50. They are also by far the world leader in

prevalence and incidents of Early Stage Renal Disease (ESRD) patients 45 and older and they

are second only to the U.S. in treating patients 20 – 44 (Appendix C). The annual increase in

dialysis patients tops the world at 3,000 to 4,000 per year, mostly senior citizens, making Taiwan

a very favorable market from a growth perspective. In addition, 93.9% of those currently

receiving dialysis treatment are treated with in-center hemodialysis in Taiwan, with the majority

between the ages 45 – 74 (Appendix D). Further detailed information regarding dialysis in

Taiwan and its comparison to other markets can be viewed in Appendix B – E.

The high percentage of ESRD patients is mainly attributable to the fact that there are

higher percentages of patients with diabetes and high blood pressure in Taiwan, and these

patients tend to use more medication that contain nephrotoxins. People over 65 with high blood

pressure and hyperazoturia who have suffered from diabetes for more than 10 years tend to be

potential nephrological patients as well.

Taiwan Competitive Dialysis Market

The rapid growth of the dialysis market in Taiwan and its potential means large scale

competitors await ARC in the Taiwan market, including Fresenius, Gambro, and Baxter. These

competitors are currently dominating the Taiwan market and have put significant resources into

obtaining market share, so ARC must be dedicated to compete. Many of these companies

provide some of the comprehensive services that ARC intends to offer, though none have it as a

key element of their strategy. Baxter’s Renal Division, for example, provides both dialysis

products and services to support people with kidney failure. They have also undertaken a

communications program to raise awareness of the viable options available for kidney dialysis,

targeted at a broad audience including current and potential kidney patients, caregivers, medical


professionals, and media organizations. This reinforces their own role in the market and

increasing patient familiarity with their name. This aggressive market movement is something

ARC must seek to match and innovate beyond.

Marketing Plans (Olsen)

ARC has an extensive vision that includes significantly improving the quality of life for

End Stage Renal Disease (ESRD) patients in Taiwan along with promoting the development of

renal therapy in Taiwan by working with leading medical institutions, such as Stanford

University Medical Center, one of ARC’s main partners. Furthermore, ARC wants to be the

partner of choice for leading physicians and healthcare providers, operate with the highest level

of professionalism and integrity, and provide a fulfilling and rewarding work environment for all

ARC employees.

Sales Objective:

ARC will strive to be operating at 75% capacity by year three, and 90% by year four.

Moreover, it is our intention to open three Renal Care Centers in the first year, four centers in the

second year, and five per year for the next three years for a total of 22 centers in five years of

operation. By the second year of operations, we believe that we will achieve over $2.9 million in

revenue, which will be four times more than the estimated $600,000 in revenue in our first year.

ARC generates revenue by providing renal patients state of the art dialysis treatment and

facilities and superior service. Cost and quality leadership will be our distinguishing factor. In

year three we will more than triple our revenue to over $8.4 million and we will almost double

that revenue to just over $16.4 million in year four. Patient capacity and total number ACR

centers in operation directly affect these figures.

Sales & Revenue Generation:


There are enormous growth opportunities in Taiwan for ARC. As renal care in Taiwan

expands and develops, ARC will establish its market position so patients, physicians/healthcare

providers, and hospitals will begin to recognize the superior service of ARC compared to the

competitors. ARC will build the strongest competitive dialysis care network in Taiwan through

world class quality medical standards, operating systems, academic affiliations with US partners,

superior market understanding, and strong financial backing from investors. ARC will leverage

the best practices in kidney dialysis and transfer them to Taiwan. This will include world class-

quality medical and nursing care, state of the art dialysis facilities never before available in

Taiwan, dietitian and counseling services, and a patient-focused service mentality. These

measures will provide a culture of improved service and care for dialysis patients in Taiwan,

which will be its foundation for establishing a dominant market position. It will also enable

ARC to establish necessary partnerships with physicians and hospitals.

Sales & Marketing Strategy:

ARC will be pursuing early-mover advantages for dialysis treatment in Taiwan. ARC

will be the first large U.S. dialysis company to enter Taiwan with an extensive plan of expansion

and development and a comprehensive strategy of enhanced service. ARC’s competitors do not

currently have strong connections with doctors or hospitals, and ARC plans to take advantage of

this opportunity to pursue aggressive growth.

As a more Western lifestyle becomes more common in Taiwan, the need for quality renal

care will become ever more important. ARC intends to promote the fact that they are a superior

alternative to current renal care providers in the region and the added benefits they provide

patients and physicians. ARC will utilize the expertise of its international partners to circumvent

the competition and bring the most advanced information, cost and quality systems to Taiwan


(Roberts, 2000). ARC will also promote the exchange of information, training and human

resources between world-class renal care specialists (Roberts, 2000). These measures will act as

an added incentive for potential physicians in Taiwan to join the ARC network. Partnerships

with physicians are imperative to the success of ARC, since dialysis patients depend on them to

recommend or refer them to a dialysis facility. Through these various measures, along with

sharing their expertise and information in the field of nephrology, ARC will be able to establish

an extensive network of renal care providers while also promoting the importance of

comprehensive renal care in Taiwan.

