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Province Healthcare/Capella Healthcare: Providing Success Through Providing Healthcare

May 14, 2015

In the mid-1990s, GTCR’s research in the acute-care hospital sector led us to the view that non-urban hospital owners (particularly municipalities and not-for-profit organizations) would struggle with the rapid changes in the healthcare industry. We developed the thesis that an operationally focused management team could create significant value by driving revenues and profitability at undermanaged hospitals. Our private equity firm’s extensive search for an acute-care hospital executive with whom to partner led us to Martin Rash, the COO of Community Health Systems. During Mr. Rash’s 10 years with Community Health Systems, the company had grown to 40 hospitals. In 1996, GTCR and Mr. Rash agreed to form Province Healthcare, a management start-up targeting the non-urban hospital sector.

Over the following two years, our private equity firm worked closely with Mr. Rash and his team to identify and acquire undermanaged hospitals. Together, GTCR and management transformed the operations of the acquired healthcare facilities by reducing costs, driving revenue growth and integrating eight hospitals into a centrally managed, high-performing company. In 1998, Province Healthcare completed an IPO.

During the ensuing six years, GTCR remained active on the board of directors of Province Healthcare. In particular, our private equity firm worked closely with Mr. Rash to recruit Dan Slipkovich to Province Healthcare as its COO and Mr. Rash’s likely successor. Together, Mr. Rash and Mr. Slipkovich continued to build value at Province Healthcare, acquiring 13 additional hospitals and continuing to improve operating performance. In 2005, LifePoint Hospitals, another publicly traded acute-care hospital company, acquired Province Healthcare.

Following the sale, our private equity firm explored the possibility of re-entering the industry. The opportunity to drive revenue growth and increase profitability at undermanaged hospitals continued to exist, and we committed to a second effort in the sector. GTCR chose to partner with Mr. Slipkovich, who had played a prominent role in the success of Province Healthcare. In late 2005, GTCR and Mr. Slipkovich agreed to formalize a new management start-up called Capella Healthcare, again targeting the non-urban acute-care hospital sector. Several of the senior members of Mr. Slipkovich’s team from Province Healthcare joined the Capella Healthcare management team.

Capella Healthcare, a GTCR portfolio company, acquired its first four hospitals in late 2005. Capella Healthcare has since grown to 13 hospitals, making Capella Healthcare the ninth-largest for-profit hospital operator in the country.