The Importance of Ownership Models in Provider-Based Healthcare


In the rapidly evolving landscape of provider-based healthcare, the choice of ownership model plays a crucial role in determining the success and sustainability of healthcare organizations. Innovative healthcare models, particularly those that involve taking on risk, require substantial capital, scalability, and time to mature. The decision on whether to adopt a public, private equity (PE)-backed, hospital-backed, or independent ownership structure is critical in addressing these needs. This white paper explores the importance of ownership models in healthcare, highlighting the advantages and challenges associated with each type and provides insights into why certain models may be more suitable for specific stages of organizational maturity.

Innovative Healthcare Models and the Need for Capital, Scale, and Time

Innovative healthcare models such as those focused on value-based care and risk-based contracts demand significant financial resources to develop and implement effectively. These models often require upfront investment in technology, infrastructure, and human resources to manage risk and deliver high-quality care. According to the Centers for Medicare & Medicaid Services (CMS), the adoption of value-based care models has led to a significant reduction in healthcare costs and improvement in patient outcomes. Additionally, achieving the necessary scale to operate efficiently and the time to refine and mature these models are crucial factors for success.

Public Ownership: Opportunities and Challenges

Public ownership offers access to large pools of capital through the sale of equity shares on stock exchanges. This can be particularly advantageous for mature healthcare organizations looking to expand or enhance their services. Public companies can leverage their visibility and credibility in the market to attract investors and partners, facilitating further growth and innovation. For instance, large healthcare systems like HCA Healthcare have successfully utilized public ownership to fund expansive growth and development initiatives.

However, public ownership also introduces several challenges, especially for early-stage healthcare companies. According to Marlow Hernandez, co-founder of Soran Health, public ownership can entail additional costs and market fluctuations that disrupt strategic planning and operational stability. These fluctuations, driven by investor expectations and market dynamics, can pressure organizations to prioritize short-term financial performance over long-term strategic goals. The regulatory and compliance requirements for publicly traded companies are also significantly higher, adding to the administrative burden and operational costs.

Private Equity-Backed Ownership

Private equity-backed (PE-backed) ownership provides an alternative model that offers both capital and strategic guidance. PE investors typically bring substantial financial resources and management expertise, helping healthcare organizations scale rapidly and navigate complex regulatory environments. According to a report by Bain & Company, the healthcare private equity sector saw a record-breaking $151 billion in deal value in 2021, indicating strong investor interest and confidence in this model.

However, the pressure for short-term returns from PE investors can sometimes conflict with the long-term goals of innovative healthcare delivery. As noted by Jason Conger, co-founder of Soran Health, PE-backed models require careful alignment of incentives to ensure that the organization’s mission and investor expectations are harmonized.

Hospital-Backed Ownership

Hospital-backed ownership models involve partnerships or integrations with hospital systems. These models can provide integrated care solutions and access to extensive resources, including advanced technology, specialized staff, and established patient networks. Hospital-backed organizations can benefit from the stability and support of a larger healthcare system, which can facilitate the implementation of innovative care models. For example, Mayo Clinic’s extensive network allows for significant resource sharing and innovation across its system.

However, hospital-backed models may also lead to bureaucratic complexities and slower decision-making processes due to the hierarchical structure of hospital systems. The alignment of goals between the hospital and the provider organization is crucial to ensure that innovation and patient care quality are prioritized.

Independent Ownership

Independent ownership allows healthcare organizations greater flexibility and control over their operations. This model can be particularly attractive for organizations that prioritize autonomy and innovative approaches to care delivery. Independent ownership enables healthcare providers to make swift decisions and adapt to changing market conditions without the constraints imposed by external investors or partners. For instance, independent clinics and small healthcare practices have shown resilience and adaptability in rapidly shifting to telehealth services during the COVID-19 pandemic.

The primary challenge for independent ownership is access to capital. Without the financial backing of public markets, PE investors, or hospital systems, independent organizations may struggle to secure the necessary funds for growth and innovation. Additionally, they may have limited access to advanced technologies and specialized resources.

Evaluating Ownership Structures

When evaluating different ownership models, healthcare organizations must consider several factors to determine which structure best supports their strategic objectives. These factors include:

  1. Stage of Development: Early-stage companies may benefit more from PE-backed or hospital-backed models that provide capital and strategic guidance. Mature companies with established revenue streams and operational stability might consider public ownership to access larger capital pools.
  2. Capital Needs: Organizations with significant capital requirements for technology, infrastructure, and human resources should assess whether the ownership model can meet these needs without compromising long-term goals.
  3. Scalability: The ability to scale operations efficiently is critical for innovative healthcare models. Ownership structures that support rapid scaling through financial resources and strategic partnerships are advantageous.
  4. Time to Maturity: Innovative healthcare models require time to refine and mature. Ownership models that align with long-term objectives and provide stability during the maturation process are essential.
  5. Regulatory and Compliance Considerations: Public companies face higher regulatory and compliance burdens, which can impact operational flexibility. Organizations must evaluate whether they have the capacity to manage these requirements effectively.

Choosing the right ownership model is pivotal for the success of provider-based healthcare organizations. Each model—public, PE-backed, hospital-backed, and independent—has its advantages and challenges, and the best choice depends on the organization’s stage of development, capital needs, and strategic objectives. A thorough evaluation of potential ownership structures, considering both the specific needs of the organization and the characteristics of potential owners, is essential. By aligning ownership models with their long-term goals, healthcare organizations can better navigate the complexities of the industry and achieve sustainable growth and innovation.



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