Ovation Healthcare finds profit in nonprofit rural health providers

Hospital operations, management and consulting companies can provide an avenue for private equity firms to harvest profits from nonprofit and public healthcare providers.

Ovation Healthcare (formerly QHR Health)[1] owned by private equity firm Grant Avenue Capital since 2021, focuses on independent and rural hospitals.[2]

Ovation Healthcare is a hospital advisory and operations company. On QHR’s website prior to its rebranding as Ovation Healthcare, it called itself the “largest hospital management firm in the U.S.,” reporting that its hospital management and advisory services have served 700 clients with an average client tenure of 21 years. As of January 2023, QHR reported having hospital management clients across 33 states,[3] and 105 multi-year hospital clients across 40 states, overall.[4]

Private equity firm Grant Avenue Capital acquired Ovation Healthcare from Quorum Health Corporation in June 2021.[5] Many of the clients Ovation is working with now are clients it had before the acquisition.

The case studies involving Ovation’s management of rural hospitals around the country discussed below raise questions about the relationship between for-profit hospital operations companies with their nonprofit clients, and how private equity ownership may impact these relationships further.

Montrose Regional Health – Montrose, CO

In Montrose, Colorado, Ovation had a 30-year relationship with the local hospital, Montrose Regional Health.[6] In tax year 2020, the hospital paid Ovation $913,561 for a hospital management contract, which included management fees and the cost of a CEO and CFO to whom Ovation paid salaries.

In 2020, the hospital ended the relationship and hired a nonprofit hospital management company.[7] Ovation has since partnered with a venture capital firm, Colorado Outdoors, LLC, to construct an ambulatory surgery center in the community that is slated to open in 2024.[8]Velocity Surgical Management, one of Ovation’s subsidiaries, will manage the center.[9] This center will be in direct competition with Montrose Regional Health, which is also opening an ambulatory care center.

While the CEO of Ovation, Dr. Dwayne Gunter, maintains that their outpatient center will not be a threat to the local hospital and may even help prevent a ”larger entity from coming to set up an inpatient care facility,” the Montrose Regional Health board does not share that view. The board president, Kjersten Davis, told the Montrose Daily Press in March 2022 that ”having a duplicate service in the same town threatens everyone’s ability to offer health care at the cheapest price.”[10] According to Davis, competition is not always a good thing in a “certain size market,” because if volumes are too low, then the providers “tend to raise prices.”[11]

The hospital’s CEO, Jeff Mengenhausen, published an editorial in the Montrose Daily Press less than a month later. He wrote:

“We have a different point of view on how the medical clinic being proposed by the national firm [Ovation] in the Colorado Outdoors area will affect Montrose Regional Health and your care providers. Since [Ovation] is a for-profit entity, they need to generate revenue to support their national shareholders. Are they going to accept every patient regardless of their ability to pay? Are they going to be here to support the local events, give back through a health fair, support your children’s sports’ team? What is their motive for coming to Montrose?… [Ovation] can choose to offer only the services that receive the highest reimbursement and gather those patients to make a profit, while we need all of the services to properly care for our communities.”[12]

Both the hospital’s and Ovation’s ambulatory surgery centers are in the construction phases, with Ovation’s expected to open first.[13]

Ovation’s decision to remain in a rural community after the local hospital ended its contract with the firm, and to then go on and compete with the hospital despite Ovation’s considerable financial advantage as a large, national company backed by private equity, deserves further scrutiny.

Springfield Hospital – Springfield, VT

In Springfield Vermont, Ovation entered into a management contract in 2018 with the local hospital.[14] Ovation continued to collect management and contract fees even as the hospital cut services and filed for bankruptcy in June 2019.[15]

During that year, the hospital paid $845,536 to Ovation for management services, which includes compensation for a CEO and CFO. In its 2020 990 form, the hospital claims it was not aware of the amount of compensation paid to the CEO and other executives by Ovation.[16]

A local newspaper reported in 2020 that Ovation was costing the hospital over $100,000 per month even as the hospital had filed for bankruptcy.[17]

Under Ovation’s leadership from 2019-2021, Springfield Hospital closed its Childbirth center and reduced the workforce.[18] Despite these cuts and a state bailout, Springfield Hospital is still experiencing financial woes.[19] Ovation advertised Springfield Hospital as a success story on its former website,[20] and advertises it as a successful turnaround currently.[21]

Recent large-scale partnerships

Since its rebranding to Ovation, the company has announced two large-scale partnerships with nonprofit healthcare associations: Idaho Hospital Association (IHA) and Illinois Critical Access Hospital Network (ICAHN).[22] The IHA partnership will expand Ovation’s access to clientele for its revenue cycle management and supply chains services,[23] and the ICAHN partnership will expand Ovation’s access to clientele for its clinical advisory services and care management solutions.[24] As part of the partnerships, Ovation will offer complimentary educational webinars for members of the nonprofit associations.

