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SaskMedical Diagnostics© (P.C.) Bjorn Hunter

SaskMedical Diagnostics© (P.C.) Business Plan

Prepared for Dr. Painter

By Bjorn Hunter

MBA 992

3 June, 2016


Table of Contents

1.0 Executive Summary………………………………………………………………………..1-2

2.0 Introduction………………………………………………………………………………..3-5

2.1 Proposed Business…………………………………………………………………..3-4

2.2 Positioning Statement………………………………………………………………….4

2.3 Goals and Objectives……………………………………………………………......4-5

3.0 Industry Overview…………………………………………………………………………...6

4.0 Operations………………………………………………………………………………...7-23

4.1 Organizational Structure…………………………………………………………….7-9

4.2 Development Plan………………………………………………………………….9-10

4.3 Site Plan……………………………………………………………………………...11

4.4 Floor Plan…………………………………………………………………………….12

4.5 Work Process Plan………………………………………………………………..12-13

4.6 Quality Control Program…………………………………………………………14-15

4.7 Average Work Schedule………………………………………………………….15-17

4.8 Suppliers and Service Providers……………………………………………………...18

4.9 Capital Expenditures……………………………………………………………...19-20

4.10 Capital budget……………………………………………………………………21

4.11 Operating Expenses (2020-2025)………………………………………………...21

4.12 Operating Expenses (2026-2030)………………………………………………...22

4.13 Cost of Revenues…………………………………………………………………23

5.0 Human Resources……………………………………………………………………….24-35

5.1 Job Descriptions and Qualifications……………………………………………...24-26

5.2 Work Schedule for Medical Director/Radiologist……………………………......26-27

5.3 Work Schedule for Radiologists……………………………………………………..27

5.4 Work Schedule for MRTs……………………………………………………………28

5.5 Work Schedule for the Secretary and Secretarial Assistant………………………….29

5.6 Work Schedule for Custodian………………………………………………………..30

5.7 Compensation and Benefits………………………………………………………31-34

5.8 Training and Education…………………………………………………………...34-35


6.0 Marketing………………………………………………………………………………..36-51

6.1 Market Demand for MRI Services………………………………………………..36-38

6.2 Competitor Analysis……………………………………………………………...38-41

6.3 Customer Analysis………………………………………………………………..41-42

6.4 Target Market…………………………………………………………………….42-44

6.5 Services Offered………………………………………………………………….44-46

6.6 Revenue and Service Level Targets………………………………………………46-47

6.7 Distribution Strategy……………………………………………………………...47-48

6.8 Pricing Policy………………………………………………………………………...48

6.9 Segmentation, Targeting and Position……………………………………………….49

6.10 Marketing Strategy and Advertising Budget…………………………………50-51

6.11 SWOT/TOWS Summary of Marketing Strategy………………………………...51

7.0 Accounting and Finance………………………………………………………………...52-60

7.1 Projected Profitability………………………………………………………………..52

7.2 Sensitivity Analysis………………………………………………………………53-54

7.3 Break Even Analysis……………………………………………………………...54-55

7.4 Ratio Analysis…………………………………………………………………….56-57

7.5 Risk Analysis……………………………………………………………………..58-60

8.0 Business Plan Summary………………………………………………………………...61-63

9.0 References………………………………………………………………………………..64-67


List of Tables

Table 1: Summary of suppliers and service providers…………………………………………...18

Table 2: Summary of capital expenditures………………………………………………………19

Table 3: Summary of capital expenditures for furniture………………………………………....20

Table 4: Summary of capital expenditures for furniture continued……………………………...20

Table 5: Capital budget summary………………………………………………………………..21

Table 6: Summary of operating expenses from 2020-2025……………………………………...21

Table 7: Summary of operating expenses from 2026-2030……………………………………...22

Table 8: Summary of cost of revenues for SaskMedical Diagnostics…………………………...23

Table 9: Job Descriptions and required qualifications for staff at SaskMedical Diagnostics…...24

Table 10: Planned work schedule for the Medical Director of SaskMedical Diagnostics………26

Table 11: Planned work schedule for radiologists……………………………………………….27

Table 12: Planned work schedule for MRTs…………………………………………………….28

Table 13: Planned work schedule for secretary and secretarial assistant………………………..29

Table 14: Planned work schedule for custodian…………………………………………………30

Table 15: Projected salaries and wages for staff and projected EI and CPP benefit costs………31

Table 16: Projected worker’s compensation and holiday pay expenses for staff………………..33

Table 17: Main MRI clinics in Alberta and Saskatchewan……………………………………...39

Table 18: Percentage of Canadian operating funds by source…………………………………...41

Table 19: SMA pricing guidelines for MRI exams……………………………………………...45

Table 20: Targeted cities with population and expected demand of private MRI services……...49

Table 21: Pro Forma Income Statement from 2020 to 2030…………………………………….69

Table 22: Pro Forma balance statement from 2017 to 2025……………………………………..70

Table 23: Pro forma balance statement from 2026 to 2030……………………………………...71

Table 24: Pro forma retained earnings from 2017 to 2030………………………………………72

Table 25: Predicted economic variables from 2020 to 2030…………………………………….72

Table 26: Pro forma cost of revenue from 2020 to 2030………………………………………...72

Table 27: Pro forma cash flow statement from 2017 to 2030……………………………………73

Table 28: Pro forma revenues from 2020 to 2030……………………………………………….74

Table 29: Pro forma capital budget from 2017 to 2030………………………………………….74

Table 30: Financing budget with equity debt breakdown for SaskMedical Diagnostics………..74


Table 31: Pro forma operating expenses from 2017 to 2030……………………………….........75

Table 32: Pro forma total salary and wages……………………………………………………...75

Table 33: Pro forma annual salary and wages……………………………………….…………..76

Table 34: Pro forma benefit expenses……………........................................................................76

Table 35: Pro forma marketing expenses………………………………………………………...76

Table 36: Pro forma debt amortization schedule………………………………………………...77

Table 37: CCA depreciation schedule by asset class…………………………………………….77

Table 38: Tax schedule for federal, provincial and property tax………………………………...78

Table 39: Projected taxable income and after-tax income……………………………………….78

Table 40: Rates used for the calculation of tax…………………………………………………..78

Table 41: Sensitivity analysis of projected cash flows (Base case and 1% case)………………..80

Table 42: Sensitivity analysis of projected cash flows (2% case and 3% case)…………………80

Table 43: Sensitivity analysis of projected cash flows (4% case and 5% case)…………………81

Table 44: IRR at different annual service levels and market exam price discount rates………...81

Table 45: Daily break even analysis for SaskMedical Diagnostics……………………………...82

Table 46: Sensitivity analysis of break even point up to 3% case……………………………….83

Table 47: Sensitivity analysis of break even point from 4% to 5% case………………………...84

Table 48: Projected ratios for SaskMedical Diagnostics from 2020 to 2030……………………86

Table 49: Projected gross profit margin and interest coverage for SaskMedical Diagnostics…..86

Table 50: Available pricing and MRI unit information from competitors…………………........88

Table 51: Technical specifications for MRI units………………………………………………..89


List of Figures

Figure 1: Organizational structure for SaskMedical Diagnostics…………………………………8

Figure 2: 5-year development plan for SaskMedical Diagnostics………………………………...9

Figure 3: Site plan for SaskMedical Diagnostics………………………………………………...11

Figure 4: Floor plan for SaskMedical diagnostics……………………………………………….12

Figure 5: Patient flow chart for SaskMedical Diagnostics………………………………………13

Figure 6: General daily work schedule for staff at SaskMedical Diagnostics…………………...16

Figure 7: Projected dividend payments as a percentage of operating cash flows………………..34

Figure 8: Number of MRI exams conducted annually in Saskatchewan………………………...36

Figure 9: Wait times for MRI services in Saskatchewan from 2008-2015………………………37

Figure 10: Number of MRI exams per 1000 people by province and territory………………….38

Figure 11: Expected number of MRI exams for SaskMedical Diagnostics and competitors……40

Figure 12: Number of Saskatchewan residents by total income group category for 2013………42

Figure 13: Median total income by family type for Saskatchewan in 2013……………………..43

Figure 14: Number of married and common-law families in Saskatchewan…………………….44

Figure 15: Number of Outpatient MRI exams in Ontario by anatomical site…………………...46

Figure 16: Projected Revenue for SaskMedical Diagnostics from 2020-2030…………………..47

Figure 17: Projected market price for MRI exams in Saskatchewan…………………………….48

Figure 18: Projected marketing costs for the first 10 years of operations……………………….50

Figure 19: SWOT/TOWS summary of strategy implications in marketing plan………………..51

Figure 20: Projected net income and cash flows for SaskMedical Diagnostics………………....52

Figure 21: Sensitivity analysis of cash flows for SaskMedical Diagnostics…………………….53

Figure 22: IRR at different service levels and market exam price discount rates……………….53

Figure 23: Projected breakeven points for SaskMedical Diagnostics from 2020 to 2030……….54

Figure 24: Sensitivity analysis of daily break even points at varying discount rates……………55

Figure 25: Projected debt, debt to equity, and cash flow to total debt ratios…………………….56

Figure 26: Projected gross profit margin for SaskMedical Diagnostics…………………………57

Figure 27: Projected interest coverage for SaskMedical Diagnostics…………………………...57

Figure 28: Risk factors for SaskMedical Diagnostics with mitigation strategies………………..58


List of Appendices

10. Appendix A—Pro Forma Financial Statements……………………………………....68-78

10.1 Pro Forma Income Statement……………………………………………………….69

10.2 Pro Forma Balance Statements………………………………………………….70-71

10.3 Pro Forma Retained Earnings………………………………………………………72

10.4 Predicted Economic Variables……………………………………………………...72

10.5 Pro forma Cost of Revenue…………………………………………………………72

10.6 Pro Forma Cash Flow Statement…………………………………………………...73

10.7 Pro Forma Revenues………………………………………………………………..74

10.8 Pro Forma Capital Budget…………………………………………………………..74

10.9 Financing Budget…………………………………………………………………...74

10.10 Pro Forma Operating Expenses…………………………………………………....75

10.11 Pro forma Total Salary and Wages………………………………………………..75

10.12 Pro forma Annual Salary and Wages for each Position…………………………...76

10.13 Pro Forma Employee and Physician Benefits……………………………………..76

10.14 Pro Forma Marketing Expenses…………………………………………………...76

10.15 Pro forma Debt Amortization……………………………………………………..77

10.16 CCA Schedule for SaskMedical Diagnostics……………………………………...77

10.17 Projected Tax Schedule with Tax Rates………………………………………….78

11. Appendix B—Sensitivity and Break-even Analysis…………………………………...79-84

11.1 Sensitivity Analysis of Projected Cash Flows…………………………………..80-81

11.2 Break Even Analysis…………………………………………………………….82-84

12.0 Appendix C—Ratio Analysis………………………………………………………….85-86

12.1 Solvency, Investment Utilization and Profitability Ratio Analysis………………...8

13.0 Appendix D—Competitor Information and Technical Specifications……………..87-89

13.1 Competitor Information…………………………………………………………….88

13.2 MRI Unit Technical Specifications…………………………………………………89


1.0 Executive Summary

As of March 2016 private MRI services became legal in Saskatchewan. With demand for MRI

services exceeding 40,000 exams a year (Figure 8) and wait times in the province remaining

unchanged in the last 5 years (Figure 9), there is a significant demand for additional MRI

capacity in the province. There are currently only two private MRI clinics in Regina and none in

the rest of the province. This means that over 300,000 people in central and northern

Saskatchewan are forced to travel to Regina or out of province to seek private MRI services.

SaskMedical Diagnostics will open in 2020 and will become the first private MRI clinic in

Saskatoon, offering private MRI exams to patients as well as publicly funded exams for the

Saskatoon Health Region. The clinic will have waiting room capacity for up to 20 patients with

average times from when the patient enters the clinic to when they leave taking approximately 55

minutes (Figure 5). The clinic will be open 0800-1800, Monday to Friday. Operating expenses

such as preventative maintenance and laundry will be outsourced to contractors (Table 1).

Clinic staff will consist of 3 radiologists, 4 Medical Radiation Technologists (MRTs), a

secretary, secretarial assistant and custodian (Table 9). A 360° performance appraisal system will

be managed by the Clinic Director. Radiologists and MRTs will be required to complete

mandatory Continuing Medical Education (CME) training as a condition of maintaining their

license in the province.

Saskatchewan’s utilization rate for MRIs falls below the national average, indicating a lack of

available capacity (Figure 10). Patients who are most likely to be able to afford private MRI

exams have an annual income greater than $70,000 (Figure 12). Coupled families are within this

income range making them an ideal target market for private MRI services (Figure 13). With no

established private MRI clinics and a combined population of over 300,000 people, the cities of

Saskatoon, Lloydminster, North Battleford and Prince Albert are ideal geographical regions for

targeted marketing efforts (Table 20). The majority of the marketing budget will be allocated to

radio advertisements. Print brochures will also be distributed in hospitals and clinics throughout

the 4 targeted cities. The clinic website will be used by patients to schedule appointments and

access research.

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SaskMedical Diagnostics is projected to maintain a margin of safety over the break even point

for the first 10 years of operations (Figure 23). At the expected market exam discount rate and

service level, SaskMedical Diagnostics is also projected to generate an IRR of 19% (Figure 22).

SaskMedical Diagnostics will return 30% of operating cash flows to equity shareholders in the

form of dividends (Table 24). With net cash flows expected to be positive until 2029,

SaskMedical Diagnostics will have over $7.2 million to finance a major clinic upgrade in 2031

(Table 27).

With the creation of a private MRI industry in Saskatchewan, there is a need for additional MRI

capacity in the province. I recommend that this business plan be implemented according to the 5-

year development plan (Figure 2) and operated from 2020 to 2030. Continued operations past

2030 will be contingent on profitability and operational performance. If the clinic is unable to

finance an upgrade and clinic expansion in 2031, the business will no longer be profitable and

should be discontinued. Becoming a first mover in a nascent industry is a rare opportunity for

businesses that can be very profitable if successfully executed. Executing the business plan

according to the development plan timeline will be essential to realizing this first mover

advantage.

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2.0 Introduction

2.1 Proposed Business

SaskMedical Diagnostics will be a private medical clinic providing diagnostic imaging services

in Saskatoon. In March 2016, the MRI Facilities Licensing Act came into effect province wide.

Under this legislation, medical clinics in Saskatchewan are able to provide MRI exams to

patients in Saskatchewan who are willing to pay privately. Within 14 business days from the

time that a private MRI exam is performed, one publicly funded MRI exam must also be done

for a patient on the public waiting queue. This system ensures that Saskatchewan residents with

the ability to pay can access MRI treatment and patients who cannot afford to pay privately will

have their wait times reduced.

SaskMedical Diagnostics will have three practicing radiologists who will also be partners

owning class A shares in the organization. According to the College of Physicians and Surgeons

of Saskatchewan (CPSS), only members of the college can hold voting Class A shares (CPSS,

2016). As a result, voting shares will be restricted to the radiologists of the clinic. Non-voting

shares can be distributed to corporations and trusts. The majority of equity will have to be

sourced from institutional investors as it is unlikely that the clinic partners will be able to provide

the $3.25 million of equity financing required to fund the clinic construction and purchase of

capital assets (Table 30).

SaskMedical Diagnostics will be a professional services business specializing in diagnostic

imaging using sophisticated, state-of-the-art technology. This necessitates the use of cost of

revenues in the financial analysis since there is no manufacturing involved. Profit margins are

also very high compared to businesses in “old economy” industries. The use of high technology

also means that the clinic faces a high rate of technological obsolescence. The overall work

environment will be demanding with a strong emphasis placed on professional patient care. As

with other professions, radiologists will be expected to practice medicine in a way that is

consistent with the standards of their profession. MRTs operating the MRI theatre and preparing

the patients will also be expected to provide professional patient care within their scope of

practice. The clinic will also be a great learning environment for all involved, with MRTs having

ample opportunities to learn from the radiologists. Radiologists will have many opportunities to

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network and learn from other specialists in Saskatchewan during Continuing Medical Education

(CME) accreditation.

2.2 Positioning Statement

To position SaskMedical Diagnostics as a professional, core-service clinic for MR diagnostic

services in Saskatchewan, our positioning statement will be:

To become the centre of excellence for MR imaging services in central and northern

Saskatchewan through providing public services to the Saskatoon Health Region and private

services to Saskatchewan residents.

2.3 Goals and Objectives

Short and long term goals for SaskMedical Diagnostics will help the clinic realize its positioning

statement and continue revising its vision for the future. In order of time horizon and impact,

these goals are:

1. To successfully fund the construction of the clinic and purchase of necessary capital

assets to begin operations by 2020 while staying within the fiscal constraints of the $4.5

million financing budget. (4-5 years)

2. To become a primary business partner with the Saskatoon Health Region by 2020 in

providing public MRI services and added MRI capacity to Saskatoon and Saskatchewan.

(4-5 years)

3. To achieve an annual service level of 5500 exams for each of the 10 years of operation

from 2020 to 2030. (10-15 years)

4. To maintain positive operating cash flows for each of the 10 years of operation from

2020 to 2030. (10-15 years)

5. To become the best private MRI clinic in Saskatchewan both in terms of efficiency and

professional patient care. (10-15 years)

6. To fund an expansion of the clinic and service offering as well as a major upgrade of the

MRI theatre in 2031. (15-20 years)

7. To expand and open clinics outside of Saskatchewan with the aim to have a SaskMedical

Diagnostics in every major Canadian city. (30-50 years)

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8. To become internationally recognized for research and clinical best practices, both in

terms of clinical procedures and in the early adoption of technology yet to be invented.

(>50 years)

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3.0 Industry Overview

The private MRI industry in Saskatchewan is currently in its infancy with only two medical

clinics in Regina offering private MRI services (Table 50). Following its passing in the

legislature and public consultation, Bill 179 The MRI Facilities Licensing Act became

enforceable in the province allowing private MRI services as of March, 2016. With privatization

in other provinces such as Alberta and Ontario leading to a significant increase in MRI capacity,

it is likely that Saskatchewan will see a substantial increase in MRI facilities in the next 10 years.

