Nonprofit Lender Aims to Spur Care Delivery

Vital Healthcare Capital has launched a nine-figure drive to jumpstart spending on care for a costly cohort of underserved patients and to invest in the development of frontline healthcare workers.

Deep-pocketed investors are bankrolling a bold effort to revolutionize healthcare delivery for high-risk patients.

"It's one of our concluding big bets," says Sara Kay, head of advocacy and health equity programs at Bermuda-based Atlantic Philanthropies, the world's largest limited-life foundation.

The private foundation, established in 1982, has disbursed grants valued at more than $7 billion and is slated to cease grant activity by the end of 2016. As part of last year's spend-down activity, it awarded a $12.5 million grant to Boston-based Vital Healthcare Capital (V-Cap).

Financing efforts to retool care delivery for high-risk patients, including people with multiple chronic conditions who are the high-flyers of healthcare spending, "is the biggest opportunity to affect how care is delivered," says V-Cap CEO Steven Weingarten. "These high-need patients have been underserved by our siloed system of care, while consuming the highest amount of resources."
 
Launched in May 2014, V-Cap is a 501(c)3 nonprofit financing organization. It offers three types of loans:

1. Business financing for working capital, infrastructure and equipment, and cash reserves linked to regulatory requirements;
2. Facilities loans such as acquisition and construction financing for healthcare facilities, particularly in disadvantaged communities;
3. Bridge loans to help healthcare providers respond rapidly to opportunities to serve at-risk patients.

"We're not just limited to facilities and traditional service needs. We have flexibility," Weingarten says.

Last month, V-Cap announced the formation of a $30 million fund to accelerate the organization's lending activity. Managers of the fund plan to establish a $100 million revolving-loan fund over the next five years.

Weingarten says V-Cap is willing to understand and probe the changing context of the healthcare market whereas a traditional lender "may not take the time to understand a [healthcare] organization and its sources of strength."

Partnering to Balance Risk
V-Cap loans are targeted to range from between $500,000 and $5 million and larger projects are "typically [looked at] with other lending institutions," he says.

The nonprofit lender's largest loan to date, which was also its first financing project, followed the joint lender model. The $10 million loan to Boston-based Commonwealth Care Alliance (CCA) in June 2014 was made with financial support from the Robert Wood Johnson Foundation in Princeton, NJ.

CCA is a not-for-profit healthcare payer that features a prepaid care delivery network for about 16,000 Medicare- and Medicaid-eligible beneficiaries in Massachusetts. Most of the beneficiaries are medically complex patients, which make CCA an ideal candidate for V-Cap financing. Atlantic Philanthropies' Kay says CCA patients receive "much better, much richer" care than the vast majority of their peers across the country.

V-Cap exemplifies the kind of transformative "big bets" that Atlantic Philanthropies is wagering as the foundation whittles away its endowment. "The concluding round [of grant disbursement] is not limited by past practices or guidelines. The V-Cap grant falls into this category because it is market-changing, Kay says. "This grant is different in nature and size. Even for a foundation, this is a large grant."

In the past, Atlantic Philanthropies has focused on programmatic grants. "This grant is marketplace-facing and functions as an impact investment. It's more valuable to the grantee because it doesn't have to be paid back, so it brings others in by reducing their risk of loss."

V-Cap and Atlantic Philanthropies share the same values and ambitions. "We have a social justice mission, so that's kind of our sweet spot," she says, noting V-Cap's commitment to investing in healthcare organizations that provide high-quality service to high-risk patients in disadvantaged communities.

"At-risk patients are the people who tend to be poorly served by the healthcare system we have because it's so fragmented. By focusing on these at-risk groups, we feel we are going to make the healthcare system better for everyone."

"Forcing the whole system into a more integrated framework," Kay believes, "is better for everybody."

The foundation also embraces V-Cap's focus on workforce development in the healthcare industry, Kay says. "The healthcare sector is one of the fastest-growing sectors in the U.S. economy. It's important to develop the care models [alongside workforce development]. It's an incredible employment opportunity. Part of V-Cap's mission is to create good jobs… in this growing market segment."

Workforce Development
Last month, V-Cap's workforce development mission drew $5 million in financing from New York-based JPMorgan Chase & Co. "Healthcare is one of the key areas of opportunity," says Chauncy Lennon, managing director of global philanthropy for the banking behemoth, which holds assets totaling $2.4 trillion. "There are a lot of middle-skilled jobs in healthcare. The rest of the economy is U-shaped, with high-end or low-end jobs. In healthcare, you have a lot of technically skilled positions. They're skilled, pay good wages, have good career growth, but don't require a bachelor's degree."

V-Cap's focus on workforce development for frontline caregivers was a crucial selling point for gaining JPMorgan Chase's financial backing, Lennon says. "There's a way to succeed while investing in your workers," he says about efforts to design training programs for the kind of mid-level jobs that employers are struggling to fill. "V-Cap is working directly with employers and helping them adopt the right strategy around recruitment and training."

JPMorgan Chase is urging healthcare providers and payers to "take the high road" strategy for workforce development, insisting that cutting wages is a losing game plan for all industry stakeholders. "You can provide service, make profits, and pay workers at the same time," Lennon says.

V-Cap is seeking to support workforce development efforts that include "compensation that is going to create a new set of good-paying jobs," Weingarten says. "Organizations in the pipeline of transactions" include healthcare providers who want financing to help raise pay for frontline workers and to launch training programs.

There are daunting hurdles to transforming the delivery of healthcare services to high-needs patients, but raising capital should not be problematic, Kay maintains. She notes the significant resources held at large health systems and payers and to the nation's 17%-of-GDP healthcare spend, which just broke the $3 billion mark. "It's hard to believe there isn't enough money."