Since his exit from the healthcare stage last January, former OrNda HealthCorp top executive Charles Martin Jr. has quietly worked backstage, helping set up niche healthcare companies in the Nashville area.
Now he's ready to debut his new privately held, for-profit hospital company, Vanguard Health Systems, which has a lot in common with Martin's former company.
Martin had been OrNda's chairman, president and chief executive officer since 1992. Tenet Healthcare Corp. acquired 53-hospital OrNda in a $3.1 billion transaction that closed last January.
Like OrNda, Vanguard will be buying hospitals to create local integrated delivery systems and will be targeting markets where hospitals have a desire to consolidate but where there hasn't been much activity yet.
"We want to be where the market is encouraging, if not demanding, consolidation of systems," said Martin, who will be Vanguard's chairman, president and CEO.
Vanguard is being funded mostly by management and New York-based Morgan Stanley Capital Partners. It has about $1.5 billion available in capital from debt and equity sources, a Vanguard spokeswoman said.
Martin wouldn't say whether any acquisitions have been lined up.
Management and Morgan Stanley own the company, but officials declined to be more specific about the ownership arrangement.
Vanguard's governance structure will be unique, Martin said. It will be subdivided into regions, each governed by an 11-member board. Eight members will be elected from the participating hospitals in that area and three will be chosen by Vanguard.
The regional boards will make decisions usually made at the corporate level, including setting budgets, approving strategic plans and deciding whether to purchase new facilities. Vanguard will put up the capital for all acquisitions.
The regional boards will have a vested interest in providing the best quality care because they will be shareholders in the Vanguard parent company. In purchasing each hospital, Vanguard will use a combination of cash and company stock.
But David Whelan, a principal at Atlanta-based consulting firm Hamilton HMC, said it may be difficult for Vanguard to rely on regional boards for the big decisions. Many of the boards and Vanguard itself may be "torn between keeping Wall Street happy and the (local) community happy," he said.
Joseph Moore, Vanguard's executive vice president and chief financial officer, said that while no board is perfect, regional boards will be strong enough to make difficult decisions because, as shareholders, boards have an incentive to carefully consider the consequences of their choices. Moore left Columbia/HCA Healthcare Corp. last April because he wanted to become an owner of a healthcare company.
Last year, Martin helped launch two new companies: Vger Technologies, a healthcare technology company, and Ambulatory Resource Centres, an outpatient facilities company. He also is a board member of three other relatively new healthcare companies in the Nashville area.