Profiting from nonprofits

Struggling rural hospitals often decide it is necessary to bring in consultants and management groups to help achieve financial solvency. Healthcare administration is often mired with excessive bureaucracy and regulatory complexity, and so many hospitals can and do benefit greatly from hiring experts to help.

However, achieving financial solvency is not always in alignment with community needs. Oftentimes it involves layoffs, closing lines of service that do not produce revenue but are important nonetheless (e.g. labor and delivery), and adding lines of services that are profitable but not necessarily a community need (like sleep study services).

Ovation Health has subsidiary companies and additional services, such as supply chain solutions, that many of its clients end up contracting with or paying for.[25] Through these services, Ovation can offer economies of scale.[26] Through its new partnerships with IHA and ICAHN, Ovation could theoretically develop a competitive advantage in certain geographic areas for specific types of services, like revenue cycle management. Yet, as a hospital operations and advisory company that contracts with, rather than owns, hospitals, it is not subject to the same legal or regulatory antitrust scrutiny as a hospital chain.

The fact that a for-profit (and now private equity-owned) hospital operations and advisory company has a business model that extracts revenues from nonprofit, oftentimes struggling critical access and rural hospitals, is cause for concern and warrants further scrutiny.[27]

QHR’s rebranding to Ovation Healthcare

On March 8, 2023, QHR announced its rebranding to Ovation Healthcare. [28] With the rebranding, its service lines were re-named and even recharacterized.[29]

For example, it no longer advertises itself “strategic hospital management services,” instead advertising a service line called “Octave Leadership Advisory Services.” Its new website explains,

“For hospitals facing immediate challenges, we specialize in turnaround services, including access to capital, rapid savings opportunities, and advisory services. Our experts bring deep expertise and access to alternative models, and when necessary, lead organizations through restructuring to achieve ongoing viability.”[30]

It is unclear if Ovation will phase out hospital management services and only provide consulting/advisory services in the future, or if it is simply deploying new language.

In addition, its revenue cycle management arm was rebranded from ResolutionRCM to Amplify and its supply and expense management solutions were rebranded from PLUS to Elevate.

The press release announcing the company’s rebranding does not suggest changes to services, but rather changes to its clientele following its self-reported rapid growth. Prior to rebranding, QHR marketed itself to community and rural hospitals. [31] The March 8 press release indicates that Ovation is hoping to reach larger clients, as well:

“The launch of Ovation Healthcare follows a year-long initiative to capture both the company’s 45-year legacy supporting independent community healthcare and its rapid growth, which positions the organization as a solution to hospitals and health systems of all sizes.”[32]

It is not unusual for companies to rebrand themselves, especially following an acquisition. However, QHR’s rebranding to Ovation and the lack of archived content on its new website[33] about its past business dealings may make it difficult for regulators, current clients, and future clients, to find information about the company.

For more information on private equity investment in rural health, see PESP’s January 2023 report, “Private Equity Descends on Rural Healthcare.”

[1] In March 2023, QHR Health rebranded as Ovation Healthcare. Throughout this blog, we will use Ovation to refer to the company both before and after the rebranding. Note that some of the cited documents and sources will use the previous brand name, QHR Health.

[2] QHR Health Becomes Independent Company Through Acquisition by Grant Avenue Capital,” QHR Health, June 1, 2021, https://web.archive.org/web/20230131040707/https://qhr.com/news/qhr/qhr-health-becomes-independent-company-through-acquisition-by-grant-avenue-capital/

[3] QHR Health. “Strategic Hospital Management Services.” https://web.archive.org/web/20221208204511/https://qhr.com/solutions/hospital-management/.

[4] QHR Health. “Hospital Shared Services & Consulting Solutions.” Accessed November 14, 2022. https://web.archive.org/web/20230131031831/https://qhr.com/solutions/.

[5] Kara Hartnett, “Quorum Sells Consulting Arm to NYC Firm,” Nashville Post, accessed September 19, 2022, https://www.nashvillepost.com/business/health_care/quorum-sells-consulting-arm-to-nyc-firm/article_3605d49e-c300-11eb-a939-3f746ce4a35f.html ; “QHR Health Becomes Independent Company Through Acquisition by Grant Avenue Capital,” QHR Health, June 1, 2021, https://web.archive.org/web/20230131040707/https://qhr.com/news/qhr/qhr-health-becomes-independent-company-through-acquisition-by-grant-avenue-capital/.

[6] Katharhynn Heidelberg, “QHR Health: Medical Center at Colorado Outdoors Is Win for Area, Patients and Will Help Hospital,” Montrose Daily Press, May 18, 2022, https://www.montrosepress.com/news/qhr-health-medical-center-at-colorado-outdoors-is-win-for-area-patients-and-will-help/article_c21644fe-9aa6-11ec-a836-af7cc0abf5c9.html.

