Bill Frist, Contributor
Why is Nashville considered the health services capital of the United States?
Because Middle Tennessee is a health ecosystem like no other. Nashville by far has greater reach and touches more patients through health service delivery than any city in the United States.
One company (HCA) in Nashville has 35 million patient encounters annually, more than any health system in America. Another (HealthStream) virtually educates a quarter of a million unique healthcare professionals—every 24-hours! Yet another (Change Healthcare), one of the largest healthcare IT companies in the country, every year touches 1 in 3 patient records.
1968: Nashville’s health services origins take root
The Nashville health service ecosystem had its origins 53 years ago when a young physician Tommy Frist and his father (my brother and father) came up with the then-novel idea of linking hospitals to achieve economies of scale and accessing public markets for capital. They, along with Jack Massey, founded Hospital Corporation of America (HCA). Since that time a continually growing stream of health entrepreneurs and managers have operated out of Middle Tennessee, where the unique Nashville healthcare culture actively and proudly promotes entrepreneurship, mentorship, and sharing ideas and lessons learned along the way.
Nashville began as a “hospital town.” Most of the original investor-owned hospital chain systems either were founded in or transferred their headquarters to Nashville. Indeed, Nashville companies today own or manage 15% of all hospital beds in the countryand approximately half of all investor-owned beds. HCA, with 49,000 beds, has the nation’s largest health system of doctors (47,000 practicing in HCA facilities, along with 98,000 registered nurses) and is nearly twice as big as the next system (Ascension, with 28,000 beds). Forbes (2020) ranks HCA as the largest non-MedTech healthcare company in the world.
The Nashville “Family Tree” (the vividly descriptive graphic designed by Wall Street analysts in the late 1990s to illustrate the connectedness of companies evolving from the early days of HCA) rapidly grew into a robust cluster of dynamic health businesses.
Renowned Harvard economist and business expert Michael Porter explains the power of single-sector business clusters: “Proximity—the colocation of companies, customers, and suppliers—amplifies all of the pressures to innovate and upgrade.”
The vibrancy of Nashville’s healthcare market reflects all of the synergies of the geographic concentration of interconnected healthcare companies that Porter describes:
Today Nashville is home to more than 500 healthcare companies that impact the healthcare landscape locally, nationally, and internationally. Nashville is the corporate headquarters to 17 publicly traded healthcare companies. The Middle Tennessee healthcare industry generates globally more than $92 billion in revenue and more than 570,000 jobs. In addition, Nashville is home to nearly 400 professional service firms (accounting, architecture, finance, legal) that provide health industry expertise to clients in all 50 states.
And the culture of Nashville, while healthily competitive with such a high concentration of health businesses, is also proudly collaborative—demonstrated by the 25-year-old Nashville Health Care Council, which forges collegial relationships, fosters dialogues, and mentors rising leaders. The brainchild of some of Nashville’s original, forward-thinking healthcare innovators, the Council is foundational to the community’s expansive growth, bringing together more than 300 member companies headquartered in and outside of Tennessee for dozens of events, study trips, and courses attended by nearly 7,000 annually. The cumulative pooling of health-related talent produces a compounding effect: an ever-stronger center of gravity to attract even more healthcare and technology expertise, and a force multiplier for additional businesses to be established.
As Nashville matures, so does its healthcare industry
The Nashville cluster evolves with the changing times. As an example, Nashville’s large hospital systems now include massive outpatient reach. LifePoint Health, which operates 88 hospitals in 29 states (more states than any other system in the country) achieves 60% of its revenue from outpatient care. HCA now has close to 2,000 outpatient sites of care delivery, including 123 surgery centers, 170 urgent care clinics, and 104 freestanding emergency rooms. Each day HCA has more than 25,000 emergency room visits.
The immense Nashville network spans the continuum of care, from the beginning of life through the end. HCA Healthcare delivers one out of every 17 babies in the country (over 224,000 babies) each year. And for those later in life, Brookdale Senior Living BKD +1.5% is the largest assisted living company in the US, with 64,000 residents living in 726 locations.
