CHICAGO (Reuters) - Thomas DeRosa is making a $4 billion bet that he can build a national, low-cost healthcare network for America’s aging population that will succeed where so many other models have struggled.
His secret: strip out the “for-profit” business model, and leverage the real estate in nursing homes for outpatient care.
DeRosa’s strategy starts with buying out the property of the huge bankrupt nursing home chain HCR ManorCare, and teaming up with a non-profit hospital operator, ProMedica, to create a 30-state healthcare system.
His own company, real estate investment trust Welltower Inc (WELL.N), is purchasing the ManorCare real estate for $2.7 billion under a deal unveiled April 24 and awaiting approval from a U.S. bankruptcy court.
ProMedica is buying ManorCare’s operations for $1.3 billion and combining them with its own surgery centers, clinics and health plan to form a network with $7 billion of annual revenues and 70,000 employees.
“This is about a health system moving into a beleaguered sector of healthcare,” DeRosa told Reuters in an interview. “We’re breaking down the wall of what has traditionally been acute care services and services for the aging.”
The aim is to strip out $300 million in costs from the operation, mainly from cheaper rent, once HCR ManorCare emerges from its Chapter 11 bankruptcy this year, according to interviews with Welltower and ProMedica executives.
ProMedica Chief Executive Randy Oostra expects the merger - which will propel the group into the 25 largest U.S. health systems by revenue alongside names like Mayo Clinic, Geisinger and Johns Hopkins - to boost margins by two percentage points to between 3 percent and 4 percent over the next