Medicology intends to be an Internet Application Service Provider (ASP) specializing in service to the Healthcare industry. Medicology is a young and aggressive firm with extensive experience in focusing on solutions that are needed in the Healthcare industry today. Medicology intends to use the Internet to simplify workflows, decrease costs and improve quality of care throughout the Healthcare industry. This business plan is the result of years of research and experience in the field of electronic medical patient data and medical office operations. This plan will present, explain and analyze the business parameters, financial structures, operations, marketing techniques and success factors of our Business Model.

The Healthcare industry is rapidly changing in the United States. Every entity involved with Healthcare today is trying to find a way to stay in business without sacrificing the quality care that is demanded by insurance companies, State and Federal governments and patients themselves. Each of these entities realizes the rising cost of Healthcare, the demand for continual preventative care and the fact that the average lifespan of Americans grows each year, yet refuse to recognize the constant rise in costs to run any Healthcare facility and the overwhelming demand to have quick, accurate and private access to any and all patient information. A solution would require a standard, which could grow with modern technology, that every insurance company, HMO, hospital and physician, as well as State and Federal governments, could adhere to in order to operate a more efficient and productive Healthcare system.

A number of Internet-based companies have attempted to establish themselves as industry leaders in the field of medical information and patient data. On such company, Healtheon Corp., has entered the eHealthcare market with a bang. Although Healtheon has staggering debt and net losses on their books, a February 1999 public offering earned $45M for the company. Healtheon promotes the Internet for the use of patient medical data, specifically for lab results, physician referrals, prescriptions and patient educational information. Healtheon recently announced a merger with the start-up WebMD. This merger was valued at $8 billion.

Another business looking to enter the patient education and information industry is led by C. Everett Koop, drKoop.com. This Internet site raised $55M with a public offering in June 1999. The interactive website, drKoop.com, is dedicated to providing information and education to visitors through a number of hyperlinks. There are also helpful tools at this site such as a drug interaction search, which will assist patients in determining themselves about possible side effects or multiple drug interaction problems.

Medicology believes the services provided by Healtheon and drKoop.com leave a lot to be desired. First, these services lack substance. Hyperlinks to other medical reference sites and providing a common funnel to communicate information to physician practices can be done by many different businesses with funding and proper management. Second, there is very little internally developed services included within these sites. With a lack of proprietary information or service agreements, long term, profitable customer relationships are not secure. In the Internet world, without ownership of a service or application, profitability and resilience are short-lived assets.

The Medicology Solution

Medicology will provide instant, high speed access, via the Internet, to complete patient records, including billing, scheduling, exams, reports and prescriptions, from any computer, anywhere in the world with a simple connection to the Internet without the use of Digital Subscriber Lines (DSL). Aside from strategically aligning with cutting edge technology developers, Medicology will create a comprehensive medical application. Medicology will meet the needs of the Healthcare industry by providing high-end, turn-key software applications and services at a low monthly cost to all physicians and practitioners.

The Internet’s universal accessibility, open architecture and growing acceptance make it an increasingly important environment for business-to-business and business-to-consumer interaction. Use of the Internet is rapidly expanding from simple information publishing, messaging and data gathering to critical business transactions and confidential communications. For many industries, the Internet is connecting previously disconnected business processes and allowing companies to automate workflows, lower distribution costs and extend their market reach. Medicology believes the Healthcare industry, because of its’ size, fragmentation and extreme dependence on information exchange, is particularly well suited to benefit from greater use of the Internet.

Medicology’s service will be developed and designed to provide scalability, reliability, flexibility, availability and ensure security. Medicology’s solution includes application framework to allow reliable, simultaneous access by large numbers of users. Open architecture and object oriented design permit integration with existing third party software applications and legacy systems. A combination of advanced technologies, including digital encryption, wireless communication and audit trail tracking ensure security. The data and application will be hosted on redundant, fault tolerant mainframes in multiple locations throughout the country. Because the Internet does not turn off, the services will be available 24 hours a day, 365 days per year.

Medicology’s objective will be to become the leader in Internet based transaction and information services to the eHealthcare industry. The strategy will include:

Expand functionality and transaction capability of Medicology’s services through the development, acquisition or enabling of Internet based applications.

Leverage Internet technology to provide secure transactions and communications among a broad range of Healthcare participants, regardless of their computing platforms.

Establish a large customer base quickly through partnerships and acquisitions of billing companies.

Form additional strategic relationships to expand our portfolio of applications and services, increase the number of connected Healthcare participants and provide specialized Healthcare industry experience for new applications.

Target regional markets to gain critical mass and a strong client base, thereby expanding nationally region by region.

Provide our products and services to client’s and reduce the initial investment required by customers to obtain the benefits of high end information technology systems and enable physicians, small organizations and individuals to gain access to advanced information systems for the first time.

The Medicology software product will store and manipulate data into any format or report desired. This product will connect all departments in a medical facility including front office, billing, nursing, physician assistant and office management, by allowing all levels of the medical office to be a part of the system. The solution provided by Medicology will also create a Virtual Private Network (VPN) to connect all clients of this software to communicate with each other and the patients. Also, the need for individual clients to maintain their own professional services, such as hardware and software engineers for maintenance and administration, are not required due to the data and applications being processed, stored and maintained by Medicology. This system provides control of Healthcare services to the physician throughout the application. Since all members of the office staff have access to different levels of information, each member, including the physician, can be more productive with fewer mistakes while providing an audit trail. This global solution can be easily adjusted to apply to any different language, in order to penetrate the international markets.

Medicology has developed a market niche for the new millenium. Microsoft has continued to prepare the technology world for the Internet. With high speed access, low cost hardware and centralized storage of information, the Internet provides the absolute best solution for wide area data access and data transfer. This solution also provides the Healthcare provider with low cost network administration and virtually eliminates the cost of maintenance and capital expenditures. Medicology will provide a standard for patient information and education access, electronic patient record security and emergency notification for electronic data within the system.

Targeted Customers

Medicology will market its products to physicians, hospitals, managed care organizations; particularly small HMOs and Independent Physician Associations (IPAs). Other important customers will be among the four hundred insurance companies across the country and the general public. With constant State and Federal government pressure, along with the increasing influence of managed care and managed competition, there is an immediate demand that: 1) physicians deliver more care at less cost, 2) hospitals deliver health services with greater economic efficiency, and 3) health management organizations have the instantaneous capability to monitor physicians and hospitals to curtail the rising medical delivery expenditures.

Marketing Strategy

Medicology plans to market its products through the following vehicles:

Direct Sales

Continuing Education Seminars and Trade Shows

The INTERNET

Strategic Alliances and Partnering

Hospitals, HMOs and Surgery Centers

Business models and projected sales for all of these categories are described in detail in this Business Plan.

Goods and Services

These marketing vehicles will provide the opportunity to generate revenue through the following services:

Medical application access

Low monthly fee structure for access to high-end medical applications, including Internet access, e-mail and electronic, automatic billing.

Cellular access

Medicology will partner with a major communications company, probably AT&T, to provide wireless, cellular access to the Internet from any portable or handheld computer. These services will be resold to end users.