Currently, there are only 10 MRI units in Saskatchewan with 8 of them being publicly owned.

Due to underinvestment, wait times in Saskatchewan have remained relatively unchanged in the

last 5 years (Figure 9). Utilization of MRI services in Saskatchewan also remain at 39 exams per

1000 people remaining well below the national average of 49 exams per 1000 people (Figure

10). Saskatchewan patients on low-priority wait lists routinely face unacceptably long wait times

for standard MRI exams. Faced with wait times that would be unthinkable in most developed

countries, these patients are forced to seek MRI services outside of Saskatchewan. Many of these

residents pay for treatment at a clinic in Alberta, or at the Mayo Clinic in the United States.

The shortcomings of the public healthcare system in Saskatchewan have created a political

environment that is now more receptive to privatization. As with any nascent industry, this

provides a unique advantage to clinics that are first to move into the market. This environment

also creates a considerable level of uncertainty and risk as there is no Saskatchewan-specific

market history. Being a western Canadian province with similar demographics and having a well

developed private MRI industry, Alberta provides the closest comparison to Saskatchewan’s

private MRI industry in 10-20 years.

With more clinics expected to open up operations in Saskatchewan it will be critical to the

success of SaskMedical Diagnostics to begin operations in 2020 and become the first private

MRI clinic established in Saskatoon. With the only private clinics being located in Regina, there

is already interest from residents for similar clinics in Saskatoon. As one patient said, “If a

Saskatoon resident pays for an MRI, a Regina patient on the public list will get a scan simply

because the licensed facilities are in this city” (Cowan, 2016). By opening clinics in Saskatoon,

the benefits of shorter wait times can be expanded to residents living outside of Regina.

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4.0 Operations

4.1 Organizational Structure

SaskMedical Diagnostics will be incorporated in Saskatchewan as a professional corporation

(P.C.). This form of organizational structure is beneficial for SaskMedical Diagnostics for the

following reasons: tax minimization, collective liability and capital asset pooling. Tax

minimization would be achieved mainly through the use of a clinic billing number by all

radiologists at the clinic. Billing all of the services to a single number will result in less tax

compared to having each radiologist bill to their own separate number. Collective liability would

result in all members of the clinic becoming equally liable for charges of malpractice at the

clinic. In this context, the members of the clinic would be all radiologists owning voting class

shares. Collective liability would hold practicing members accountable to upholding patient care

and would also equally allocate the costs of fines or litigation amongst the members. For PCs

registered with the College of Physicians and Surgeons of Saskatchewan (CPSS), this is also a

legal requirement (CPSS, 2016). Pooling capital assets will also improve the equity and stability

of the clinic instead of having each radiologist responsible for their own capital assets. As a PC,

the capital assets would also be under the ownership of SaskMedical Diagnostics, removing

liability from the radiologists in the event of reacquisition during a bankruptcy.

The legal requirements for a PC are outlined in both The Business Corporations Act and The

Professional Corporations Act. Legal requirements for the naming of a corporation registered by

CPSS include having the word “professional corporation” or P.C. included in the title name of

the organization. The name of the corporation must also clearly indicate that the corporation

engages in the practice of medicine (CPSS, 2016). Both of these requirements are met in the

name “SaskMedical Diagnostics (P.C.).” For the purposes of distributing voting-class shares,

only members of the corporation are required to be shareholders. Members of the corporation are

restricted to practicing radiologists registered by CPSS and holding a full, special, or provisional

license to practice medicine in Saskatchewan (CPSS, 2016). For non-voting shares, ownership is

expanded to a member of CPSS, or the member’s spouse, children, parents or a corporation or

trust that meet the requirements of The Professional Corporations Act (CPSS, 2016).

For the board of directors in a private corporation, at a minimum there must be at least one

shareholder with the officer positions of president and secretary filled (Corporation centre.ca). It

7


is also common practice for private corporations to initially issue 1000 shares to members. In

addition to the requirements of being a member in a PC, Saskatchewan corporations also require

the majority of directors to be Canadian, with at least one director a Saskatchewan resident. An

external auditor will also be contracted by the corporation to file the financial statements

(Corporation centre.ca).

Figure 1: Organizational structure for SaskMedical Diagnostics.

SaskMedical will have three members as both shareholders and members of the board of

directors. The members will be fully licenced radiologists with one radiologist taking the role of

CEO as Clinic Director, and the officer position of President. The positions of Vice-President

and Secretary will be assigned to the other two radiologists. The voting class shares of the

corporation will be issued to the members with 52% going to the CEO, and 24% going to each of

the other two members. This share ownership structure is designed to give the CEO veto rights

and to ensure that the CEO maintains control of decision making within the clinic. The

employees of the clinic will consist of a secretary, secretarial assistant, a custodian and four

8


MRTs. An external auditor will be responsible for auditing and filing the financial statements.

The secretary will be mainly responsible for scheduling patients at the front desk and

appointments for the clinic members as well as preparing financial information for the external

auditor. A secretarial assistant will assist the secretary with daily tasks. The custodian will be

hired on a part-time basis for general maintenance and cleaning of the facility. The MRTs will be

responsible for the main operations of the clinic including the triaging of patients, operation of

the MRI unit, preparation of the patients and MRI unit for exams, and other routine tasks within

the clinic.

4.2 Development Plan

The development of the clinic will take place over the course of 5 years, with the first year of

operations beginning in 2020 (Figure 2).

Figure 2: 5-year development plan for SaskMedical Diagnostics.

The financing phase of the clinic would begin first to ensure that sufficient capital is available for

the construction of the clinic. This financing period would take place from 2016 to 2018 and

would begin with the recruitment of partners for the corporation. After partners have been

selected for the clinic, SaskMedical Diagnostics would begin the process for incorporation

9


followed by the issue of shares to the members. Debt and equity would be acquired according to

the capital cost structure of the clinic.

After sufficient financing is achieved, clinic property would be purchased and the construction of

the clinic and hiring of employees would begin. This would also be expected to take place over

the course of two years, with construction of the clinic and hiring of staff to be completed by

2020. The hiring and selection process for MRTs would occur using the available applicant pool

from the Saskatchewan Association of Medical Radiation Technologists (SAMRT). A secretary

with the appropriate credentials would be hired from a larger applicant pool with preference

given to applicants living in Saskatchewan. A custodian would be hired from within the

province. The construction of the clinic would take place on 325 Fairmont Drive after this

property is purchased by SaskMedical Diagnostics. A construction firm would be selected in an

open-bid process for the construction of the clinic. Once a construction plan is developed by the

project manager, the MRI unit with peripheral equipment would be ordered to have delivery and

partial installation coincide with construction of the MRI theatre. This is to prevent additional

construction costs from the reopening of the MRI theatre during installation of the MRI unit. As

the MRI unit would not fit through the entrance to the MRI theatre, the delivery and partial

installation of the MRI unit would have to coincide with the ongoing construction of the clinic.

Once the MRI unit is installed and the clinic is approaching completion, the appropriate

shielding of the MRI theatre and installation of peripheral equipment can occur. After

construction is complete, full certification by the Saskatoon Health Region and provincial

government would be required for the clinic to begin operating.

After certification, full clinic operations would begin ideally by 2020. This development plan

does not take into account any delays in construction, hiring, or the certification process. Delays

in any of these stages would postpone operations beyond 2020. If the development plan is on

schedule, the first fiscal year would be completed by 2021.

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4.3 Site Plan

Figure 3: Site plan for SaskMedical Diagnostics

The clinic will be located on a 1821m2 lot at 325 Fairmont Drive, S7M 5G7 (Figure 3). In

addition to the building, there will also be 20 parking spaces adjacent to the clinic. The clinic site

will be zoned in M2 in accordance with Saskatoon bylaws (City of Saskatoon, 2016).

Development standards for M2-zoned buildings require a maximum site coverage of 40%,

minimum site area of 450m2 and a minimum requirement for one parking space per 30m2 of

gross floor area with parking spaces located within 3m of any building entrance (City of

Saskatoon, 2016). The clinic will have 20 parking spaces, surpassing the minimum requirement

for 17 (500/30) and placing the parking within 3m of either fire exit 1 or the front entrance. The

site coverage for the clinic will also be 27%, putting the clinic within the 40% site coverage

maximum. The 500m2 site area will also meet the requirement for 450m2 minimum development.

4.4 Floor Plan

11


)

Figure 4: Floor plan for SaskMedical diagnostics.

The clinic will be fully accessible to patients, with a wheelchair ramp available in the front

entrance. All washrooms will also be able to accommodate people with disabilities. There will be

two eye rinse stations installed in the clinic, one along the corridor adjacent to the treatment

rooms, and the second station installed along the corridor leading to the MRI theatre. A fire

sprinkler system will also be installed in the clinic. The waiting area will have a maximum

occupant load of 10 people (Figure 4).

4.5 Work Process Plan

From the time that a patient enters a clinic to the time the patient leaves will on average take 55

minutes (Figure 5). After entering the clinic, the patient will register at the front desk and then sit

in the waiting area to be received by an MRT. This will take approximately 5 minutes. After

being received by an MRT, the patient will then enter one of the three treatment rooms where the

MRT will take a set of vital signs from the patient and then hand care of the patient over to a

radiologist. The radiologist will then prepare the patient for the exam to include answering any

questions the patient may have and reviewing the patient’s medical history. During this time the

12


MRT will prepare the MRI unit for the exam by installing the appropriate coils depending on the

exam ordered. The MRT will then bring the MRI trolley into the treatment room and provide the

patient with a gown. The patient will then change and lie on the trolley in preparation for being

taken into the MRI theatre by the MRT. This step will take approximately 15 minutes. Once the

patient and the MRI unit is ready for the exam, the MRT will wheel the trolley with the patient

into the MRI theatre and begin the exam. An average MRI exam takes approximately 30 minutes

(Advanced Imaging, 2016). After the exam is complete, the patient will be taken by the MRT

back into the treatment room while the radiologist reviews the results of the exam. The patient

will change out of the gown and if there are no complications, the patient will be released from

the clinic. This step will take approximately 5 minutes.

Figure 5: Patient flow chart for SaskMedical Diagnostics.

4.6 Quality Control Program

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The clinic quality control program will be centrally regulated by the Diagnostic Imaging Quality

Assurance Program (DIQAP) in partnership with the Advisory Committee on Medical Imaging

(ACMI). Legislation governing the certification requirements of the facility unique to medical

imaging are outlined in regulatory bylaw 25.1 from the CPSS (CPSS, 2015). The quality control

program will be developed by the clinic director and must conform to this bylaw in addition to

requirements made by The Radiation Health and Safety Act 1985, The Radiation Health and

Safety Regulations, 2005, and The Health Information Protection Act. To ensure the safety of

patients, at a minimum the clinic director must be on-site at the clinic for 25% of the studies

performed in a given month (CPSS, 2015). Additionally, the clinic director must also ensure that

an accredited radiologist is on-site for a minimum of 80% of the studies performed at the clinic

each day (CPSS, 2015). The MRI unit must receive the required number of preventative

maintenance exams in accordance with The Radiation Health and Safety Regulations, 2005

(Government of Saskatchewan, 2005).

Electronic record keeping of physician and employee hours and tasks will be kept to ensure that

radiologists and the Clinic Director are present for studies that are performed at the clinic using

Enterprise Application Software (EAS). All employees will have clinic Blackberry© devices

with access to the clinic EAS. MRTs, radiologists, the secretary and the secretarial assistant will

use their Blackberry© devices to check on appointments and scheduled tasks for the day. For

MRTs, once a scheduled task has been completed such as scheduled cleaning of the MRI theatre,

or the removal of soiled laundry from the clinic, the task will be checked off as completed using

their Blackberry©. This information will then be updated on the EAS network. The schedule will

be updated continuously, assigning different tasks to different MRTs to ensure equal distribution

of responsibilities. For the radiologists, this system will be used for the scheduling of patient

appointments, as well as meetings specific to their positions on the board of directors. The

secretary will be able to update the EAS network and schedule appointments directly for the

radiologists and Clinic Director. EAS-enabled computers will also be present in all treatment

rooms and offices allowing the patient history to be brought up while an MRT or radiologist is

assessing the patient. This system will also be compatible with the electronic record keeping

systems used by the Saskatoon Health Region. This will allow patient referrals to be

electronically imported and exported to and from the clinic’s EAS network.

14


To ensure that clinic guidelines are maintained, an extensive manual detailing subject operating

procedures (SOPs) will be made available to all radiologists and employees in both electronic

and physical copies, with physical copies available in every treatment room, office, and at the

front desk. All radiologists and employees will be expected to be familiar with the SOP manual.

This manual will be written in accordance with the DIQAP. The manual will detail all clinical

procedures and workflow guidelines for receiving the patient, as well as during and after MRI

exams. The manual will also detail emergency SOPs for emergencies such as a building fire, or a

patient’s adverse reaction to a contrast media. Implementation of the quality control program will

be documented electronically on the EAS network and will be filed to ACMI for auditing

purposes.

4.7 Average Work Schedule

On average, the clinic will be open 50 hours a week, Monday to Friday, 0800-1800. On an

average work day, the clinic will require all radiologists and employees to be present at the clinic

NLT than 0730 Monday to Friday, with the clinic to be open for receiving patients by 0800.

From 0800-1800, patients will be received by the clinic for their scheduled exams following the

work process previously described (Figure 5). An hour lunch break will be made available to all

employees and radiologists each workday, with staggered lunch breaks to ensure that the MRI

unit is in continuous use. In addition to the lunch break, employees and radiologists will also

have a 30 minute scheduled coffee break each day which will be accommodated into the

schedule. Employees and radiologists will also be permitted to use the staff room when there is a

natural break between scheduled tasks (Figure 6).

15


Figure 6: General daily work schedule for staff at SaskMedical Diagnostics.

Over the course of the workweek, there will be scheduled deep cleaning of the entire clinic. The

procedures and checklist for deep cleaning will be outlined in the SOP manual. For treatment

rooms and the MRI theatre, deep cleaning will involve removal of items from the storage

cabinets and disinfection. The waiting area will also be disinfected weekly, with chairs made of a

material that will allow regular cleaning by disinfectant sprays and wipes.

On a monthly basis, performance evaluations will be carried out by the clinic director for all

staff. The EAS network will be used in evaluating employees and radiologists since it will be

impossible for the Clinic Director to directly supervise staff. Quantitative data from the EAS

network such as time for each patient appointment, time required to complete scheduled tasks,

and number of exams completed in a day will be used to evaluate efficiency. Empirical data from

patient feedback forms will be used to ensure that professionalism is maintained.

On an annual basis, corporate annual renewal will be required to be submitted by the clinic

director to CPSS no later than November 1 of each year. The annual renewal will be done online

16


through the clinic director’s portal (CPSS, 2016). In addition to annual renewal, the external

auditor will be required to submit all corporate financial documents by the fiscal year end of

December 31 each year. External auditing will be outsourced to KPMG Saskatoon. Corporate

income tax will also be filed by KPMG annually. On an annual basis, all radiologists and MRTs

will be required to complete CME accreditation to maintain or upgrade their licence. 21 days will

be allocated for CME and executive training for the radiologists, and 7 days will be allocated for

the MRTs. The secretary and secretarial assistant will be allocated training days depending on

the time available and relevance of the opportunities to the clinic operations.

17


4.8 Suppliers and Service Providers

Supplier Service offered Contract Cost/year

K-Bro Linen Services(AssistedLivingStore.com,

2015)

Providing clean linen cart with soiled linen

collection tub.Collect soiled linens and replenish clean

linen cart.

10-year service contract $15,000

GE Healthcare(Pers. Comm. with Block

Imaging Rep.)

Total service contract for preventative

maintenance of MRI.

10-year service contract

$85,000-$100,000

SaskPowerSaskWaterSaskEnergy

(International Facility Management Association,

2010)

ElectricitySewer/water

Natural gas heating Subscription $27,427

SaskTel(Sasktel, 2016)

Internet(VoIP) phone network

TVIP trunking

Subscription $2279.40

Blackberry(Blackberry, 2016)

BES12 EMM server licensing Perpetual license $1,074

KPMG (pers. Comm. with KPMG Rep.) Corporate auditing

Auditing and filing corporate financial

statements$7,000

Vanguard Canada(Vanguard, 2016)

Defined contribution registered retirement

plan (DC RRP)

Fund holder for Target Retirement

Fund (TRF)$100,000

Table 1: Summary of suppliers and service providers.

18


4.9 Capital Expenditures

Item Cost Source

Land $595,000 Pers. Comm. with Todd Butler, ICR Realtor

Clinic

$2,000,000 Altus Canadian Cost Guide 2016 (Altus Group, 2016)

Commercial parkingBuilding construction

Land developmentMRI unit

$1,450,000Pers. Comm. with Daniel Surette, GE Healthcare Canada Product

Sales Manager

GE Optima MR450W with GEM suite (1.5T)

Data ModuleComputer Equipment2X Patient Trolleys

Additional Equipment

$2,000 Pers. Comm. with Deb Gross, Sasktel Sales. Rep.

10X Cisco IP Phone 8861 system4X Cisco IP Phone 8800 key

expansion module2X VIZIO 80” 4K Ultra HD 240Hz

LED Smart TV $11,060

Bestbuy.ca

2X TygerClaw 42”-82” Full Motion TV Wall Mount $300

9X HP Pavilion Mini PC $3,9609X HP Pavilion 20” IPS LED

Monitor $1,080

HP Wireless classic optical keyboard and mouse combo $315

Lexmark Wireless Colour All-in-one Laser Printer $2,859

Total Additional Equipment $21,573Table 2: Summary of capital expenditures for land, clinic, MRI unit, and additional equipment.

19


Item Cost SourceFurniture

$25,000 Pers. Comm. with StatMedical Sales Rep. (StatMedical, 2016)

5X Onward series 3-seater lounge chair2X Onward series rectangular table3X Onward series guest chair6X Onward series patient chair3X square connecting spacer table5X Fairbanks Executive Bowfront Desk with Storage Wall

$58,721 National Business Furniture (National Business Furniture, 2016)

5X Apex High Grade Leather Mid-Back Chair3X 5240-145 Examination TableBoat Shape Conference TableEsquire Double Glass Top Reception DeskMobile Utility Table with Data Port5X Set of four mesh chairs4X Overhead Cabinet

$20,000Pers. Comm. with CanMed

Healthcare Sales Rep. (Can-med Healthcare, 2016).

