Howard University Medical School’s affiliated hospital, Howard University Hospital, has played critical roles in the ongoing 150-year mission to train the largest cohort of Black physicians in the nation, while also providing high quality care to a large underserved population in Washington, D.C.
But by 2017, the world’s longest running medical school had hit a crossroad.
Howard University Hospital, while crucial to the medical school’s mission, was becoming too cumbersome for an academic institution to run.
A solution was announced: Howard University and Adventist HealthCare said they have entered into a three-year management services agreement. Under the restructuring plan, Adventist HealthCare will bring in a senior leadership team to “help strengthen the hospital’s presence in the region,” according to Terry Forde, President and CEO of Adventist HealthCare.
As part of the agreement, Adventist HealthCare willwork with Howard University to build a new hospital that will help it meet the needs of the community it serves. The deal, which Dr. Hugh Mighty, Dean of the College of Medicine and Vice President, Clinical Affairs at Howard University called “huge for DC,” was conceived, constructed and brought to successful fruition by SC&H Capital. The investment banking and advisory firm introduced the parties to one another and helped structure a deal that would benefit both parties – and the community. SC&H Capital partnered with i3 Healthcare Consulting on this project.
“It was a complex project,” says SC&H Capital Founder & Managing Director Christopher Helmrath. “Its facets involved maintaining community access to healthcare as well as keeping the historically important educational programs at Howard University intact.” The solution required creative thinking from SC&H Capital’s team. “We had to find a solution where one was not obvious,” Helmrath contends.
Generating a sufficient cash-flow base when approximately 88 percent of its patient population requires public payment is “difficult for a single-source hospital,” says Helmrath. Public reimbursement of medical expenses generates less income than private insurance.
The challenge for SC&H Capital, Helmrath recalls, was not only finding a partner with an experienced track record running financially viable hospitals , but “to find a like-minded entity with a compatible mission that was interested in fulfilling Howard University’s promise to the students, residents, fellows and community it serves.”
Mergers such as these have become a trend in academic healthcare. In Washington D.C., Georgetown University partnered with MedStar and George Washington University partnered with Universal Health Services.
Originating in 1862 as the Freedmen’s Hospital, this historic hospital has been in continuous operation as the primary teaching hospital for Howard’s doctors since 1868. In 1972, the hospital was transferred to Howard University and, to date, has operated under this umbrella. As is the case for most solo health care institutions and, more so of academic health centers, the hospital has struggled to go it alone in the ever-expanding universe of healthcare consolidation. Helmrath says an affiliation with a hospital network allows the hospital to “achieve the correct scale” to compete in an industry where technology and care are rapidly evolving.
In order to meet the future challenges, Howard understood the need to establish a unique partnership going forward that would allow it to maintain its role and identity as the major producer of black physicians across the nation.
The deal was the best move, he says, for the hospital to be able to grow, evolve, and “stay relevant.” Helmrath notes that Adventist HealthCare is known for its quality care, with Shady Grove Medical Center being one of only eight hospitals to receive a 5-star rating from CMS in 2019, and its robust outpatient and physician services that play a key role in a community’s health.
“While many may have seen this as an opportunity to lever a hospital solely for the sale value, SC&H Capital brought its strategic expertise to the table to not only understand the challenges but the vision for finding a well-aligned partner,” adds Hugh E. Mighty MD, MBA, FACOG, Dean of the College of Medicine and Vice President of Clinical Affairs for Howard University. “SC&H Capital has the ability to understand the specific need of a client and bring it to the forefront, engaging with potential candidates based on this understanding. This innate expertise is different from the other firms I interviewed to guide us through this process.”
“On paper, no one saw it,” says Helmrath. “That is what I am most proud of: we did. We can look at a situation, understand it, and find solutions that create outcomes which are better than previously thought possible.”