Training for End User

Additional or on-site training will provide additional revenue. Training will be done by Registered or Licensed Nurses and Physicians. Centralized or regional training centers will be established as demand grows and need arises.

Third party software resale for communication

Certain licenses and software products (such as Microsoft network products) will be resold to end users via Internet eCommerce.

Electronic Data Interchange with non-affiliated users

Medicology will be able to provide patient information (with appropriate patient/doctor authorizations) to non-affiliated physicians throughout the country. A simple request with electronic signatures will initiate the EDI process. Charges to the non-affiliated physicians will be to a credit card or bank account and charged automatically.

Internet access for patients or employees of End User

Medicology expects to be an Internet Service Provider to many patients and employees of Medicology clients. Providing Internet access will allow patients and physicians to communicate quickly, discretely and cost effectively. Medicology clients will be urged to market the website to patients, employees and colleagues in order to expand the Medicology Virtual Private Network and thus expand the benefits of Medicology’s services.

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Capitalization Requirements and Goals

Medicology will require $2,000,000 of initial investment capital to achieve all of the first level goals set forth in this section. The funds will be budgeted and used based on Medicology’s budget approved by the Board of Directors. Medicology will begin seeking mezzanine, or second level, financing within thirty days of initial investment. Medicology will contract with a private placement underwriter to seek investment of between $15 million and $25 million to achieve all of the second level goals outlined in this section. Once the private placement funds are in place, Medicology believes the next natural step would be a public offering. Medicology further believes, based on today’s market, a public offering can bring between $90 million and $125 million into Medicology. At the point of a public offering, and with appropriate wisdom and experience, Medicology feels it will be the leader in the Electronic Medical Records market and provide the standard for all patient data within the United States. With funds from the public offering, Medicology will aggressively market and sell globally as client demand grows.

The initial investment of $2,000,000 will fully fund ongoing development and normal operating expenses. There are a number of goals to be achieved during the initial investment period (level one):

Complete Electronic Medical Records service application for wide spread use

Establish infrastructure and information network database to support 2,500 users

Complete patient encounters for the specialties of Primary Care, Internal Medicine, Othopaedic Surgery (including subspecialties Neck, Spine, Hand, Knee and Hip Surgery), Pediatrics, Neurology, General Surgery and OB/GYN

Develop relationship with major Type 2 or 3 clearinghouse for national electronic billing services

Expand employee team to support and train increased clientele

Create an interactive web site, to be used for support, marketing and demonstrations

Contract underwriter for private placement

Complete all of the above tasks within eighteen months of investment

During the private placement phase (level two), the following goals will be achieved after capitalization:

Continue ongoing development of new features for medical application including passive patient identification (possibly fingerprint or optical), wireless identification of staff while using Company’s products, integrated medical library of 3D, color pictures of any required anatomy or physiology for patient treatment, patient access to education material (soon to be a Federal requirement), patient on line scheduling so patients can request appointments for a particular doctor and finally, nurses information unit for medical terminology and pharmacology

Develop and maintain free Internet website for interactive use by the general public for medical information, relevant articles to questions, pictures, video, drug interaction information, news regarding up to the minute changes or advances in science, e-mail capability to contact their physician, physician referral service and on-line ability to schedule appointments 24 hours a day

Establish infrastructure and information network database to support 100,000 users

Expand support, management and executive team for clientele

Create proprietary billing service to deliver electronic, automatic billing services to all Company clients, including reports, statements and audits

Complete patient encounters for the specialties of Cardiology, Radiology (including Nuclear Medicine, Ultrasound, Sonography, Tomography, CT, MRI and PET Scan), Emergency Medicine, Gastroenterology, Dermatology, Plastic Surgery, Orthopaedic subspecialties Wrist, Elbow, Shoulder, Ankle and Foot (including Podiatry), Thoracic Surgery, Oncology, Urology, Vascular Surgery, Endocrinology (including Diabetes), Nephrology, Ophthalmology, Sports Medicine, Physical Therapy (including Rehabilitation), Orthotics, Pathology, EENT/Immunology, Anesthesiology, Hematology, Rheumatology, Otorhinolaryngology and Gerontology

Market to and penetrate all levels of Internet related medical services including third party billing and practice management software, practice consulting, medical organizations such as the American Medical Association, HCFA and insurance companies to broaden the impact and success of the Healthcare VPN.

Develop and maintain state of the art security measures to protect patient data. This will include digital encryption, remote data duplication, live back-ups, optical data retrieval, redundant data centers and comprehensive disaster recovery plans

Continue to develop web site not only for physicians and medical practices, but also for patients who would request transfer of records, insurance companies who would request patient information and patients who can use the Medicology web site as a reference tool to look up medical libraries to be more informed about a medical procedure or problem (this will save the physicians time and money because they can spend less time with that patient in the examination room explaining simpler issues about the medical problem and can also refer that patient to the web site for more extensive information and education, and potentially support groups for some conditions)

Prepare for the upcoming public offering

Complete all of the above tasks within thirty-six months of private placement

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The Business Models

This Business Model describes Medicology’s structure, products and manner of conducting business. It will also compare it to other companies in the Healthcare industry. These models will include information and factors pertaining to source of revenue, methods used for selling and marketing and the company’s financial practices. This plan will also explain Medicology’s general philosophy of the market as well as the fiscal and technical impact on the Healthcare industry.

The Business Models are summarized in five sections: “Business Model for Direct Sales”, “Business Model for Continuing Education Seminars and Trade Shows”, “Business Model for The INTERNET”, “Business Model for Strategic Alliances” and “Business Models for Hospitals, HMOs and Surgery Centers”.

Basis for the Business Models

Certain assumptions are represented in the Business Models:

Medicology has experienced a positive reception to the Internet medical application service. Our experience in the industry leads us to believe our restrictions will not be customers not wanting our service, but how many customers can we install and support at any one time. Medicology believes that technology companies should focus on, and provide greater shareholder equity and return on investment.

Medicology does not sell any hardware. All computer related equipment has continued to go down in price over the past eight years. There is every reason to believe this trend will continue. Major computer manufacturers are bowing out of the technology game, including Packard Bell and Intel, and many more are outsourcing development because of Asian influx of clone equipment and software. The minimum hardware required to access Medicology’s service is any terminal or computer with Internet capability. All highly paid hardware field service/support technicians work for someone else...not Medicology. All network functions (including Microsoft Office) will be licensed through Medicology’s centralized servers and database, thus eliminating the cost of administration and maintenance. The end user does not need network administration, tape back-ups or optical storage devices which all require considerable training which is an additional expense to the end user.

All revenues, except where specifically stated, are labor and access services only. Total revenue will include billed travel expenses and per diem.

Our experience shows one salesperson can complete two to three sales per month to a single practice of two doctors and an office of ten support staff. Each doctor cost per month is $250.00, while each additional user is $75.00, for a total office cost $1250.00. All support, upgrades and enhancements are included in the monthly cost. Additional billing revenues will generate $864.00 per practice per month. The initial start-up price to the physician practice is $20,000. This price includes training, first month access, nationwide Internet use, e-mail, medical library and customization of examination and reports.