Revenue Generation Strategy:

ARC has determined that emphasizing improved service and care to dialysis patients

through its world-class, state of the art facilities, which have not been seen before in Taiwan, will

build its reputation as a trusted, high-quality, superior renal care provider. This will become the

foundation for future success and market dominance in the region. In addition, it will create

significant demand for ARC’s services and opportunities for growth, while generating significant

return for investors. ARC’s cost and quality leadership, along with the ability to provide

superior service and care, will be the driving point that attracts patients and physicians to the

ARC network. Furthermore, ARC’s customer service leadership and experienced management

group will separate them from their competitors and reinforce its renal care leadership. As

patients and physicians realize the benefits of using ARC’s services, market share and

dominance will increase. In the future, as the market becomes more competitive and patient

demand increase, ARC plans to acquire, consolidate, and improve other dialysis facilities in

Taiwan as a means of rapid expansion. This will also guarantee that ARC can continue to meet

their clients’ demands at the highest satisfaction levels.


Target Market:

ARC’s target market will mainly consist of dialysis patients in Taiwan, but will include

overseas tourist and expatriates that require medical services (Roberts, 2000). With kidney-

related problems on the rise, ARC’s objective is to target anyone in Taiwan that needs dialysis

treatment. Since there is 100% medical coverage in Taiwan the patient does not have to worry

about the expense of dialysis treatment. With about 94% of dialysis patients receiving treatment

in a dialysis center, ARC is determined to be the center of choice when it comes to dialysis

treatment. It will be ARC’s cost, quality, and service leadership that will separate it from its

competitors and attract its target market.

Promotion (Olsen)

Promotion in Taiwan can be a fairly difficult and confusing process for a new company

entering the market, especially one in the medical field. The laws and regulations regarding

advertising are both the federal and local, but mostly federal. There is no one specific, single rule

covering the whole topic of advertising, so legal rules governing advertising are in several

separate laws (Appendix I). The Government Information Office (GIO) oversees advertising

regulation in Taiwan, and is in charge of enforcing existing laws and regulations. Broadcast

advertising on all television stations must be authorized by the GIO. The GIO looks for

substantiation of claims made about the effectiveness of the product as well as general

compliance with advertising regulations.

Since medical ads are restricted in many ways in Taiwan, ARC is limited to how they can

promote their service. Medical organizations such as hospitals and clinics can engage in

advertising, with restriction. The content of medical ads is limited to general information, such

as the address, telephone number, and registration number of the organization and the name and


experience of doctors, with the comments on the curative effect of therapy or equipment not

allowed. In addition, companies can not attract patients by illegal methods, and they can not

produce medical ads under another party's name, quote medical journals, or present ads as an

informational interview. See Appendices H – I for more detailed information regarding what

content is and is not allowed in advertising, specifically medical ads.

It is ARC’s intention to use an array of print, online, radio and television ads to bring

awareness to our service. There are a variety of newspapers and health, sports, and business

magazines that can reach ARC’s target market. The same is true with online advertising, which

has been steadily increasing in Taiwan. About 9% of online users frequently click on online ads,

while 77% occasionally hit the ads (Ho, 2004). Furthermore, 14% of Internet surfers would refer

to online ads when making a purchase decision and 69% would once in a while (Ho, 2004).

Radio and television promotion may be ARC’s greatest tool in promoting their services, since it

can reach the largest possible audience.

It is essential that ARC develop a precise target strategy for all promotion methods to

effectively reach users, which means feeding useful information to the right recipients. The

assistance of a skilled marketing company, like Omnicom's Diversified Agency Services (DAS),

whose companies are skilled in marketing and promoting healthcare related services (Appendix J)

will be very beneficial for ARC. They will help ARC optimize their message while promoting

within the rules and regulations regarding medical ads set forth by Taiwan’s laws. In addition,

DAS would have an essential role in ARC’s public relations by attaining necessary partnerships

with medical facilities and physicians, lobbying the Department of Health (DOH) and reaching

out to employers and employees.


As previously mentioned, it is imperative that ARC develop partnerships with established

medical facilities and top physicians. This will be extremely important to the strength of their

medical ads, since it can include the name and experience of physicians. It will also support the

fact that we are the best without directly stating we are the best, which would be illegal, while

adding credibility to that claim.

It would be wise to get the support of the DOH and work carefully with them because

they regulate medical care in Taiwan (Appendix K). Furthermore, there are various goals and

priorities the DOH has put forth to promote healthcare improvements, a healthy lifestyle, and

health education (Appendix L). The Taiwanese government recognizes the need for health

promotion initiatives and is positioning Taiwan for a healthier society for the 21st century. With

kidney disease on the rise and dialysis treatment becoming more common, renal care education

is imperative and working with the DOH in promoting improved kidney health will be an

excellent tool for promoting ARC’s extensive services.

