The private equity firm: Vanguard Health Systems
The hospital: Detroit Medical Center
The price: $1.5 billion
The scoop: On the face of it, Vanguard Health Systems' acquisition of the eight-hospital Detroit Medical Center (DMC) for $1.5 billion that closed last year looks like the typical for-profit acquisition of a non-profit hospital system. Except that it's not: Vanguard is backed by the mine-shaft deep pockets of Blackstone Partners and Morgan Stanley Capital Partners. The two private equity firms have tens of billions of dollars at their disposal.
Vanguard and its partners seemed undeterred by the issues surrounding DMC. It's based in perhaps the most beleaguered major urban area in the United States and had to pony up $30 million to settle alleged Stark violations regarding Medicare billings to help get the deal closed. Nonetheless, Vanguard will invest more than $850 million in capital improvements over the next five years.
"You look at the challenges with buying that system, and it would not be at the top of my list," said Shane Passarelli, a senior vice president with Healthcare Finance Group. "But Vanguard sees something."