We believe we will also sell two sites per month without any direct labor at all, but by simply targeting medical professionals over the net, both by e-mail and interactive demo web sites. Trade shows can be targeted as excellent resources to find physicians desperately looking for solutions to their shrinking budget problems. Trade shows can be done once a month for the first year, resulting in six sales per event. Each year in business we feel we can participate in one additional seminar per month until year three.

Outside sales reps and strategic partners should result in at least two sales per month to start. We believe this number will rapidly increase to three or four per month.

Therefore, direct sales will result in six sales per month (two sales reps), INTERNET sales will result in two sales per month and seminar sales will complete six sales per month and outside reps will complete two per month. The total per month should be sixteen sales per month.

Finally, although we expect to be able to do much of the training over the Internet, on-site training will be available for additional costs of travel and per diem. We anticipate one billing trainer, one medical trainer and one application specialist for each sales person. We further anticipate, based on techniques in marketing, the ability to centralize training through the country using a network of regional training centers.

To compare the Cost Effectiveness Evaluation with the end user prices above, an average return of the original $20,000.00 investment is realized in just over two months. Including any minor amounts of hardware that may need to be purchased, a safe assumption is a total return on investment of less than three months. Although the recurring monthly fees will be due eternally, the savings dramatically outweigh any monthly access fees.

Cost Effectiveness Evaluation

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Annuity Income

Within Medicology’s financial model, close attention should be paid to Annuity Income. This revenue may be the most important of all. Passive recurring revenue. This type of revenue is not only recurring but also predictable. The Business Model runs the annuity income model according to Medicology’s experience in application development and support.

Proper capitalization will allow Medicology to execute this Business Plan and annuity income by the end of five business years should be as follows:

Annuity Income after five years

Total Monthly Annuity Income from $18,183,750

Direct Sales

Total Monthly Annuity Income from $7,917,500

Seminar Sales

Total Monthly Annuity Income from $3,701,250

Internet Sales

Total Monthly Annuity Income from $10,113,750

Partner Sales

Total Annuity Income at end of Year 5 $39,916,250

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The Changing Healthcare Industry

A New Window of Opportunity

The Healthcare industry is undergoing dynamic changes. The essence of these changes is that physicians, hospitals and managed care organizations must deliver Healthcare more efficiently. They must provide care to more patients for less money in order to compete economically, while at the same time maintaining a standard of care that will attract patients in a highly competitive environment. Healthcare in the United States is a trillion dollar per year market. Medicology has the technology and experience to provide low cost, turn key solutions to caregivers, while controlling a very profitable portion of the Healthcare market.

Driven by uncontrolled increases in the cost of Healthcare and consequent political pressures, competitive forces are now reshaping the industry. Many organizations tout managed care and can barely manage themselves let alone their patients. Some Healthcare providers who were previously paid on the basis of fee-for-service have changed their compensation based on capitation (prepayment) or other volume discount fee plans. Providers are therefore being required to assume the risk of cost of care.

Those providers who have not jumped on the managed care bandwagon are being affected as well. Their number of patients are being reduced as employers and individuals move towards health plans that are relatively cheaper, thus causing financial pressure to make a change.

Market Size

There are over 700,000 physicians in the United States, and most of these physicians use practice management systems, which do not interface with an electronic medical records system. New and proposed federal laws require physicians to file Medicare HCFA forms electronically, store patient data in a more secure medium and document patient encounters more clearly and accurately. With more than 6,800 hospitals and 1.2 million hospital beds in this country, it is mandatory that hospitals must turn to new, high technology electronic patient records systems in order to compete in the new Healthcare marketplace. There are also over 500 Health Maintenance Organizations (HMOs) in the United States. This number is changing monthly due to the creation of new HMOs and consolidation of existing firms into larger companies. These companies are scrambling to obtain a market share of the national health delivery system. However, they do not know IF they will be profitable after they achieve their market share because of the lack of access to critical data such as preventative care information, patient health tracking, electronic physician review and almost no way to track, verify and audit billing and billing fraud. A recent Hewlett-Packard study confirmed the demand for outcome analysis to help HMOs determine their business requirements. This involves gathering data on patient treatment and analyzing that data; this is key to determining a managed care company’s profitability and ultimately, survival. Medicology’s service is uniquely equipped to provide both structured and unstructured data for outcome analysis to meet this critical HMO need.

High Administration Costs

According to Health Insurance Association of America, Healthcare is the single largest sector of the U.S. economy, consuming over $1 trillion annually, or 14% of the country’s gross domestic product. It is estimated that over $250 billion, or 25% of every Healthcare dollar, is wasted through the delivery of unnecessary care, performance of redundant tests and procedures and excessive administrative costs. Medicology believes much of this inefficiency and waste is a direct result of poor information exchange among Healthcare providers and lack of ability to go directly to the source of the problem…the patient encounter. All information in the Healthcare world originates at the patient encounter. Attempting to harness that information afterwards will cost effectively work in any environment for any practitioner.

In a typical medical office, one-quarter of the patients charts are lost or misplaced. In hospitals, it is not uncommon to have tests duplicated several times, even ten times. In both medical office and hospital environments, documentation and reports of patient encounters take weeks if not months to complete, review, transfer to referring physicians and ultimately get filed in the appropriate patient file at each of the points of care for that patient; potentially the primary provider, specialist, radiologist and laboratory. ALL of these problems occur due to the simple fact that one patient’s chart can only be in one place at any one given time, in a market where multiple caregivers need access to the same patient’s records. In many major Healthcare provider sites, as many as 70% of patient encounters with physicians occur without the presence of a complete patient chart. Lack of central access to a patient record results in delayed or erroneous billing, duplication of effort and even increased liability due to potential mistakes. This is why administrative costs account for 25% of the health premium dollar. Much of this inefficiency disappears with the introduction of a centrally located, permanent patient information system.

New Payor and HCFA Reimbursement Requirements

The largest payor in Healthcare is the Health Care Financing Administration (HCFA). Through the past six years, HCFA has announced new and far-reaching guidelines regarding documentation of physician/patient encounters, documentation requirements, billing requirements and patient education guidelines. These new rules stipulate complex guidelines for documentation and now directly link this documentation to the payment due to the provider. The guidelines will demand a dramatic increase in documentation required from physicians unless a computer is used to eliminate repetitive data collection and transcription. Managed care organizations also require adequate documentation since patients are typically seen by multiple doctors and care givers. This requires quick assimilation of medical data through consistent record keeping. Computerized systems are the only way to ensure the necessary level of thoroughness and consistency in gathering information, which comes with a built in audit trail.

Meeting The Challenge

Seventy-five percent of the United States Healthcare budget is controlled by the decisions of the physician. This is where the major potential savings in the cost of Healthcare reside. Making any changes to physician practices has been difficult because there has previously been no way to provide feedback to the physician while decisions are made. Physicians also comprise the largest group of professionals that are most distant from computers. Today, in spite of existence of some computer systems in hospitals, physicians still provide patient care instructions on slips of paper in typically cryptic handwriting.

However, the Healthcare industry is learning new management processes from other businesses. Concepts such as critical pathways, utilization review, outcome analysis, preventative care and quality assurance are popular terms in Healthcare. These management and quality techniques can only be implemented properly and accurately if physicians use computers and become part of the real-time medical information flow.