4X Base Cabinet 4X Desk mount4X Woodgrain panels4X Solid surface countertop4X undermounted single bowl sink3X high overhead cabinets 2 door15X high overhead storage units

Table 3: Summary of capital expenditures for furniture.

Item Cost SourceFurniture (cont.) $349

Ikea Website (Ikea, 2016).

Komsjo Double Bowl SinkNutid French Door Refridgerator $1899

Lagan Microwave oven $1992X Karlby Walnut countertop $460

Sektion base cabinet $2643X Secktion wall cabinet frame $1172X Section base cabinet with

shelves $246

2X Godmorgon/Odensvik sink cabinet with 4 drawers $1198

2X Godmorgon/Odensvik sink cabinet with 2 drawers $698

6X Tofino dual flush complete one piece $1794 Homedepot

(Homedepot.ca, 2016).

2X Bradley Toilet partition $2720 Sustainablesupply (Sustainablesupply.com, 2016).

Total Furniture $113,665Table 4: Summary of capital expenditures for furniture continued.

20


4.10 Capital Budget

Item CostLand $595,000Clinic $2,000,000

MRI Unit $1,450,000Additional Equipment $21,573

Furniture $113,665Net Working Capital $550,000

Total Capital $4,730,238Table 5: Capital budget summary.

4.11 Operating Expenses (2020-2025)

Operating Expenses

2020 2021 2022 2023 2024 2025

Sewage 1,424 1,452 1,482 1,511 1,541 1,572Electricity 17,311 17,657 18,010 18,371 18,738 19,113

Natural Gas 7,119 7,261 7,407 7,555 7,706 7,860Water 1,574 1,605 1,638 1,670 1,704 1,738

Linen Services 15,000 15,300 15,606 15,918 16,236 16,561EAS Software 1,074 1,095 1,117 1,140 1,163 1,186Internet and Telephone

1,979 2,039 2,100 2,163 2,228 2,295

TV Service 300 309 318 328 338 348Insurance

(Property and Capital Assets)

10,000 10,200 10,404 10,612 10,824 11,041

Insurance (CMPA)

28,740 29,315 29,901 30,499 31,109 31,731

Preventative Maintenance

100,000

102,000

104,040

106,121

108,243

110,408

Auditing 7,000 7,140 7,283 7,428 7,577 7,729Marketing 87,000 39,540 40,331 41,137 41,960 42,799Salary and

Wages1,500,1

201,530,1

221,560,7

251,591,9

391,623,7

781,656,2

54Employee/Physician Benefits

234,784

238,865

243,028

247,275

251,606

256,009

Federal Tax 243,753

247,870

240,301

228,584

213,027

193,950

Provincial Tax 169,003

172,296

166,241

156,867

144,422

129,160

Property Tax 296,552

301,167

294,471

283,768

269,358

251,550

21


CCA 254,873

215,459

183,465

157,426

136,169

118,754

Dividends 411,176

403,978

385,338

363,630

338,863

311,129

Debt Interest Expense

91,410 86,593 81,391 75,773 69,705 63,152

Total Operating Expenses

3,480,192

3,431,267

3,394,596

3,349,716

3,296,296

3,234,338

Table 6: Summary of operating expenses from 2020-2025.

4.12 Operating Expenses (2026-2030)

Operating Expenses 2026 2027 2028 2029 2030

Sewage 1,604 1,636 1,668 1,702 1,736Electricity 19,495 19,885 20,283 20,688 21,102

Natural Gas 8,017 8,177 8,341 8,508 8,678Water 1,773 1,808 1,844 1,881 1,919

Linen Services 16,892 17,230 17,575 17,926 18,285EAS Software 1,209 1,234 1,258 1,284 1,309Internet and Telephone 2,364 2,435 2,508 2,583 2,661

TV Service 358 369 380 392 403Insurance (Property and Capital Assets) 11,262 11,487 11,717 11,951 12,190

Insurance (CMPA) 32,366 33,013 33,673 34,347 35,034Preventative Maintenance 112,616 114,869 117,166 119,509 121,899

Auditing 7,883 8,041 8,202 8,366 8,533Marketing 43,757 44,946 46,489 48,529 51,240

Salary and Wages 1,689,379 1,723,166 1,757,63

0 1,792,782 1,828,638

Employee/Physician Benefits 260,461 265,002 269,633 274,358 317,937

Federal Tax 171,672 140,579 101,781 56,667 -Provincial Tax 111,338 86,463 55,425 19,333 4,034Property Tax 230,654 201,230 164,353 121,372 67,459

CCA 104,430 92,593 82,761 74,549 67,645Dividends 280,574 240,454 191,922 136,486 59,359

Debt Interest Expense 56,074 48,430 40,175 31,259 26,617


3,164,178 3,063,047 2,934,78

4 2,784,472 2,656,679

Table 7: Summary of operating expenses from 2026-2030.

22


Costing for utilities (sewage, electricity, natural gas, and water) was derived using a utilities

index from a research report published by the International Facility Management Association

(IFMA, 2010). Specific utility costs were provided in dollars/square foot for medical clinics. The

unit costs were multiplied by the total square feet of the medical clinic and increased 36% to

account for inflation since 2010 at a rate of 3% as well as price differentials between the United

States and Canada. The 3% inflation rate was also applied annually to utility expenses from

2020-2030.

4.13 Cost of Revenue

Cost of Revenue 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Contrast Dye 36 36.72 37.45 38.20 38.97 39.75 40.54 41.35 42.18 43.02 43.88

Other Consumables 3 3.06 3.12 3.18 3.25 3.31 3.38 3.45 3.51 3.59 3.66

Linens 0.14 0.14 0.15 0.15 0.15 0.15 0.16 0.16 0.16 0.17 0.17

Total Cost of Revenue/Exa

m39.14 39.92 40.72 41.54 42.37 43.21 44.08 44.96 45.86 46.78 47.71

Number of Exams 5500 5500 5500 5500 5500 5500 5500 5500 5500 5500 5500

Total Cost of Revenue

$215,270

$219,575

$223,967

$228,446

$233,015

$237,675

$242,429

$247,278

$252,223

$257,268

$262,413

Table 8: Summary of cost of revenues for SaskMedical Diagnostics.

Contrast dye makes up the majority of costs associated with MRI exams. In most abdominal

exams, contrast dye is often required (pers. Comm. with CAMIS). To reflect this, contrast dye on

a per exam basis was estimated to average $36/exam over a year of operations assuming a

service level of 5500 exams/year is achieved. This results in the contrast dye creating over 90%

of the unit cost of revenue. Other consumables consist mainly of pads and IV lines used during

the procedure as well as their disposal in biohazard bins. This cost was estimated to be $3/exam

for 2020. Linen costs are accounted for as an operating expense in the linen service contract with

K-Bro Linen Services (Table 31). Assuming an economy patient gown weighs 0.33 lb/gown and

the average cost of processing per lb is $0.48/kg based on estimates ranging from $0.35-$0.51/lb

23


(The Laundry Forum, 2009), then the average cost/linen is estimated to be $0.14. These costs

were increased at a rate of 2% a year from 2020 to 2030.

5.0 Human Resources

5.1 Job Descriptions and Qualifications

PositionAcademic

credentials/Board requirements

Position on Board of Directors

License Requirements

Job Responsibilities

Clinic Director, Radiologist

MBA MD Canadian citizen Saskatchewan

resident

President Full-time CPSS license

Maintain patient register

Patient consultation

Exam interpretation

Board duties

Radiologist MD Canadian citizen Vice-President Full-time CPSS

license

Maintain patient register


Exam interpretation

Board duties

Radiologist MD Canadian citizen Secretary Full-time CPSS

license

Maintain Patient register


Exam interpretation

Board duties

MRTs (4)

Graduate of CMA-accredited program

Passed CAMRT exam

MRI experience

N/A Full-time SAMRT license

Prepare patient for exam

Prepare equipment for scan

Operate MRI theatre

Routine tasksSecretary P. Admin.

Certificate/Business N/A N/A Schedule

appointments

24


Admin. Diploma

Preparing financial information for audit

Secretarial duties

Secretarial Assistant

Business Admin. Certificate N/A N/A Assist secretary

with duties

Custodian Grade 12 Relevant work

experienceN/A N/A

Routine maintenance and cleaning

Table 9: Job Descriptions and required qualifications for staff at SaskMedical Diagnostics.

The Clinic Director will be the CEO for SaskMedical Diagnostics and for the purposes of the

business plan will be the author of this document. The Clinic Director will also have a license to

practice radiology in Saskatchewan. The Clinic Director will fulfill the role of President within

the organizational structure of the clinic (Figure 1) and will also be responsible for maintaining a

patient register. The Clinic Director will have an MBA from a university in addition to

accreditation as a radiologist. Accreditation as a radiologist will be confirmed by having a full-

time license to practice radiology in Saskatchewan from the CPSS. There will be two additional

partners in the clinic who will also be practicing radiologists with a full-time license. The

mandatory roles of Vice-President and Secretary will be filled by the other radiologists. All

clinic partners will be required to sign a legally binding partnership agreement stipulating the

roles and responsibilities of board positions as well as clinic ownership with other stakeholders.

Additionally, all radiologists will perform duties required of their specialty. This will consist

mainly of interpreting the results of MRI studies and providing relevant medical consultation and

referrals to patients.

Four MRTs will be employed by SaskMedical Diagnostics. These technologists will be required

to be graduates from a Canadian Medical Association (CMA) accredited diagnostic imaging

program at a college or university. They also must successfully pass the CAMRT licensing

exam. MRI-relevant work experience will be a consideration during the selection process

although new graduates will be able to receive training on the job. To practice in Saskatchewan,

MRTs must also obtain a full-time license from the SAMRT. MRTs will be required to operate

in the MRI theatre to include preparing the patient for the exam, preparing the equipment and

performing routine inspection and cleaning of the MRI theatre and examination rooms.

25


The secretary will be required to have a professional administration certificate or business

administration diploma from a college or university. The secretary will be responsible for

scheduling patients for appointments and signing patients into the EAS system. The secretary

will also be involved in compiling the financial statements for the auditor and performing other

secretarial duties related to the daily operation of the clinic. To assist the secretary with more

routine duties, a secretarial assistant will also be employed. The assistant will be responsible for

assisting with secretarial tasks as well as learning the responsibilities of the secretary in the event

that the assistant is required to perform those tasks temporarily.

The custodian will be responsible for routine cleaning of the facility as well as minor

maintenance and repair. The custodian will require grade 12 education. Relevant work

experience in healthcare services will be considered during selection.

5.2 Work Schedule for Medical Director/Radiologist

Time Period Tasks

Daily

Interpreting MRI exams Receiving/counselling

patients Publishing research

Weekly

Assess financial and operating performance

Weekly performance appraisal/employee assessment

Weekly employee meeting

Monthly

Monthly performance appraisal/employee assessment

Monthly financial analysis, assess operating goals

Annually

Annual shareholders meeting

Filing of financial statements to external auditor

Submission of corporate renewal statements

Annual employee reviews

26


Table 10: Planned work schedule for the Medical Director of SaskMedical Diagnostics.

The Medical Director of the clinic will have to balance work responsibilities between the

research and clinical tasks required by radiologists as well as the administrative tasks required to

manage clinic operations. For monthly and annual tasks such as employee assessments and

reviews, time will be allotted for the Clinic Director to perform these tasks while the other two

radiologists take over the added patient load. The Clinic Director will also be required to submit

annual corporate renewal statements to the province on behalf of the clinic. By having three

radiologists practicing in the clinic, the administrative tasks of the Clinic Director should not

compromise the ability of the clinic to accept patients. For monthly financial analysis, this

activity will be made more expedient by coordinating with the secretary who will be organizing

the financial statements.

5.3 Work Schedule for Radiologists

Time Period Tasks

Daily

Interpreting MRI exams Receiving/counselling

patients Publishing research

Weekly Weekly employee meeting

Monthly Monthly performance appraisal

Annually

Annual shareholders meeting

Filing of financial statements to external auditor


Table 11: Planned work schedule for radiologists.

Due to having less of an administrative role than the Medical Director, the other radiologists will

be able to devote more time to clinical practice and research. All members of the clinic will be

expected to attend weekly employee meetings to address issues that the clinic may face and to

establish goals and celebrate accomplishments. Both partners and employees in the clinic will be

active participants in the performance appraisal and employee review process. The 360°

performance appraisal process will ensure that all members are given the opportunity to

27


contribute equally in evaluations. As partners in the clinic, the two radiologists will be required

to hold the position of Vice-President and Secretary on the board of directors. As a result, they

will be actively involved during the filing of financial statements and at the annual shareholders

meeting.

5.4 Work schedule for MRTs

Time Period Tasks

Daily

Preparing equipment for exam

Receiving/preparing patients for exam

Brief radiologist on patient assessment

SOP cleaning/inventory assessment

Weekly

Weekly employee meeting


Monthly

Monthly performance appraisal


Annually Annual employee reviews

Table 12: Planned work schedule for MRTs.

MRTs will play an important role in the daily operations of the clinic. MRTs will be responsible

for preparing the MRI theatre for exams. MRTs will also be the primary contact point with the

patient, receiving patients in the waiting area and preparing them for the exam in the treatment

rooms (Figure 4). Activities that MRTs will be expected to perform include taking vital signs of

the patient, conducting a brief patient history report for the radiologists and informing the patient

on the type of exam to be done and what to expect. MRTs will provide patients with a patient

gown and while the patient is dressing they will prepare the MRI theatre connecting the

appropriate coils depending on the type of study required. After the patient is brought into the

28


MRI theatre by the MRTs on a trolley and they are finished the exam, MRTs will brief the

radiologist on the exam before the radiologist meets with the patient to provide consultation and

interpretation of the exam results. These activities will take the majority of time in daily tasks. In

addition to MRI exams, there will be scheduled timings on a daily, weekly and monthly basis to

clean the MRI theatre and perform routine inventory assessment according to SOPs. This will

ensure that the clinic is always ready to accept patients and never short on supplies.

5.5 Work Schedule for Secretary and the Secretarial Assistant

Table 13: Planned work schedule for secretary and secretarial assistant.

The secretary will be responsible for taking daily communication and transferring to the

appropriate members of the clinic. The scheduling of clinic appointments will also be done by

the secretary for patients who book individually or are booked by their family doctor. To assist

the Medical Director, financial statements will be compiled monthly for the Medical Director to

review and annual statements will be prepared for the Medical Director to file to the external

auditor. The secretarial assistant will help the secretary with more routine tasks such as

appointment scheduling. Overtime as the secretarial assistant learns the duties of the secretary,

29

Time Period Tasks

Daily

Scheduling clinic appointments

Receiving and transferring communication to clinic partners

Weekly Weekly employee meeting

Monthly

Monthly performance appraisal

Compiling of financial statements for Medical Director

Annually


Compiling of financial statements for Medical Director


the assistant will be expected to temporarily take over duties if the secretary is ill or temporarily

out of the office. The tasks performed by the secretarial assistant will be dependent on the work

load placed on the secretary and the duties that the secretarial assistant is proficient in

completing.

5.6 Work Schedule for Custodian

Table 14: Planned work schedule for custodian.

The custodian will be responsible for the routine cleaning and maintenance of the clinic. Because

the custodian will be cleaning primarily from 1800-2200 (Figure 6), he/she will be unable to

attend weekly staff meetings. As a result, any relevant issues such as minor repairs that are

required will be discussed on a case by case basis with the Medical Director. The custodian will

receive monthly and annual performance appraisals and reviews.

30

Time Period TasksDaily Routine cleaning

Weekly Routine cleaning

Monthly Monthly performance appraisal

Annually Annual employee reviews


5.7 Compensation and Benefits

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Salary/Wage

Radiologist 300,000 306,000 312,120 318,362 324,730 331,224 337,849 344,606 351,498 358,528 365,698

MRT 35/hour 36/hour 36/hour 37/hour 38/hour 39/hour 39/hour 40/hour 41/hour 42/hour 43/hour

Secretary 75,000 76,500 78,030 79,591 81,182 82,806 84,462 86,151 87,874 89,632 91,425

Secretarial Assistant 50,000 51,000 52,020 53,060 54,122 55,204 56,308 57,434 58,583 59,755 60,950

Custodian 11/hour 11/hour 11/hour 12/hour 12/hour 12/hour 12/hour 13/hour 13/hour 13/hour 13/hour

EI

Radiologist 1,337 1,337 1,337 1,337 1,337 1,337 1,337 1,337 1,337 1,337 1,337

MRT 1,337 1,337 1,337 1,337 1,337 1,337 1,337 1,337 1,337 1,337 1,337

Secretary 1,337 1,337 1,337 1,337 1,337 1,337 1,337 1,337 1,337 1,337 1,337


Custodian398 406 414 422 431 439 448 457 466 476 485

CPP

Radiologist 2,544 2,544 2,544 2,544 2,544 2,544 2,544 2,544 2,544 2,544 2,544

MRT 2,544 2,544 2,544 2,544 2,544 2,544 2,544 2,544 2,544 2,544 2,544

Secretary 2,544 2,544 2,544 2,544 2,544 2,544 2,544 2,544 2,544 2,544 2,544

31



Custodian 575 590 605 621 637 653 670 686 704 721 739

Table 15: Projected salaries and wages for staff and projected EI and CPP benefit costs.

