Hospitals and assisted-living companies might be a match made in heaven.
Assisted-living companies have access to Wall Street capital, while hospitals offer a local brand name and the reputation for good healthcare services.
It's this joint venture partnership that will be floated as an idea by John Durso, a partner with the Chicago law firm Katten Muchin & Zavis in his ACHE session. Called "Successfully Structuring and Financing Assisted-Living Facilities," the session is at 2 p.m. Monday, March 2.
"The two are natural allies," Durso says. "Assisted-living companies bring capital and expertise in assisted living, while the hospital brings local name and reputation."
Durso also will discuss regulations covering construction of assisted-living facilities. He says hospital executives will find there isn't much regulation and most states don't require certificate-of-need approval to build assisted-living facilities.
An assisted-living boom is being fueled by Wall Street and venture capitalists. Fifteen companies with assisted living as their primary focus have launched initial public offerings in the past four years.
In addition, demographics are causing many in healthcare to take a look at assisted living. The elderly population in the U.S. will double to 70.2 million by 2030 from 35.3 million in 2000, according to the U.S. Census Bureau.
Some industry observers believe assisted living accounts for a $13 billion industry and will grow to $22 billion by the millennium (Feb. 2, p. 55).
Hospitals without access to capital will find the partnership beneficial. The joint venture would come in the form of a limited liability company.
According to Durso's formula, it eventually could lead to improved admissions. He says a 100-unit assisted-living facility often can turn out one hospital admission per resident, depending on severity of illness. That could mean as much as $2 million a year in revenues for the hospital.
Durso also will discuss the impact of managed care on assisted-living facilities. He says hospitals and assisted-living facilities will have opportunities to develop risk agreements through their joint business plans.
"Hospitals help with healthcare by providing a clinic, home healthcare services and other inpatient and outpatient needs," Durso says. "Assisted-living facilities that don't work with hospitals typically have to contract for all of these services. There are a lot of joint venture opportunities between hospitals and assisted-living facilities."