Medical management is now, more than ever, focused on two areas important in responding to competition: productivity (increased volume of patients seen with same or fewer resources), and patient satisfaction (to maintain their patient base).

Patient providers realize that in order to alter the way things are done and consequently lower costs, they must analyze accumulated medical information and make changes. They find themselves unable to do so because the Healthcare industry’s information systems lack the sophistication of other industries, like manufacturing, lagging behind by as much as ten years. The bulk of medical information, to this day, is still kept on paper.

Healthcare information systems need to move to the current generation of sophisticated computers and software to allow them to deal with the new and complex decisions, which they now face regarding competition and profit margins. Medicology is in a unique and favorable position to deliver technology to meet this need. To be a leader in the development of the most sophisticated Electronic Medical Record (EMR) system developed to date, the Company will bridge the technology gap and provide the Healthcare industry with required tools to handle today’s ongoing problems.

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The Medicology Solution

Competition in the Healthcare market comes from a highly fragmented group of over one hundred vendors, most of them small-time operators with limited resources who are focused solely on medical billing. Few companies deal with the global issues of Healthcare, including both clinical decision support systems and billing. Even the largest companies in the field (hospital systems companies) have failed to provide functional, workable computerized patient records systems despite their almost unlimited resources. Segments of Medicology’s team, including RNs, LVNs and physicians, have experience in the medical/technical field for twenty years.

Medicology’s products are unique for three reasons:

First, the application is attractive and easy to use for both physicians and office staff. Medicology products provide the interface for a medical office for: transcription, dictation, prescriptions, referrals, voice recognition, handwriting recognition, documentation storage and retrieval, reports and video capability. As physicians become more familiar with the technology, its use can progress to complex documentation, medical data review and medical decision support. In typical environments, physicians with minimal computer skills learn how to operate Medicology’s EMR service with little on-site and phone training.

Second, the EMR service was designed with a typical office workflow in mind. It is intuitive and consistent with the physician’s thought process. This EMR empowers physicians to have greater control over patient care while creating and maintaining an audit trail. Because it is meant to be used directly by the physician, all other processes such as billing and transcription are simplified and thus, more accurate.

Third, a centralized clinical database residing on multiple powerful central computers, utilizing recent hardware technology and Internet communication technology, allows instantaneous analysis of complex data with real-time feedback to physicians and nurses. This system is designed to work within the Internet, using local access, ultra fast communications abilities. Data can be transferred around the world, from wireless terminals dialing in to the Internet or computers using cellular modems, with security, accuracy and confidentiality in less than a second.

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Targeted Customers

Medicology’s EMR service products includes three main groups: physicians, hospitals and healthcare organizations (including HMOs, IPAs, etc.). These customers are all part of a rapidly changing Healthcare delivery environment throughout the United States. With government proliferation and increasing influence of managed care concepts, there is an urgent demand that 1) physicians delivery more care at less cost, 2) hospitals deliver health services with greater economic efficiency, and 3) health management organizations have the capability to monitor physicians and hospitals while urging cost containment of medical delivery expenditures.

Physicians

For physicians, these changes demand that they see more patients while maintaining a higher standard of care in order to generate the income they now enjoy. If they do not meet this challenge, the general income for physicians will continue to decline substantially. Since there is only so much time in a physician’s work day, this challenge can only be met by increasing office efficiency in order to care for an increased patient load. The only way this challenge can be met is through the greater use of computer and software technology, which frees physicians’ time from repetitive non-patient care responsibilities and allows them to see and care for more patients. One time saving factor is referring patients to the Internet for in depth information and education materials about a specific subject. The physician can receive e-mail to answer followup patient questions at his own convenience. This Medicology service will be the most advanced and efficient service available at an affordable cost to assist the physician in meeting these new demands.

Hospitals

Hospitals too must trim operating costs by becoming more efficient. As they operate today, the hospitals themselves are alarmingly aware that many of them will disappear like the dinosaur if these changes are not quickly adopted in this new competitive world of medicine. Again, this challenge can be seriously aided by greater use of new, high technology but low cost computers and medical software. However, today there is an equally important factor: the cost of purchasing and maintaining these new computers and software must be drastically reduced from their current levels. Hospitals cannot afford the high computerization costs of the past. The Medicology application service provides a single solution for both of these requirements: the application service provides the increased efficiency, and the price is solely for access not for actually purchasing expensive office management or EMR licenses, which is ten to twenty times lower than competing products in the market today.

Managed Care Organizations

For managed care organizations, the challenge is to obtain greater data regarding their constituent hospitals and physicians including the treatment and diagnosis they are giving. Only with immediately accessible information can HMOs 1) suggest an acceptable level of treatment for which they must pay, 2) monitor the performance of affiliated hospitals and physicians, 3) create care plans which are accurate and economically viable, and 4) determine the requirements of profitability. Ironically, few of these organizations presently have this capability. However, this capability is available through the application service provided by Medicology.

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Company History

Medicology was established in January, 1999 to develop and market a simplified, cost-effective solution to the Healthcare market. With the development of a wireless, central database utilizing communication speeds of the Internet, Medicology intends to create an infrastructure to deal with the customer base expected in the very near future.

Most of the planned staff has worked together for several years in the Electronic Medical Records industry. They are experienced in the installation, training and support of EMR applications. They include medical billing specialists, nurses, software and hardware certified engineers and a physician. Each will have an active role in the design requirements of the Medicology product.

For many years, members of the Medicology executive and key staff have recognized the need for a turn-key, easy to use data solution for the Healthcare environment. They realized the need to bring the same high technology used in medical diagnosing and treatment to the collection and processing of patient information. Medicology will, therefore, develop an application service that will automate the complete workflow of the medical office, including charting and patient care as well as billing and scheduling. Medicology will differentiate itself from other contenders in the medical office automation niche with concepts relating to wireless communication technology and centralized databases accessible via the Internet. Within the last year, the technology for both wireless ability and remote Internet access has been developed by the top manufacturers in the world, including IBM, Microsoft and AT&T, with set guidelines and standards, which make the technology widely available and cost-effective.

Medicology believes in focus, determination and delivery. Medicology does not practice medicine, nor make decisions in a medical environment. It will, however, provide the most up to date information and access to all related information a physician needs to do their job well.

Company Size

Medicology will initially employ 23 full time employees (Currently 18):

# Title/Department Functional Responsibility

3 Executive CEO, President, CIO

6 Administrative Management and Clerical staff

0 Inside Sales Followup leads, assist closures

2 Outside Sales Face to face sales force

1 Sales Support Pre sales and marketing support

0 Marketing Marketing team

3 Information Services In house maintenance of hardware and software

4 Development Application Development Contractors

3 Training Both billing and medical training

1 Client Services Post sale support and project supervision

Medicology plans to maintain a high percentage of its staffing to be directly related to client support (Information Systems, Development, Training and Client Services). This investment will ensure customer satisfaction and keep the Company ahead of any potential competitors. Medicology does not require a large R&D budget because communication, hardware and general software development are done by major market leaders such as Microsoft, Lucent, IBM, Cisco and 3COM. Medicology can harness that technology once these companies have invested the capital to deliver products to the marketplace.

