Leading U.S. Hospital Companies and Hospital Systems Invest in Healthcare Innovation Fund

Unique Venture Fund to Accelerate Innovation R&D for America's Hospital Industry

NASHVILLE, Tenn.--(BUSINESS WIRE)-- Three of the nation's leading hospital companies and two major hospital systems - together representing more than 400 hospitals throughout the United States - have invested in the Heritage Healthcare Innovation Fund L.P., a strategic venture fund focused on investments in businesses that improve the delivery of health care services.

Affiliates of Community Health Systems, Iowa Health System, LifePoint Hospitals, Trinity Health, Novi, MI, and Vanguard Health Systems are each limited partners in the fund.

The Heritage Healthcare Innovation Fund, L.P. will:

  • Seek, fund and mentor innovative businesses that deliver improved quality, service and efficiency for health care delivery systems;
  • Develop "purpose-built" companies specifically focused on solving problems that are identified by hospitals and which are broadly applicable to health care delivery systems, particularly issues borne of health care reform;
  • Allow health care delivery systems the opportunity to benefit from the commercialization of innovative solutions they have developed internally through the development and launch of new companies; and
  • Make individual investments of up to $10 million in early- and growth-stage health care businesses.

"Hospitals must be the leaders and incubators of health care innovation in this era of fundamental change," said Wayne T. Smith, Chairman, President and CEO of Community Health Systems, Inc., the largest publicly traded hospital company in the nation with 126 affiliated hospitals in 29 states. "This fund allows our industry to champion real and practical innovation that will improve the quality of care, service and efficiency."

The health care reform legislation passed by Congress last year contemplates and encourages innovation in numerous ways. The investors in the Heritage Healthcare Innovation Fund believe that health care delivery systems will be the real-world laboratory for developing solutions in a rapidly changing environment.

"Health care reform will require dramatic changes in strategy and operations for America's hospitals," said Bill Leaver, President and CEO of Des Moines-based Iowa Health System, the nation's sixth largest nondenominational health system. "It is both a challenge and an opportunity. Now more than ever, hospitals must create enduring solutions to the challenges they face. We believe the innovation fund will unlock these solutions and accelerate their adoption across the industry."

Because of the combination of both high labor and high capital costs, hospitals and health systems do not have sufficient resources to allocate to research and development on a consistent basis. Even so, innovation is essential to meet the challenges of health reform, and investors in the Heritage Healthcare Innovation Fund believe that this approach will unite exciting ideas with the capital necessary to deliver practical solutions.

"With the advent of bundled payments, accountable care organizations and comparative effectiveness, we have new financial incentives to deliver care at a lower cost with higher quality," said William F. Carpenter III, Chairman and Chief Executive Officer of LifePoint Hospitals. Carpenter, who also serves as Chairman of the Federation of American Hospitals, commented that "every participant in the health care delivery system must evolve or face an uncertain future." LifePoint operates 52 hospital campuses in 17 states.

The opportunity to prototype new health care delivery approaches is a particular strength of the Heritage Healthcare Innovation Fund, said Joseph R. Swedish, President and Chief Executive Officer of Trinity Health, Novi, MI, the nation's fourth largest Catholic hospital system.

"The structure of the fund is designed to create a close working relationship with innovators, offering them real-time feedback and mentoring to develop truly practical solutions to the real challenges we face today," Swedish said.

The fund will be managed by Heritage Group LLC. Founded in 1986, the Heritage Group is a privately-held investment and advisory firm led by Rock Morphis and David McClellan that has formed and led multiple health care companies.

"We are confident the Heritage Group team will be excellent managers of the fund," said Charles N. Martin, Jr., Chairman and CEO of Vanguard Health Systems, which owns and operates 26 acute care hospitals across the U.S. "They are experienced healthcare entrepreneurs, operators and investors and bring a blend of essential skills and experience to their management of the Fund."

Early and growth stage businesses interested in benefiting from the Fund should visit www.heritagegroupusa.com for more information.

Community Health Systems
Community Health Systems, Inc., headquartered in Nashville, Tenn., is one of the nation's leading operators of general acute care hospitals. The organization's affiliates own, operate or lease 126 hospitals in 29 states, with an aggregate of approximately 19,400 licensed beds. In more than 65 percent of the markets served, CHS-affiliated hospitals are the sole provider of healthcare services. Through its subsidiary Quorum Health Resources, LLC, the company also provides management and consulting services to approximately 150 independent non-affiliated hospitals located throughout the United States. More information about the company can be found at www.chs.net.

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