Health promotion is also gradually finding a place in the workplace, which could be

another means of promotion for ARC. ARC could go into various workplaces and have

seminars/clinics/symposiums with the employees where they can stress the importance of renal

care and preventative measures to ensure healthy kidneys. There are numerous benefits of

working with the DOH and employers in educating citizens/employees about renal care. Once

they start to take preventative measures healthcare costs may decrease, eliminating one of the

long-term risks for ARC – removal of dialysis care from the NHI reimbursement program.

ARC believes that it can successfully promote its service and message of renal care,

especially with the assistance of a skilled marketing company like Omnicom. Through the

above-mentioned methods, ARC is confident that the target market will receive their message


effectively and knowledge of the company and its service will dramatically. This will be

important to ARC’s success in Taiwan.

Risks (Group)

Kidney disease and the number of patients requiring dialysis in Taiwan has steadily been

on the increase. As previously mentioned, Taiwan’s population has 100% medical coverage

which covers dialysis treatment. However, dialysis treatment is beginning to take its toll on

Taiwan’s insurance program. Simply put renal dialysis is becoming a heavy financial burden.

The Bureau of National Health Insurance (NHI) paid more than NT$20 billion for renal dialysis

in 2002 (“Dialysis Becomes”, 2003) and that figure increased to NT$23.6 billion in 2003 (Su,

2004). It actually cost the government in 2002 over NT$16 million to treat just one patient,

which was the most ever (Su, 2004).

In the past, patients had to pay for renal dialysis on their own, but under the current

regulations, the NHI pays the bill as long as a patient produces a renal dialysis application form

with the signature of a licensed kidney disease doctor. However, some unethical medical

facilities have supposedly placed patients on renal dialysis prematurely in order to increase their

own revenues (“Dialysis Becomes”, 2003). Another problem is that many patients feel that

dialysis is a forced choice for them and many patients are tired of receiving the treatment three

times a week for the rest of their lives (“Dialysis Becomes”, 2003). This can become a problem

for ARC, because as the cost of providing this service continues to increase, so will the pressure

on the government to curtail coverage or reimbursement, directly affecting ARC revenues.

Taiwan’s relationship with China is a continuous problem that could affect ARC’s long

term position in Taiwan. Most in Taiwan are content to maintain the status quo (Cheng, 2004),

but there is always talk of independence, which leads to this ever-growing uncertainty. Given the


current economic interdependence between Taiwan and China, which is vast and increasing, a

war between Taiwan and the mainland would not be in anyone’s economic interest. However, as

long as there is talk of independence there is the threat of war and economic interest alone does

not always guarantee peace.

Another potential problem facing ARC’s entrance into Taiwan is its lack of sufficient

domestic energy sources. Taiwan is almost totally dependent on energy imports, leading to very

high energy costs without reducing energy consumption, which has continued to increase

(Allison, 2000). This is an increasing problem for Taiwan and the rest of Asia. See Appendix M

for further information. ARC will have to pay very close attention to this problem because

higher energy costs could have a negative affect on their revenue, as it will cost more to operate

their medical facilities.

Financial Plan (Reed)

Financial Plan Summary:

Asia Renal Care is looking for external agencies to contribute start-up and short term

working capital in two stages for entry into Taiwan. Start-up capital requirements are $400,000

per clinic, with three clinics opened in year one and four additional clinics in year two, for total

initial infrastructure costs of $2.8 million. In addition to this start-up capital ARC is seeking two

years of working capital for daily operations, totaling $2.8 million. At the end of year two ARC

will seek an additional $3.9 million in expansion and working capital for further expansion in

Taiwan and to continue operations until the breakeven point, forecasted to occur in year four.

Total external financing for operations until positive cash flows, net of capital expenditures,

which occur in year five are $9.5 million.


Sources of Funding and Cash Flow:

ARC is seeking external funding for the initial startup capital required for expansion in

Taiwan. The preferred form of initial funding is an equity investment by a venture capital

investment firm or firms totaling $5.7 million. This includes anticipated initial startup funding

requirements of $2.8 million in capital investments to open three clinics in year one and four

additional clinics in year two. It also includes $2.9 million in working capital to fund operations

for the first two years of operation. After this two year initial period ARC can either raise an

additional $3.8 million to continue expansion at a rate of five clinics per year for years three

through five, or continue self-sustaining operations with seven clinics.

If ARC does not receive additional funding, positive income of $50,000 occurs in year

three with a net cash flow of $400,000 in that year. Payback of the initial $5.7 million

investment occurs in year six with no further expansion. ARC could finance limited continued

expansion through operations beginning in year four with a postponed payback depending on the

scale of expansion. ARC could also continue expansion through debt financing, albeit with a

negative impact on cash flow and payback.

The preferred situation for ARC is a continued expansion through year five, funded by an

additional $3.8 million in equity capital contributed in year three. This scenario allows ARC to

fund five additional clinics in years three through five for a total of 22 clinics. Positive income

of $90,000 occurs in year four in this scenario, with positive cash flows of $919,000 year five.

With a total investment of $9.5 million, payback occurs in year seven with a net positive cash

position of over $5 million at the end of that year.

