LHP Hospital Group: Dan Moen, CEO

by HCE Exchange on August 19, 2010

In January 2008, a group of investors and healthcare managers who believe that a hospital belongs to its community decided to form a private healthcare company. The goal was to provide an opportunity for community hospitals to form a partnership that would solve their most pressing strategic challenges. Access to capital is difficult to come by these days. Far too often, the not-for-profit community hospital feels compelled to give up ownership and control of their hospital in order to continue meeting the needs of the patients they serve.

“If a hospital has a need, or doesn’t have the capital to take advantage of an opportunity, our company was formed to become their partner. We form joint ventures with not-for-profit hospitals and health systems to acquire, build, expand and operate hospitals pretty much anywhere in the country,” says Dan Moen, CEO of LHP Hospital Group, Inc.

A Collaborative Culture as a Way of Doing Business

LHP comes with the capital necessary for the typical not-for-profit community hospital to meet their existing need or to take advantage of a developing opportunity. In a typical scenario, LHP puts up 80% of the capital and the hospital comes up with 20%. Because they believe it is important that a community retain control of their hospital, however, LHP shares the governance 50-50, while giving the not-for-profit partner a number of additional reserve powers. Therefore, even though LHP has invested up to 80% of the capital in the joint venture, it does not maintain control of the joint venture’s governing board.  All board decisions must gain the approval of both the not-for-profit partner’s members as well as LHP’s.

“That’s very different from your typical investor and it takes a very trusting relationship to be able to do that,” says Moen. LHP also manages the day-to-day operations, and the CEO of the joint venture is accountable to the joint venture governing board.

As far as Moen is aware, there are no other companies who handle a partnering joint venture in this way. “There are plenty of people who will buy a hospital,” says Moen. “Our competitors offer to buy them; we offer them the opportunity not to sell their hospital. Instead, we invest alongside them and they remain in control. That makes us very different from our competitors.”

LHP’s first joint venture was with Portneuf Medical Center in Idaho. They are currently working on transactions with hospitals in Texas and New Jersey. Moen looks for the company to add three to five hospitals per year in markets with populations of 35,000 or more. He expects that within five years or so, the company will have cleared start-up status and will be well established as a company busy doing good things for the communities they are involved in.

Weathering Economic Times

“We started this company and a few months later, the recession hit. So it has probably been more of a struggle than we expected,” Moen admits. However, the need for companies like LHP is greater than ever, as not-for-profit hospitals face increasing difficulties in obtaining capital for crucial investments in an environment where hospital reimbursements continue to be under increasing pressure.

Day-to-Day Operations Managers

The LHP partners and leadership team average 30 years experience in the management of community hospitals. LHP manages the day-to-day management operations, while all strategic questions are taken to the stake holders – the not-for-profit partner, the community leaders, and the physicians on the medical staff.

“Even though most people think of us as young or a startup company—both of which are true—as a management team, we’ve been doing this for a long time and have significant experience,” says Moen. LHP is not the management team’s first business together. They started Triad Hospitals in 1999 and sold the company to Community Health Systems in 2007 for $5.1 billion.

“We have a very deep knowledge of working with not-for-profits and structuring and operating these joint ventures,” says Moen. “I guess I’d sum it up by saying, as a team and as a company, we’re not just practicing. We’ve got experience. We’ve done this many times.”

Making a Difference, Community by Community

Whenever a hospital has a need or an opportunity that requires capital, the typical reaction is to borrow the money or sell to another entity that has the money in place. An alternative, finding a partner, creates a winning situation for everyone involved.

“We’re always trying to get the word out,” says Moen. “Typically, a hospital is one of the largest employers in the community. It’s thought of as one of the most valuable businesses in the community. Most not-for-profit board members don’t want to sell their hospital, and that’s what what we’re trying to get across—you don’t have to give up control or sell your facility in order to meet opportunities or capital needs. There’s an alternative. Stay your course and bring in a partner like LHP.”

-by T.M. Simmons

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