Longevity Healthcare Systems Case Study
Longevity Healthcare Systems, Inc developed from a couple in which both are familiar and involved within the healthcare system. Kathryn is a registered nurse and her husband is a medical doctor. This is very important to note because in the beginning of the establishment of their business they were able to see an opportunity within the healthcare system that they are involved that others may not have been able to envision. They also were able to set-up their business with inside knowledge regarding the necessary protocols and regulations for such a business, and they also have expertise in clinical knowledge to operate such a business. This gave them an advantage over others who may have considered entering the market with a similar business in the Grand Rapids area. Longevity expanded within the Grand Rapids area with nursing homes adding more beds for patients and increased services to cater to all the needs of the elderly patients, which increased their target market. The foundation of Longevity was built on nursing care for older patients who needed help with daily living. Due to the couple’s expertise and Kathryn’s husband’s connection to the community as a medical doctor for elderly people their expansion of nursing home beds and services were successful due to referrals from hospitals, physicians, and healthcare insurers. Their facilities operated at full or near full capacity giving them maximal profit opportunities in the Grand Rapids Area. They also expanded into subacute care, as the demand was high with little supply. This proved to be successful as they were able to care for acute patients at half the cost of a full hospital. By adding only 80 total beds for subacute care they were able to generate $9 million dollars in revenues. This means they generated $112,500 per bed per year, which is substantially higher than their main strength of nursing home beds. Their nursing home beds generated more revenues because of the increased volume, but per bed they generated $45,000 per year. They then also expanded into the pharmacy business by purchasing and incorporating a pharmacy facility in Michigan as well. Longevity expanded into several different areas of business within the healthcare industry. They have nursing care, subacute care, rehabilitation services, and pharmacy business. Now they want to continue to expand, but they lack vision for the future of their business. While vertical integration in healthcare allows for more control in many aspects of the system, it is difficult to achieve and maintain. The company was founded on its nursing home care and standards and now is in multiple arenas with uncertainty as to where they should be headed in the future. The LTC services and facilities have been there strength throughout the company’s existence accounting for 80% of their total revenues in 2008. Now they are in several different businesses that are spreading out their capital and getting away from their strengths thus reducing their sustainability and identity. With all the new business they have undertaken they are now unsure what direction they are heading in and this is one main issue for Longevity as they are approached with several new business opportunities. They have begun to overextend themselves and pulled themselves in different directions and into different types of business. For example they acquired a pharmacy, which is a notoriously low margin, high upstart venture. The net income generated from their pharmacy services was only 6% of their overall business revenues and the cost of this small operation accounted for over 80% of their net revenue. Only having one pharmacy is very difficult as well because of a lack of central resources such as drug warehouses and facilities and also no purchasing power or relationship with drug suppliers to increase margins. Longevity needs an overall marketing strategy to form an identity with their business and...
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