Building on the strong foundation of delivering care to patients nationwide, Nashville is seeing an explosion in health data, analytics, and information technology. Change Healthcare, for example, uniquely positioned at the center of the healthcare ecosystem, processes over 15 billion clinical and financial healthcare transactions per year, including over $1.5 trillion in healthcare payment transactions. Emids Technologies has touched 140 million lives through clinical and claims systems they’ve built, while electronic healthcare record company MEDHOST, Inc. has partnered with over 1,000 hospitals nationwide.
In behavioral health, Nashville is a national leader as well. Acadia Healthcare, addressing the growing, unmet need for accessible, high-quality behavioral health services, is one of the nation’s largest stand-alone behavioral health companies. It operates a network of 227 behavioral healthcare facilities with 9,900 beds in 40 states and Puerto Rico.
And the smaller but growing pharmaceutical sector is led by publicly traded, specialty drug producer Cumberland Pharmaceuticals, whose development pipeline and FDA-approved products address some of the world’s biggest health challenges. In addition, the region is rapidly attracting new, cutting-edge entrants such as August Bioservices, an expanding contract pharma biotech company which partners on drug discovery, development, and manufacturing.
Nashville is also home to PathGroup, one of the largest private providers of pathology, clinical and molecular laboratory services in the United States, as well as laboratory sciences company Aegis Sciences Corporation, which recently announced a contract with the CDC to conduct next-generation sequencing analysis of SARS-CoV-2.
And Nashville’s reach isn’t limited to the United States. In Greater London, HCA accounts for a third of all hospital admissions and 40% of the healthcare revenue, working with 3,000 consulting doctors. And until 2021, Acadia boasted a robust, countrywide UK presence through its Priory brand, which it recently sold to Waterland Private Equity.
Beyond industry, taking the lead in medical education
The Middle Tennessee health ecosystem is not just about investor-owned sectors. Nashville is home to two medical schools, Meharry Medical College and Vanderbilt University Medical Center. Meharry is the nation’s largest private, historically black academic health sciences center and the only medical school whose stated purpose is to train physicians and dentists to treat the underserved (“to eliminating health disparities through education, research, and patient care”). It has produced 41% of all African American dentists practicing in the United States.
Building human capital for the future, Vanderbilt is the largest clinical training center in the Southeast, with over 1,000 residents and clinical fellows training in more than 100 specialties. And Vanderbilt is the nation’s research leader in biomedical informatics with over 100 informatics faculty, the largest geographically centered bioinformatics department in the country. The Vanderbilt genomics database BioVU is the nation’s largest single-site DNA bank linked to electronic health records. As for specialty care, the Vanderbilt Heart Transplant Center, which I helped found, is today the largest in the world, performing annually more heart transplants than any other hospital center globally.
Innovators, disruptors, and the supporting investors
Over the past decade there has been an explosion in new health service companies founded and grown in Nashville. Nashville startups have gone on to become disruptors and industry leaders, including Aspire Health (becoming the largest community-based, non-hospice palliative care company) and home-based nursing management company myNEXUS (provides support to 1.7 million Medicare Advantage members in 20 states). NaviHealth is pioneering senior-centered care, partnering with health systems and health plans nationwide with over 8 million lives under post-acute care management, touching one of every four discharges nationally. And Brentwood-based Premise Health, serving more than 2,200 of the largest commercial and municipal employers, is the nation’s leading direct healthcare provider with more than 800 wellness centers located onsite or near-site in the communities of the 45 states they serve.
To support this innovation and entrepreneurship, private investment firms are migrating to Nashville. In the last two years, New York-based Starr Investment Holdings moved its healthcare group to Nashville, billion-dollar Chicago private equity firm Shore Capital Partners opened a healthcare-focused Nashville office, and Atlanta’s MSouth Equity Partners chose Nashville for their expansion. And two new, Nashville-based firms focused on building transformational healthcare companies—Rubicon Founders and Russell Street Ventures—were founded by dynamic individuals who each had led the federal government agency in Washington, DC specifically charged with creating health delivery innovation in Medicare and Medicaid, the Center for Medicare and Medicaid Innovation.
