Ask David Vandewater about his days with Columbia/HCA Healthcare Corp., and he might quote John F. Kennedy saying, "Those who look only to the past or present are certain to miss the future."
But Vandewater, who is now chief executive officer of Ardent Health Services, does want to remember one legacy of his time as chief operating officer at Columbia/HCA-the joint ventures that the company entered into with not-for-profit hospital systems.
Ardent is looking to add to its total of seven acute-care and rehabilitation hospitals, and Vandewater said joint ventures with tax-exempt systems would be a big driver of its growth. Vandewater made his comments in an interview at Modern Healthcare's Chicago headquarters last week.
Ardent is not the only investor-owned chain that's interested in joint ventures with not-for-profits. Triad Hospitals, Plano, Texas, and Vanguard Health Systems, Nashville, pursue the same strategy.
Vandewater cites the Columbia and Columbia/HCA joint ventures that he helped create in Alexandria, La.; Austin and San Antonio, Texas; Cleveland; Denver; and Miami as proof that he and his Ardent team know how to structure these deals to meet the needs of a local not-for-profit system.
"You had some boards who came to the conclusion that, to meet their missions, (they didn't) have to operate a hospital" because funding healthcare foundations with the sales proceeds was adequate, Vandewater said.
HCA has maintained the joint ventures in Alexandria, Austin, Denver and San Antonio. HCA and Cleveland's Sisters of Charity of St. Augustine Health System agreed to part ways three years ago (March 5, 2001, p. 20) and later that same year, HCA bought out its partners at Cedars Medical Center in Miami.
The joint venture with St. David's Health Care System, Austin, prompted the Internal Revenue Service to revoke the not-for-profit system's tax exemption. After six years and a lengthy court battle, a federal jury restored the exemption to St. David's last month (March 15, p. 8). Vandewater said Columbia/HCA and St. David's carefully structured the deal to ensure St. David's tax exemption, and he added that the jury has "decided the IRS is wrong."
Ardent is still interested in acquiring not-for-profit hospitals outright, Vandewater said. Ardent was outbid, however, in its quest for the former Health Midwest system in Kansas City, Mo., which HCA ended up buying. "If it's just about the money, they might go elsewhere," Vandewater said, but Ardent will pitch itself to not-for-profit sellers as a company whose leaders know how to structure joint ventures to the benefit of both parties.
The company is making its growth strategy public after finishing the initial phase of its combination of two formerly separate systems in Albuquerque. Ardent bought four-hospital St. Joseph Healthcare System for $77 million from Catholic Health Initiatives and merged it with Lovelace Health System, which included a health plan, a hospital and a physician practice. Lovelace was purchased from Cigna Corp. for $211 million.