The Management Team

George Krkljus

President and Chief Executive Officer

See: http://www.industrialtelesis.com

Keith Drohan

Consultant and Advisor to the Board of Directors

Mr. Drohan has been involved in business and finance for the past nine years. Mr. Drohan worked in bank operations and later joined his family owned business in computer network and integration where he became Controller of the small (2+Million) business from 1990 to 1996.

Mr. Drohan’s experience is in Operations and general management. From 1996 to 1999, he was President and Chief Executive Officer of 3D Network Design, Inc., computer network integration and medical application development firm. At 3D, Mr. Drohan was dedicated to building a strong infrastructure, team training and quality customer service. A central thrust of the business was management software for medical practitioners.

Mr. Drohan brings valued knowledge and experience in blending market strategies with available resources in the medical industry to Medicology.

Mr. Drohan assisted Messrs. Krkljus and Richmond in strategy towards marketing and sales and has been involved with defining the challenges of installing wireless patient encounter systems, scheduling and billing routines and followup professional training and client support.

Paul Richmond

Consultant and Advisor to the Board of Directors.

Mr. Richmond brings 42 years of business, engineering, government relations and consulting experience to the Company. A national honors Chemical Engineer, he spent fifteen years with Exxon. His responsibilities at Exxon included process and project engineering which led to Assistant Staff Engineer, Europe. Then Exxon International offered market coordination of aviation fuels in Europe, which resulted in the largest commercial jet fuel contract in the company’s history. This was followed by Lago Oil and Transport Co., Aruba, Netherlands Antilles as Supervising Engineer, Operations Coordination and Leader of the Caribbean Fuel Oil Desulfurization Project Planning Group, developing what became a $235 Million Investment.

Declining assignment to the middle east (Libya) brought a return to the United States as the Manager of a sixteen sight Bulk-Liquids Tank-Terminal company. Thirty months of intensive marketing and operations coordination brought the general interest profit from $25,000 per year to over $1,000,000 per year.

A client, a joint venture of Mitsubishi’s based in Long Beach, CA, needed business overview and analysis. Over a period of ten years the capital investments of that company in the United States were planned and executed by Mr. Richmond. The gross annual value exceeded $500 Million per year in US exports to the world. At the request of the Port and City of Long Beach, Mr. Richmond represented the viewpoint of the private sector during hearings held by the House Sub-Committee on Public Buildings, etc. regarding approval of the World Trade Center eventually built in downtown Long Beach.

Mr. Richmond has been the Principal of Team Management Systems for fifteen years providing both full and part time advice and operating assistance to a wide variety of clients.

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Product Overview

Medicology’s products offer all computer users an easy solution for the rapidly expanding Healthcare industry. The solution comprises a front end package that allows the diverse departments in a medical practice to communicate and share information, while creating enormous benefits in terms of improved efficiency and reduced waste.

This solution can be broken up in a number of products, which can stand alone, or be an integral part of the turn key package:

Patient Encounter System, a pen-based, wireless and remote electronic medical records system

Advanced Scheduler, a state of the art medical office scheduling and appointment system

Billing System, an easy to use practice management system for small and large offices and clinics

Office Manager, a Windows based system designed to manage large offices and practices

Patient Encounter System

The Patient Encounter System (PES) is a complete data storage and retrieval instrument that joins together all departments in a medical facility, enabling message sending and simultaneous access to its data by multiple Healthcare workers. The departments may be in the same building or across town, or across the country. With centralized databases and the high speed communications of the Internet, any physician may access their own database with a simple connection to the Internet via phone line, wireless intraoffice network or cellular connection to the local Internet. Although this PES can bring together databases from many operating systems, both on-site and off-site, the system operates best in a Microsoft environment utilizing SQL and NT as typical, standard protocols. Databases may include current medical information, drug data or any other database that will aid in a more efficient delivery of Healthcare services.

The Patient Encounter System is a front-end package designed to allow interaction between patients, doctors, appointment clerks, nurses, medical assistants, clinical departments, the billing office and various data repositories. The system will run on ANY electronic device with access to the Internet from PalmTop computers to the most advanced computer on the market today. The PES is particularly successful using handheld Pen computers. These computers can also be terminals which are lightweight, wireless, portable and do not require handwriting; just a tap of the Pen. Therefore, these machines can be carried from room to room, office to home or with the physician when on-call.

This service combines information from disparate databases to provide one file for each patient. Common limitations for physicians are not having access to x-ray results, lab work, medication lists and family and personal histories. This information typically is in written form at the location where the patient care originally took place. In today’s medical world, the physician would need to submit requests for information by phone or fax to various hospitals, laboratories, outpatient diagnostic centers or provider offices to receive such information and data. At each of the receiving locations, a person would need to locate the information, copy it, then send it back by mail or fax to the requesting physician. This process takes place millions of times per day in the U.S. Obvious delays occur in this process, and potentially create problems for the patient because of the wait. Finally, any missing test results or other paperwork, which can not be found, will result in a retest, or the physician may need to diagnose the patient without additional information. Doctors are sued every day for making decisions without knowing all of the facts about their patients.

A physician or physicians group, utilizing the power of Medicology’s services, would not encounter these problems. All data is entered into preconfigured, customized patient encounters depending on the type of physician giving care. Based on privacy and security, all records are viewed easily and immediately upon request by the physician or patient. Medicine includes lab, pharmacy, radiology and therapy departments, therefore, all patient records are included in the service and all records are available upon request. This type of service is what quality of care means, informing physicians and empowering them to make the appropriate medical decision for his patient.

This PES serves many functions. First, it replaces the patient medical chart, and allows simultaneous access to the patient record by doctors, nurses, labs and all other authorized Healthcare providers. As this PES operates in a network it allows the practitioner to place orders as he sees the patient. With the flexibility of the PES the practitioner can place orders to x-ray, to the lab for testing, to book appointments, to schedule surgeries and to write prescriptions. After a department completes the order the information is electronically passed back to the patient chart. The content of the orders may be customized for the user’s individual requirements.

Every step in the PES process is documented for billing purposes and provides an audit trail tracking: time, utilization of services and personnel who perform duties.

The PES’ open design allows the program to link to all practice management and billing systems, provided the information is stored in a standard database structure such as Excel or Word file format. For instance, the practitioner, with a portable Pen computer in hand while seeing a patient, can 1) determine the most advantageous code for the procedure performed, 2) automatically issue a fee ticket for those services to the billing system, and 3) since the exam is documented as it is performed (which will be used for billing), all required documentation and reports are completed before the patient leaves the room.

With the PES, the practitioner can substantially reduce transcription costs. The PES can also create a wide variety of medical reports by use of templates, physician-created standard reports input into the System, by dictation directly into the System or by voice recognition using third party software linked to the PES.

This PES unites and organizes all existing departments and creates an economical workflow to reduce the costs of delivering medical services.

Advanced Scheduler

The Advanced Scheduler is the first step in the workflow process. The Scheduler is activated when the patient telephones for an appointment. The appointment clerk can quickly record the basic patient information for an appointment and schedule. For example, if the patient’s first priority is finding a workable appointment time rather than seeing a particular physician, the Scheduler will allow the patient to be scheduled that way. Also, the Scheduler can determine certain appointment types (predetermined allotted time slots for appointment types, .i.e. new patient, follow-up or pre-op) and search the electronic Scheduler for the first available time for that particular appointment type. The work is sorted by the system and the appointment is automatically scheduled.

