South-Eastern Anatolia UHG Business Plan Highlights

Preliminary and Draft Copy for Discussion Purposes Only

Background
Universal Hospitals Group is the largest private healthcare provider in Turkey which currently has 8,500 employees, 1,300 physicians and 58 healthcare facilities. Foundations of the group were laid back in 1972. The group started its operations in 1972 when Dr. Azmi Ofluoglu has opened the most modern out-patient clinic of that 70s in Turkey. The group consistently grew over the decades and became a healthcare giant providing world-class healthcare services, mostly in western Turkey. UHG wants to expand its business into South, East and South-Eastern Turkey by building new hospitals in the region. This is to be achieved by establishing business relationships with local landlords in the region where possible. UHG has established a wholly owned subsidiary to plan, execute and control operations and building its headquarters in Adana.

UHGs Mission and Vision

UHGs mission is to maintain its reference hospital status in the Turkish Healthcare industry by using modern knowledge and latest technology within the framework of internationally accepted healthcare standards and business ethics. UHG respects patient rights and recognizes its social responsibilities and aware the importance of patient and family satisfaction. UHGs vision is to become a global healthcare provider by providing services in other parts of the world where there is need; as it is proud of building a model and brand in healthcare; with its highly qualified team, modern infrastructure as well as pioneering applications utilizing latest technology, academic achievements and great experience.

Parties to This Business Plan

Entrepreneurs:  South Eastern Anatolia UHG (SEA-UHG) (A Wholly Owned Subsidiary of UHG)  Individual Landlords in Various Cities of South, Eastern and South-East Anatolia (Landlords) Others:  Physicians in Public Hospitals and Independent Practice, as well as Nurses and Hospital Administrators currently living or willing to live in those cities  Local Businesses  General Public

The Business Model

Landlords who are mostly wealthy local businessmen show interest in building a hospital in their cities and apply UHG for consideration. UHG studies the local healthcare market and if found feasible, drafts and negotiates a contract establishing a business relationship with the landlords. Landlords provide a hospital building either by renovating an existing building, or building a new one according to specifications given by SEA-UHG. SEA-UHG provides assistance during renovation and/or construction phase with its architects and engineers. SEA-UHG provides medical equipment and furniture and operates the hospital. The rental revenue for landlords is variable and a pre-determined percentage of the hospital revenue.

Executive Summary
Being the leader in the healthcare industry with its 58 establishments, The Group wishes to further expand into less developed / under privileged Southern, Eastern and South-Eastern regions of the country to meet demand which was not satisfactorily met for decades. This is one of the main motives behind the investment decision. UHG Hospitals will meet the evident demand and bring world class healthcare services to the people of the region specifically by providing most needed hygienic operating theatres and intensive care facilities, as well as modern medical imaging technologies. These hospitals, which are designed to serve patients in international healthcare standards, will become magnet hospitals and reference centers in their areas specifically with their high technologies and comfort level they will provide.

Marketing Highlights

Macro Environment
Turkey in last two decades show enormous development and became one of the key economic players in Europe and Middle East. Turkish economy is becoming more and more stable ever year and there is a growing interest among foreign investors as politics and economy stabilizes. There is a very big growth potential in the country's economy and the country is a candidate for EU membership. As the economy grows demand for better education and world-class healthcare services, where there is an obvious gap between demand and supply, also grow.

Competitive Environment
Competition from public hospitals are weak due to their very limited resources and insufficient service levels. There is a serious funding problem for these facilities as these facilities are funded by the central governments budget. Teaching facilities (tertiary level providers), where exist, provide high level services but they also have budgetary constraints and are very crowded. Physicians working in these facilities are looking into better business opportunities with private providers. There are few private hospitals but they are operated mostly by local physicians and inadequate in providing world-class services. Their buildings and equipment are mostly outdated or poor in quality. Some of these facilities have serious infection control risks. Independent physician offices ad imaging centers and labs may meet primary care needs and some outpatient need, however the lack complexity required by todays care requirements

The Industry
The industry was overwhelmed by public facilities which are funded by central governments budget. Although this is still the case their dominance is loosing strength as privately owned healthcare facilities emerge. Today only about 10% of the market belongs to private hospitals and clinics, but as the public facilities grow older, their re-furbishing and equipment needs cannot be met by the central budget. Government has developed a healthcare transformation plan which ultimately aims at privatizing the whole industry. This plan is developed under auspices of The World Bank and IMF, who are very determined for its success, as they are the main lenders of the country. A new general public healthcare insurance scheme will be taking effect starting from January 2007. The new scheme integrates payers into a single body.

Customer Priorities
We call customers of healthcare as patients. However their patience is running out as they compare quality and quantity of healthcare services available to them with those of developed countries. Customers of healthcare are now much better informed about their choices than they were a decade ago. Thus their demand is much more educated. Current level of hygiene and comfort in crowded public facilities lead patients into private services. The are willing to pay more for a healthier choice. Physicians in private healthcare are more emphatic than their counterparts in public services, as they are being directly paid by the patient. Price elasticity of demand in healthcare is very low. Patients are willing to pay more, as inability to meet these services are considered life threatening.

Service Strategies
As the population of the country ages and income level increases, cardio-vascular problems are becoming very common. Therefore availability of cardiology and cardiovascular surgery is key to success, as they are not widely available in lesser developed regions of the country. Patients expect better imaging and lab services which can only be provided with modern equipment available in wealthy hospitals. Recently services of private hospitals became available for patients under public insurance. As these patients are white and/or blue collar workers time management of these services are important for them and their employees. An integrated approach to spend less time in the healthcare facility makes both patients and their insurers happy. Dark and dirty environments, long waiting queues and non-smiling faces are not welcomed in private healthcare. One of the most important service standards will be a welcoming facility where patients and families may feel the comfort and peace.