Financial Goals:


ARC plans to build and staff world class quality dialysis clinics in Taiwan, creating a

dialysis center that is significantly better than competing clinics. This leading quality will allow

ARC to achieve full customer loads quickly in new clinics, with a stated goal of 90% of full

capacity operations within four years of opening the clinic. This rapid patient load ramp-up will

let ARC have clinics operating at a net profit within three years of opening, which is the second

financial goal of operations. ARC plans to use clinic management and cost cutting techniques

learned in the highly competitive US market to operate highly profitable clinics in Taiwan, with

a goal of 15% corporate net profit margins in steady state operation.

Financial Risk:

The dialysis business is a somewhat unique situation from a business risk perspective.

There are large fixed costs associated with dialysis, including the cost of the equipment itself,

fixed salary costs, and insurance, combined with a total lack of control over reimbursement rates.

Counterbalancing this is the fact that ESRD is a chronic condition, and patients receiving dialysis

will continue to receive it until they either receive a transplant or die. That fact coupled with a

solid government administered health plan that pays high fixed reimbursement rates means the

source of cash flow is fairly stable and predictable, because once patients become clients of ARC

and get used to the high quality service, they are unlikely to go elsewhere for treatment. A

significant enabler for this patient stability is maintaining good relations with the referring

doctors, which is a key focus of ARC’s business strategy. Overall, ARC’s success or failure in

managing these risks and driving strong patient growth through good doctor relations will be

apparent during the first two years of operation, and positive results in that period should

facilitate additional funding and expansion.


Revenue Breakdown:

ARC is a service company, providing outpatient hemodialysis treatment to patients with

End Stage Renal Disease through independent dialysis clinics. These clinics provide services for

doctor referred patients that pay for the dialysis through government health plan reimbursement.

The normal dialysis patient requires 10 treatments per month and the current reimbursement rate

is $156 per treatment. With fixed reimbursement rates, the only way for ARC to increase

dialysis revenues is through increasing the number of patients serviced, either through increasing

the number of patients per clinic or by increasing the number of clinics. Increasing the number

of clinics is the preferred method for increasing revenues, but increasing the number of patients

per clinic is perhaps the most efficient. For this reason, ARC will pursue an aggressive

expansion plan as outlined, but will also pursue methods of increasing patient density. This

campaign for increasing patient capacity will become a major focus of the company beginning in

year five, at which time all of the first year clinics will have reached their full patient capacity

and revenue growth from them will stop. ARC expects that it can realize a 20% increase in

patient capacity in the period from year five to year eight, allowing revenue growth to continue

even after expansion stops. Since this is a somewhat ambitious goal, the pro forma financial

forecasts do not reflect increases in patient capacity.

The newly opened clinics will not immediately operate at 100% of capacity, which is 100

patients per clinic, but will instead undergo a period of increasing patient load, a ramp-up period.

The financial plan accounts for this ramp-up through the use of ramp-up factors that generally

apply until the clinic reaches 90% capacity. The percentage figure used for the ramp-up is the

average percentage of full operations for the clinic for the year. In other words, if the ramp-up is

50% it means the clinic is operating at an average 50% capacity for the entire year. This


simplification avoids the difficulty of calculating year-start and year-end figures, or other

methods of calculating revenues and revenue increases during the ramp-up period.

Expense Breakdown:

Variable Labor - Significant portions of the labor costs are variable because they are tied

to the patient load of the clinic. As a clinic increases the patient load it also needs to increase the

number of nurses and support technicians servicing those patients. While this variability is

actually tied to patient load and could be expressed as a multiple of the number of patients, it is

instead expressed as a percentage of revenues. Tying the labor expenses to revenues allows the

financial plans to include inflation as a part of the labor costs. As inflation increases salaries and

labor costs it should also increase reimbursement rates and revenues, so keeping labor costs

connected to revenues simplifies financial planning.

Fixed Labor – Fixed labor expenses are a smaller portion of the total labor expense, and

primarily reflect the need to keep a doctor on staff without regard to actual patient load. For this

reason fixed labor costs have a fixed value during the first three years of a clinic’s operation, and

then change to a percentage of revenues. Long-term fixed labor costs are tied to revenues for

much the same reason variable labor costs are – there is a small correlation between patient load

and fixed labor increases, as patient load increases there is a need for more than one doctor on

staff, and tying fixed labor costs to revenues also accounts for inflation.

Supplies – Supplies are the single largest expense for ARC. Supplies are the dialyzer

used to clean the blood, blood tubing, needles, and the like. ARC will initially procure these

items from local suppliers in Taiwan, but at a later point ARC can investigate a global sourcing

network if desired. Some of these products are perishable, and so will have to be procured in


Taiwan. Due to high Taiwan distribution costs, ARC’s cost for supplies is higher than that of

clinics in the US and Europe. The cost of supplies is also tied to revenues instead of patients.

Admin Expenses – This category accounts for clinic administration and is expressed as

both a variable cost related to revenues with an additional expense incurred during clinic ramp-

up. This ramp-up cost reflects the increased costs associated with developing a patient base for

the clinic, above and beyond normal administrative expenses. This includes extra marketing

expenses and other unforeseen initial costs. Once the clinic reaches 90% capacity the extra

administrative expense goes away.