Since the centralized database is accessed for each appointment request, large practices can centralize their resources for making and confirming appointments. Furthermore, patients can be allowed to make their own appointments over the Internet by logging on to their physician’s web site and following instructions. Management can audit time effectiveness of employees because the service keeps track of volume and efficiency of work being performed.

Once the patient arrives for the appointment, the Scheduler tracks the patient’s progress, recording time of arrival, waiting time in the front office, waiting time in the exam room, time with physician and time of check out. This is extremely valuable in evaluating the cost efficiency of the work flow procedures, time management needed for personnel allotment, possible upgrade of visit type for billing which thereby increasing revenue and the ultimate profitability of the Healthcare providers (doctors, HMOs and IPAs). The evaluation is also important in establishing, monitoring and analyzing patient satisfaction. As competition increases, patient satisfaction will be of substantially greater importance to HMOs and their constituent physicians.

The Scheduler is customizable to each doctor’s office and even to each service done within the medical practice. Therefore, each doctor, lab, x-ray machine, specialist and therapist can have his or her own changeable schedule, which fits their caregiving style.

Billing System

The Billing System is an easy to use program designed to track patients, fill out and submit health insurance forms and to handle statements and payments, all on a Windows operating system that lets the user point-and-click to make the most powerful tasks simple. Some of the systems’ features include:

Electronic claim submission using a mouse to point-and-click on a single button

Automatic secondary insurance claims

Mouse driven user interface with keyboard hot keys

Statement generation

Enrollment and eligibility verification

Management reports

Daily verification of insurance

Electronic daysheets and ledgers to handle accounts receivable

Networked to allow use by as many workstations as necessary

The system easily handles billing, posting payments and creating statements. Electronic daysheets and ledgers let you see your daily activity. The system allows everyone within the office, from novice to computer expert, to use the system easily and painlessly because of the Windows interface which make the learning curve small.

The package allows the user to create customized reports and supports LaserJet printing for professional looking statements. All of the billing is primarily created by physician/patient encounter, lab requests and other examinations, which provide accurate, same day billing.

Office Manager

The Office Manager is a client server based system which runs on a graphic user interface (GUI). The target market is large medical offices with twenty or more physicians with multiple site clinics. This Windows practice management system is several years ahead of the competition based on communication, technology and access to secure data from anywhere in the world. It presents a unique opportunity in a marketplace where 1) physicians change their practice management systems every five years and 2) everyday HMOs are buying up physician practices and combining them into decentralized offices.

Client Services

Client service and support will be handled by trained staff, at the Medicology site. Although service and support will initially take place from 6am to 6pm PST, 24 hour support will be essential within twelve months. There will be an emergency number available during off-peak hours, which will be answered by a trained employee of Medicology. Since client service and support is an integral part of the business, Medicology will strive to keep its clients satisfied at all times. Medicology will give particular effort to immediate response to clients by maintaining both an application support team made up of billing specialists, nurses and doctors as well as an Information Services department made up of hardware, communication and technology experts.

Medicology intends to emphasize Client Services and make it a key component of the marketing plan. Medicology also believes that providing its’ customers with accurate, timely and professional response to their issues, is the key to repeat business and word of mouth advertising. Not only will Medicology train all employees how to deliver excellent service, but the Client Service department itself will be given the flexibility to respond creatively to client requests. In addition, Medicology will continually monitor client’s level of satisfaction with its’ services through surveys and other convenient feedback opportunities.

An important part of Medicology’s operating plan is to make contact with clients after the sale is completed. Medicology believes that new sources of revenue can be developed through additional post-sale services, and that the client base can be more effectively retained through this approach.

Medicology intends to utilize the Internet for a significant portion its’ Client Services effort. Aside from the convenience of immediate 24 hour access to the Internet, clients will browse through the web site and find answers to their questions quickly and easily. Though the cost of starting and developing an Internet site can be moderately expensive, there is almost no cost to maintain and update the site, and it can be done as often as necessary. Some of the information offered at the Internet site will be: browse using a Key Word, Frequently Asked Questions (FAQ) and answers, links to related topics, drug interaction information, patient information center, posting of newly discovered service issues and the ability to e-mail for help with the click of a button.

Medicology will continually strive to improve our Client Services by taking any and all steps necessary to make the client feel comfortable and confident.

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Installed Clientele

Since Medicology’s products are in the design and development stage, there have been no direct sales to this point. However, Mr. Keith Drohan (consultant to the Board of Directors) has extensive experience with end user sales in the Electronic Medical Records industry having successfully installed EMR software similar to Medicology’s product at the following:

A hospital in Los Angeles, CA featuring Spinal and Neck Orthopaedic Surgery with two surgeons and four fellows (student doctors). The practice features wireless, pen computers utilizing scheduling, billing and encounters on a local area network. Specifically, documentation for worker’s compensation is the focus of this major Orthopaedic practice.

In Central California, another Orthopaedic practice with four locations, seven doctors and over one hundred employees used a wireless, pen based computer system for EMR, including billing and encounters over a wide area network. This practice (the largest private worker’s compensation practice in California) focused heavily on documentation, referral letters and reports.

Included in other success examples are physicians and surgeons using the specialty specific encounters in the areas of OB/GYN, Primary Care, Internal Medicine, General Surgery, Orthopaedic Surgery and Podiatry in seventeen states throughout the country.

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Proprietary Information

The source codes for all Medicology products have been developed and owned by Medicology. There have been no arrangements involving the licensing, transfer or use of the source codes. For the benefit of dealers and customers, the source codes will be escrowed in the unforeseen event that Medicology in unable to support its products or clients. This is a standard in the industry for a new company and software development. Each end user will share the cost of the source code escrow if the customer wants to be a beneficiary under the escrow agreement by paying the annual fee directly to the escrow holder. Medicology will escrow the source code upon final completion. Medicology intends to protect its trade secrets and proprietary rights to the fullest extent of the law.

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The Marketing Strategy

Partnering with Billing Companies

The primary goal to partnering with billing companies is to establish a market presence quickly and cost-effectively. In order to attract billing companies into partnerships, it must be financially beneficial to the principals of the partner company and provide Medicology with a steady, yet profitable stream of customers to buy our combined broader services.

Target billing companies have contracted with either a T2 or T3 clearinghouse to market their billing software and electronic (EDI) claims processing based on a fixed rate structure based on dollar/claim volume. Their customer is charged a fixed monthly service and per claim fee after mark-up. A T2 clearinghouse such as Envoy/NEIC charges a lower rate than a T3 such as Chross HCS.

Medicology’s plan is to initially contract with Chross HCS as a transparent T3 based on forecasted volume, and negotiate with Envoy/NEIC on actual volume for further discounted rates.

Therefore, the structure of the transition and benefits for all parties needs to be developed. The most obvious method is to potential partners. The goal under this scenario for Medicology is simple: provide a plan for billing companies and their owners to provide rights to their customers, which in time, will buy our broader value-added services. Basically, Medicology’s plan is to establish a customer base with cash flow from future revenue by partnering with non-competing billing service providers with customers in need of our services.

