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Ascension Health deal to help spin-off grow

Greg Jefferson, Indianapolis Business Journal, July 31 - August 6, 2000

A for-profit subsidiary of St. Vincent Hospitals and Health Services recently struck a deal with the system's massive parent company to take its business nationwide.

Technology Management Concepts LLC- which contracts with hospitals and physician groups to maintain medical equipment like CT scanners- is working out plans to offer services to Ascension Health's 80 hospitals, nursing homes and other health care facilities nationwide.

Ascension was created in November of 1999 from the merger of St. Vincent owner Daughters of Charity National Health System in St. Louis and Sisters of St. Joseph Health Network in Ann Arbor, Mich. With combined revenue of $6.4 billion in 1999, it is the largest non-for-profit hospital system in the country.

Before its July 1998 spin-off, TMC had been a division within St. Vincent, servicing equipment of hospitals in the system. The north-side based chain is TMC's sole stakeholder.

The firm was forged to open a new revenue stream for the central Indiana network, said TMC President Greg Ranger.

It worked: TMC currently contracts with 26 hospitals around the state, and revenue jumped from $600,000 in its first fiscal year as a stand-alone to $3.2 million for the year ending last June 30. Ranger would not name TMC's current clients, but said interest has been strong among rural facilites, which usually struggle with expenses.

The savings come from TMC technicians' taking over the service and maintenance that hospitals typically have to rely on the equipment manufacturers to provide. On a $1 million piece of equipment, manufactures' fees are often 10 percent, $100,000, while TMC's charges average 4.2 percent, or $42,000, Ranger said.

The venture fits into a larger movement among hospitals, according to John Wyand, head of Olive LLP's health care group in Indianapolis.

"It's part of a ground swell of outsourcing that many, many hospital systems are doing in order to improve quality and reduce costs," Wyand Said. "You see a lot of consulting and supply-chain work being provided, particularly in large systems, by somebody with a core competency in that certain area, which evidently St. Vincent has."

Under the agreement, St. Louis-based Ascension will become a co-owner of TMC, which will then contract with individual hospitals in the network. The company will attempt to cut expenses on medical equipment in return for a management fee that could be pegged to the hospital's savings.

The firm could save Ascension hospitals $51 million over a five-year period, Ranger estimated.

As a result of its Ascension deal, TMC expects to add 18 to its 62 engineers and specialists in the information technology, data management, accounting and marketing. The firm is also planning a move from its current location at 9101 Wesleyan Road on the northwest side to Indiana Technology Park (Intech), also on the northwest side.

TMC benefited from early exposure with one of Ascension's major players- Chief Operating Officer Douglas French, who left his position as president and CEO of St. Vincent in 1998 to take over as COO at Daughters of Charity.

Meanwhile, John Doyle- executive vice president of St. Vincent-anchored network Central Indiana Health System- has also moved temporarily to St. Louis headquarters to assist Ascension in new business development. It's a position that could become permanent, he said.

Doyle, who was recruited by French in 1996, cited the TMC deal as an example of what the Catholic chain is considering. Another example: Ascension could partner with a software company to develop Internet-based supply-chain software.

"Because we are the largest non-profit [hospital operator] in the country, a lot of deals come in the door," he said.