Most people know of HCA as the nation’s largest hospital chain, but to a growing number of fledgling health care businesses, the company has become a source of capital for helping get their products or services to a broader market.
Through its Health Insight Capital subsidiary, Nashville-based HCA is targeting $10 million a year in venture capital investments with a focus on concepts that can be deployed in its hospitals to improve quality and efficiency and reduce costs.
“Intentionally, we’re a customer first and investor second,” said Will Morrow, vice president of development/special assets at HCA. “It’s more than just a financial return we’re seeking. We’re looking for a partner to solve a problem — develop products and services that will be a strategic fit for our hospital operations.”
On a broader scale, the move is part of a push by hospital systems nationwide to encourage innovation as their industry faces more pricing pressures, such as the move toward reimbursements based on value and quality rather than volume.
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Last week, the Ascension Health Ventures unit of the St. Louis-based parent of Nashville’s Saint Thomas Health hospital system closed on a $225 million venture capital fund with plans to invest in health care firms specialized in information technology, medical devices and diagnostic services. Separately, a venture fund of Nashville-based investment firm Heritage Group – created with $157 million raised from investors including affiliates of the locally based chains Community Health Systems, LifePoint Hospitals and Vanguard Health Systems – is making strategic investments in companies that aim to improve delivery of health care services.
Health Insight Capital has invested in urgent care chain CareSpot and health care IT firm InterMedHx, both of Nashville; mobile medical device firm AirStrip Technologies of San Antonio; and Nasolux, a medical device firm focused on preventing hospital-acquired infections.
Last fall, it invested $1.78 million in InvivoLink, a Nashville health care tech firm that tracks and analyzes data from medical device implants with the goal of improving outcomes of implant procedures, including hip and knee replacements.
Besides investing, HCA brings its experience and management insights to help companies complete development of products or services. Senior HCA executives sit on the fund’s investment committee.
Ryan Wells, InvivoLink’s CEO, considers HCA an ideal partner considering the number of hospitals it runs that perform more than 50,000 total joint replacement procedures a year. Having HCA as a partner helps InvivoLink gather the critical mass of data to validate success of its offering, he said.
“It provides a clear path to executing our mission — a clear path for revenues based upon our performance and how well our product provides value for their organization,” Wells said.
Frank Morgan, an analyst at RBC Capital Markets in Nashville, sees benefits for both the hospital chain and company receiving the investment.
“It could be a win for the startup company if they can do business with HCA and help drive their growth,” Morgan said. “For HCA, there can be several strategic merits for doing this. No. 1, it can drive patient volume. Or it can help them manage costs better, and if you’re in the hospital business those are two things you’d like to do.”