Vanguard Health Systems, the new for-profit hospital chain launched by former OrNda HealthCorp top executive Charles Martin Jr., has had its shingle out since July 1997, but it didn't attract much business until recently.
Not-for-profit hospital advocates said Vanguard's slow start indicates a seller's market and not-for-profits' growing hesitancy to get caught in the endless buy-sell cycle of for-profits.
"What may be playing out here is that communities have seen so many (for-profit) companies come and go with the same people involved," said Elliott Moore, president of the Nashville-based Hospital Alliance of Tennessee, which represents 61 not-for-profit and governmental hospitals in the state. "I don't think (for-profit companies) are making any promises that the not-for-profits haven't heard before."
Vanguard, based in Nashville, made a big public splash when it announced its creation last month (Jan. 26, p. 14). But Vanguard actually was incorporated in Delaware last July and soon afterward obtained $1.5 billion in financial backing from New York-based Morgan Stanley Capital Partners.
A Vanguard spokeswoman said Martin is declining press interviews and is focusing on the company's recent developments.
On Jan. 30, Vanguard announced it had signed a letter of intent to acquire its first hospital, 213-bed Maryvale Samaritan Medical Center in Phoenix (Feb. 2, p. 4). Not-for-profit Samaritan Health System owns Maryvale.
And last week, the Boston Globe reported that Vanguard was interested in buying 423-bed MetroWest Medical Center in Framingham, Mass. Neither MetroWest's owner, Nashville-based Columbia/HCA Healthcare Corp., nor the Vanguard spokeswoman would confirm the report.
Columbia acquired 80% of the formerly not-for-profit MetroWest in April 1996.
But it typically takes a new company at least eight months to make its first hospital acquisition, said Dana McLendon Jr., senior vice president of finance and administration for Brentwood, Tenn.-based New American Healthcare Corp.
New American is buying five hospitals from Tenet Healthcare Corp. Tenet had inherited the hospitals when it bought OrNda last year (See story, p. 17).
McLendon said New American's first acquisition, 94-bed Doctors Hospital in Wentzville, Mo., took eight months to complete. The next acquisition took place nine months later in May 1997.
"The lead time between the first serious discussions, contract and closing -- six to nine months -- is not excessive," said McLendon, who had worked with Martin when the two were at Healthtrust before it was purchased by Columbia for $5.6 billion in 1995. "Some (deals) push toward 12 months," McLendon said. "It's a long, long pipeline."
Vanguard has added a few new twists to the typical chain acquisition of not-for-profits.
First, Vanguard will act as a holding company with a regional board, mostly composed of local Vanguard hospital representatives who will make decisions usually made at the corporate level.
Also, in purchasing each hospital, Vanguard will use a combination of cash and company stock, so that the regional board members will be shareholders in the company.
Vanguard hopes to use this as a marketing tool to potential not-for-profit hospitals. Regional board members, as Vanguard shareholders, will need to approve takeovers before they occur.
But Linda Miller, president and executive director of the Volunteer Trustees for Not-For-Profit Hospitals, Washington, said Vanguard is "a different package, but it's the same product," as other for-profit companies."