CASE STUDY: SWAN REHABILITATION COMPANY: A GREAT SUCCESS STORY - 2008 Philip J. Adelman and Alan M. Marks
Kay Wing never knew how successful she was going to be in 1998 when she was working in a rehab facility. In early 2003, Kay decided to start her own business, and it appears that she has done everything right-she's become a very successful entrepreneur, including finding her niche with a clinical practice for stroke survivors based on current research while using an intensive treatment approach. In the mid-1990s, an increased amount of research was being done on the importance of intensive therapy for neurological diseases. Kay tried to start a program in her facility but did not have management support.
The Balanced Budget Act (BBA) of 1997 hit the health-care industry and in the space of a few months her facility had decreased their staff by 50 percent and doubled their productivity requirement. She was so un- happy about the quality of patient care that her group was being forced to administer that Kay decided to quit. She wrote a program and presented it to a large Phoenix health-care system, but they were not interested. Although she was reluctant to open her own program, she believed it was her only option. After she quit her job, she worked as a fill in therapist for several months while she was deciding what to do. A few months later, Kay started South West Advanced Neurological Rehabilitation (SWAN Rehab) in a warehouse in Tempe, Arizona.
A vendor who was developing a piece of equipment for stroke rehab had space in the warehouse district and offered it to her at no cost. Kay used their equipment on her patients, so it was a win-win situation. She didn't borrow any money; instead, she used her own seed money and bought equipment when she could afford to pay for it. She took a leap of faith and started her dream practice. Kay soon outgrew the free space and subsequently rented space in a another warehouse, where she and a part-time physical therapist treated patients using a radical, non-traditional, intensive, research-based therapy.
As her reputation grew, she began to see patients who came to Phoenix from all over the United States. Her website, https://www.swanrehab.com, recommends housing, and schedules patients daily during their time in Phoenix. As proof that there was a market for this niche, in just 51/2 years the practice has grown to 10 employees, and they are moving from a rented 2,000-square foot facility to a new 6,000-square foot clinic.
Kay is filling a very small niche because there are more than 700,000 new stroke victims every year, most of whom do not get proper therapy. Her business is a clinical practice for stroke survivors based on current research using an intensive treatment approach. From her own experience and after doing much research, Kay planned a unique practice using intensity and repetition. Intensive training is defined in her practice as 4-5 days per week, 3-6 hours per day, and one-on-one with a skilled neuro therapist. The repetitions are necessary to cause neuro plastic changes that are not possible in a more traditional setting, where patients are seen 2-3 times a week for only an hour at a time.
SWAN maintains a friendly, feel-good atmosphere. Her patients believe that SWAN cares about them. When a new piece of equipment or therapeutic technique is available, Kay makes sure that it is based on solid research and her staff gets educated on its use. They were one of the first clinics to be qualified to use several pieces of technology (Saebo Flex, Bioness H-200 and L-300, Reo Go, and the technique of BIG). Because of her relationships with companies that develop and sell equipment, she is often asked to Beta test new equipment. Companies know that if SWAN uses the product, they can use SWAN's name in marketing their products.
SWAN has formalized caregiver sup- port; contacts patients and family members after discharge to see how things are going; and sends get-well cards if someone goes into the hospital or is sick and sympathy cards or flowers if there is a death in the family. SWAN helps more needy patients who do not have a support group with finding rides to their facility. Several years ago, Kay realized that every other disease process in the United States had a camp that was just for fun, but stroke, with the largest population of disabled people in the United States, did not.
She started a stroke camp in 2003.The first year, they had 25 stroke survivors, caregivers, and family members; this year (2008), it will probably be about 150 people. They go to a camp in northern Arizona for 5 days every fall. Occupational therapy (OT) and physical therapy (PT) schools as well as therapists in the community volunteer. They provide a full camping experience. One of their patients told SWAN that his few days at camp were the most fun he had experienced since his stroke. This camp is not just for their patients, but for stroke support groups through- out the Phoenix metropolitan area as well. Several years ago, the neurological instructor in the PT department at Northern Arizona University and Kay started a class for PT students called the neuro clinic.
It is an intense course where the students complete the class with more than 30 hours of real patient care. When they graduate and go into their clinical rotations, their clinical instructors are very enthusiastic because their students have had this experience. Kay re- quires all new employees to take this class so they come to SWAN already trained. SWAN has no patient van, and patients must find their own way to the clinic. Kay's philosophy right now is that they will have one quality clinic that is growing. Even though they have an excellent staff, the clinic revolves around Kay, who is the face be- hind the business.
