I am starting this discussion topic to evaluate pros and cons of investing in dialysis unit to educate potential investors. Please contribute
1.Potential to make profit
2.Additional stream of income
3.Have more say/control in patient care and developing dialysis unit protocols
4.Opportunity to be a medical director though investment is not a requirement for medical directorship. Typical medical director’s salary is $500-$1200/patient though depends upon local market rates.
5.As of now, has good sale value since big companies are interested in expanding and buying units. Some dialysis clinics have been sold 5-8 times of EBITDA (earnings before income tax, depreciation and amortization) not so long ago.
1.Additional time needed for administration and overlooking business operations
2.Start up cost is high (Figures typically run in 7 digits; 1-3 Million $ depending upon size)
3.Investment cannot be easily liquidated (just like real estate)
4.It is a long term investment. Returns may vary significantly over time.
5.Negative cash flow may happen requiring more capital contributions.
6.Investment risk is significant
a.All eggs in one basket
i.Risk is not diversified with investment in single unit
i.At least more than 5% commercial payers needed all the time to make profit regardless of total number of patients. To make significant profit at least 10% commercial payers are needed. Commercial payers subsidize underpayments by medicare or medicaid patients.
i.For private payers, payment rates vary significantly from one insurance company to another and payment rates may change significantly over time (in general, rates are declining). Medicare rate per treatment is lower than cost per treatment and is not expected to increase in future.
d.Not having enough dialysis patients
i.There is no magic number for ‘break even”, since profitability is determined by number of commercial payers. A reasonable number of patients will be needed nonetheless depending upon size of clinic.
i.Managers not vigilant enough to overlook and control expenses.
i.Possibility of court judgment exceeding malpractice insurance.
i. Dialysis unit may close if not compliant with medicare, federal and state regulations.
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