Boards and managements of non-profit hospital companies are experiencing pressure to consider business combination transactions in light of the need for real consolidation of the industry. A whole-hospital joint venture is an alternative approach to ownership change that falls between the more conventional options available to nonprofits (e.g., combining with a non-profit partner or an outright sale to a for-profit company). This article focuses on whole hospital joint ventures between for-profit and non-profit hospitals/health systems and seeks to provide an understanding of their basic structure, the reasons for entering into these arrangements, the types of non-profits that have entered into them, and the outcomes that have been experienced.
Whole-Hospital Joint Ventures
By entering into a whole-hospital joint venture (WHJV), a non-profit organization is selling a majority position in its hospital system to a for profit partner, and retaining both an equity stake and a role in the future governance of the “new company.” Most often, these have involved ventures between non-profit and for-profit companies; there have also been a small number of WHJVs created by two non-profit companies. These have not, however, involved the payment of cash to the non-profit and do not represent a meaningful alternative to more traditional transactions. Also, the structure reviewed in this article should not to be confused with joint ventures involving specialized services (e.g., surgery centers). As a result, we will focus exclusively on WHJVs entered into by non-profits with for-profit partners.