A hospital dealmaker who's known for brokering sales of not-for-profit facilities -- often to for-profit chains -- is starting a new company to keep hospitals from doing just that.
Nashville-based consultant Joshua Nemzoff unveiled the details of his new company exclusively to MODERN HEALTHCARE last week.
Called MissionHealth, the company will invest in not-for-profit hospitals and provide them with needed capital without requiring the hospitals to give up local control of their facilities. Nor will it result in a change of their tax-exempt status or jeopardize that status, Nemzoff said.
Nemzoff, the company's president and chief executive officer, plans to unveil MissionHealth this week. He also heads Nemzoff & Co., a mergers and acquisitions firm in Nashville representing not-for-profit hospitals.
"For the first time, we're providing equity to nonprofit hospitals," Nemzoff said. "We are investors. The concept of an equity investor in a nonprofit hospital is an idea that really hadn't been around before."
But it's an idea that might not be in much demand, one observer said.
"Do these not-for-profits need to be saved? There's a presumption that not-for-profit hospitals are struggling to stay open and alive," said Dan Bourque, senior vice president for corporate and public affairs at VHA, an Irving, Texas-based not-for-profit hospital alliance. "A lot of the not-for-profit organizations, and certainly the systems, are quite healthy financially and I don't think are desperate for capital at this point."
Bourque commented at the request of MODERN HEALTHCARE with no specific knowledge about MissionHealth.
Nemzoff said MissionHealth's partnership plans are unlike past or present ventures by other companies.
One such failed venture was InteCare, in which VHA invested. Designed to help not-for-profit hospitals convert to for-profit status, InteCare went out of business in May.
Now VHA members in the Southwest have launched a new not-for-profit company to take over not-for-profit hospitals flirting with the idea of flipping tax status.
What Nemzoff wants to do is different, he said.
He said MissionHealth has a $2 billion financial commitment from a New York investment banking firm. He declined to name the financier.
A partnership between MissionHealth and a not-for-profit hospital would work like this: MissionHealth would buy an equity interest in the hospital by paying the hospital in cash. In exchange, MissionHealth would collect a proportionate share of the hospital's excess cash flow.
Nemzoff said the unrestricted money a hospital gets from MissionHealth will be a "war chest" to finance expansion and other efforts to better compete with the for-profits.
Partnering with MissionHealth means the hospital's not-for-profit corporation will stay in place, although it will transfer assets to a new partnership with MissionHealth.
The not-for-profit corporation will make up 75% of the partnership's governing board and the remaining 25% of the members will be from Mission-Health. That means no change in the hospital's tax-exempt status and the not-for-profit corporation retains control of the hospital and the partnership, Nemzoff said.
MissionHealth makes money on the deal by collecting from the hospital's excess cash flow. The money a hospital gets from MissionHealth isn't a loan, either.