Salaries for radiologists, the secretary and secretarial assistant were determined based on the

market rate for attracting the required personnel with qualifications in the province. The

custodian will be payed the minimum wage rate for Saskatchewan ($10.5/hour). All salaries and

wages were adjusted for inflation at a rate of 2% annually. EI premiums for radiologists, MRTs

and the secretary were capped at the maximum annual employer premium of $1,337. This will be

the portion of the EI premium paid from the clinic with a maximum of $955 paid by the

employee (CRA, 2016). For employees that fall below the maximum annual insurable earnings

($50,800) such as the secretarial assistant and the custodian, EI premiums were paid at a rate of

1.88% of annual earnings plus 40% from the employer (CRA, 2016). CPP contribution

premiums were calculated using the difference of the maximum annual pensionable earnings

($54,900) and the basic exemption amount ($3,500) multiplied by the employee and employer

contribution rate of 4.95% (CRA, 2016). For the secretarial assistant and custodian, annual

compensation was used since this was less than the maximum annual pensionable earnings

amount.

32


2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Worker’s Compensation

Radiologist 750 765 780 796 812 828 845 862 879 896 914

MRT 288 293 299 305 311 317 324 330 337 344 350

Secretary 188 191 195 199 203 207 211 215 220 224 229

Secretarial Assistant 125 128 130 133 135 138 141 144 146 149 152

Custodian 38 39 39 40 41 42 43 43 44 45 46

Holiday Pay

Radiologist 17,308 17,654 18,007 18,367 18,73

4 19,109 19,491 19,881 20,279 20,684 28,131

MRT 8,846 9,023 9,204 9,388 9,575 9,767 9,962 10,161 10,365 10,572 14,378

Secretary 4,327 4,413 4,502 4,592 4,684 4,777 4,873 4,970 5,070 5,171 7,033


Custodian872 890 908 926 944 963 982 1,002 1,022 1,042 1,418

Table 16: Projected worker’s compensation and holiday pay expenses for staff.

Workers compensation for all staff was calculated at a rate of 0.25% multiplied by annual

compensation (Saskatchewan Worker’s Compensation Board, 2016). Holiday pay was calculated

at a rate of 6% of annual compensation for the first 9 years with a rate of 8% used for the 10th

year of operations in 2030. This was calculated assuming that all staff remained employed by the

clinic for the first 10 years of operations (Canpay, 2016). Additionally, all employees at the

clinic with the exception of the custodian will be eligible to contribute to a corporate defined

contribution registered retirement plan (Table 1). An initial target retirement fund (TRF) of

33


$100,000 will be established by SaskMedical Diagnostics in 2020, with employees able to

receive matching contributions to the plan from the clinic up to a certain amount. Vanguard

Canada will be the fund holder for the DC-RRP. Annual costs of corporate contributions to the

TRF will be adjusted for inflation at a rate of 2% annually. For shareholders of SaskMedical

Diagnostics and clinic partners holding class A shares, 30% of operating cash flows will be paid

out as dividends. Dividend payouts are projected to be $411,176 in 2020 and decline to $59,359

in 2030 as operating cash flows decline (Figure 7).

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

Dividend Payout and Operating Cash Flows for Years of Operation 2020-2030

Dividend PayoutOperating Cash Flows

Time (Years)

Am

ount

($)

Figure 7: Projected dividend payments as a percentage of operating cash flows from 2020 to

2030.

5.8 Training and Education

Both radiologists and MRTs will be required to complete annual CME accreditation to maintain

their respective licenses in Saskatchewan. For MRTs, CME training will be conducted in house

at SaskMedical Diagnostics. Due to having licensed radiologists at a state-of-the-art facility,

MRTs will be able to receive their required training without travelling to another facility. This

will also make the training process more efficient, as CME training can be accommodated into

the work routine depending on work load. Radiologists will have the opportunity to schedule

34


their own training depending on interests and opportunities. CME training for radiologists can

consist of a variety of opportunities ranging from conferences to research projects. Radiologists

will be expected to seek their own CME training depending on their interests and availability.

Radiologists will be required to pay for CME training opportunities as a condition of maintaining

their medical license in Saskatchewan. The secretary and secretarial assistant are not required to

complete ongoing training unless a relevant learning opportunity that benefits the clinic is

approved by the Medical Director.

35


6.0 Marketing

6.1 Market Demand for MRI Services

The use of MRI technology has significantly expanded in Saskatchewan with 7 public MRI units

available in five hospitals in the province and two private MRI units operational in Regina. There

are currently no private MRI clinics outside of Regina. Demand for MRI services in

Saskatchewan have also increased substantially in the past 10-15 years with the number of exams

in Saskatchewan increasing from 12,628 in 2003/2004 to more than 42,000 exams in 2011/2012

(Figure 8).

2003-2004

2004-2005

2005-2006

2006-2007

2008-2009

2009-2010

2010-2011

2011-2012

05,000

10,00015,00020,00025,00030,00035,00040,00045,000

Number of MRI Exams in Saskatchewan from 2003-2012

Time (years)

Num

ber

of M

RI E

xam

s

Figure 8: Number of MRI exams conducted annually in Saskatchewan from 2003-2012 (CIHI,

2012).

36


While the number of MRI exams have steadily increased in Saskatchewan, wait times for

receiving diagnostic imaging services in the province have remained relatively unchanged.

Between 2011 and 2015, wait times for MRI services in the province remained relatively the

same at the 90th percentile (Figure 9).

Figure 9: Wait times for MRI services in Saskatchewan from 2008-2015. Data for 2008, 2009,

2012, and 2014 are unavailable (CIHI, 2016).

Compared to other provinces, utilization of MRI services in Saskatchewan remain below the

national average. This is due in part to limited accessibility to MRI services in the province.

Many Saskatchewan residents who are on a low-priority for receiving MRI services and wait

longer than the recommended wait time period seek treatment out of province either through

private clinics in Alberta, or at the Mayo Clinic in the US. Compared to the national average of

49 exams per 1000 people in Canada, Saskatchewan ranks lower at 39 exams per 1000 people

(Figure 10). This data indicates that there is an insufficient supply of MRI clinics in

Saskatchewan with residents being forced to seek treatment outside of their home province.

37

2008 2009 2010 2011 2012 2013 2014 20150

20

40

60

80

100

120

140

160

Wait Times for MRI Services in Saskatchewan from 2008-2015

50th Percentile

90th Percentile

Time (years)

Wai

t tim

e (d

ays)


N.L. P.E.I. N.S. N.B. Que. Ont. Man. Sask. Alta. B.C. Y.T. N.W.T.Can.0

10

20

30

40

50

60

70

Number of MRI Exams performed per 1000 people by Province and Territory for 2012

Province/Territory

Num

ber

of M

RI E

xam

s per

100

0 pe

ople

Figure 10: Number of MRI exams per 1000 people by province and territory. Data is from 2012

(CIHI, 2012).

With MRI units with a magnetic strength of 7T now available on the market and more powerful

software allowing for more specific studies to be performed, MR imaging is becoming more

efficient. These added features will increase the rate of throughput at many MRI clinics resulting

in lower costs and higher revenue streams. Also, with radiology services being increasing

outsourced to lower cost countries as a result of globalization, MRI clinics in North America will

be under increasing pressure to lower costs in an effort to remain competitive.

6.2 Competitor Analysis

In Saskatchewan, there are currently two private MRI clinics operational in the province:

OpenSkies MRI and Mayfair Diagnostics both of which are located in Regina. These clinics

have both started providing user-pay MRI services as of enforcement of the MRI Facilities

Licensing Act in March 2016. Outside of Saskatchewan, many residents seek private MRI

38


services at clinics in Alberta and the Mayo Clinic in the US. The most prominent MRI clinics

located in Calgary and Edmonton are Central Alberta Medical Imaging Services (CAMIS),

Medical Imaging Consultants (MIC), Insight Medical Imaging, and Canada Diagnostics Centre

(CDC).

Competitors Location MRI Unit Pricing

Provincial Government

Saskatoon Health Region

1.5T Siemens3.0 T Siemens Free

Mayfair Diagnostics Regina, SK 1.5 GE Optima with

GEM suite coilDependent on exam

($550-$1,100)

OpenSkies MRI Regina, SK 1.5T Phillips Panorama HFO

Dependent on exam($550-$1,100)

CAMISRed Deer, AB

Olds, ABStettler, AB

1.5T Siemens $725-$1,100

MIC Edmonton, AB 1.5T Siemens $575-$1,000Insight Medical

Imaging Edmonton, AB 1.5T Siemens $550-$925

CDC Calgary, AB 1.5T GE SignaFirst scan is $770

Each additional scan 50% off

SaskMedical Diagnostics Saskatoon, SK 1.5T GE Optima with

GEM suite coilDependent on exam

($550-$1,100)Table 17: Main MRI clinics in Alberta and Saskatchewan.

These clinics all offer comparable quality and professional service due to the highly regulated

nature of health care in Canada. SaskMedical Diagnostics is expected to become the first private

MRI clinic in Saskatoon. This will provide the clinic with the competitive advantage of offering

MRI services to patients in Saskatoon and the surrounding area without requiring extended

travel. This will make SaskMedical Diagnostics the first choice clinic for patients in central and

northern Saskatchewan. The services provided by SaskMedical Diagnostics will be consistent

with what is offered by competitors and outlined in the SMA fee guide (Table 19). SaskMedical

Diagnostics will use the same MRI unit as that used by Mayfair Diagnostics. SaskMedical will

have a competitive advantage over OpenSkies MRI in being able to offer breast exams. Due to

the open-bore design of OpenSkies’1.5T Phillips Panorama MRI unit, breast exams are not

possible. OpenSkies will have an advantage over SaskMedical Diagnostics and other competitors

using conventional MRI units in the ability to accommodate obese patients as a result of the

39


open-bore design. SaskMedical Diagnostics will also be at a disadvantage due to immediate

competitors in Regina already having a brand presence in the market when the clinic opens.

SaskMedical Diagnostics will require aggressive marketing in central-northern Saskatchewan to

create brand awareness in these target regions. Due to all clinics in Saskatchewan and Alberta

offering similar services within the same price range, SaskMedical Diagnostics will have a

competitive advantage within central and northern Saskatchewan due to being strategically

located in Saskatoon. With excess demand expected to increase in Saskatchewan as a result of

population growth, SaskMedical Diagnostics is expected to hold 7.8%-8% market share for the

first 10 year operating period without targeting markets outside of Saskatchewan (Figure 11).

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 20300

5,00010,00015,00020,00025,00030,00035,00040,00045,00050,000

Expected Number of MRI Exams for SaskMedical Diagnostics and Competitors (2020-2030)

Excess DemandMayfair Di-agnosticsOpenSkies MRIMedicareSaskMedical Diagnostics

Time (Years)

Num

ber

of M

RI E

xam

s

Figure 11: Expected number of MRI exams for SaskMedical Diagnostics and competitors (2020-

2030)

New entrants entering the market in Saskatchewan as a result of MRI privatization legislation

will result in lower market prices for MRI exams in the province. This will reduce profitability

for SaskMedical Diagnostics. Long term success in Saskatchewan will require SaskMedical

Diagnostics to establish brand awareness within the province. In 2031, SaskMedical Diagnostics

40


will also have to invest in building and equipment upgrades to expand the service offerings of the

clinic in order to remain competitive long term.

6.3 Customer Analysis

For free standing MRI clinics in Canada, the majority of patients that access MRI services are

private paying citizens. For Saskatchewan, due to legislation in the MRI Facilities Licensing Act,

the number of patients receiving exams at private MRI clinics will be evenly split between

publicly funded and user-pay exams. This means that the source of operating funds for the clinic

will be equally distributed between the Saskatoon Health Region and private insurance coverage

and out-of-pocket payments (Table 18).

Sources of Operating FundsAs of January 1,

2006 (Canada)

As of January 1, 2020

(Saskatchewan)

Provincial Governments 0% 40%

Workers Compensation Board 6.30% 6.30%

Private Health Insurance, Private

Insurance, Out-of-Pocket Payments79% 40%

Other Types of Funding 14.70% 14.70%

Table 18: Percentage of operating funds by source for Canadian MRI clinics using 2006 CIHI

data for January 1, 2006 (CIHI, 2006) and predicted percentages based on legislation from the

MRI Facilities Licensing Act.

The patients receiving treatment at SaskMedical Diagnostics will have a referral from a

physician for one of the treatments that the clinic provides (Table 19). Based on outpatient data

in Ontario from 2005-2006, it is expected that the majority of exams conducted at the clinic will

be of the head and spine (Figure 15). Patients receiving MRI exams will come from a wide

ranging demographic. Due to the scope of potential injuries that can necessitate a referral for an

MRI, there is no particular age group that will be targeted. Patients from the entire demographic

spectrum can require MRIs, ranging from a spine MRI exam for the geriatric patient suffering

from lower back pain to the post-concussion adolescent requiring a head MRI exam. For publicly

funded MRI exams, there is no distinction of patients based on socio-economic background, as

all patients would receive a publicly funded exam regardless of ability to pay. Due to the costs

41


associated with paying out of pocket for an MRI exam, socio-economic distinctions in the patient

clientele will be more pronounced for privately-funded MRI exams.

6.4 Target Market

All Inc

ome G

roups

<$500

0

>$500

0

>$100

00

>$150

00

>$200

00

>$250

00

>$350

00

>$500

00

>$750

00

>$100

000

>$150

000

>$200

000

>$250

000

Targete

d Inc

ome G

roup

0100,000200,000300,000400,000500,000600,000700,000800,000900,000

Number of Saskatchewan Residents by Income Group for 2013

Income Groups

Num

ber

of S

aska

tche

wan

R

esid

ents

Figure 12: Number of Saskatchewan residents by total income group category for 2013

(Statistics Canada, 2015).

Coupled families with combined incomes totalling more than $75,000 are also groups where

potential patients are likely to pay privately for MRI exams. In Saskatchewan, coupled families

earned over $90,000 in annual income for 2013 (Figure 13). These families are also more likely

to become private MRI patients if they have children. If the child receives a referral for an MRI

exam but is on a low priority waiting list, the family is likely to pay out of pocket for a private

MRI exam to skip the queue and give their child more immediate treatment. For married and

common-law families with children in Saskatchewan, there were 100,030 and 16,200 in

Saskatchewan as of 2011 respectively (Figure 14). The coupled family target market provides the

best opportunity for SaskMedical Diagnostics to compete for market share in the user-pay MRI

42


market. Maintaining competitive pricing relative to competitors and being the sole provider of

private MRI services in Saskatoon will allow SaskMedical Diagnostics to effectively target this

market segment.

010,00020,00030,00040,00050,00060,00070,00080,00090,000

100,000

Median Total Income by Family Type for Saskatchewan in 2013

Family Types

Med

ian

Tot

al In

com

e ($

)

Figure 13: Median total income by family type for Saskatchewan in 2013 (Statistics Canada,

2015).

43


Married Couple Families Common-law Couple Families0

50,000

100,000

150,000

200,000

250,000

Number of Married and Common-law Census Families in Saskatchewan for 2011

With ChildrenWithout ChildrenTotal

Census Families

Num

ber

of C

ensu

s Fam

ilies

Figure 14: Number of married and common-law families in Saskatchewan with and without

children for 2011 (Statistics Canada, 2011).

6.5 Services Offered

SaskMedical Diagnostics will provide diagnostic imaging services to private paying Canadians

and to the Saskatoon Health Region. The Saskatchewan Medical Association (SMA) provides

guidelines for recommended pricing for uninsured medical procedures (SMA, 2015). Due to the

standards for diagnostic imaging being closely regulated by the province, the service offering

provided by SaskMedical Diagnostics will be indistinguishable from the quality of service at any

other certified MRI clinic. The distinguishing factor that will create a positive brand image for

patients will be the professional interactions with patients and the efficiency of the clinic.

Professionalism and emotional maturity personality traits will be selected for during the

recruitment and selection process. Operational efficiency in being able to reduce wait times in

the clinic and improve the expediency of procedures will be dictated by the experience of the

staff that are hired. There will also be a learning curve required by staff at the clinic, which will

result in greater efficiency and service as the clinic operates.

44


Exam Type Description Total Maximum Cost (Recommended)

Average Exam Cost

(Actual Price with Markup)

Breast MRIThree spin echoes of the

female breast (unilateral or bilateral) with contrast dye

$286.8

$550-$1,100

Head and Neck Multislice MRI

Three spin echoes of the head and neck with or without

contrast dye$286.80

Thorax Multislice MRI

Three spin echoes of the thorax with contrast dye $343.00

Pelvis Multislice MRI

Three spin echoes of the pelvis with contrast dye $343.00

Extremities Multislice MRI

Three spin echoes of the extremities with or without

contrast dye$272.80

Spine MRI (one spine zone)

Three spin echoes of spine zone with or without contrast

dye$272.80

Spine MRI (two spine zones)

Three spin echoes of two adjoining spine zones with or

without contrast dye$272.80

Spine MRI (three spine

zones)

Three spin echoes of three adjoining spine zones with or

without contrast dye$424.00

Table 19: SMA pricing guidelines for MRI exams.

These pricing guidelines will be used for negotiating pricing arrangements with the Saskatoon

Health Region. Because these prices are recommendations only, actual pricing for private MRI

services will be dependent on external market conditions and competitor pricing.

45


Figure 15: Number of Outpatient MRI exams in Ontario from 2004-2005 by anatomical site.

(ICES, 2006).

The costs of a typical MRI exam can range anywhere from $500-$1100 depending on the type of

study done and whether or not contrast dye is required. Additionally, there is a lost opportunity

cost from missing work that could be problematic for some patients. As a result, it is expected

that most patients that pay privately for an MRI exam will be in a middle to high income group

earning > $75000 (Figure 12).

6.6 Revenue and Service Level Targets

Based on the expected competitive environment, the primary objective of SaskMedical

Diagnostics is to capture and maintain 8% market share in the Saskatchewan MRI market from

2020-2030 (Figure 11). This primary objective will be supported by the goal to achieve and

maintain an annual service level of 5500 exams every year from 2020 to 2030. If this goal is

accomplished, SaskMedical Diagnostics expects to maintain profitability until 2030, with further

building and technology upgrades required to maintain profitability past 2030.

Excess demand for MRI services is expected to continue throughout the first 10-year phase of

operations. The clinic is expected to operate at close to full capacity throughout the first phase of

46

Brain Spine Extremities Other0

10,00020,00030,00040,00050,00060,00070,00080,00090,000

100,000

Number of Outpatient MRI Exams by Anatomical Site, Ontario, 2004-2005

Num

ber

of E

xam

s


operations (Figure 11). With increased population growth, excess demand is expected to increase

which will be absorbed by new entrants entering the market and competitors from out of

province. For the four geographical regions targeted by SaskMedical Diagnostics (Table 20),

direct competitors are not expected to have a significant impact on the market price until after the

first 5 years of operations (2025-2030).