These newer entrants join a strong foundation of existing pure healthcare investment firms, including private equity firms Cressey and Company, Pharos Capital, Claritas, Petra Capital, and Council Capital, and venture capital groups Frist Cressey Ventures, Health Velocity Capital, Martin Ventures, Heritage Group, Mountain Group Partners, and many others. These firms actively create and build younger companies, taking advantage of the rich, local, human capital markets and creative knowledge base clustered in the region.
And the large national payor community also recognizes the unique and special role the Nashville ecosystem plays in creating strong, innovative companies that shape and improve our healthcare system. Anthem acquired both Aspire Health and myNEXUS, and UnitedHealth Group’s UNH -0.5% Optum business arm recently acquired both NaviHealth and Change Healthcare (pending).
Population health, social determinants, and NashvilleHealth
Nashville not only delivers health services to every other state in the union, but it also focuses on the population health of its own citizens. Specifically addressing social determinants and health equity in the community, six-year-old NashvilleHealth is a unique, broadly supported community collaborative I launched to bring together industry executives, public health officials, nonprofits, and faith leaders to move the needle on the health and well-being of the entire Middle Tennessee population. It focuses on hypertension, smoking, maternal and child health, the built environment, and the “culture of health and wellbeing.”
Partnering with the Nashville Chamber of Commerce, the Nashville Health Care Council, and the Meharry Medical College Center for the Study of Social Determinants of Health, NashvilleHealth is currently convening diverse stakeholders to examine comprehensively and critically the city’s Covid-19 response and better position the city for the next major health crisis. This disciplined, major after-action review is a model for other mid-sized cities nationwide.
The “It” city for growth, entrepreneurship, and families
Nashville today is regarded as an “It” city, attracting energized, creative people from around the country. Its culture of creativity, dually grounded in music (boasting the highest concentration of music industry jobs in the U.S., more than Los Angeles and New York City) and innovation in health services, coupled with a strong pro-business tax and labor environment, provides the rich substrate for progressive, dynamic growth.
All this leads to job growth and opportunity. Nashville ranks second in the U.S. for job creation over the last decade (2010 – 2019), behind Austin but ahead of Orlando, Raleigh, Charlotte, Dallas, and Denver. And it has been a top 10 metropolitan area for overall population growth for the past five years.
Why is the Middle Tennessee economy so consistently stable? The broad diversity and counterbalance of sectors within the city’s economy explain why Nashville tends not to suffer as much as others during economic downturns. The four major economic drivers in Nashville are healthcare ($67 billion economic impact), advanced manufacturing ($70 billion), music and entertainment ($16 billion), and tourism and hospitality ($21 billion).
For families Nashville is an affordable and attractive place to live with the cost of living well below the national average. And most noticeable to those moving to Nashville, the estimated burden of major taxes for a family earning $75,000/year is less than Seattle, Denver, Charlotte, and Atlanta (and substantially lower than Chicago, Los Angeles, and New York City). Attractive to businesses for logistics and families for travel, Nashville is geographically centered. Two thirds of the nation’s population live within 650 miles of Nashville, meaning it’s just a short flight or drive for vacations or business.
Nashville is a land of healthcare opportunity. With the unparalleled foundation of healthcare experience, knowledge, and wisdom, Nashville will continue to be a powerful magnet for individuals and businesses with a healthcare focus, consistent with its well-earned reputation as the health services capital of the nation. The one-of-a-kind, Nashville healthcare services cluster yields influence in every state in the country and drives innovation and productivity in an ecosystem that is dynamic, attractive, and inviting to all.
If you dream of improving the healthcare for others around the world, Nashville is the place to be!
Middle Tennessee Public Healthcare Companies (by size)
Source: Nashville Business Journal
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