PLANO, TX – Not-for-profit hospitals that used to fear the mention of investor-owned chains knocking on their doors might have a different reaction to Legacy Hospital Partners Inc.
At least that’s what a privately owned, Plano, Texas-based hospital company hopes after opening for business in late January.
Legacy is looking to acquire hospitals and operate them collaboratively with leaders in communities. Its development strategy is to acquire and develop hospitals in partnership with various not-for-profit hospital companies.
The collaborative approach isn’t new to Legacy’s executives, said Daniel Moen, its CEO. Its senior management consists of former executives from Triad Hospitals, which was acquired last year by Community Health Systems.
Senior management’s original intent was to take Triad private, but its bid was bested by a late, higher offer from Community. Out of jobs, the executives decided to develop a company that maintained the Triad culture and the joint venture approach.
Funded by an affiliate of CCMP Capital Advisors LLC, a private equity firm, and the Canada Pension Plan Investment Board, Legacy spent its pre-announcement weeks recruiting a board of directors who understand the not-for-profit industry, Moen said. The board is led by James Shelton, the former CEO at Triad and a past board member of the American Hospital Association.
“No one else in the industry is pursuing a strategy of joint venturing with not-for-profits,” Moen said. “That’s the differentiator in the strategy we’ll pursue.”
Company officials believe that strategy will be attractive to the 85 percent of the nation’s hospitals that are not-for-profit.
“There are a significant number that are in financial need or undergoing some financial struggle to recapitalize themselves,” Moen said. “None of them want to sell, and they don’t want to give up control. Our plan is to share the ownership – they’ll contribute the assets and we’ll contribute the cash.”
The approach would make Legacy the majority owner, in most cases, while the not-for-profit collaborator would share in the governance and financial risk of operating the facility. A local board of trustees would still guide the facility, Moen said.
Legacy, which shies away from even using the word “acquire,” is looking for not-for-profit hospitals that want to paticipate in its joint venture concept. Its announcement attracted several calls, and officials hope to reach agreements later in the year.
“We’ll fill a pipeline with opportunities,” Moen said. “We’re looking to add two to four hospitals a year and be a multi-billion dollar company in five years.”