Fixed Expenses – These are normal operating overhead expenses, expressed as a fixed

cost during ramp-up and then as a percentage of revenues. These expenses will be higher than

for comparable clinics in the US or Europe because of the high costs in Taiwan’s cities.

Rent – In an effort to reduce lease cost fluctuations ARC will sign long-term lease

contracts on clinic facilities where possible. As is common in many major Asian cities, rent is

very expense and can be volatile, especially on the upside. Rent expenses in the financial plan is

a fixed cost to reflect the desired long-term lease arrangement, but the initial expense value in the

plan is higher than anticipated actual rental expenses to allow leeway for the high degree of

variability in rent costs.

Country Overhead – Expressed as a straight percentage of revenues, this category

accounts for other variable costs associated with the country of entry. It allows for unique or

unanticipated additional costs inherent to each country, includes potential costs associated with

government licenses or marketing expenses, and insurance.

Corporate Overhead – These are normal corporate overhead expenses incurred by a

chain of independent clinics, and include headquarters staff labor and admin costs. The financial


plan expresses these expenses as a fixed cost with a variable component tied to the number of

clinics in operation.

Potential Impacts:

Exchange Rate Impact – ARC will face relatively small exchange rate risks in their

Taiwan operations for several reasons. The first reason is that the Taiwan government has been

very willing to support the Taiwan dollar in the past, with fluctuations in only a 10% band

around 34 TWD/USD over the past four years. This consistency in the exchange rate makes

future planning more accurate and reduces the need for exchange rate planning in the financial

models. A second reason that exchange rates won’t have much of an impact on ARC’s normal

operations is that ARC will book both the revenues and expenses in Taiwan. Since ARC is an

in-person service company revenues will naturally be in Taiwan dollars, and expenses will also

be in Taiwan dollars through the use of Taiwan labor and overhead. The only foreign currency

expenses will be purchase of equipment and supplies, and ARC will initially procure most

supplies locally. If ARC begins sourcing supplies globally at a later time than exchange rate

changes will have an impact on this area. Equipment is a significant foreign currency expense

and this only significantly impacts expansion, not day to day operations. Since ARC plans to

reinvest profits into expansion for the first five years at least, there are no exchange rate

considerations for the repatriation of profits, but if ARC expands to other countries in the future

as planned Taiwan profits used to finance such expansion will be subject to exchange rate risks.

Inflation Impact – Similarly to the foreign exchange rate impact, inflation will play a

small role in financing for ARC. Historically, Taiwan has had low rates of inflation, less than

5% in the period from 1985 to present, and less than 2% in the period from 1997 to the present

(CIA, 2003). However, the primary reason that inflation will play a small role for ARC is that


both revenues and expenses will be booked in Taiwan, meaning that increases in revenues should

offset corresponding increases in expenses due to inflation. There is a risk that inflation will

impact certain expenses without impacting revenues, area such as rent, supplies sourced globally

and capital expenditures for equipment purchased abroad, but these issues are dealt with in the

respective areas, instead of through a broad adjustment for inflation.

Reimbursement Impact – The most significant impact on ARC’s future revenues is the

dialysis reimbursement rate. Since Taiwan covers all citizens for dialysis through the

government health plan the only way reimbursement rates will increase is through increases from

the government health plan, unlike countries with private insurance plans where reimbursement

rates may vary. If reimbursement rates do not increase to keep pace with inflation then actual

financial performance will not match forecast returns. A typical reimbursement rate scenario is

that reimbursement rates will lag for a period of time and then the government will increase rates

to catch up to inflation, creating a situation where revenues will lag for a period and then jump

when reimbursement rates as increased, then slowly lag again until the next increase.

Financial Statements:

Included below are composite financial statements for both the two year expansion option

and the continued expansion option, showing projected revenues, costs, and cash flow positions

until the payback period is reached, six years for the two year plan and seven years for the

continued expansion plan. Additional financial statements, including 10 year projections,

financial planning inputs, single center financials, and yearly planning projections are included in

the appendix of this plan.


