HCA heirs could make China Nashville’s new health care frontier

Monday, July 28, 2008 at 2:36am

Forty years ago this summer, a group of Nashville entrepreneurs was plotting to remake American health care, starting with hospitals in Erin and Smithville, Tenn.

The company that grew from those modest beginnings, HCA Inc., helped make health care one of Nashville's dominant industries. Now two generations of HCA's founding family are hoping history will repeat itself as they seek to build their first hospital in China.

Charles A. "Chuck" Elcan and HCA co-founder Thomas F. Frist Jr. have launched China Healthcare Corp. Working with a Chinese partner, they have negotiated a joint venture to build and operate a hospital near the port city of Ningbo, China.

Elcan is married to Frist's daughter Patricia. The new company is not affiliated with HCA.

The hospital will replace an existing facility and will be serve patients within China's public health care system, with some beds set aside for private-pay care. CHC will own a controlling 70 percent interest in the venture, according to Elcan. He would not elaborate further on the dimensions of CHC's investment.

"What they're looking for is the management and the processes that we would bring from the U.S.," explains Elcan, who left an executive vice president position with the Long Beach, Calif.-based health care real estate investment trust HCP Inc. in April.

Elcan says his team is in the process of applying for permission from the central government, which can take from four to nine months to render a decision. "It could possibly be turned down, and then the game is over," Elcan says. "Fortunately, the negotiation part is really over with."

Chinese authorities announced measures last year to encourage foreign health care companies to invest in the country. In a March 2007 press conference, Health Minister Gao Qiang said that "foreign invested hospitals will be strictly supervised by the Chinese government, but there will no intervention in the economic management of these hospitals."

The government has good reason to welcome Nashville-style health care entrepreneurship, says Julie Chen. It's one way to hold off a revolution.

Chen, a senior vice president with investment bankers CRT Capital Holdings LLC in Stamford, Conn., covers Chinese business and health care. She says the Chinese regime has targeted improvements in health care as a key element in its efforts to maintain social harmony amid the dramatic changes sweeping through the country's economy.

"China right now is afraid of unrest among the poor population," Chen says.

If CHC's venture succeeds, "it would open the floodgates" to further American investment, Chen predicts. Since Chinese entrepreneurs lack the capital and expertise to bring about improvements on their own, she thinks the central government is likely to take a favorable view of further interest from Nashville's health care niche players - such as developers of ambulatory surgery centers and specialty clinics for various diseases.

Yes, says Elcan, the authorities are eager to do business. However, he adds, sighing wearily, "everything goes through a process."

Slogging through the bureaucratic necessities will be worth the effort if CHC's public-private hospital model turns out to work. "If the first one is successful, we will be looking to roll out additional hospitals through either acquisition or ground-up development," Elcan says.

Joel Gordon, like HCA's founders, was creating a new private hospital company 40 years ago - General Care Corp., another forerunner to numerous local healthcare enterprises. He sees great potential in what Elcan and Frist are trying to do.

"If they are successful, it would certainly give a roadpath to other possibilities in China," Gordon says. "Something this significant would surely inspire other entrepreneurs to pursue that market."

"I think it could be very exciting," Gordon adds. "Chuck's a good fellow. If anybody can make it successful, he certainly can."

There are other local health care firms with international operations. HCA is a leading private health care provider in England. Healthways Inc. has exported its disease-management concept with new contracts in Germany and Brazil this year, and the company has set up subsidiaries in France, Ireland, Luxembourg and the UK.

Global expansion, however, has not previously been a focus for many in the Nashville health care community. Business models that work well in the U.S. do not necessarily translate in countries with different public health systems, traditions and resources. HCA sold its two hospitals in Switzerland last year, and Community Health Systems Inc. divested the Irish hospital it had acquired in last year's merger with Triad Hospitals Inc.

Still, Elcan knows he has company in eyeing China's population of 1.3 billion as a health care market. "A lot of people are looking," he says.

"If somebody does break the ice, whether it's us or someone else, others will beat a path behind them."

This version corrects misidentification of Thomas F. Frist Jr.

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