New Fund Aims To Capitalize On Problems Facing U.S. Healthcare System

Feb 20 2013 | 3:38pm ET

Ronnie Hale serves as the fund manager for the newly-launched National Healthcare Development Fund (NHDF). Hale previously served as fund manager for Epic Capital Advisors, and Chairman and CEO of YRSI Holdings. He recently spoke with FINalternatives about the fund and its targeted for-profit alternative investment vehicle, America's ER.

The National Healthcare Development Fund was launched early this year, and called the ‘first of its kind’ within the for-profit retail medicine market. What does that mean? 

The NHDF is the only alternative asset class investment fund designed specifically to generate revenue in the healthcare market using a unique co-ventured fund and physician model. NHDF will generate revenues for its investors from both its portfolio of real estate assets and its operational interests in an emerging healthcare market which has been created as a result of the shortfall across the country in the public’s access to medical care.

The healthcare system in the U.S. has been an evolving and uncertain environment for several years specifically for patients and practitioners. What are some of the challenges facing America’s healthcare system?

As we all know, the healthcare system is already overburdened and getting worse. The factors that led us to this point are tremendously complex and will take years to correct; assuming we even have a workable solution. However, there is one very specific reason that we can point to that is making an already bad situation worse and impacting how care is delivered across the country. There are simply not enough primary care physicians to sufficiently care for the American population. The real question should be, why do we not have enough doctors? The answer is relatively simple. Primary care physicians, or family practice doctors, are the lowest paid physicians in the industry. As a result, becoming a PCP has become very unattractive which has led to a 51% drop in the number of medical students entering family practice. Even with significant incentives, family practice training programs continue to have fewer and fewer applicants and graduates. Fewer graduates mean fewer PCP’s in the community. Fewer practicing doctors means fewer openings to get in and see a doctor. The country’s health is deteriorating. Where will they go for care?

If that doesn’t scare you, according to government statistics this loss of medical students entering family practice means that our country may only have, at best, about 65% of the primary care physicians needed to adequately care for our nation’s population. This is a particularly alarming statistic because given the time it takes to “make” a doctor; there is no way to respond to this shortfall in timely manner that will help us today. The fact is, our nation’s health is greatly at risk and it has to give somewhere within the system.

Emergency departments across the nation are the ones shouldering this added burden. Because patients cannot get into see their PCPs, emergency rooms are being flooded with patients needing medical care. This has resulted in increased waits times, angry patients, over-worked hospital staff; the list goes on. The downstream impact of simply not having enough family practice doctors is enormous and far-reaching throughout the entire system. This has a real life impact on patient health as well. Aside from a mere inconvenience or maybe an unpleasant experience in the ER, a recent study showed that longer wait times in the emergency room can result in an increased chance of dying if you are admitted to the hospital.  Pretty scary statement, but it actually makes perfect sense. If you are really sick and you have to wait to begin treatment because the ER is too crowded for you to be seen right away, your condition may worsen. These researchers discovered that something as simple as waiting can possible kill you. Now, couple that with the fact that a third of existing ERs are projected to close by 2020 and you’ve got a real big problem on your hands.

Without sounding too gloom and doom, if all of that’s not bad enough, Obama-care’s addition of another twenty-five to thirty million newly insured people to the already over burdened system really creates a huge mess. Before Obama-care, one could argue that without insurance, there may be a hesitation to go to the ER or seek treatment by a PCP. Now that they are insured, they will seek care. Who’s going to care for all these people? So you can start to see how all of these variables interact to make the overall situation worse. Its not just one issue. It’s the interplay of many but with very distinct effects: Not enough doctors, crowded ERs, diminishing access to care.

The system, and specifically emergency medical departments, needs desperate help.  That need creates an opportunity to provide a solution. We believe our unique fund model creates that solution by addressing these issues directly. By relieving some of the pressure on our over burdened system, we offer a solution that directly benefits frustrated patients, overworked physicians and as a direct result, our investors.

How is NHDF going to address these unbelievable challenges, and at the same time serve its investors?
Even with all of the complications in healthcare today, the opportunity created by the healthcare crisis is matched only by the opportunity it creates for the investor. It’s that simple. Opportunity is found in the solution to every problem and that’s what we have here, a huge problem in healthcare that is rapidly growing and we offer a solution that is poised to address many of the problems the system faces.

As I’ve said, the problem is an overburdened healthcare system that has reached a tipping point.  Our solution to that problem is to increase access to medical care when and where it’s needed.  From a fever to heart attacks, and everything in between, we can treat it all. One thing I want to make perfectly clear, we are an emergency room, not a walk clinic or urgent care center. Walk in clinics and urgent care centers do not have the same capabilities as we do. Not even close. That’s because we are licensed emergency care facility and they are not. At our ERs, the person responsible for your care will be an emergency room physician; not a nurse, a physician assistant or a non-emergency practitioner. Completely opposite to what you get in an urgent care center or walk clinic. The difference is night and day.

What is great here for the investor besides the obvious? Well according to the centers for Medicare and Medicaid services, healthcare will grow from 2.8 trillion to 4.8 trillion in the next 10 years. That’s nearly a 60% increase in the size of the market. That’s huge when you are talking about an already enormous market. This of course means that healthcare companies and their investors will share in the additional capital flowing into the healthcare sector. The same will be true for our investors.

So as you can see, this is a phenomenal opportunity for investors and I have to say an amazing opportunity for our alternative asset class fund because of our unique model and structure. Like I was saying, our product is a real emergency room, fully licensed with board certified ER Physicians on staff 24/7. Our facilities are capable of handling any medical condition, right now, and not in twenty-one days. We are creating a new access point to all forms healthcare. And because of our model’s structure and how we strategically locate our emergency rooms we are able to maximize operational effectiveness thereby increasing returns for our investors.

What are your criteria for choosing locations?

To start with, we want to be clear, we deliver true emergent patient-centered care with board certified ER doctors, registered emergency room nurses all within a state-of-the-art patient-centered environment. The way our model is designed truly focuses on delivering unparalleled medical care to the areas we serve, 24 hours a day, 7 days a week in convenient locations within working communities.

We believe that by focusing on local markets rather than regional demographics, like traditional healthcare systems do, we’ll be able to reach into those communities and deliver the quality medical care when and where its actually needed. While we can’t turn back the clock to a time when doctors made house calls, we can do the next best thing; we’ve placed a doctor virtually next door by putting a full service true emergent care facility where its needed most, right in the heart of the neighborhood.

How large is the fund and how will you begin to deploy the capital?

For its first project, the National Healthcare Development Fund—a $30 million closed-ended fund—will develop six free standing emergency room facilities. Our goal is to open many more of these funds in order to rapidly expand and provide our solution throughout the nation.

To sum it up, the healthcare system in our country has a serious problem. A problem that at its core, is an issue of supply and demand. Demand for care is growing and supply, or access to that care, is dwindling. The National Healthcare Development Fund’s goal is to increase access. In doing so, we help the patient, the physician, the system as a whole and our investors.

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