Corporate Financials Year
Inputs 1 2 3 4 5 6

Number of New Centers 3 4 0 0 0 0
Total Number of Centers 3 7 7 7 7 7
Revenues $ 608,400 $ 2,940,600 $ 7,402,200 $ 11,559,600 $ 13,384,800 $ 14,196,000
Expenses
Variable Labor $ 85,176 $ 411,684 $ 1,036,308 $ 1,618,344 $ 1,873,872 $ 1,987,440
Fixed Labor $ 105,000 $ 245,000 $ 245,000 $ 304,268 $ 401,544 $ 425,880
Supplies $ 182,520 $ 882,180 $ 2,220,660 $ 3,467,880 $ 4,015,440 $ 4,258,800
Admin Expenses $ 186,420 $ 511,030 $ 734,110 $ 785,980 $ 669,240 $ 709,800
Fixed Expenses $ 420,000 $ 980,000 $ 980,000 $ 998,048 $ 1,070,784 $ 1,135,680
Rent $ 324,000 $ 756,000 $ 756,000 $ 756,000 $ 756,000 $ 756,000
Country Overhead $ 36,504 $ 176,436 $ 444,132 $ 693,576 $ 803,088 $ 851,760
Corporate Overhead $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000
Corporate Overhead Variable $ 10,000 $ 30,000 $ 70,000 $ 70,000 $ 70,000 $ 70,000 $ 70,000
Total Expenses $ 1,869,620 $ 4,532,330 $ 6,986,210 $ 9,194,096 $ 10,159,968 $ 10,695,360
Expenses as % of Revenues 307.3% 154.1% 94.4% 79.5% 75.9% 75.3%
EBITDA $ (1,261,220) $ (1,591,730) $ 415,990 $ 2,365,504 $ 3,224,832 $ 3,500,640
EBITDA as % of Revenues -207.3% -54.1% 5.6% 20.5% 24.1% 24.7%
Depreciation $ 150,000 $ 350,000 $ 350,000 $ 350,000 $ 350,000 $ 200,000
Earnings before Interest and Taxes $ (1,411,220) $ (1,941,730) $ 65,990 $ 2,015,504 $ 2,874,832 $ 3,300,640
Interest $ - $ - $ - $ - $ - $ -
Profits before Taxes $ (1,411,220) $ (1,941,730) $ 65,990 $ 2,015,504 $ 2,874,832 $ 3,300,640
Taxes 25% $ - $ - $ 16,498 $ 503,876 $ 718,708 $ 825,160
Net Income $ (1,411,220) $ (1,941,730) $ 49,493 $ 1,511,628 $ 2,156,124 $ 2,475,480
Net Income as % of Revenues -232.0% -66.0% 0.7% 13.1% 16.1% 17.4%
Capital Expenditures $ 1,200,000 $ 1,600,000 $ - $ - $ - $ -

Cash Flow
Net Income $ (1,411,220) $ (1,941,730) $ 49,493 $ 1,511,628 $ 2,156,124 $ 2,475,480
Depreciation $ 150,000 $ 350,000 $ 350,000 $ 350,000 $ 350,000 $ 200,000
Capital Expenditures $ 1,200,000 $ 1,600,000 $ - $ - $ - $ -
Net Cash Flow $ (2,461,220) $ (3,191,730) $ 399,493 $ 1,861,628 $ 2,506,124 $ 2,675,480
Net Cash Position $ (2,461,220) $ (5,652,950) $ (5,253,458) $ (3,391,830) $ (885,706) $ 1,789,775
Terminal Value (x EBITDA) 5 $ (6,306,100) $ (7,958,650) $ 2,079,950 $ 11,827,520 $ 16,124,160 $ 17,503,200

Figure 1. Two Year Expansion


Corporate Financials Year
Inputs 1 2 3 4 5 6 7

Number of New Centers 3 4 5 5 5 0 0
Total Number of Centers 3 7 12 17 22 22 22
Revenues $ 608,400 $ 2,940,600 $ 8,416,200 $ 16,122,600 $ 25,552,800 $ 34,476,000 $ 41,067,000
Expenses
Variable Labor $ 85,176 $ 411,684 $ 1,178,268 $ 2,257,164 $ 3,577,392 $ 4,826,640 $ 5,749,380
Fixed Labor $ 105,000 $ 245,000 $ 420,000 $ 654,268 $ 926,544 $ 1,049,660 $ 1,178,860
Supplies $ 182,520 $ 882,180 $ 2,524,860 $ 4,836,780 $ 7,665,840 $ 10,342,800 $ 12,320,100
Admin Expenses $ 186,420 $ 511,030 $ 1,044,810 $ 1,534,130 $ 2,057,640 $ 2,243,800 $ 2,313,350
Fixed Expenses $ 420,000 $ 980,000 $ 1,680,000 $ 2,398,048 $ 3,170,784 $ 3,265,760 $ 3,376,960
Rent $ 324,000 $ 756,000 $ 1,296,000 $ 1,836,000 $ 2,376,000 $ 2,376,000 $ 2,376,000
Country Overhead $ 36,504 $ 176,436 $ 504,972 $ 967,356 $ 1,533,168 $ 2,068,560 $ 2,464,020
Corporate Overhead $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000
Corporate Overhead Variable $ 10,000 $ 30,000 $ 70,000 $ 120,000 $ 170,000 $ 220,000 $ 220,000 $ 220,000
Total Expenses $ 1,869,620 $ 4,532,330 $ 9,268,910 $ 15,153,746 $ 22,027,368 $ 26,893,220 $ 30,498,670
Expenses as % of Revenues 307.3% 154.1% 110.1% 94.0% 86.2% 78.0% 74.3%
EBITDA $ (1,261,220) $ (1,591,730) $ (852,710) $ 968,854 $ 3,525,432 $ 7,582,780 $ 10,568,330
EBITDA as % of Revenues -207.3% -54.1% -10.1% 6.0% 13.8% 22.0% 25.7%
Depreciation $ 150,000 $ 350,000 $ 600,000 $ 850,000 $ 1,100,000 $ 950,000 $ 750,000
Earnings before Interest and Taxes $ (1,411,220) $ (1,941,730) $ (1,452,710) $ 118,854 $ 2,425,432 $ 6,632,780 $ 9,818,330
Interest $ - $ - $ - $ - $ - $ - $ -
Profits before Taxes $ (1,411,220) $ (1,941,730) $ (1,452,710) $ 118,854 $ 2,425,432 $ 6,632,780 $ 9,818,330
Taxes 25% $ - $ - $ - $ 29,714 $ 606,358 $ 1,658,195 $ 2,454,583
Net Income $ (1,411,220) $ (1,941,730) $ (1,452,710) $ 89,141 $ 1,819,074 $ 4,974,585 $ 7,363,748
Net Income as % of Revenues -232.0% -66.0% -17.3% 0.6% 7.1% 14.4% 17.9%
Capital Expenditures $ 1,200,000 $ 1,600,000 $ 2,000,000 $ 2,000,000 $ 2,000,000 $ - $ -