Pricing Strategies
The government fixes the prices it pays for the medical services through public insurance. The price differentiation is achieved by charging a surplus over the amount paid by the public insurance. The amount of surplus is dependent upon availability of similar services in their local market and ability of patients to pay the difference. Private insurance companies started provide insurance policies to cover these surplus charges. Prices for those policy holders are negotiable between hospitals and insurance companies, but usually does not vary extensively around Turkish Medical Associations minimum price list. UHG believes that the pricing of its services should not be a barrier to access to better healthcare. Therefore the pricing of the services will be set according to the local market conditions, keeping in mind that the quality service can be expensive, at times.

Distribution Strategies
One of the key element for quality healthcare services is to increase accessibility for those services. This requires understanding local conditions and careful planning to meet demand, local in character. Strong business relations with local business circles will enable SEA-UHG to satisfy this need. Out-patient clinics will be established to capture demand where necessary. These will become supply centers for patients. Some of our hospitals will provide specialty services (e.g.: oncology treatments or special non-invasive diagnostic techniques, etc.) which will be marketed by our other hospitals in neighboring regions. Patient and family education not only a right but is a key to success in healthcare. The company will extensively use its resources for this purpose.

SWOT Analysis
Strengths
        Extensive Experience in Operating Hospitals Strong Price Advantage of Centralized Buying Adherence to International Healthcare Standards Need to Educate Nursing and Other Independent Providers for Standards Geographical Distance from Main Headquarters Growing Demand and Inability of Public Sector to Meet Such a Demand Early Entry to Those Market Segments General Economic Crises

Weaknesses

Opportunities

Threats

Operations Highlights

Processes
Main Processes in Hospital Operations are:  Outpatient Visits with Lab and Imaging  Lab and Imaging Services to Outside Providers  Ambulatory Surgeries  Non-Surgical In-patient Admissions  Surgeries  Emergency Room Visits  Wellness and Checkup Programs  Advanced Diagnostics Services (e.g.: Cath-Lab, CT Angiography etc.)

Facility Requirements
Each Hospital has its own spacing requirements according to its plan of care, however the following facilities are musts in almost all of our hospitals:  Outpatient Clinics : In Almost All Specialties  Radiology Department : MRI, CT, X-Ray, Fluoroscopy, US-Doppler etc.  Central Laboratory : Microbiology, Bio-chemistry, Pathology  Inpatient Rooms : Single Occupancy  ICUs : Medical & Surgical, Cardio-vascular, Coronary  Cath-Lab : Cardiac and DSA  Operating Theatres : HEPA Filters, Laminar Flow  CSSD : Steam, Ethylene Oxide, Plasma  Catering Services : Patients & families, Employees  Delivery Rooms, Morgue, Administrative Spaces etc

Equipment and Inventory Requirements

Each hospital has a room-by-room equipment inventory list drawn out of its functional program and plan of care. Availability on time and proper maintenance of medical equipment is one of the keys for success in healthcare.  UHG has both experience and buying /negotiation power in purchasing the most modern medical equipment in both local and international markets.  UHGs central equipment inventory and ability to exchange medical equipment among UHG hospitals is an another strength factor.  The group has a centralized purchasing department which can expedite purchasing process significantly.

Supply Chain Requirements

Large number of different inventory items. Difficult storage requirements. Many infrequently used and expensive items. Mostly provided by just-in-time basis by suppliers. Advantage of volume buying and volume contracts. Items require fast delivery.

Highlights of The Financial Plan

The project will be financed both by equity and loans. As buildings are on long-term lease there will be no initial cash outflow for land, buildings and alike. Only medical equipment and furniture will be financed with loans (some in operational leasing) The company has no existing loans and liabilities. The company has signed long-term operational leasing contracts with landlords. The projected financials are available upon request.

Human Resources
All HR activities will be centrally coordinated from Adana Office. Two HR specialists will be employed to coordinate the activities. HR specialists will have special training on JCI standards on credentialing and continuing education issues. All job descriptions will be written and will be presented to prospective employees before a job offer and the final interview. HR specialists will also arrange training for individual hospital managements and action plans for labor and union issues A well structured compensation plan will be prepared and submitted to the management for approval. A skills inventory will be developed and new hiring will only take place according to budget and the HR master plan.

Hospitals in Construction
Universal Adana Card. & Cardiovascular Surgery Hosp. Universal Adana Ophtalmology Hospital Universal Adana Gynecology & Pediatrics Hospital Universal Diyarbak r Hospital Universal Elaz Hospital Universal Van Hospital Universal Hatay Hospital Universal Urfa Hospital Universal A r Hospital Universal Cizre Hospital Universal Bingl Hospital TOTAL Building (m2) 4,000 4,000 8,000 18,000 20,000 12,000 10,000 20,000 10,000 7,000 5,000 128,000 # of beds 52 10 52 100 200 100 80 200 100 50 50 994

Hospitals Planned
Universal Yozgat Physical Theuraphy & Rehabilitation Hospital Universal Sivas Hospital Universal Malatya Hospital Universal Mersin Hospital Universal Bingl Hospital Universal Hakkari Hospital Universal Gaziantep Hospital Universal Ad yaman Hospital

Geographical Positioning