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 0

500,000.0 1,000,000.0 1,500,000.0 2,000,000.0 2,500,000.0 3,000,000.0 3,500,000.0 4,000,000.0 4,500,000.0 5,000,000.0

Projected Revenue for SaskMedical Diagnostics for Years of Operation (2020-2030)

Time (Years)

Rev

neue

(Mill

ions

of $

)

Figure 16: Projected Revenue for SaskMedical Diagnostics from 2020-2030.

Revenues for SaskMedical Diagnostics are predicted to decline from $4.4 million in 2020 to $2.9

million in 2030 (Figure 16). From 2020-2026 revenue is predicted to decline at an accelerated

discount rate of 0.5% annually. As an increasing number of entrants enter the market, it is

expected that the accelerated discount rate will increase to 1.5% annually from 2026 to 2030

(Table 41). This decline in revenues will be due to increased price pressure from new entrants in

the central-northern region of Saskatchewan.

6.7 Distribution Strategy

Distribution channels are not relevant for MRI services due to the advanced technology and

highly trained personnel that are required to provide the procedure as well as legal requirements

that restrict MRI services to licensed healthcare facilities. Due to the location of the clinic in

47


Saskatoon, SaskMedical Diagnostics will be in a strategic position to service the needs of

patients in central and northern Saskatchewan without necessitating the need to seek service at

clinics in Regina or out of province.

6.8 Pricing Policy

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 0

100 200 300 400 500 600 700 800 900

Projected Market MRI Exam Price for Saskatchewan from 2020-2030

Time (Years)

Ave

rage

Mar

ket P

rice

($)

Figure 17: Projected market price for MRI exams in Saskatchewan. New entrants entering the

market are expected to place downward pressure on the market price.

Pricing policy for SaskMedical Diagnostics will follow the market rate for MRI exams in the

province (Figure 17). As new entrants enter the market, revenues are expected to decline as the

market rate decreases. For publicly-funded exams carried out for the Saskatoon Health Region, it

is predicted that the negotiated exam price will be similar to the market rate due to the bargaining

power of SaskMedical Diagnostics as a result of being the only private clinic in Saskatoon.

Market-rate pricing is also used by other competitors in Saskatchewan and Alberta. Residents in

central and northern Saskatchewan will have an incentive to go to SaskMedical Diagnostics for

treatment due to the lower travel costs compared to other clinics.

48


6.9 Segmentation, Targeting and Positioning

For the purposes of segmenting private MRI service demand in Saskatchewan, annual income is

used as this is a direct indicator of the ability of patients to pay for private MRI services. For this

analysis, potential patients that will be able to pay for a private MRI exam are expected to have

an income over $75,000 (Figure 12). This puts the number of patients in Saskatchewan receptive

to private MRI services at 242,000 (figure 12). In addition, because of the central location of the

clinic within the province, four main geographical regions will be targeted for attracting private

MRI patients: Saskatoon, Prince Alberta, Lloydminster, and North Battleford (Table 20).

Communities Population (2011)

Number of MRI

Exams per 1000

people (2012)

Expected number of

MRI patients

Saskatoon 260,600

39

10,163

Prince Albert 42,673 1,664

Lloydminster 30,798 1,201

North Battleford 19,216 749

Table 20: Targeted cities with population and expected demand of private MRI services.

These four cities will be the focus of marketing efforts for attracting MRI patients to the clinic.

Because available census data for these regions are from 2011 and 2012, it is expected that

demand will be higher when the clinic begins operations in 2020.

Targeting prospective patients for MRI services will be dependent on the types of MRI exams

available at the clinic. The clinic will be capable of providing all types of MRI exams offered in

the SMA fee guide (Table 19). This service offering will ensure that Saskatchewan residents are

able to obtain essential MRI services without having to seek treatment outside of the province.

The clinic will be positioned to provide a core service offering focusing exclusively on MRI

exams. As demand for MRI services in the province have outstripped available capacity, a

private clinic that focuses exclusively on MRI services will be able to provide the greatest

benefit to the people of Saskatchewan.

49


6.10 Marketing Strategy and Advertising Budget

Figure 10: Projected marketing budget for SaskMedical Diagnostics from 2020-2030.

Marketing success for SaskMedical Diagnostics will be heavily dependent on attracting referrals

from physicians in Saskatchewan. Print advertisements will be made available in the form of

brochures that will be distributed in all major medical clinics and hospitals within the targeted

regions of Saskatoon, Prince Albert, Lloydminster and North Battleford

Figure 18: Projected marketing costs for the first 10 years of operations and advertising media.

Marketing efforts will be focused primarily on attracting patients within the four main target

cities (Table 20). Publicly-funded MRI patients will be attracted through receiving referrals from

physicians within the Saskatoon Health Region. To increase awareness of the clinic to

physicians, print brochures will be made available in medical clinics and hospitals in Saskatoon

and other target regions. For patients receiving care through the Saskatoon Health Region, exams

will be directed to the private clinic when the public MRI facility at RUH is at full capacity. Print

advertisement expenses are expected to cost $7,000 in 2020 increasing to $9,287 by 2030 (Figure

18). To increase brand awareness of SaskMedical Diagnostics in the general public, website and

radio advertising will be used. Radio time will be purchased from major radio stations in the

targeted regions such as C95 and Power 99 FM during peak commute times in the morning and

afternoon. This strategy is designed to target the parents of coupled families that are most likely

to pay for private MRI services (Figure 14). The website will also allow for online appointments

to be scheduled by patients and will provide information to patients and physicians about

diagnostic imaging through articles and research papers that will be regularly posted on the

website. Start up costs for website development is expected to be $50,000 in 2020 with

maintenance costs starting at $1,800 in 2021 and increasing to $2,151 in 2030 (Figure 18). Radio

50

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000

$100,000

Projected Marketing Costs for SaskMedical Diagnostics from (2020-2030)

Website Radio

Print

Time (Years)

Cos

t ($)


advertising costs are expected to start at $30,000 for 2020 and increase to $39,801 in 2030

(Figure 18).

6.11 SWOT/TOWS Summary of Marketing Strategy

Opportunities

Temporary dominance in target market before new entrants enter geographical region

Create favourable brand awareness before new entrants enter market

Threats

Technological obsolescence

Competition from established clinics in Regina and Alberta

Strengths

First mover advantage in untapped market

Presence in central northern Saskatchewan without immediate competitors in targeted regions

Strengths to Exploit Opportunities

Use temporary first mover advantage to solidify brand image

Fine tune operating procedures and processes before significant competitors arrive

Strengths to Neutralize Threats

Use leadership position in target region to build cash reserves in preparation for upgrade in 2031

Develop brand loyalty with community to increase barriers to competitors

Weaknesses

10 year wait before significant clinic upgrades

Uncertainty risk due to nascent industry conditions

Weaknesses that Interfere with Opportunities

Lag time before clinic upgrade can negatively impact brand awareness

Uncertainty risk can inhibit capture of target market share

Weaknesses that Increase the Risk of

Threats Lag time before clinic upgrade increases the risk of technological obsolescence

Uncertainty in new industry creates information asymmetry between SaskMedical Diagnostics and established competitors

Figure 19: SWOT/TOWS summary of strategy implications in marketing plan.

51


7.0 Accounting and Finance

7.1 Projected Profitability

If SaskMedical Diagnostics maintains a service level of 5500 exams a year, the business is

expected to generate positive net cash flows for the first 9 years of operations (Figure 20). By the

year 2030, the exam market price is expected to decline to $544 per exam assuming the base case

discount rate is applied (Table 45). This will result in the clinic becoming unprofitable without a

significant expansion of the clinic and an upgraded MRI theatre. With an expected cash balance

of $7.2 million (Table 23) and debt fully paid by 2030 (Table 30), SaskMedical Diagnostics will

be in a favourable position to finance the expansion in 2031 assuming that the projected

profitability targets are met.

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030-400,000-200,000

0 200,000 400,000 600,000 800,000

1,000,000 1,200,000 1,400,000

Projected Net Income and Net Cash Flow for Years of Operation (2020-2030)

Net IncomeNet Cash Flow

Time (Years)

Am

ount

( $)

Figure 20: Projected net income and cash flows for SaskMedical Diagnostics from 2020 to 2030.

52


7.2 Sensitivity Analysis

Figure 21: Sensitivity analysis of cash flows for SaskMedical Diagnostics based on changing the

number of exams performed annually and the discount rate of the market exam price from 2020

to 2030.

Figure 22: IRR at different service levels and market exam price discount rates for SaskMedical

Diagnostics from 2020 to 2030.

53

5500 exams

5250 exams

5000 exams

4750 exams

4500 exams

4250 exams

4000 exams

0%

5%

10%

15%

20%

25%

Sensitivity Analysis of IRR at Different Service Levels and Market Exam Price Discount Rates

Base CaseBase Case (+1%)Base Case (+2%)Base Case (+3%)Base Case (+5%)

Annual Service Level

IRR

(%)

5500 exams

5250 exams

5000 exams

4750 exams

4500 exams

4250 exams

4000 exams

(600,000)(400,000)(200,000)

0 200,000 400,000 600,000 800,000

1,000,000

The Effect of Number of Annual Exams and Discount Rate of Exam Market Price on Average Cash Flows from 2020-2030

Base CaseBase Case +1%Base Case +2%Base Case +3%Base Case +4%Base Case +5%

Number of Annual Exams

Ave

rage

Cas

h Fl

ows f

rom

20

20-2

030

($)


To obtain an average negative cash flow from 2020 to 2030, SaskMedical Diagnostics’ expected

service level would have to decline to 4750 exams a year and the market exam price discount

rate would have to increase by 5% (Figure 21). At a required return on investment of 10%, the

annual service level could decline to 4750 exams and still maintain an IRR of 11% (Table 44).

At the expected annual service level of 5500 exams, the market exam price discount rate could

increase by 3% and still return the required rate of return (Table 44).

7.3 Break Even Analysis

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 20308

10121416182022

26003100360041004600510056006100

Daily and Annual Number of Exams required to Break Even and Expected Number of Exams for Years of Operation 2020-2030

Break Even (Daily)Expected (Daily)Break Even (An-nually)Expected (Annually)

Time (Years)

Dai

ly N

umbe

r of

Exa

ms

Ann

ual N

umbe

r of

Exa

ms

Figure 23: Projected breakeven points for SaskMedical Diagnostics from 2020 to 2030 on a daily

and annual basis.

At an expected service level of 5500 exams, SaskMedical Diagnostics will be able to surpass the

daily and annual break even points with a comfortable margin of safety from 2020 to 2030

(Figure 23). Additionally, the market exam price discount rate could increase by up to 3% and

the clinic would still be able to meet the break even point for the first 10 years of operations

assuming that the clinic reaches its service level target (Table 44). In the worst planned scenario

54


of a 4000 exam annual service level and a +5% market exam price discount rate, the clinic would

be expected to maintain a margin of safety until 2025 (Table 47).

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 20300

5

10

15

20

25

30

Projected Daily Break Even Points at Different Discount Rates of the Exam Market Price for Years 2020-2030

Ex-pected Service LevelBase CaseBase Case (+1%)Base Case (+2%)Base Case (+3%)Base Case (+4%)Time (Years)

Dai

ly B

reak

Eve

n N

umbe

r of

Exa

ms

Figure 24: Sensitivity analysis of daily break even points at varying discount rates of market

exam price for SaskMedical Diagnostics from 2020 to 2030.

55


7.4 Ratio Analysis

Cash flows to total debt are expected to steadily increase before plateauing in 2027 with a sudden

drop in 2029 due to decreased profitability (Figure 25). Since both the D/E and Debt ratio are

predicted to steadily decline from 2020 to 2030, the sudden decrease in the cash flow to total

debt ratio is due to operating cash flows declining at a faster rate than the payment of debt.

Figure 25: Projected debt, debt to equity, and cash flow to total debt ratios for SaskMedical

Diagnostics from 2020 to 2030.

Projected gross profit margin is expected to exceed the 2014 industry average from 2020 to 2030

starting at 95% in 2020 and slowly declining to 91% in 2030 (Figure 26). Interest coverage for

the same period will be below the industry average ranging from 11.12x to 26.84x (Figure 27).

Below average performance in this metric could be due to the relatively high percentage of debt

financing at 28% (Table 30) and an interest rate of 8% (Table 25). While these metrics may

provide insight into potential performance for SaskMedical Diagnostics, the fact that industry

data was only available for 2014 and financial projections for SaskMedical Diagnostics were

made from 2020 to 2030 indicate that these results should not be used for decision making

purposes.

56

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 20300.00

0.05

0.10

0.15

0.20

0.25

0.30

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Projected Debt, D/E and Cash Flow to Total Debt Ratios for Years of Operation (2020-2030)

Debt RatioD/E RatioCash Flows to Total Debt

Time (Years)

Deb

t and

D/E

Rat

io(x

)

Cas

h Fl

ows t

o T

otal

Deb

t


Figure 26: Projected gross profit margin for SaskMedical Diagnostics from 2020 to 2030

compared to the 2014 industry average.

2022

2023

2024

2025

2026

2027

2028

2029

2030

-50

0

50

100

150

200

Projected Interest Coverage of SaskMedical Diagnostics Compared to Industry Average (2014) for Years of Operation 2020-2030

Lower QuartileUpper QuartileIndustry Average (2014)SaskMedical Diagnostics

Time (Years)

Inte

rest

Cov

erag

e (x

)

Figure 27: Projected interest coverage for SaskMedical Diagnostics from 2020 to 2030 compared

to the 2014 industry average.

57

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0%

20%

40%

60%

80%

100%

120%

Projected Gross Profit Margin for SaskMedical Diagnostics compared to Industry Average for Years of Operation (2020-2030)

SaskMedical Diag-nosticsIndustry Average (2014)

Time (Years)

Gro

ss P

rofit

Mar

gin

(%)


7.5 Risk Analysis

There are several risks that can have a negative impact on the success of SaskMedical

Diagnostics. The most significant risk facing clinic operations is the adoption of newer

technology by immediate competitors such as Mayfair Diagnostics and OpenSkies MRI. This

risk is especially relevant because at the start of operations SaskMedical Diagnostics will have

no technological advantage as the 1.5T MR450W MRI unit by GE Healthcare will be the same

model used by Mayfair Diagnostics (Table 50). Additionally, SaskMedical Diagnostics will be

required to use this MRI until 2031 at the earliest. Combined with the high obsolescence rate of

technology used in radiology, there is a significant risk that SaskMedical Diagnostics will be

obsolete compared to similar clinics before 2030. The likelihood of this event occurring is

relatively high, and could have a significant impact on the clinic’s ability to attract patients.

Event Risk Contingency PlanUnmitigated Risk Score(UL X UI)

Mitigated Likelihood

(ML)

Mitigated Impact

(MI)

Mitigated Risk Score(ML X MI)

New technology is adopted by competitors

Clinic technology becomes obsolete

Expand clinic and upgrade

technology in 2031Offer membership

program

20 Medium (3) Medium (3) 9

Competition lowers exam market price

greater than expected

Clinic becomes unprofitable

Reduce fixed costsProvide additional

servicesIntroduce

membership program

12 Medium (3) Medium (3) 9

Legislative changes are made to MRI

Facilities Licensing Act

Business model becomes unviable

Lobby governmentpublic awareness

campaign10 Low (2) Medium (3) 5

Lack of qualified professionals and

technicians

Clinic cannot operate

Increase benefit package 10 Very Low (1) Very High

(5) 5

Public opinion rejects privatized healthcare

Social license rejected by the

community

Invest in community

Public awareness campaign

9 Low (2) Low (2) 4

Lower than expected demand for MRI

services

Clinic becomes unprofitable

Reduce fixed costsIntroduce

membership program

Provide additional services

8 Low (2) Medium (3) 6

Unable to secure service contract with

Saskatoon Health Region

Business model becomes unviable

N/A 3 Very Low (1) Medium (3) 3

Figure 28: Risk factors for SaskMedical Diagnostics with mitigation strategies.

58


There is little that SaskMedical Diagnostics will be able to do between 2020-2030 to offset this

risk. If profitability exceeds expectations, upgrading the clinic may occur prior to 2031. This

possibility would be remote however. Another contingency plan could be to introduce a

membership program to keep patients with the clinic long term. The drawback to this plan is that

this program would have less of an impact in attracting new patients, and would only be focused

on retaining current ones. The most likely outcome is that the clinic will be upgraded in 2031 to

remain competitive in the market. Through this mitigation strategy, the overall threat level would

be reduced from 20 to 9 (Figure 28).

Another risk facing the clinic is if competition in the marketplace reduces the market exam price

greater than expected. This would result in the discount rate used being >5% plus the base case

discount rate. This would make the clinic unprofitable. The best mitigation strategy for this risk

is to diversify the service offering of the clinic to increase the service level. This could include

offering other medical services which would require changes to equipment and staff. Fixed costs

could also be reduced wherever possible to lower the break even service level that the clinic

needs to achieve. A membership program could also be beneficial in retaining current patients

and offering other services with membership to attract more patients. With these strategies in

place, overall risk can be reduced from 12 to 9 (Figure 28).

Another business risk facing the clinic are any legislative changes made to the MRI Facilities

Licensing Act. Changes made in legislation could potentially have a negative impact on the

ability of the clinic to operate in the province. Such changes could include limiting the price that

private clinics can charge privately-paying patients, or restricting the proportion of total exams

that can be done privately. Private MRI clinics in the province must be active in promoting their

business interests in the province. Voicing concerns to the provincial government would be the

best method to prevent negative changes from occurring. This would require SaskMedical

Diagnostics to partner with other private clinics to form a formal lobby group to lobby against

the provincial government when required. Alternatively, making investments in public awareness

campaigns can improve public opinion regarding privatized healthcare and place pressure on the

government to not pass anti-privatization legislation. These mitigation strategies would be

implemented depending on the current political environment and are expected to reduce the

overall threat level from 10 to 5 (Figure 28).

