The name "R. Clayton McWhorter" is like the Good Housekeeping Seal for Nashville healthcare ventures, says C. Wayne Gower, the chief executive officer of Iasis Healthcare Corp.
Gower should know. McWhorter was an initial investor in Iasis, injecting about $2 million in the then-unknown hospital company and helping pave the way for a $200 million investment from New York venture-capital firm Joseph Littlejohn & Levy that enabled it to buy 15 hospitals.
More than perhaps any other healthcare leader, McWhorter is an embodiment of the centuries-old tradition of patronage. In what others would consider their retirement years, he has started a venture capital firm, Clayton Associates, that has not only seeded numerous Nashville healthcare ventures but also has provided them with office space and less tangible resources. Without McWhorter's role in the community, there is a good chance many of the healthcare companies that are thriving today would not exist or would not be in Nashville. He provides an example of what one person's conviction and assets can do to shape an entire segment of a local economy.
"They say the secret to business is networking," says Richard Treadway, M.D., chairman and CEO of Medical Properties of America, a healthcare real estate company in Nashville. "Clayton is the best networker around."
Treadway's current business venture is just one example of the fruits of that networking. When the idea for the medical real estate company struck him, Treadway approached McWhorter.
"In about 30 minutes, I got a call back from Clayton," Treadway recalls. "He told me the guy who was there to see him wanted to do the same thing I did."
Not only did McWhorter ultimately invest in the company, but he put Treadway in touch with that guy who happened to be in his office at the time of Treadway's call--Philip Suiter. Treadway met with Suiter, and the two ultimately put their business plans together.
Suiter, who says he has known McWhorter since 1984, is now executive vice president and a co-founder of Medical Properties.
Early this year, when the company was trying to secure financing from Reckson Strategic Venture Partners, a private investment fund, McWhorter went out to Nashville's Belle Meade Country Club to have dinner with the group and help persuade them to invest. Ultimately, Reckson committed $100 million in financing for Medical Properties.
"Not everyone knows Phil and me, but everybody knows Clayton," Treadway explains.
The godfather. McWhorter, 67, worked his way up the ranks of the Hospital Corporation of America and its spinoffs and reincarnations, finally retiring from HCA-The Healthcare Co.'s board of directors this past May. His ties to Thomas Frist Jr., M.D., HCA's founder, CEO and chairman, continue to be strong, and he has deep pockets into which he has dipped many times to help rev up the engine of Nashville's healthcare business community.
Some healthcare executives have referred to him affectionately as the Godfather of Nashville healthcare.
The McWhorter name, or just plain "Clayton," as he is known around town, can clinch deals, open wallets and propel ideas into reality, say those who have benefited from his influence.
His son, Stuart McWhorter, 32, is a founding principal of Clayton Associates and shares management responsibilities with his father. The family's net worth is between $100 million and $500 million, Stuart McWhorter estimates.
McWhorter also has a daughter, Jodie McWhorter Coker, who lives in Georgia, where she takes care of the family farm, a 5,000-acre hunting preserve near Augusta upon which sits an antebellum house.
Despite his name recognition, wealth and status within the Nashville community, McWhorter has a knack for making others feel at ease. Well over 6 feet tall, he squeezes his lanky frame into a Volkswagen New Beetle rather than drive a showy car. And when asked about how he got to where he is in healthcare, he focuses more on mentors and family than on personal accomplishments.
McWhorter's parents separated when he was 2 years old, and his mother worked in a woolen mill in Georgia to provide for her four children.
"We didn't even have indoor plumbing in those days," McWhorter, the youngest of the four, says.
When McWhorter told his mother of his plans to finish high school, get a job and buy a car, she told him to go to college instead. He took her advice.
McWhorter graduated from Samford University in Birmingham, Ala., in 1955 with a bachelor's degree in pharmacy, after working evenings in a Birmingham pharmacy to pay his way through school. He also worked for a year in his oldest brother's pharmacy in Chattanooga.
HCA and HealthTrust. When he decided pharmacy was "too confining" a career, McWhorter got into the hospital business, serving in the early 1960s as assistant administrator of Phoebe Putney Memorial Hospital in Albany, Ga., and then administrator at two other Georgia hospitals. In 1970, the newly formed HCA recruited him to go back to Albany to open a new hospital, Palmyra Park, and he went on to become a divisional vice president at HCA, overseeing 27 hospitals in Georgia, the Carolinas, Florida and Virginia. He came to Nashville in 1977 to become executive vice president at the rapidly growing company, and in 1985 became president and chief operating officer.
McWhorter speaks almost tenderly of his years as chairman and CEO of HealthTrust-The Hospital Co., the rural hospital company HCA spun off in 1987 and later bought back.
"Our slogan was that we were going to make pedigree greyhounds out of these dogs," he says. "We created a fabulous culture at HealthTrust, and people still talk about it."
