By purchasing post-acute provider HCR ManorCare in 2018, ProMedica was one of the first major health systems to underscore the importance of controlling the total cost of care across the continuum. The $1.4 billion deal resulted in the 15th-largest not-for-profit health system by revenue and expanded Toledo, Ohio-based ProMedica’s population health-driven senior healthcare. CEO Randy Oostra considers it one of his boldest moves.
WHAT HAS BEEN YOUR RISKIEST DECISION? Our riskiest decision was the acquisition of HCR ManorCare. The unique, first-of-its-kind transaction brought together a not-for-profit health system, a large post-acute provider and a real estate investment trust as partners.
WHY WAS THAT MOVE RISKY? Health systems, especially not-for-profits, tend to be very traditional. We usually prefer innovation in incremental moves. The acquisition of HCR ManorCare expanded our footprint from six to 30 states and quadrupled our number of employees. It was a great deal of change in a relatively short period of time. But we understood that a major strategic change was needed to help ensure that we remain well-prepared to meet future healthcare demands.
WHAT WAS THE OUTCOME? From both our traditional system and HCR ManorCare perspectives, the result has been outstanding. Right from the start, we were focused on identifying significant cost-saving measures. ProMedica converted HCR ManorCare to a not-for-profit, which established the largest not-for-profit senior services provider in the nation and provided a substantial expense reduction. Also, because of how we structured the real estate part of the acquisition (part of the deal involved real estate investment trust Welltower buying HCR’s landlord), we were able to reduce HCR ManorCare’s annual rent payments by hundreds of millions of dollars.
The partnership has revealed opportunities we never knew existed and opened up opportunities in new markets. Further, we have been able to expand the reach of our social determinants of health efforts.