59


Another risk that is equally threatening to clinic operations is an inability to attract qualified

personnel to the clinic. This risk is due to the relatively low number of radiologists licensed to

practice in the province as well as difficulties in retaining qualified personnel due to the size of

the province and differences in lifestyle expectations. This risk can best be mitigated by

providing opportunities for personnel to excel in the clinic and increasing compensation and

benefits as appropriate. Opportunities in research and training can be considered which would

require an investment in training separate from standard CME accreditation. This mitigation

strategy would reduce the threat level from a 10 to a 5 (Figure 28).

Lacking a social license to operate in the province is also a risk to clinic operations. This is

especially problematic in a province known as the “birthplace of Medicare” with a significant

proportion of Saskatchewan residents having negative perceptions regarding privatized medicine

and a two-tier healthcare system. Public awareness campaigns and research will be important to

mitigate this threat. Communicating the benefits of the private clinic to patients will be part of an

ongoing strategy to improving public perceptions regarding privatized MRI services. This

strategy should reduce overall risk from a 9 to a 4 (Figure 28).

Lower than expected service levels are also a potential risk to clinic profitability. Annual service

levels falling significantly below 5500 will restrict the ability of the clinic to produce positive

cash flows. The same mitigation strategy used to address greater than expected competition will

be used to mitigate this threat. Membership programs and expanded service offerings are

expected to attract patients to the clinic. This should reduce the overall threat level from an 8 to a

6 (Figure 28).

Lastly, inability to secure a service contract with the Saskatoon Health Region presents a minor

risk to the clinic. This would require the clinic to contract with a health region outside of the

immediate geographical area. Due to the absence of any competitors in Saskatoon and the

increasing demand for MRI services, this risk is expected to be negligible. The cost of

implementing a strategy to address this threat would be greater than any benefit derived from

reducing the risk. As a result, there is no mitigation strategy required.

60


8.0 Business Plan Summary

With MRI utilization remaining below the national average (Figure 10) and wait times remaining

unchanged in the past 5 years (Figure 9), there is a strong demand for additional MRI capacity in

the province. Government underinvestment in MRI capacity has created an opportunity for

private corporations to fill the widening gap between supply and demand. This presents a

potentially lucrative opportunity for private MRI clinics opening in the province. With a

combined population of over 300,000 people and not a single private MRI clinic established in

the area, being the first private MRI clinic to operate in central-northern Saskatchewan presents a

unique opportunity for SaskMedical Diagnostics.

Over 200,000 Saskatchewan residents earn an income greater than $75,000 a year (Figure 12).

This segment of the population will likely be able to pay privately for MRI services. With a

median total income of over $90,000 annually, coupled families are a prime target market for

private MRI services. With a young child requiring an MRI exam and facing a long wait on the

public queue, parents of these families will likely pay privately for their children to receive care

sooner. By being located in Saskatoon, SaskMedical Diagnostics will be strategically located to

provide patients with the closest available clinic at a competitive price due to the lower traveling

costs.

Using a utilization rate of 39 exams per 1000 people, SaskMedical Diagnostics’ targeted regions

are likely to produce approximately 13,000 MRI patients every year (Table 20). This more than

doubles the expected service level of 5,500 exams every year for the clinic. By being the first

clinic in Saskatoon and strategically located to provide MRI services to central and northern

Saskatchewan, SaskMedical Diagnostics will be able to maintain a competitive advantage over

competitor clinics in Regina and outside of the province. This competitive advantage will decline

as new entrants enter the market placing downward pressure on the exam market price (Figure

17). If SaskMedical Diagnostics does not have sufficient funds to finance a clinic expansion and

MRI upgrade in 2031, the clinic would close in 2030. Shutting operations before 2030 would be

unfavourable due to the forgone cash flows and requirement to pay debt obligations.

All members of SaskMedical Diagnostics will be important for the success of the corporation.

The individuals that will be most central for this success will be the radiologist and MRTs.

These individuals will be in direct contact with patients providing patient care. They will also

61


have the strongest impact on perceptions that patients receive from their procedure at the clinic.

This is why it will be critical for all radiologists and MRTs to have the right character and

personality to interact with patients and provide a professional level of care. By creating a

cohesive work environment through sharing and celebrating accomplishments at weekly

employee meetings, SaskMedical Diagnostics staff will become members of a team with limited

power distance barriers. Using these employee meetings to foster a team environment will be

critical to business success since everybody is dependent on one another to successfully provide

care to patients. Nurturing a team environment also assists with shortening power distances that

naturally arise as a result of educational and social status differences between different

subgroups of the clinic such as MRTs and radiologists. Ideally, the clinic will become a

workspace where everybody respects and values each other for the role that everybody has in

achieving results.

Due to the high rate of technological obsolescence at radiology clinics and the long time period

before the MRI unit can be replaced, technological obsolescence is the most significant threat for

business success. Financing a significant expansion of the clinic and upgrade of the MRI theatre

in 2031 will make this threat temporary. In the interim, introducing a membership program and

expanding into other service offerings such as executive healthcare can serve to minimize the

loss of business to more technologically advanced clinics. Failure to reach required service levels

or higher than expected competition being encountered in the market can result in reduced

profitability and is also a risk for business success. Expanding into service offerings that are

compatible with the clinic and introducing a membership program can help mitigate this threat.

Fixed costs can also be reduced where feasible. Legal risks such as changes to legislation

governing the private MRI industry can be mitigated through government lobbying and investing

in public awareness campaigns to inform the public about the benefits of private MRI services.

Public awareness campaigns are also beneficial in earning a social license if there is opposition

against the private MRI industry. Increasing compensation and benefits as well as creating

unique learning experiences can mitigate the risk of being unable to hire and retain qualified

personnel at the clinic.

At a required rate of return of 10%, investors of SaskMedical Diagnostics will be able to receive

a return on investment comparable to equity securities. Given the risks associated with operating

62


the clinic and the uncertainty inherent in the industry in Saskatchewan, investing in SaskMedical

Diagnostics would result in a medium level of risk. The IRR at the base discount rate and

expected service level is 19%, making this a favourable investment opportunity.

63


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lang=en-

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t=checksk

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in-saskatchewan.

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Regulations, 2005. Chapter R-1.1 Reg 2. The Queen’s Printer.

22. Government of Canada. (2014). Canadian Industry Statistics. Medical and Diagnostic

Laboratories (NAICS 62151): Financial Performance Data (2014). Accessed 13 May,

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%20complete%20One%20piece%201.08%2F1.59%20Gal%20Elongated%20toilet

65

https://www.homedepot.ca/en/home/search.products.html#!q=Tofino%20Dual%20flush%20complete%20One%20piece%201.08%2F1.59%20Gal%20Elongated%20toilet

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of industries. Rate code S12-07.

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%202%20in%20

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66

http://www.thelaundryforum.com/forums/business/price-per-pound-t41.html

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67

https://www.vanguardcanada.ca/institutional/etfs/target-retirement-funds.htm


10.0 Appendix A—Pro Forma Financial Statements

68


10.1 Pro Forma Income Statement

Income Statement 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Sales 4,400,000 4,378,000 4,334,220 4,269,207 4,183,823 4,079,227 3,956,850 3,778,792 3,552,064 3,285,660 2,989,950

COR 215,270 219,575 223,967 228,446 233,015 237,675 242,429 247,278 252,223 257,268 262,413

Gross Profit 4,184,730 4,158,425 4,110,253 4,040,760 3,950,807 3,841,552 3,714,421 3,531,514 3,299,841 3,028,392 2,727,537

Gross Profit Margin 95% 95% 95% 95% 94% 94% 94% 93% 93% 92% 91%

Operating Expenses

Sewage 1,424 1,452 1,482 1,511 1,541 1,572 1,604 1,636 1,668 1,702 1,736

Electricity 17,311 17,657 18,010 18,371 18,738 19,113 19,495 19,885 20,283 20,688 21,102

Natural Gas 7,119 7,261 7,407 7,555 7,706 7,860 8,017 8,177 8,341 8,508 8,678

Water 1,574 1,605 1,638 1,670 1,704 1,738 1,773 1,808 1,844 1,881 1,919

Linen Services 15,000 15,300 15,606 15,918 16,236 16,561 16,892 17,230 17,575 17,926 18,285

EAS Software 1,074 1,095 1,117 1,140 1,163 1,186 1,209 1,234 1,258 1,284 1,309Internet and Telephone 1,979 2,039 2,100 2,163 2,228 2,295 2,364 2,435 2,508 2,583 2,661

TV Service 300 309 318 328 338 348 358 369 380 392 403Insurance (Capital

Assets) 10,000 10,200 10,404 10,612 10,824 11,041 11,262 11,487 11,717 11,951 12,190

Insurance (CMPA) 28,740 29,315 29,901 30,499 31,109 31,731 32,366 33,013 33,673 34,347 35,034Preventative Maintenance 100,000 102,000 104,040 106,121 108,243 110,408 112,616 114,869 117,166 119,509 121,899

Auditing 7,000 7,140 7,283 7,428 7,577 7,729 7,883 8,041 8,202 8,366 8,533

Marketing 87,000 39,540 40,331 41,137 41,960 42,799 43,757 44,946 46,489 48,529 51,240

Salary and Wages 1,500,120 1,530,122 1,560,725 1,591,939 1,623,778 1,656,254 1,689,379 1,723,166 1,757,630 1,792,782 1,828,638

Employee/Physician Benefits 234,784 238,865 243,028 247,275 251,606 256,009 260,461 265,002 269,633 274,358 317,937

Federal Tax 243,753 247,870 240,301 228,584 213,027 193,950 171,672 140,579 101,781 56,667 -

Provincial Tax 169,003 172,296 166,241 156,867 144,422 129,160 111,338 86,463 55,425 19,333 4,034

Property Tax 296,552 301,167 294,471 283,768 269,358 251,550 230,654 201,230 164,353 121,372 67,459

CCA 254,873 215,459 183,465 157,426 136,169 118,754 104,430 92,593 82,761 74,549 67,645

Debt Interest Expense 91,410 86,593 81,391 75,773 69,705 63,152 56,074 48,430 40,175 31,259 26,617Total Operating

Expenses 3,069,016 3,027,289 3,009,258 2,986,086 2,957,433 2,923,210 2,883,604 2,822,593 2,742,862 2,647,986 2,597,320

NOI/NOL 1,825,022 1,852,470 1,802,007 1,723,893 1,620,181 1,493,003 1,344,481 1,137,194 878,538 577,778 201,711

Taxable Income 1,825,022 1,852,470 1,802,007 1,723,893 1,620,181 1,493,003 1,344,481 1,137,194 878,538 577,778 201,711

Income Taxes 412,756 420,167 406,542 385,451 357,449 323,111 283,010 227,042 157,205 76,000 4,034

Property Tax 296,552 301,167 294,471 283,768 269,358 251,550 230,654 201,230 164,353 121,372 67,459

Net Income 1,115,714 1,131,136 1,100,995 1,054,674 993,374 918,342 830,817 708,922 556,979 380,406 130,218

Table 21: Pro Forma Income Statement from 2020 to 2030.

69


10.2 Pro Forma Balance Statements

Balance Statem

ent2017 2018 2019 2020 2021 2022 2023 2024 2025

Current Assets

Cash 518,286

830,408

1,078,195

1,977,395

2,854,984

3,683,876

4,456,498

5,165,263

5,802,760

Total Current Assets

518,286

830,408

1,078,195

1,977,395

2,854,984

3,683,876

4,456,498

5,165,263

5,802,760

Non-Current Assets

Land 595,000

595,000

595,000 595,000 595,000 595,000 595,000 595,000 595,000

Clinic 2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

MRI Unit

1,450,000

1,450,000

1,450,000

1,450,000

1,450,000

1,450,000

1,450,000

1,450,000

1,450,000

Electronics

Equipment

21,573 21,573 21,573 21,573 21,573 21,573 21,573 21,573 21,573

Furniture

113,665

113,665

113,665 113,665 113,665 113,665 113,665 113,665 113,665

CCA (198,524)

(562,267)

(865,805)

(1,120,678)

(1,336,137)

(1,519,602)

(1,677,028)

(1,813,197)

(1,931,952)

Total Non-

Current Assets

3,981,714

3,617,971

3,314,433

3,059,560

2,844,101

2,660,636

2,503,210

2,367,041

2,248,286

Total Assets

4,500,000

4,448,379

4,392,628

5,036,956

5,699,086

6,344,512

6,959,708

7,532,303

8,051,047

Liabilities

Long term Debt

1,250,000

1,198,379

1,142,628

1,082,417

1,017,390 947,160 871,312 789,395 700,926

Total Liabilit

ies

1,250,000

1,198,379

1,142,628

1,082,417

1,017,390 947,160 871,312 789,395 700,926

Equity

Class A Shares

3,250,000

3,250,000

3,250,000

3,250,000

3,250,000

3,250,000

3,250,000

3,250,000

3,250,000

Retained

Earnings

0 0 0 704,538 1,431,696

2,147,353

2,838,397

3,492,908

4,100,121

Total Equity

3,250,000

3,250,000

3,250,000

3,954,538

4,681,696

5,397,353

6,088,397

6,742,908

7,350,121

Total Liabilities and Equity

4,500,000

4,448,379

4,392,628

5,036,956

5,699,086

6,344,512

6,959,708

7,532,303

8,051,047

Table 22: Pro Forma balance statement from 2017 to 2025.

70


Table 23: Pro forma balance

statement from 2026 to 2030.

71

Balance Statement 2026 2027 2028 2029 2030

Current AssetsCash 6,361,886 6,819,756 7,156,128 7,416,570 7,222,358Total

Current Assets

6,361,886 6,819,756 7,156,128 7,416,570 7,222,358

Non-Current AssetsLand 595,000 595,000 595,000 595,000 595,000

Clinic 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000

MRI Unit 1,450,000 1,450,000 1,450,000 1,450,000 1,450,000Electronics Equipmen

t21,573 21,573 21,573 21,573 21,573

Furniture 113,665 113,665 113,665 113,665 113,665

CCA (2,036,381) (2,128,974) (2,211,735) (2,286,284

) (2,353,929)

Total Non-Current Assets

2,143,857 2,051,264 1,968,503 1,893,954 1,826,309

Total Assets 8,505,743 8,871,020 9,124,631 9,310,524 9,048,667

LiabilitiesLong term

Debt 605,379 502,188 390,742 332,716 0

Total Liabilities 605,379 502,188 390,742 332,716 0

EquityClass A Shares 3,250,000 3,250,000 3,250,000 3,250,000 3,250,000

Retained Earnings 4,650,364 5,118,832 5,483,889 5,727,808 5,798,667

Total Equity 7,900,364 8,368,832 8,733,889 8,977,808 9,048,667

Total Liabilities and Equity

8,505,743 8,871,020 9,124,631 9,310,524 9,048,667


10.3 Pro Forma Retained Earnings

Retained Earnings 2017 201

8 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Beginning Retained Earnings

- - - - 704,538 1,431,696

2,147,353

2,838,397

3,492,908

4,100,121

4,650,364

5,118,832

5,483,889

5,727,808

Net Income - - - 1,115,71

41,131,13

61,100,99

51,054,67

4 993,374 918,342 830,817 708,922 556,979 380,406 130,218

Dividends - - - 411,176 403,978 385,338 363,630 338,863 311,129 280,574 240,454 191,922 136,486 59,359End

Retained Earnings

- - - 704,538 1,431,696

2,147,353

2,838,397

3,492,908

4,100,121

4,650,364

5,118,832

5,483,889

5,727,808

5,798,667

Operating Cash Flows

- - - 1,370,587

1,346,595

1,284,460

1,212,101

1,129,544

1,037,096 935,247 801,515 639,740 454,955 197,863

Table 24: Pro forma retained earnings from 2017 to 2030.

10.4 Predicted Economic Variables

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Debt Interest

Rate8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%

Inflation 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2%

Inflation

Factor1.02 1.02 1.02 1.02 1.02 1.02 1.02 1.02 1.02 1.02 1.02

Table 25: Predicted economic variables from 2020 to 2030.

10.5 Pro forma Cost of Revenue

Cost of Revenue 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Cost of Revenue/Exa

mContrast Dye 36 36.72 37.45 38.20 38.97 39.75 40.54 41.35 42.18 43.02 43.88

Other Consumables 3 3.06 3.12 3.18 3.25 3.31 3.38 3.45 3.51 3.59 3.66

Linens 0.14 0.14 0.15 0.15 0.15 0.15 0.16 0.16 0.16 0.17 0.17

72


Total Cost of Revenue/Exa

m39.14 39.92 40.72 41.54 42.37 43.21 44.08 44.96 45.86 46.78 47.71

Number of Exams 5500 5500 5500 5500 5500 5500 5500 5500 5500 5500 5500

Total Cost of Revenue

215,270

219,575

223,967

228,446

233,015

237,675

242,429

247,278

252,223

257,268

262,413

Table 26: Pro forma cost of revenue from 2020 to 2030.