Like many small businesses, Kay is not able to offer good health insurance, but gives each employee a monthly insurance allotment. Several other clinics that claim to be "just like SWAN Rehab" have opened, increasing Kay's competition, and insurance companies have reduced the benefits patients get for long-term therapy. Business expertise was needed to help the clinic grow. Kay had been department head of physical therapy, occupational therapy, and speech therapy in several large hospital systems, and therefore had experience with budgeting, purchasing of equipment, designing and implementing new programming, and supervising of employees. This experience prepared her for many aspects of a private practice. How- ever, she got to the point where her business knowledge was inadequate and needed im mediate expert advice.
She researched and retained the services of a competent group of consultants where she could get ongoing help with effective billing and reimbursement practices, marketing, setting short- and long-term goals, handling payroll and taxes, building a web page, and setting and reaching financial goals.
In an interview with Kay, I asked her to classify her business with respect to its degree of contact with the public. She is a woman who is truly an expert in her field. She has taught courses to physical and occupational therapists on therapeutic intervention, speaks at the Arizona Physical Therapy association, and has submitted and had proposals accepted at national conventions. She is active in the professional associations and will be a speaker at the national convention in June 2009.
She is the president of the Arizona Physical Therapy Association. The Bio-Engineering Department and the Industrial Design section of the Architectural School at Arizona State University use her clinic for their students when they have projects that involve stroke survivors. SWAN administers therapy to people who suffered a stroke or head injury, have Parkinson's disease, have multiple sclerosis, as well as offering occupational and physical therapy.
Each patient is seen by a PT or OT every minute they are in her clinic. SWAN does free trials on certain pieces of equipment so patients know if it is beneficial before they start therapy or buy the equipment. They do free re-fittings on equipment if necessary, even years after the equipment was purchased. Family members and caregivers are encouraged to ask questions and receive information.
They perform patient and family education, both formally in the structure of evening seminars (free) and informally during therapy. Kay believes it is critical for patients to understand why hard work is important, how it reorganizes the brain, how therapy must be supported at home to be most successful, and what types of equipment and supplies are beneficial. She maintains a lending library of books about stroke, brain injuries, and other neurological diseases for patients and patient families.
Quality patient care and work output is expected of all staff and employees, who are expected to be experts in the use of all equipment. SWAN provides the continuing education needed by employees, and there is ample continuing education funding. SWAN positions their service in the mind of the consumer as a leader in state-of- the-art neurological rehab.
In addition, they are experts who are creative and work hard on behalf of the customer to get them services. Pricing strategies used by SWAN include a survey of the community to keep their pricing structure within community standards and working with their accountant to make sure they are being fiscally prudent. Because SWAN is moving into a new facility, Kay's start-up costs will be a phone system, $4,000; building upgrades, $5,000; network computer, $4,000; capital equipment, $40,000; new network computer, $4,000; office equipment, $50,000; and a lease increase from $4,500 to $12,500 per month. SWAN's gross revenues from inception were: 2003, $7,000; 2004, $370,000; 2005, $426,800; 2006, $670,000 and 2007, 887,500. The company has a positive cash flow and earns a profit. Kay's personal goals are to continue growing over the next 5 years and obtain grants for clinical research.
She hopes to get her work week down to 40-50 hours and to be able to take a long vacation and a couple of short vacations every year. Her 10-year goals include selling the business while continuing to teach and consult. She expects that when she sells the business, she will stay on for a couple of years to ensure a smooth transition. SWAN Rehab is a success.
Many entrepreneurs are smart, but not successful. Kay Wing knows that the one thing that made a difference between being smart enough and being successful is her drive. It is obvious that her level of aspiration has also increased as a result of her many successes. SWAN gives the people what they want, and most definitely can serve as a positive model to the rest of the business community.
Read the case starting upon page 328, entitled SWAN Rehabilitation Company: A Great Success Story.
Write a 3-5 page paper (800-1500 or more words) in APA format in response to questions:
a. Think of two negative and two positive considerations SWAN would face when purchasing a larger facility. Dedicate one paragraph to each consideration and provide the insight necessary for a sound CAPEX decision.
b. Given the nature of the company, would you suggest growing over time it or selling it as soon as possible? Why?