The relationship and rapport already established by the billing company will provide our sales force an attentive audience to which to market with the assistance of the billing company. Medicology will be in a profit position by taking on new customers with little sales or marketing costs to the end user. The Company does not intend to buy out or takeover the billing companies. We will simply contract with the billing company to market to customers with their assistance for a smooth transition for end-users to the new medical products and services. The transition for customers is as simple as completing new registration forms in order to utilize our clearinghouse. This will provide us an enormous opportunity to market our medical encounter, scheduling, and practice management services, including the new simplified billing module as part of the encounter software.

With the reduced maintenance, network administration, and hardware costs, combined with the ability to treat more patients (see “Cost Effectiveness Evaluation”), we feel that a minimum of 40% of the billing clients will buy additional services. This will provide us with the revenue projected in the Business Plan from a future, yet existing (billing) revenue stream.

Medicology will pay commissions to the billing company for sales to its’ clients, and pay additional commission on our broader services when assisted by the billing company.

This partnering plan for the establishment of a customer base may have dramatic impact on our Business Plan, its’ revenue, profitability, cash flow, resource requirements, liklihood of success, and demand for additional capitalization once implemented.

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Sources of Revenue

Medicology will generate revenue through the sale of six types of products and services:

1. Patient Encounter System Sales

2. Electronic Billing System Claims Processing

3. Monthly Annuity for Patient Encounter System

4. The Internet

5. Training and Development of Dealers and Resellers

6. Cellular Access

The primary focus of Medicology is in the sales and development of the Patient Encounter System. As described above, this PES is multifunctional, including a sophisticated scheduler, messaging and medical workflow, which could be separated out and planned as additional sources of revenue.

Medicology also has the additional revenue source of the Electronic Billing System. This billing system provides access to electronically submit patient claims after two automatic audits to verify accuracy of billing amount and description and verification of proper documentation. The billing system allows automatic patient insurance verification on a daily basis. Revenue is generated per claim, per statement, per remittance advice and per verification of insurance. This billing system can work independently from the PES or work as an integral part of the overall, turn-key package.

The monthly annuity revenue will be the most consistent source for income. The cost for each doctor will be $250.00 per month for access to all of the services provided by Medicology, while each additional user (defined as a non-caregiver) will cost $75.00 per month. Therefore, an office of two doctors and ten additional staff will be charged $1250.00 per month. Each additional client contracted will cause this monthly annuity to grow rapidly with little cost.

There are no upgrade costs, hardware or software, support costs or additional fees of any kind other than billing. Should customer practices grow, the only costs to the client would be additional training for new users and the monthly increase per employee.

Medicology has an excellent opportunity for revenue via the Internet by providing Internet access to individuals and companies throughout the United States. Access to the Internet can be provided for non-medical customers for as little as $10 per month. The customer base to be marketed will be patients and associates of the medical practices, which utilize Medicology services. Selling advertising space on its home page on the Internet is another excellent way to capitalize on the growing awareness of the Internet to get information about anything. For example, pharmaceutical companies or medical equipment manufacturers would pay for a banner on the web site because doctors and nurses would see it every day in order to perform their normal daily duties.

Another revenue source discussed in this section is from Dealers and Resellers. Although Medicology expects to establish a large Dealer and Reseller network, it recognizes the need for cost effective training and implementation to Dealers and Resellers to make a major impact on the market. Our plan will include signing one to two Dealers during the first year. The fee to establish the Dealer will be only $5,000 which will include training, access to demo software and technical support by trained employees, internet based support and written technical manuals and videos. We recognize that each of these Dealers should easily establish one to two clients per month.

The final source of revenue is through the resale of cellular service. Medicology has entered into negotiations with AT&T to provide wireless, nationwide access to the Internet. This cellular service will be sold to Medicology in large blocks of minutes and resold to individual clients after an appropriate markup.

Methods of Selling

Medicology has invaluable experience in the Healthcare field, which includes providing medical office solutions, hands-on medical practice experience and executive project management. These values represent the core of Medicology.

Selling in this industry requires not only a good representation of what the Healthcare market is and how Medicology address’ its’ niche, but every employee has to be sensitive to the unique needs that are in the Healthcare market today.

Information from the marketplace indicates that the average software manufacturer spends 5.5% of revenues on advertising and promotions. Trade shows, seminars and professional meetings are the preferred ways of advertising. Also, medical journals and magazines are an excellent resource for name familiarity and recognition. On the way to being the Electronic Medical Records industry leader, Medicology will also have many independent seminars, both at trade shows and at large client sites (such as hospitals). Medicology’s marketing plan will contain the following:

Advertising

Placement of advertisements in strategic publications targeted to specific types of physicians, such as Family Practitioners, Orthopaedists, Podiatrists, Neurologists, Surgeons, Pediatricians and Internists. This is an important, yet inexpensive method in communicating the Company’s solutions.

Sponsored education seminars with end users giving testimony as to the product

Professional society seminars and trade shows

Publicity

Medicology will be a high profile service provider. It anticipates many articles in local newspapers as well as product articles and descriptions in Modern Healthcare, Modern Physician, New England Journal of Medicine and other trade magazines specifically designed to assist today’s physician while moving into the 21^st century.

Initially, Medicology will support two sales reps and one sales manager. We anticipate both sales reps and sales support to increase dramatically over the first two years.

Sales Cycles

It is important to understand the time frame required for the sales cycle for different target clients. For example, a physician office with four or five employees, can literally see the demo of software, ask questions and sign up for the service the same week as introduced. On the other hand, a Dealer or Reseller can take as much as two months to achieve positive cash flow due to training and comfort level while demonstrating Medicology’s products. After the learning curve has been passed by the Dealer, revenue should be reached within sixty days.

The average sales cycles are listed below for different types of clients:

Physician practice of 1 to 10 physicians will normally be completed within one week to six weeks.

Large practices of 11 to 30 physicians will normally be much more detailed in customization and require two to five months to be fully completed.

Managed care organizations have very complex installations and will have many different types of physician specialties, which will contribute to a six month to eighteen month sales cycle.

A hospital client will run on a two to three year sales cycle.

Revenue Segments

The sources of revenue discussed above will be sold through a variety of ways:

1. Direct Sales: Medicology will sell directly throughout the United States, to small and medium size practices, large medical institutions, HMOs, IPAs, managed care environments and hospital facilities.

2. Seminars and Trade Shows: Physicians are required to have annual Continuing Medical Education credits. Some of these credits may be earned at certain seminars and trade shows. Medicology will be at many of the trade shows with live, fully functioning demonstrations that physicians may pick up and play with. A physician will get a feel for the wireless units and see first hand the capabilities of the cellular connection, speed, documentation preparation and medical libraries, which will be a part of the Medical Reference Section of the web site. These seminars will be attended by both sales and medical staff to answer all questions relating to the product, service and security of the system. Medicology feels this is the most effective form of advertising and marketing for its’ products and services in the healthcare industry.

3. Internet Sales: Advertising and market penetration will be a focus of Medicology regarding the Internet. Contacts and demonstrations can be made using the Internet at a low cost. Information, demonstrations, referrals and testimonials will be available through the Internet as well as cost savings analysis and hands on tutorials.

