Hospital Joint Ventures Between Non-Profit and Investor-Owned Companies
A joint venture between Duke University Health System and LifePoint Hospitals, Inc., Duke LifePoint, recently completed the acquisition of Marquette General Health System in Marquette, Michigan. This combination represents the most significant use of the rapidly evolving buyer joint venture (BJV) structure. Most investor-owned hospital companies are currently attempting to form similar arrangements with non-profit partners.
Non-profit companies, both large and small, should consider the significance of these sorts of arrangements as they contemplate the impact of healthcare reform on their businesses. This article explores the practical and market features of BJVs, reviews the objectives of non-profit participants, and considers potential future applications of the structure.
Buyer Joint Ventures
BJVs are arrangements between non-profit and investor-owned hospital companies in which the ownership of existing, newly acquired or newly constructed hospitals is shared. They are simple in concept and structure, varied in commercial application, and complex in organizational design. BJVs will have an important role in the near-term as hospital consolidation accelerates, and could be a precursor of hospital companies in the future.
This structure has evolved from another arrangement between investor-owned and nonprofit hospital companies involving hospitals: the whole-hospital joint venture, or seller joint venture (SJV). Non-profit and investor-owned hospital companies have entered into more than 30 SJVs over the past 20 years. In these, the non-profit seller retains a minority ownership position and shares in governance. Essentially, SJVs are alternatives to outright sale and represent efforts by non-profit sellers and investor-owned companies to work together to share ownership and governance of the seller’s hospital.