10.6 Pro Forma Cash Flow Statement

Cash Flow

Statement

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Operating Cash FlowNet

Income - - - 1,115,714

1,131,136

1,100,995

1,054,674 993,374 918,342 830,817 708,922 556,979 380,406 130,218

CCA 198,524 363,743 303,538 254,873 215,459 183,465 157,426 136,169 118,754 104,430 92,593 82,761 74,549 67,645

Total Operating Cash Flow

198,524 363,743 303,538 1,370,58

71,346,59

51,284,46

01,212,10

11,129,54

41,037,09

6 935,247 801,515 639,740 454,955 197,863

Changes in

Working Capital

Inventories - - - - - - - - - - - - - -

Accounts Payable - - - - - - - - - - - - - -

Total Change

in Working Capital

- - - - - - - - - - - - - -

Investment

ActivitiesLand (595,000) - - - - - - - - - - - - -

Clinic (2,000,000) - - - - - - - - - - - - -

MRI Unit (1,450,000) - - - - - - - - - - - - -

Electronics

Equipment

(21,573) - - - - - - - - - - - - -

Furniture (113,665) - - - - - - - - - - - - -Total

Investment

(4,180,238)

- - - - - - - - - - - - -

73


ActivitiesFinancing ActivitiesLong term

Debt 1,250,000 (51,621) (55,751) (60,211) (65,028) (70,230) (75,848) (81,916) (88,469) (95,547) (103,191

)(111,446

) (58,026) (332,716)

Class A Shares 3,250,000 - - - - - - - - - - - - -

Dividends - - - (411,176)

(403,978)

(385,338)

(363,630)

(338,863)

(311,129)

(280,574)

(240,454)

(191,922)

(136,486) (59,359)

Total Financing Activities

4,500,000 (51,621) (55,751) (471,387

)(469,006

)(455,568

)(439,478

)(420,779

)(399,598

)(376,121

)(343,645

)(303,368

)(194,513

)(392,075

)

Net Cash Flow 518,286 312,12

2 247,788 899,200 877,589 828,892 772,622 708,764 637,498 559,126 457,869 336,372 260,442 (194,212)

Cash Balance

Beginning of Year

- 518,286 830,408 1,078,19

51,977,39

52,854,98

43,683,87

64,456,49

85,165,26

35,802,76

06,361,88

66,819,75

67,156,12

87,416,57

0

Cash Balance End of Year

518,286 830,408

1,078,195

1,977,395

2,854,984

3,683,876

4,456,498

5,165,263

5,802,760

6,361,886

6,819,756

7,156,128

7,416,570

7,222,358

Table 27: Pro forma cash flow statement from 2017 to 2030.

10.7 Pro Forma Revenues

Years 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030Number of exams/day 20 20 20 20 20 20 20 20 20 20 20

Number of exams/year 5500 5500 5500 5500 5500 5500 5500 5500 5500 5500 5500

Average cost/exam 800 796 788 776 761 742 719 687 646 597 544

Total Sales

4,400,000

4,378,000

4,334,220

4,269,207

4,183,823

4,079,227

3,956,850

3,778,792

3,552,064

3,285,660

2,989,950

Revenue Breakdow

nprivate billing

2,200,000

2,189,000

2,167,110

2,134,603

2,091,911

2,039,614

1,978,425

1,889,396

1,776,032

1,642,830

1,494,975

public billing

2,200,000

2,189,000

2,167,110

2,134,603

2,091,911

2,039,614

1,978,425

1,889,396

1,776,032

1,642,830

1,494,975

Total Revenue

4,400,000

4,378,000

4,334,220

4,269,207

4,183,823

4,079,227

3,956,850

3,778,792

3,552,064

3,285,660

2,989,950

Table 28: Pro forma revenues from 2020 to 2030.

10.8 Pro Forma Capital Budget

Capital Budget 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Land 595,000 595,000 595,000 595,000 595,000 595,000 595,000 595,000 595,000 595,000 595,000 595,000 595,000 595,000Clinic 2,000,0 2,000,0 2,000,0 2,000,0 2,000,0 2,000,0 2,000,0 2,000,0 2,000,0 2,000,0 2,000,0 2,000,0 2,000,0 2,000,0

74


00 00 00 00 00 00 00 00 00 00 00 00 00 00MRI Unit

1,450,000

1,450,000

1,450,000

1,450,000

1,450,000

1,450,000

1,450,000

1,450,000

1,450,000

1,450,000

1,450,000

1,450,000

1,450,000

1,450,000

Electronics

Equipment

21,573 21,573 21,573 21,573 21,573 21,573 21,573 21,573 21,573 21,573 21,573 21,573 21,573 21,573

Furniture 113,665 113,665 113,665 113,665 113,665 113,665 113,665 113,665 113,665 113,665 113,665 113,665 113,665 113,665

Total 4,180,238

4,180,238

4,180,238

4,180,238

4,180,238

4,180,238

4,180,238

4,180,238

4,180,238

4,180,238

4,180,238

4,180,238

4,180,238

4,180,238

Table 29: Pro forma capital budget from 2017 to 2030.

10.9 Financing Budget

2017 PercentageBank Debt 1,250,000 28%

Equity 3,250,000 72%Total 4,500,000 100%

Table 30: Financing budget with equity debt breakdown for SaskMedical Diagnostics.

10.10 Pro Forma Operating Expenses

Operating Expenses 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Sewage - - - 1,424 1,452 1,482 1,511 1,541 1,572 1,604 1,636 1,668 1,702 1,736Electricity - - - 17,311 17,657 18,010 18,371 18,738 19,113 19,495 19,885 20,283 20,688 21,102

Natural Gas - - - 7,119 7,261 7,407 7,555 7,706 7,860 8,017 8,177 8,341 8,508 8,678Water - - - 1,574 1,605 1,638 1,670 1,704 1,738 1,773 1,808 1,844 1,881 1,919

Linen Services - - - 15,000 15,300 15,606 15,918 16,236 16,561 16,892 17,230 17,575 17,926 18,285EAS Software - - - 1,074 1,095 1,117 1,140 1,163 1,186 1,209 1,234 1,258 1,284 1,309Internet and Telephone - - - 1,979 2,039 2,100 2,163 2,228 2,295 2,364 2,435 2,508 2,583 2,661

TV Service - - - 300 309 318 328 338 348 358 369 380 392 403Insurance

(Property and Capital Assets)

- - - 10,000 10,200 10,404 10,612 10,824 11,041 11,262 11,487 11,717 11,951 12,190

Insurance (CMPA) - - - 28,740 29,315 29,901 30,499 31,109 31,731 32,366 33,013 33,673 34,347 35,034Preventative Maintenance - - - 100,000 102,000 104,040 106,121 108,243 110,408 112,616 114,869 117,166 119,509 121,899

Auditing - - - 7,000 7,140 7,283 7,428 7,577 7,729 7,883 8,041 8,202 8,366 8,533Marketing - - - 87,000 39,540 40,331 41,137 41,960 42,799 43,757 44,946 46,489 48,529 51,240

Salary and Wages - - - 1,500,120

1,530,122

1,560,725

1,591,939

1,623,778

1,656,254

1,689,379

1,723,166

1,757,630

1,792,782

1,828,638

Employee/ - - - 234,784 238,865 243,028 247,275 251,606 256,009 260,461 265,002 269,633 274,358 317,937

75


Physician BenefitsFederal Tax - - - 243,753 247,870 240,301 228,584 213,027 193,950 171,672 140,579 101,781 56,667 -

Provincial Tax - - - 169,003 172,296 166,241 156,867 144,422 129,160 111,338 86,463 55,425 19,333 4,034Property Tax - - - 296,552 301,167 294,471 283,768 269,358 251,550 230,654 201,230 164,353 121,372 67,459

CCA 198,524

363,743

303,538 254,873 215,459 183,465 157,426 136,169 118,754 104,430 92,593 82,761 74,549 67,645

Dividends - - - 411,176 403,978 385,338 363,630 338,863 311,129 280,574 240,454 191,922 136,486 59,359Debt Interest

Expense - 100,000 95,870 91,410 86,593 81,391 75,773 69,705 63,152 56,074 48,430 40,175 31,259 26,617


198,524

463,743

399,409

3,480,192

3,431,267

3,394,596

3,349,716

3,296,296

3,234,338

3,164,178

3,063,047

2,934,784

2,784,472

2,656,679

Table 31: Pro forma operating expenses from 2017 to 2030.

10.11 Pro forma Total Salary and Wages

Salary and Wages 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Radiologists - - - 900,000 918,000 936,360 955,087 974,189 993,673 1,013,546 1,033,817 1,054,493 1,075,583 1,097,095

MRTs - - - 460,000 469,200 478,584 488,156 497,919 507,877 518,035 528,395 538,963 549,743 560,737

Secretary - - - 75,000 76,500 78,030 79,591 81,182 82,806 84,462 86,151 87,874 89,632 91,425

Secretarial Assistant - - - 50,000 51,000 52,020 53,060 54,122 55,204 56,308 57,434 58,583 59,755 60,950

Custodian - - - 15,120 15,422 15,731 16,045 16,366 16,694 17,028 17,368 17,715 18,070 18,431

Total Salary and Wages - - - 1,500,120 1,530,122 1,560,725 1,591,939 1,623,778 1,656,254 1,689,379 1,723,166 1,757,630 1,792,782 1,828,638

Table 32: Pro forma total salary and wages for SaskMedical Diagnostics staff from 2017 to 2030.

10.12 Pro forma Annual Salary and Wages for each Position

Wage Rates/Salar

y2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Radiologists - - - 300,000

306,000

312,120

318,362

324,730

331,224

337,849

344,606

351,498

358,528

365,698

MRTs - - - 35 36 36 37 38 39 39 40 41 42 43

Secretary - - - 75,000 76,500 78,030 79,591 81,182 82,806 84,462 86,151 87,874 89,632 91,425Secretarial Assistant - - - 50,000 51,000 52,020 53,060 54,122 55,204 56,308 57,434 58,583 59,755 60,950

Custodian - - - 10.5 11 11 11 11 12 12 12 12 13 13

Table 33: Pro forma annual salary and wages for clinic positions from 2017 to 2030.

10.13 Pro Forma Employee and Physician Benefits

Employee/Physician Benefits 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

76


Workers Compensation - - - 3,750 3,825 3,902 3,980 4,059 4,141 4,223 4,308 4,394 4,482 4,572

Employment Insurance - - - 12,410 12,445 12,480 12,515 12,552 12,589 12,627 12,665 12,705 12,745 12,786

Canada Pension Plan - - - 23,231 23,296 23,362 23,429 23,497 23,552 23,568 23,585 23,602 23,620 23,638Holiday Pay - - - 95,392 97,299 99,245 101,230 103,255 105,320 107,426 109,575 111,766 114,002 155,042

Direct Contributions Plan - - - 100,000 102,000 104,040 106,121 108,243 110,408 112,616 114,869 117,166 119,509 121,899

Total Employee/Physician

Benefits- - - 234,784 238,865 243,028 247,275 251,606 256,009 260,461 265,002 269,633 274,358 317,937

Table 34: Pro forma benefit expenses for employees and physicians at SaskMedical Diagnostics.

From 2017 to 2030.

10.14 Pro Forma Marketing Expenses

2017

2018

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Website - - - 50,000 1,800 1,836 1,873 1,910 1,948 1,987 2,027 2,068 2,109 2,151

Radio - - - 30,000

30,600

31,212

31,836

32,473

33,122

33,868

34,799

36,017

37,638

39,802

Print - - - 7,000 7,140 7,283 7,428 7,577 7,729 7,902 8,120 8,404 8,782 9,287Total

Marketing

Expenses

- - - 87,000

39,540

40,331

41,137

41,960

42,799

43,757

44,946

46,489

48,529

51,240

Table 35: Pro forma marketing expenses for SaskMedical Diagnostics from 2017 to 2030.

10.15 Pro forma Debt Amortization

Debt Amortization 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Number of

Periods, Annual (2017-2030)

Beginning Balance - 1,250,00

01,198,37

91,142,62

81,082,41

71,017,39

0 947,160 871,312 789,395 700,926 605,379 502,188 390,742

332,716

14

Addition 1,250,000 - - - - - - - - - - - - -

Payment - 151,621 151,621 151,621 151,621 151,621 151,621 151,621 151,621 151,621 151,621 151,621 89,286 359,333

Interest - 100,000 95,870 91,410 86,593 81,391 75,773 69,705 63,152 56,074 48,430 40,175 31,259 26,617Principal - 51,621 55,751 60,211 65,028 70,230 75,848 81,916 88,469 95,547 103,191 111,446 58,026 332,71

77


Reduction 6

End Balance 1,250,000

1,198,379

1,142,628

1,082,417

1,017,390 947,160 871,312 789,395 700,926 605,379 502,188 390,742 332,71

6 -

Table 36: Pro forma debt amortization schedule for SaskMedical Diagnostics from 2017 to 2030.

10.16 CCA Schedule for SaskMedical Diagnostics

CCA

Rate Assets 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Class 1 4% Clinic

Building


01,881,60

01,806,33

61,734,08

31,664,71

91,598,13

01,534,20

51,472,83

71,413,92

41,357,36

71,303,07

21,250,94

91,200,91

1

Addition 2,000,000 - - - - - - - - - - - - -

CCA Expense 40,000 78,400 75,264 72,253 69,363 66,589 63,925 61,368 58,913 56,557 54,295 52,123 50,038 48,036

End Asset Value

1,960,000

1,881,600

1,806,336

1,734,083

1,664,719

1,598,130

1,534,205

1,472,837

1,413,924

1,357,367

1,303,072

1,250,949

1,200,911

1,152,875

Class 8

20%

Furniture

Beginning Balance - 102,299 81,839 65,471 52,377 41,901 33,521 26,817 21,454 17,163 13,730 10,984 8,787 7,030

Addition 113,665 - - - - - - - - - - - - -CCA

Expense 11,367 20,460 16,368 13,094 10,475 8,380 6,704 5,363 4,291 3,433 2,746 2,197 1,757 1,406

End Asset Value 102,299 81,839 65,471 52,377 41,901 33,521 26,817 21,454 17,163 13,730 10,984 8,787 7,030 5,624

Electronics

Equipment

Beginning Balance - 19,416 15,533 12,426 9,941 7,953 6,362 5,090 4,072 3,257 2,606 2,085 1,668 1,334

Addition 21,573 - - - - - - - - - - - - -CCA

Expense 2,157 3,883 3,107 2,485 1,988 1,591 1,272 1,018 814 651 521 417 334 267

End Asset Value 19,416 15,533 12,426 9,941 7,953 6,362 5,090 4,072 3,257 2,606 2,085 1,668 1,334 1,067

MRI


01,044,00

0 835,200 668,160 534,528 427,622 342,098 273,678 218,943 175,154 140,123 112,099 89,679

Addition 1,450,000 - - - - - - - - - - - - -

CCA Expense 145,000 261,000 208,800 167,040 133,632 106,906 85,524 68,420 54,736 43,789 35,031 28,025 22,420 17,936

End Asset Value

1,305,000

1,044,000 835,200 668,160 534,528 427,622 342,098 273,678 218,943 175,154 140,123 112,099 89,679 71,743

Total CCA Expense 198,524 363,743 303,538 254,873 215,459 183,465 157,426 136,169 118,754 104,430 92,593 82,761 74,549 67,645

Accumulative CCA Expense

198,524 562,267 865,805 1,120,678

1,336,137

1,519,602

1,677,028

1,813,197

1,931,952

2,036,381

2,128,974

2,211,735

2,286,284

2,353,929

Table 37: CCA depreciation schedule by asset class for SaskMedical Diagnostics.

10.17 Projected Tax Schedule with Tax Rates

Taxes 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Property Tax 296,552 301,167 294,471 283,768 269,358 251,550 230,654 201,230 164,353 121,372 67,459

78


Federal Tax 243,753 247,870 240,301 228,584 213,027 193,950 171,672 140,579 101,781 56,667 -

Provincial Tax 169,003 172,296 166,241 156,867 144,422 129,160 111,338 86,463 55,425 19,333 4,034

Total Taxes 709,308 721,334 701,013 669,219 626,807 574,661 513,663 428,272 321,559 197,372 71,494

Table 38: Tax schedule for federal, provincial and property tax for SaskMedical Diagnostics

from 2020 to 2030.

NOI/NOL2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

1,825,022 1,852,470 1,802,007 1,723,893 1,620,181 1,493,003 1,344,481 1,137,194 878,538 577,778

Accumulated Loss Carryforward - - - - - - - - - -

Loss Carryforward used - - - - - - - - - -

Taxable Income 1,825,022 1,852,470 1,802,007 1,723,893 1,620,181 1,493,003 1,344,481 1,137,194 878,538 577,778

Taxes 709,308 721,334 701,013 669,219 626,807 574,661 513,663 428,272 321,559 197,372

After-tax income 1,115,714 1,131,136 1,100,995 1,054,674 993,374 918,342 830,817 708,922 556,979 380,406

Table 39: Projected taxable income and after-tax income for SaskMedical Diagnostics from

2020 to 2030.

Table 40: Rates used for the calculation of tax for SaskMedical Diagnostics.

11.0 Appendix B—Sensitivity and Break-even Analysis

79

Calculation of Tax RatesCapitalization Rate 6.5%

% of Value Taxable (commercial) 100%Exempt Assessments 0City/Library mill rate 1.1676School board mill rate 8.28

Saskatchewan Small Business tax rate 2%Federal CCPC rate after federal tax abatement 28%

Provincial tax rate (lower) 2%Provincial tax rate (higher) 12%

Saskatchewan business limit 500000Federal CCPC rate after general tax reduction 15%

Small business deduction 19.0%Effective Tax Rate 38%


11.1 Sensitivity Analysis of Projected Cash Flows

Years 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030Discount Rate (base

case) 0.00% 0.00%

0.00% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50

%3.00% 4.50% 6.00% 7.50% 9.00%

5500 exams (3,250,000) - - 1,310,3

771,281,5

671,214,2

301,136,2

521,047,6

27948,6

27839,7

00698,32

4 528,294 396,929 (134,853)

5250 exams (3,250,000) - - 1,200,5

891,172,5

071,106,4

791,030,3

78 944,174 848,107

742,590

606,107 442,267 319,945 (236,599)

80


5000 exams (3,250,000) - - 1,090,8

021,063,4

47 998,729 924,504 840,720 747,588

645,481

513,890 356,240 234,986 (339,270)

4750 exams (3,250,000) - - 981,014 954,388 890,978 818,629 737,267 647,0

69548,3

71421,67

4 272,356 121,792 (443,495)

4500 exams (3,250,000) - - 871,227 845,328 783,227 712,755 633,813 546,5

49451,2

62329,60

4 173,827 8,598 (559,276)

4250 exams (3,250,000) - - 761,439 736,268 675,476 606,880 530,359 446,0

30354,1

52240,88

5 50,301 (106,805) (683,255)

4000 exams (3,250,000) - - 651,652 627,208 567,726 501,006 426,906 347,1

51259,9

07108,53

7(73,652

)(231,62

4) (807,234)

Discount Rate (+1%) 0.00% 0.00%

0.00% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50

%4.00% 5.50% 7.00% 8.50% 10.00%

5500 exams (3,250,000) - - 1,284,6

521,230,5

041,138,5

921,037,1

65 926,553 807,329

680,204

524,467 344,514 191,662 (407,457)

5250 exams (3,250,000) - - 1,176,0

341,123,7

651,034,2

79 935,794 828,602 713,232

590,345

440,153 268,986 90,728 (499,108)

5000 exams (3,250,000) - - 1,067,4

161,017,0

26 929,966 834,424 730,652 619,135

500,485

355,839 182,364 (10,206

) (605,576)

4750 exams (3,250,000) - - 958,798 910,287 825,654 733,054 632,702 525,0

38410,6

25274,56

0 70,764 (113,426) (714,842)

4500 exams (3,250,000) - - 850,179 803,548 721,341 631,683 534,752 430,9

42322,3

88170,16

0(40,835

)(220,70

5) (824,108)

4250 exams (3,250,000) - - 741,561 696,810 617,029 530,313 436,801 338,8

50223,2

79 49,094 (154,722)

(343,671) (933,374)

4000 exams (3,250,000) - - 632,943 590,071 512,716 428,984 342,089 230,1

3394,31

0(72,81

6)(278,71

5)(466,63

7)(1,042,64

0)

Table 41: Sensitivity analysis of projected cash flows at different numbers of exams performed

and at the base discount rate of market exam price and the base case discount rate plus 1%.