4. Dealers and Resellers: Medicology will market through Dealers in strategic geographical areas throughout the United States. It will seek out companies and consultants with the contacts and ability to offer this service to established Healthcare businesses. This will include Strategic Alliances in certain specialties.

5. Hospitals and Managed Care facilities: Medicology will address long term relationships with HMOs, hospitals and managed care facilities on a case by case basis. These contracts will run into the ten million dollar range and up. Therefore, Medicology will have to pay extremely close attention to each individual client and their particular needs.

The pricing structure for each of these approaches is outlined in the Business Plan. Each of these targets has its own justification.

Medicology will both capture and move information, as well as provide practice management tools for the patient/physician encounter. One preferred strategy is to Partner with other businesses, which can provide additional services to the Healthcare provider to produce an even more powerful solution. This will allow Medicology to penetrate the market more quickly, while reducing the cost of marketing, development and general overhead.

For example, Medicology will Partner with Healthcare facilities in different specialty areas, such as Orthopaedics, Neurology, Internal Medicine, Family Practice and Pediatrics. Since these physicians will work on a daily basis with Medicology’s products, the system becomes more and more functional as each of these Partners discovers their own way of doing their job better. With the influx of new ideas, Medicology can upgrade each client’s system, which will create better functionality, secures more value and is more widely marketable. Each product is unique because the source of the information…the Healthcare worker. Whether the worker is a physician, nurse, receptionist or specialist, this worker’s activity is made part of a larger machine and when circulated properly, allows the facility to share and pass information from a central location. By allowing information to be streamlined and accessed by all workers, the facility functions more harmoniously.

The Marketing Role of Dealers

In the past, software resellers would buy products and value add to that software by customization or including it in a turn key solution in order to make money. Medicology has a 21^st Century alternative for Dealers…Passive Recurring Revenue. Through the establishment of clientele, the Dealer/Reseller has a long term revenue stream in which to look forward to. In fact, Medicology firmly believes Dealers will not only aggressively market their product, but will also spend their own marketing capital to successfully complete sales with physicians and other end users. Some of these funds will also be used to pay the initial training and support costs of the service.

Medicology expects to have a large presence of the Internet. Both Medicology and Dealer web pages will advertise and market the product line. Internet users will be able to perform a demonstration, realize the ease of creating and sending a claim, use the on-line medical library and answer a few questions to receive their own customized Cost Savings Analysis immediately and automatically, via internet auto responder. Dealers will have the same type of capability of their own web pages. Medicology will also pursue software developers, such as: Microsoft, Sybase, Oracle, Citrix, Computer Associates and Novell, to display Medicology’s products on their web pages. Publications such as Modern Physician and Wireless will have hyperlinks to Medicology and Dealer web pages.

As client lists grow for both Dealers and Medicology, the dedication of all involved will continue to only get stronger. Medicology will acknowledge and award top Dealers and Resellers nationwide for revenue and new accounts. Medicology will also provide Seminar and Trade Show booth space for its Dealers. Medicology recognizes the fiscal benefits of sales and marketing labor performed by the Reseller instead of Medicology. Finally, in the future, Medicology will promote Dealers on the web site for prospective clients to contact and feel comfortable that a local company is addressing their needs and concerns.

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Competitive Analysis

Medicology will have competition. However, potential competitors will have a substantial disadvantage. No other company is providing as complete a package as described herein. With inexpensive, wireless access anywhere in the world, no administrative costs because no network is required, very low cost hardware and immediate, accurate and LIVE technical and application support, Medicology provides what no other company can: a complete service that works and is easy to use while the cost is not at all prohibitive.

Many companies in the medical records industry today are billing companies that had a physician write a basic program which would allow basic, fundamental pieces of information to be retrieved easily and error free. Companies such as Intel, Microsoft and Hewlett Packard are spending millions of dollars to create a perfect practice management and medical records package. These companies are targeting generic customers as opposed to the customized niche market Medicology is targeting.

First, they are companies that sell hardware and software. They are creating applications to work on their expensive, legacy products. Physician offices can not afford high priced consultants or computer engineers. Physicians need dependable, low maintenance solutions for their office. Office staffs throughout the country have different levels of computer knowledge. Some have not ever touched a computer. With a user friendly graphic interface and help, both over the Internet or over the phone, customers will be satisfied support is a phone call away.

Second, doctors needs are practice specific. An off the shelf product is not going to work on any one doctor. Doctors have different billing methods, based on the county or state, which they practice. Also, different physicians will do the same examination many different ways. Perhaps one physician would start with the family history of a certain condition whereas another physician would review patient history last. A medical service to be used by thousands of different physicians needs to be stable but customizable.

The medical world is in a constant state of change. How would these big companies continue to update each physician specialty? Annual upgrades would need to be purchased by the end user. Even though it would be an expense to have to purchase these upgrades annually, it would not be the largest expense. Every year or so when Microsoft or Intel or Hewlett Packard releases a new product or “upgrade” what happens? It usually requires a better set of computers and peripheral equipment to go along with it. Software developers and hardware manufacturers work together hand in hand. If you want to keep up to date with the latest software, rest assured your hardware can’t be more than three years old.

Furthermore, when a physician does buy this upgrade, how does he install it? They again have to pay someone else to install it for him or her, and hope they do it right. Why not install one thousand customers at once instead of each customer one at a time.

Finally, these services put Medicology ahead of the rest. In 1997, 80% of the hottest inventions and new technologies were created by companies with less than twenty-five employees and had less than three million dollars of revenue. Large companies can not compete with small business in this capacity because they are both slow to move within the related industry and must create a huge product to be a success. For example, Hewlett Packard spent over 50 million dollars to provide an electronic patient record tracking program for a hospital in Texas. By the time the program was nearing completion, it had taken over four years, gone over budget and been developed so uniquely for the one client, there was no other potential clients for that product without major enhancements and changes.

In accordance with this, the Healthcare market is embarking upon a new course. The industry is downsizing and is steadily proceeding towards personal computing. Value will be the key decision making factor in tomorrow’s Healthcare facility. It is no longer enough to just supply the Healthcare provider with an accounting system that will eventually become obsolete. Medicology’s product line links all departments together as one in the Healthcare environment. This ability to streamline information, coupled with Medicology’s strategy and sales philosophy, promises the product line to be unmatched in the industry.

Medicology conservatively estimates a three to five year technology lead over the competition in Electronic Medical Records. Although many firms are trying to create the best solution for Healthcare providers and others in the medical community as quickly as possible, many of the products in the market today and under development with character based solutions, thus requiring a keyboard and scanner. These solutions are inadequate because of the lack of mobility and inferior database structures.

The next thirty six months will determine who the market leader in Electronic Medical Records is. Outside of the hospital market, the clear leader will become the Healthcare standard. Larger companies with greater marketing capability claim to have superior products, but do not create solutions for the average physician. With the availability of reasonable economic resources, Medicology can strategically align with a large medical organization to provide a front end physician interface with the practice management module for sales into a hospital environment. These hospitals would provide an incredibly successful cash flow and a large market share. Also, the marketing resources contemplated in this Business Plan can allow Medicology to overwhelm the medical community and the HMO markets and become the dominant force in the industry.

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