Sunday, February 27, 2011

A counterbalance focused on quality

Ascension Health, the largest chain of Catholic hospitals, has joined forces with Oak Hill Capital Partners, a private equity firm, "to form Ascension Health Care Network (AHCN), a joint venture that will provide an alternative funding source for the acquisition of Catholic hospitals and other healthcare provider entities. AHCN will offer these entities access to financial, operational and clinical resources."

Ascension Health is renowned for its quality and safety programs and also its commitment to the efficient and profitable operation of the hospitals in its non-profit network. Further, Ascension operates under a distributed leadership model, designed to ensure a strong local presence in all communities that are served by the national system.

The announcement is short on details as to how the business arrangement between a non-profit chain and a private equity firm will work. But this move seems to be a direct challenge to other private equity firms with little or no hospital experience. Ascension seems to be saying to hospitals in distress: "Before you sell out to someone with no track record and no demonstrated commitment to the long run, call us."

Gentlemen, start your engines . . . .


Anonymous said...

This is indeed a new wrinkle in the nascent private equity foray into health care, and on the face of it would seem to be superior to a model provided by an inexperienced organization such as Cerberus. I will leave to Paul and others the economic analysis of whether patients' and investors' needs can be reconciled better in this hybrid model, but certainly the operational experience and good reputation of Ascension are encouraging.

One cautionary note was sounded in the press release:
" In addition, they’ll be able to maintain their Catholic identity.”

In my area, there was recently a public dispute over an Ascension-affiliated hospital's vs. a non-Catholic hospital's competing bids to build a new hospital in an outlying area. One argument used was the lack of reproductive services available should the Catholic hospital win (it did).

nonlocal MD

Anonymous said...

Paul, don't for-profits and not-for-profit hospitals end up with almost the same amount of money at the end of the year? If the profit margins are slim, then how is this new arrangement going to work? The only difference between Steward and Ascension that I can see is that the people at the helm of Ascension have some experience at properly running hospitals, but it still begs the same question: how are these hospitals going to pay back the equity + profit at the end of the day?
Hyder, MD