One of the people who remembers it well is Barbara Garvin, director of Belmont University's Center for Entrepreneurship in Nashville. She was also McWhorter's assistant at HCA and HealthTrust.
"He's always pushing you to be the best you can be, and I think people wanted to do that for him," she says.
In fact, McWhorter was instrumental in the founding of the Center for Entrepreneurship, which helps female entrepreneurs get new businesses off the ground, Garvin says.
In 1992, McWhorter, an ardent Democrat, was encouraged to run for governor. Although he never officially declared and did not end up running because of his corporate responsibilities, he raised more than $1 million, much of it from Republican coffers, he jokes. And yes, he gave the money back.
He came back to what was by then Columbia/HCA Healthcare Corp., when it bought HealthTrust back, and he became chairman of the combined company.
McWhorter was about to retire when the company's troubles with the federal government came to light. When Frist came out of retirement to turn things around at HCA, he asked McWhorter to stay on its board of directors, which he did.
Revving up investments. In the past few years, McWhorter began increasing his investment activities. He also helped found the Nashville Healthcare Council in 1995.
He started Clayton Associates in 1996, raising two private equity funds that have invested in more than 30 companies. The firm also provides financial services to wealthy individuals and foundations, has an investment banking arm and provides healthcare consulting services.
The company's investments have topped $50 million, with $40 million of that in Tennessee companies. More than 90% of the companies in which McWhorter's firm invests are in Nashville, and about 50% of his investments are linked to people he knows. McWhorter says that financing friends and acquaintances, in addition to philanthropy, is a less risky investment strategy than investing in strangers because it cuts out the courtship phase and is less likely to lead to unpleasant surprises down the road.
About 65% of Clayton Associates' investments have been in healthcare services and healthcare information technology companies. The firm recently ventured into healthcare publishing with an investment in HealthLeaders, a Nashville-based company formed in July when Passport Health Communications spun off its online healthcare news service and merged it with Harkey & Associates, a managed- care research company. In August, HealthLeaders bought San Francisco-based Healthcare Business Media, which publishes a healthcare magazine.
In 1998, ground was broken on the Dover Centre, a sleek, modern office complex in Franklin, Tenn., that Clayton Associates moved into in 1999. It now consists of three buildings and has space for three more.
About 10 of the companies Clayton Associates has invested in, including Iasis, have moved to the Dover Centre, taking advantage of its campuslike atmosphere. Right outside McWhorter's wing of the office is an area called "the bullpen," where he allows entrepreneurs to use desk space, a computer, telephone and conference room space--rent-free--until they get established.
The Dover Centre has a state-of-the-art board room, available for rent by the hour or by the day. Flanking the board room doors are glass cases displaying etched plaques for each of the companies Clayton Associates has helped launch.
McWhorter's office at the former Clayton Associates headquarters is now Treadway's office, in a building diagonally across from HCA's corporate headquarters. Medical Properties is the second company Treadway has helped found with McWhorter's help and one of about 15 companies the two are involved in together. The connection between them goes back many years, to when Treadway was a psychiatrist practicing at the Parthenon Pavilion, an HCA hospital in Nashville, and McWhorter was an executive at HCA. Treadway became vice president of HCA's Tennessee division, and years later when he had ideas for starting a company to provide integrated mental health services, he knew where to turn. In 1997, with McWhorter's help, Psychiatric Solutions was born. A year and a half later, Medical Properties got its start.
"You just kind of join the family," Treadway says.
Opening doors. A McWhorter endorsement goes a long way toward building credibility and swinging wide the doors of opportunity that otherwise might be difficult to pry open. That fact is borne out by the numerous appearances the McWhorter name makes in press releases announcing the birth of new companies.
HealthMont, a new hospital company, is yet another example. Timothy Hill, a former executive of the bankrupt New American Healthcare Corp., and a colleague started the company by buying four New American hospitals in August. Hill, a former internal audit supervisor at HealthTrust, initially approached McWhorter with the idea. McWhorter was able to get him in touch with Richard Ragsdale, a founder of Community Health Systems, who is now on HealthMont's board.
"He's the first person I went to," Hill says of McWhorter. He would not disclose McWhorter's investment in the new company, "but we disclosed his name because it does give us credibility," Hill says.
Although he came to Nashville via a childhood in Chattanooga and an adulthood in Georgia, McWhorter is fiercely devoted to middle Tennessee and to its thriving healthcare economy.
"We think there's plenty of opportunity here; we don't need to go to California or other places. One of the things we're interested in is how to keep people here."
McWhorter has made a point of helping those who had difficult beginnings like his own, such as establishing a scholarship fund targeted to two middle Tennessee counties that have the fewest students attend college."Often, a young entrepreneur will say, `How can I repay you?' " he says, "and I say, `By doing this for others.' "