Cash Flow
Net Income $ (1,411,220) $ (1,941,730) $ (1,452,710) $ 89,141 $ 1,819,074 $ 4,974,585 $ 7,363,748
Depreciation $ 150,000 $ 350,000 $ 600,000 $ 850,000 $ 1,100,000 $ 950,000 $ 750,000
Capital Expenditures $ 1,200,000 $ 1,600,000 $ 2,000,000 $ 2,000,000 $ 2,000,000 $ - $ -
Net Cash Flow $ (2,461,220) $ (3,191,730) $ (2,852,710) $ (1,060,860) $ 919,074 $ 5,924,585 $ 8,113,748
Net Cash Position $ (2,461,220) $ (5,652,950) $ (8,505,660) $ (9,566,520) $ (8,647,446) $ (2,722,861) $ 5,390,887
Terminal Value (x EBITDA) 5 $ (6,306,100) $ (7,958,650) $ (4,263,550) $ 4,844,270 $ 17,627,160 $ 37,913,900 $ 52,841,650

Figure 2. Continued Expansion


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27, 2004 from The FundSupermart Homepage on the World Wide Web:

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Asia Renal Care, Inc. Business Plan

Market: Taiwan

Appendices


Marketing/Economic Appendix A:

(Blake, 2000)

(Kopple, 2000).


GDP per capita in US$ purchasing power equivalents for the 10 richest nations in Asia
(Woods, 2004)

Total spending on health care per capita in purchasing power parity US$ for the 10 richest
nations in Asia

(Woods, 2004)


Taiwan: Econom ic Data

Jun 20th 2003
From the Economist Intelligence Unit
Source: Country data

1999 2000 2001 2002
GDP per head ($ at PPP) 21,200 22,740 22,590 23,420

GDP (% real change pa) 5.42 5.86 -2.18 3.55

Government consumption (% of GDP) 13.15 12.9 13.05 12.56

Budget balance (% of GDP) -5.94 -4.49 -6.65 -6.6

Consumer prices (% change pa; av) 0.18 1.25 -0.01 -0.2

Public debt (% of GDP) 23.71 26.67 26.93 29.8

Labour costs per hour (USD) 5.51 5.85 5.7 5.58

Recorded unemployment (%) 2.93 2.99 4.58 5.16

Current-account balance/GDP 2.91 2.88 6.37 9.14

Foreign-exchange reserves (m$) 106,200 106,742 122,211 161,656

Notes
Budget balance (% of GDP) Percentage of fiscal-year GDP.

Consumer prices (% change pa; av) Non-seasonally adjusted
Public debt (% of GDP) Percentage of fiscal-year GDP.

Labour costs per hour For production workers.
Includes pay for time worked,
other direct pay (eg. holiday
Recorded unemployment (%) pay), recent data derived from
Most employer expenditures on
Directorate-General of Budget,
Accounting and Statistics. Non-
seasonally adjusted.

Copyright © 1995-2001 T he Economist Newspaper Group Ltd. All rights reserved.


Taiwan Comparative Economic Indicators, 2003

Taiwan China Hong Kong US Japan

GDP (US$ bn) 284 1,472 161 10,984 4,318

GDP per head (US$) 12,552 1,136 23,347 37,831 33,941

GDP per head (US$ at PPP) 24,500 5,153 27,543 37,831 28,086

Consumer price inflation (av; %) -0.3 1.2 -2.6 2.3 -0.2

Current-account balance (US$ bn) 25 32 22 -541 126

% of GDP 8.8 2.2 13.9 -4.9 2.9

Exports of goods fob (US$ bn) 143.0 436.1 225.9 714.5 447.1

Imports of goods fob (US$ bn) -119.6 -397.4 -230.3 -1,260.4 -346.6

(Economist Intelligence Unit, CountryData).


