Despite the credentials of its founder and top officer, Vanguard Health Systems is struggling to acquire hospitals, and the future doesn't look promising, some observers say.
So far, despite entering into at least four discussions, the Nashville-based hospital chain launched 15 months ago by Charles Martin Jr., has acquired just one hospital: 209-bed Maryvale Samaritan Medical Center in Phoenix.
Vanguard's most recent near miss was a big one: losing out to Tenet Healthcare Corp. over the eight Philadelphia-area hospitals being divested by the Allegheny Health, Education and Research Foundation as part of AHERF's bankruptcy proceedings (Oct. 5, p. 2). But that sale hit a snag last week (See story below).
Whether Vanguard's slow start makes the company less attractive to hospitals on the block depends on whom you talk to.
Vanguard sees no downside to its situation.
Beth Brisbane, Vanguard's spokeswoman, said withdrawing from the AHERF bidding won't hurt Vanguard's ability to acquire hospitals. In some ways, she said, it shows the company's selectivity in targeting deals that match Vanguard's goals.
Brisbane would not say whether the company has any pending deals. Martin, the former president of OrNda HealthCorp, declined an interview request.
Others, though, say Vanguard may have problems because it is a start-up company in a tough acquisitions market, and it has to deal with increased scrutiny of hospital sales by communities and local governments.
"Vanguard is obviously a start-up and does not have a (substantial) track record," said Daniel Bourque, senior vice president of corporate and public affairs for VHA in Washington. "They can't point to other institutions they've successfully managed," he said.
VHA, a not-for-profit hospital alliance with 1,600 members, strongly supports not-for-profit healthcare and has rallied against not-for-profit conversions.
In another failed Vanguard deal, 190-bed Barnert Hospital in Paterson, N.J., ended exclusive talks with Vanguard last month about a possible acquisition. Barnert's spokeswoman wouldn't elaborate on why the talks ended but said the hospital expects to talk to other systems about a potential deal (Sept. 21, p. 4).
Vanguard also missed out on acquiring Nashville-based Columbia/HCA Healthcare Corp.'s 80% stake in 398-bed MetroWest Medical Center in Framingham, Mass. Tenet snatched that deal for a reported $60 million to $80 million. A final agreement is expected by year-end.
Linda Miller, president of the Washington-based Volunteer Trustees of Not-For-Profit Hospitals, said Vanguard's troubles are largely because states and the public are paying more attention to not-for-profit hospital conversions. Volunteer Trustees opposes such conversions.
"It's not so much a reflection on Vanguard but on how difficult it is to make these deals now," Miller said.
A few years ago, attorneys general and communities were not interested in dealing with the future of local not-for-profit hospitals, Miller said. But today, 33 states have laws increasing state oversight and public evaluation of not-for-profit hospital conversions.
"In the end it makes it a little harder (to complete transactions), but communities get a better deal," Miller said. "It's important that there be oversight, because you are changing the use of assets."
Vanguard's acquisition field has also been reduced because many not-for-profits that might be tempted to sell out to a for-profit buyer are merging or affiliating with other not-for-profits, Bourque said.
"While there will always be opportunities, I think as this plays out, it will be harder and harder for start-ups to jump in, because there are larger (not-for-profit) players," Bourque said.