Years 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030Discount Rate

(+2%) 0.00% 0.00% 0.00% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 6.50% 8.00% 9.50% 11.00%

5500 exams (3,250,000) - - 1,258,927 1,179,955 1,064,474 941,057 810,320 673,077 530,229 362,701 164,043 (54,731) (678,556)5250 exams (3,250,000) - - 1,151,478 1,075,513 963,530 844,055 717,653 585,082 447,186 287,878 63,421 (146,693) (774,571)5000 exams (3,250,000) - - 1,044,030 971,072 862,586 747,053 624,986 497,088 364,143 202,348 (37,200) (242,277) (870,587)4750 exams (3,250,000) - - 936,581 866,631 761,643 650,052 532,319 409,093 284,676 91,779 (139,678) (351,868) (966,602)4500 exams (3,250,000) - - 829,132 762,190 660,699 553,050 439,652 323,831 177,070 (18,789) (244,061) (461,459) (1,062,618)4250 exams (3,250,000) - - 721,683 657,749 559,756 456,048 349,727 217,038 57,833 (131,538) (366,612) (571,049) (1,158,633)4000 exams (3,250,000) - - 614,234 553,308 458,970 362,674 236,191 90,745 (62,474) (254,040) (489,164) (680,640) (1,254,649)

Discount Rate (+3%) 0.00% 0.00% 0.00% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 7.50% 9.00% 10.50% 12.00%

5500 exams (3,250,000) - - 1,233,202 1,129,920 991,860 847,869 698,783 545,587 389,294 208,768 (58,098) (290,781) (940,802)5250 exams (3,250,000) - - 1,126,923 1,027,753 894,217 755,103 611,186 463,387 314,449 107,960 (150,657) (388,204) (1,024,897)5000 exams (3,250,000) - - 1,020,643 925,586 796,574 662,337 523,589 381,188 232,636 7,151 (243,391) (485,628) (1,108,992)4750 exams (3,250,000) - - 914,364 823,420 698,931 569,571 435,992 302,775 122,545 (94,904) (351,364) (583,051) (1,193,087)4500 exams (3,250,000) - - 808,084 721,253 601,288 476,805 350,985 194,417 12,453 (198,168) (461,818) (680,474) (1,277,183)4250 exams (3,250,000) - - 701,805 619,086 503,645 386,307 246,100 76,397 (99,538) (318,396) (572,272) (777,897) (1,361,278)4000 exams (3,250,000) - - 595,525 516,919 408,870 277,057 120,388 (42,744) (219,938) (441,133) (682,725) (875,320) (1,445,373)


annually and at the base discount rate of the market exam price +2% and +3% respectively.

Years 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

81


Discount Rate (+4.00%) 0.00% 0.00% 0.00% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 8.50% 10.00% 11.50% 13.00%

5500 exams (3,250,000) - - 1,207,478 1,080,400 920,737 757,541 591,799 424,583 261,511 9,287 (266,950) (534,052) (1,176,453)5250 exams (3,250,000) - - 1,102,368 980,484 826,327 668,881 509,064 349,000 162,370 (83,354) (363,913) (620,417) (1,249,837)

5000 exams (3,250,000) - - 997,257 880,568 731,917 580,220 426,330 273,416 60,867 (177,333) (463,250) (706,783) (1,323,220)4750 exams (3,250,000) - - 892,147 780,652 637,506 491,560 346,353 163,248 (41,093) (279,332) (562,587) (793,148) (1,396,604)

4500 exams (3,250,000) - - 787,037 680,736 543,096 404,123 246,850 53,080 (145,067) (391,205) (661,924) (879,513) (1,469,988)4250 exams (3,250,000) - - 681,927 580,820 449,288 310,490 128,080 (58,541) (261,046) (503,078) (761,261) (965,879) (1,543,372)

4000 exams (3,250,000) - - 576,817 481,861 353,261 183,273 8,823 (176,287) (384,576) (614,951) (860,598) (1,052,244) (1,616,756)Discount Rate

(+5.00%) 0.00% 0.00% 0.00% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00% 9.50% 11.00% 12.50% 14.00%

5500 exams (3,250,000) - - 1,181,753 1,031,394 851,087 670,013 489,225 312,790 86,551 (178,995) (489,124) (754,907) (1,387,961)

5250 exams (3,250,000) - - 1,077,812 933,706 759,843 585,332 411,153 227,167 (6,892) (267,369) (578,254) (831,233) (1,451,731)5000 exams (3,250,000) - - 973,871 836,018 668,599 500,650 336,299 124,448 (102,184) (369,157) (667,384) (907,560) (1,515,501)

4750 exams (3,250,000) - - 869,930 738,329 577,354 416,443 239,153 21,728 (197,905) (470,945) (756,514) (983,887) (1,579,271)4500 exams (3,250,000) - - 765,989 640,641 486,110 335,471 127,040 (82,980) (311,339) (572,733) (845,645) (1,060,213) (1,643,041)

4250 exams (3,250,000) - - 662,049 542,952 398,229 213,934 14,611 (194,121) (425,212) (674,521) (934,775) (1,136,540) (1,706,810)4000 exams (3,250,000) - - 558,108 44-8049 280,947 92,397 (100,227) (319,070) (539,085) (776,309) (1,023,905) (1,212,866) (1,770,580)


annually and at the base discount rate of the market exam price +4% and +5% respectively.

Annual Service

Level (exams)

Base Case

Discount Rate

Base Case

(+1%)

Base Case

(+2%)

Base Case

(+3%)

Base Case

(+4%)

Base Case

(+5%)

5500 19% 17% 14% 10% 1%5250 17% 14% 11% 5%5000 14% 11% 7%4750 11% 7%4500 8% 1%4250 2%4000

Table 44: IRR at different annual service levels and market exam price discount rates compared

to a required rate of return of 10% from 2020 to 2030. IRRs exceeding the required rate of return

are green, IRRs at parity are yellow and IRRs below the required rate of return are red. Shaded

cells indicate IRRs that could not be calculated due to Descartes’s Rule of Signs.

11.2 Break Even Analysis

82


2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Base Case 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 4.5% 6.0% 7.5% 9.0%

Market Price 800 796 788 776 761 742 719 687 646 597 544

Fixed Expenses (Daily) 8390 8275 8224 8160 8080 7985 7876 7707 7487 7225 7085

Variable Expense/Exam 39 40 41 42 42 43 44 45 46 47 48

Break Even (Daily) 11 11 11 11 11 11 12 12 12 13 14

Base Case (+1%) 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 5.5% 7.0% 8.5% 10.0%

Market Price 792 780 765 745 723 698 670 633 589 539 485



Break Even (Daily) 11 11 11 11 12 12 12 13 13 14 16

Base Case (+2%) 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 6.5% 8.0% 9.5% 11.0%

Market Price 784 764 741 716 687 656 623 583 536 485 432



Break Even (Daily) 11 11 11 12 12 12 13 13 14 15 18

Base Case (+3%) 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 7.5% 9.0% 10.5% 12.0%

Market Price 776 749 719 687 652 616 579 536 488 436 384



Break Even (Daily) 11 11 11 12 12 13 13 14 15 17 20

Base Case (+4%) 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 8.5% 10.0% 11.5% 13.0%

Market Price 768 733 697 658 619 579 538 492 443 392 341



Break Even (Daily) 11 11 12 12 12 13 14 15 17 19 23

Base Case (+5%) 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 9.5% 11.0% 12.5% 14.0%

Market Price 760 718 675 631 587 543 500 452 402 352 303



Break Even (Daily) 11 11 12 12 13 13 15 16 19 22 27

Expected Daily Service Level 20 20 20 20 20 20 20 20 20 20 20

Table 45: Daily break even analysis for SaskMedical Diagnostics using varying discount rates

for the market exam price compared to the expected service level of 20 exams/day. Green cells

indicate daily break even points below the expected daily service level. Yellow cells indicate

parity with the expected daily service level. Red cells indicate daily break even exceeding the

expected daily service level.

Base Case 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 20300.0 0.5% 1.0% 1.5% 2.0% 2.5 3.0% 4.5% 6.0% 7.5% 9.0%

83


% %5500 exams (20 Exams Daily) 11 11 11 11 11 11 12 12 12 13 145250 exams (19 Exams Daily) 11 11 11 11 11 11 12 12 12 13 145000 exams (18 Exams Daily) 11 11 11 11 11 11 12 12 12 13 144750 exams (17 Exams Daily) 11 11 11 11 11 11 12 12 12 13 144500 exams (16 Exams Daily) 11 11 11 11 11 11 12 12 12 13 144250 exams (15 Exams Daily) 11 11 11 11 11 11 12 12 12 13 144000 exams (15 Exams Daily) 11 11 11 11 11 11 12 12 12 13 14

Base Case (+1%) 1.0% 1.5% 2.0% 2.5% 3.0% 3.5

% 4.0% 5.5% 7.0% 8.5% 10.0%

5500 exams (20 Exams Daily) 11 11 11 11 12 12 12 13 13 14 165250 exams (19 Exams Daily) 11 11 11 11 12 12 12 13 13 14 165000 exams (18 Exams Daily) 11 11 11 11 12 12 12 13 13 14 164750 exams (17 Exams Daily) 11 11 11 11 12 12 12 13 13 14 164500 exams (16 Exams Daily) 11 11 11 11 12 12 12 13 13 14 164250 exams (15 Exams Daily) 11 11 11 11 12 12 12 13 13 14 164000 exams (15 Exams Daily) 11 11 11 11 12 12 12 13 13 14 16

Base Case (+2%) 2.0% 2.5% 3.0% 3.5% 4.0% 4.5

% 5.0% 6.5% 8.0% 9.5% 11.0%


Base Case (+3%) 3.0% 3.5% 4.0% 4.5% 5.0% 5.5

% 6.0% 7.5% 9.0% 10.5% 12.0%


Table 46: Sensitivity analysis of break even point with market exam price discount rates from the

base case up to 3% and varying daily service levels. Green cells indicate daily service level

exceeding the daily break even point. Yellow cells indicate parity between daily break even and

service levels. Red cells indicate daily break evens exceeding the daily service level.

84


Base Case (+4%)2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 8.5% 10.0% 11.5

% 13.0%

5500 exams (20 Exams

Daily) 11 11 12 12 12 13 14 15 17 19 23


Daily) 11 11 12 12 12 13 14 15 17 19 23


Daily) 11 11 12 12 12 13 14 15 17 19 23


Daily) 11 11 12 12 12 13 14 15 17 19 23


Daily) 11 11 12 12 12 13 14 15 17 19 23


Daily) 11 11 12 12 12 13 14 15 17 19 23


Daily) 11 11 12 12 12 13 14 15 17 19 23

Base Case (+5%) 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 9.5% 11.0% 12.5

% 14.0%


Daily) 11 11 12 12 13 13 15 16 19 22 27


Daily) 11 11 12 12 13 13 15 16 19 22 27


Daily) 11 11 12 12 13 13 15 16 19 22 27


Daily) 11 11 12 12 13 13 15 16 19 22 27


Daily) 11 11 12 12 13 13 15 16 19 22 27


Daily) 11 11 12 12 13 13 15 16 19 22 27


Daily) 11 11 12 12 13 13 15 16 19 22 27

Table 47: Sensitivity analysis of break even point with market exam price discount rates from

4% to 5% and varying daily service levels. Green cells indicate daily service level exceeding the

daily break even point. Yellow cells indicate parity between daily break even and service levels.

Red cells indicate daily break evens exceeding the daily service level.

85


12.0 Appendix C—Ratio Analysis

86


12.1 Solvency, Investment Utilization and Profitability Ratio Analysis

Solvency Ratios 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Debt Ratio 0.21 0.18 0.15 0.13 0.10 0.09 0.07 0.06 0.04 0.04

Debt to Equity Ratio 0.27 0.22 0.18 0.14 0.12 0.10 0.08 0.06 0.04 0.04

Cash Flow to Total Debt 2.01 2.12 2.18 2.25 2.31 2.39 2.49 2.55 2.56 2.05

Investment Utilization Ratios 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Total Asset Turnover 0.87 0.77 0.68 0.61 0.56 0.51 0.47 0.43 0.39 0.35

Fixed Asset Turnover 1.44 1.54 1.63 1.71 1.77 1.81 1.85 1.84 1.80 1.73

Total Wages/Sales 34% 35% 36% 37% 39% 41% 43% 46% 49% 55%

Profitability Ratios 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Gross Profit Margin 95% 95% 95% 95% 94% 94% 94% 93% 93% 92%

Net Profit Margin 25% 26% 25% 25% 24% 23% 21% 19% 16% 12%

Return on Assets 22% 20% 17% 15% 13% 11% 10% 8% 6% 4%

Return on Equity 28% 24% 20% 17% 15% 12% 11% 8% 6% 4%Table 48: Projected ratios for SaskMedical Diagnostics from 2020 to 2030.

Gross Profit Margin Interest Coverage

Yea Lower Upper Whole SaskMedical Lower Upper Whole SaskMedical

87


r Quartile Quartile Industry Diagnostics Quartile Quartile Industry Diagnostics2020 76.6% 99.9% 87.6% 95% -6.7 165.6 36.3 N/A

2021 76.6% 99.9% 87.6% 95% -6.7 165.6 36.3 24.88

2022 76.6% 99.9% 87.6% 95% -6.7 165.6 36.3 25.39

2023 76.6% 99.9% 87.6% 95% -6.7 165.6 36.3 25.83

2024 76.6% 99.9% 87.6% 94% -6.7 165.6 36.3 26.20

2025 76.6% 99.9% 87.6% 94% -6.7 165.6 36.3 26.52

2026 76.6% 99.9% 87.6% 94% -6.7 165.6 36.3 26.84

2027 76.6% 99.9% 87.6% 93% -6.7 165.6 36.3 26.39

2028 76.6% 99.9% 87.6% 93% -6.7 165.6 36.3 24.93

2029 76.6% 99.9% 87.6% 92% -6.7 165.6 36.3 21.87

2030 76.6% 99.9% 87.6% 91% -6.7 165.6 36.3 11.12

Table 49: Projected gross profit margin and interest coverage for SaskMedical Diagnostics from

2020 to 2030 compared to 2014 industry averages.

13.0 Appendix D—Competitor Information and Technical Specifications

88


13.1 Competitor Information

Competitor Available Pricing Information MRI Unit

MayFair Diagnostics Dependent on exam (approx. $750-$1200)

1.5T Optima MR450W with GEM suite coil

OpenSkies MRI Dependent on exam (approx. $750-$1200)

1.5T Phillips Panorama HFO

Central Alberta Medical Imaging Services (CAMIS)

$725 (abdominal exam without contrast dye)

$1100 (abdominal exam with contrast dye)

1.5T Siemens Espree

Medical Imaging Consultants (MIC)



1.5T Siemens Espree

Insight Medical Imaging



1.5T Siemens Symphony

Canada Diagnostics Centre (CDC)

First scan is $770Each additional scan is 50%

off1.5T GE Signa

89


Table 50: Available pricing and MRI unit information from competitors in Saskatchewan and

Alberta. Information was obtained through personal communication and information made

available on company websites.

13.2 MRI Unit Technical Specifications

Phillips Ingenia 1.5T S

Phillips Ingenia 1.5T

Phillips Ingenia 1.5T CX

GE Signa Explorer 1.5T

GE Optima MR450W with GEM suite 1.5T

GE Signa Pioneer 3.0 T

Product Number 781347 781341 781262 N/A N/A N/A

Bore Diameter (cm) 70 70 60 60 70 70

Max amplitude/axis (mT/m) 33 45 33 33 44 36

Max slew rate/axis(T/m/s) 120 200 120 120 200 150

Max weight capacity (kg) 250 250 250 159 250 N/A

Magnet Room minimum size (m) N/A N/A N/A 3.54 x 5.7 3.6 x 6.2 x 2.5 3.7 x 5.8

Equipment Room (m²) N/A N/A N/A N/A 10.8m² 1.8m x 2.7m

Electronic Equipment Room N/A N/A N/A 2.7m x 2.5m N/A N/A

Control Room N/A N/A N/A 1.5m x 2.13m 3.2m² 1.5m x 2.1mMinimum siting

requirement (m²) 19.5 27 19.5 31 N/A 29

Magnet weight (kg) 3060 3060 2900 5500 3692 7561

Approximate unit cost N/A N/A 1,200,000-1,450,000 N/A N/A 1,900,000

Source (Phillips, 2016)

(Phillips, 2016) (Phillips, 2016) (GE Healthcare,

2014)

(pers. Comm. with Daniel Surette, GE Healthcare Canada, MRI Product Sales

Manager)

(GE Healthcare, 2015)

Table 51: Technical specifications for MRI units. The GE Optima MR450W will be used by

SaskMedical Diagnostics.

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