Marketing Analysis and Plan

Appendix B:

Prevalence of ESRD: Prevalence of ESRD, by age

(International Comparisons…, 2002)


(Blake, 2000)

The prevalence figure has actually risen to 1,449 pmp and an additional 1,476 people

joined the ranks of renal dialysis patients in 2002, which was the world's highest annual growth

rate (Renal Dialysis…, 2003). It is believed that this has been attributed to the good quality of

local renal dialysis that has prolonged the life of many patients.


Appendix C:

Incidence of ESRD:



Incidence of ESRD, by age:


A high percentage of Taiwan's population is dying from kidney-related problems and the

need for dialysis continues to increase. There are a variety of reasons doctors have determined

have lead to this problem. Taiwan has a relatively high percentages of patients with diabetes and

high blood pressure and that Taiwan patients tend to use excessive amounts of medication that

contain nephrotoxins. People over the age of 65 with high blood pressure and hyperazoturia and

who have suffered from diabetes for more than 10 years tend to be potential nephrological

patients needing regular dialysis treatment (Kuo, 2004). Along with the higher number of cases

of high blood pressure and diabetes among the old, there has also been an increased consumption


of western-style fast food that has resulted in a large number of overweight youngsters and they

are more likely to develop kidney problems later. (Wu, 1998).

A majority of dialysis patients in Taiwan are senior citizens and there has been some

positive research that showed the benefits of dialysis treatment for the elderly. Elderly kidney

failure sufferers on dialysis treatment live just as long as younger patients and in some cases

even longer. Patients that were 70 or older with renal failure were 71% more likely to survive at

least a year, compared with 63% for younger patients (“Age no barrier…,” 2000). The

importance of this research shows that age should not be a barrier for dialysis patients.


Appendix D:

Percent Distribution of Prevalent Dialysis Patients, by Modality



Distribution of dialysis patients by modality (hemodialysis (HD) and peritoneal dialysis (PD)) in
selected countries in Asia.

(Woods, 2004)

(Blake, 2000)


Distribution of Prevalent Dialysis Patients Prevalent Dialysis Patients, by Age



Appendix E:

Transplant Rates


Between 1993 and 1997, there were 784 kidney transplants were carried out in Taiwan

and on average one out of every 159 kidney dialysis patients has needed a kidney transplant,

compared with one out of every 229 dialysis patients in Japan (Wu, 1998). As renal disease

continues to rise, kidney transplants may be more common in Taiwan.


Medical Treatment Law Appendix F:

Medical Treatment Law:

Medical Treatment Establishments – General Provisions

Article 11 Medical establishment equipped with medical wards to
accommodate patients are hospitals and establishments with
only outpatient services are clinics. Medical facilities setup
for non-direct medical diagnosis purposes such as medical
insurances by physicians are considered as other medical
establishments. Clinics mentioned previously are permitted
to set up 9 observatory beds to the maximum. Facility
standards of medical establishments are to be set by the
central health government office.

Article 11.1 Two or more clinics established at a single location, utilizing
common facilities but executing separate outpatient services
are considered joint clinics. The central health office
determines the management regulations of such clinics.

Article 12 Establishment or expansion of hospitals can apply for
construction license under the relevant construction law after
obtaining permission from the health government offices.

Article 13 Commencement of medical treatment establishments,
abiding by the left regulations, should apply, approbate and
registered by the local municipality or county (city) health
offices and obtain practice license:
Applicant of Applicant of Applicant of juridical
private public medical person’s medical
medical treatment establishment or other
treatment establishment medical establishments
establishme should be its attached to other juridical
nt should be representative. corporations by law should
the be the juridical person
physician involved.

Article 14 Application and change of medical treatment establishment
names should be limited to approbation of the local
municipality or county (city) health government offices.
Principles of name application and change are to be
determined by the central health government office.


Non-medical establishments cannot apply names or any of it
similar of medical treatment establishments.

Article 15 Medical treatment facilities should appoint a physician in
charge of whom to be responsible for the establishment’s
activities and supervising obligation.
The physician in charge mentioned previously should
accomplish two years of training and obtain a proofed
certificate from a hospital appointed by the central health
government office. Physician in charge of vocational
hospitals or clinics should possess vocational physician
qualification. The physicians in charge on duty before
promulgation of this law are not subjected to this regulation.

Article 15.1 Physicians unable to execute relevant duties with acceptable

reasons should appoint an acting physician in charge with the

same qualifications. When acting period exceeds 45 days,

the acting physician in charge should submit reference to the

original practice license issuer. Acting period mentioned

previously should not exceed over one year.

Article 16 Medical treatment establishments should post its practice
license, service schedule and other service regulations in
visible area. Same regulation is applicable to physician
license of physicians in clinics and vocational hospitals.

Article 17 Medical service fee standards of medical treatment
establishments are to be determined by municipal or county
(city) health government offices. Medical service fee
standards of public medical treatment establishments are to
be determined separately by its relevant supervision offices.

Article 18 Medical treatment establishments when charging medical
fees should provide relevant expenses lists and receipts and
also provide relevant standard expenses list for patients
reference. Medical treatment establishments should not
infringe the fee standards and charge its fees above the
quota.

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