[7]  Katharhynn Heidelberg, “Montrose Regional Health: Hospital’s New Name Designed to Reflect Regional Mission,” Montrose Daily Press, October 26, 2021, https://www.montrosepress.com/news/montrose-regional-health-hospitals-new-name-designed-to-reflect-regional-mission/article_1a85f134-33a0-11ec-b837-23af53bde52b.html.

[8] Sam Klomhaus, “Colorado Outdoors Breaks Ground on Outpatient Medical Center,” The Grand Junction Daily Sentinel, June 6, 2022, https://www.gjsentinel.com/news/western_colorado/colorado-outdoors-breaks-ground-on-outpatient-medical-center/article_7d8e3b8e-e38f-11ec-a790-cb7c39ff631e.html.

[9] Sam Klomhaus, “Colorado Outdoors Breaks Ground on Outpatient Medical Center,” The Grand Junction Daily Sentinel, June 6, 2022, https://www.gjsentinel.com/news/western_colorado/colorado-outdoors-breaks-ground-on-outpatient-medical-center/article_7d8e3b8e-e38f-11ec-a790-cb7c39ff631e.html.

[10] Katharhynn Heidelberg, “QHR Health: Medical Center at Colorado Outdoors Is Win for Area, Patients and Will Help Hospital,” Montrose Daily Press, May 18, 2022, https://www.montrosepress.com/news/qhr-health-medical-center-at-colorado-outdoors-is-win-for-area-patients-and-will-help/article_c21644fe-9aa6-11ec-a836-af7cc0abf5c9.html.

[11] Katharhynn Heidelberg, “QHR Health: Medical Center at Colorado Outdoors Is Win for Area, Patients and Will Help Hospital,” Montrose Daily Press, May 18, 2022, https://www.montrosepress.com/news/qhr-health-medical-center-at-colorado-outdoors-is-win-for-area-patients-and-will-help/article_c21644fe-9aa6-11ec-a836-af7cc0abf5c9.html.

[12] Jeff Mengenhausen, “Let’s Keep It Local: Hospital Is Invested in Communities,” Montrose Regional Health (blog), March 21, 2022, https://montrosehealth.com/guest-column/lets-keep-it-local-hospital-is-invested-in-communities/.

[13] Wiersma, Brad. “Ambulatory Care Center (ACC).” Montrose Regional Health (blog). Accessed November 16, 2022. https://montrosehealth.com/about/ambulatory-care-center-acc/; Klomhaus, Sam. “Colorado Outdoors Breaks Ground on Outpatient Medical Center.” The Grand Junction Daily Sentinel, June 6, 2022. https://www.gjsentinel.com/news/western_colorado/colorado-outdoors-breaks-ground-on-outpatient-medical-center/article_7d8e3b8e-e38f-11ec-a790-cb7c39ff631e.html

[14] Holmes, Chip. “How QHR Health Helped Springfield Hospital Navigate a Financial Turnaround.” QHR Health (blog), August 23, 2022. https://web.archive.org/web/20230131034638/https://qhr.com/resources/how-qhr-health-helped-springfield-hospital-navigate-a-financial-turnaround/

[15] Savage, Katy. “Springfield Hospital and Health Centers to Go Separate Ways.” VTDigger, March 4, 2020. https://vtdigger.org/2020/03/04/springfield-hospital-and-health-centers-to-go-separate-ways/.

[16] Pg. 54, “2020-990 Springfield Hospital.” Accessed November 16, 2022. https://pdf.guidestar.org/PDF_Images/2020/030/179/2020-030179437-202132289349302868-9.pdf?_gl=1*1u2wtxt*_ga*Mjc5MjMyMDkyLjE2NjYxMTc3MzM.*_ga_5W8PXYYGBX*MTY2ODQ4NDAwMi41LjEuMTY2ODQ4NDAyMy4zOS4wLjA.&_ga=2.178775905.478439763.1668484003-279232092.1666117733.

[17] Katy Savage, “Springfield Hospital and Health Centers to Go Separate Ways,” VTDigger, March 4, 2020, https://vtdigger.org/2020/03/04/springfield-hospital-and-health-centers-to-go-separate-ways/.

[18] Robert Adcock et al., “FY22 Green Mountain Care Board Budget Presentation,” 6, https://gmcboard.vermont.gov/sites/gmcb/files/documents/SH%20FY22%20Budget%20Presentation%208-25-21GMCB%20Amended%20Submission.pdf.

[19] Nora Doyle-Burr, “After Bailout from the State, Springfield Hospital Still Struggling Financially,” Valley News, August 10, 2021, sec. News/Health-Care, https://www.vnews.com/Springfield-Hospital-continues-to-lose-money-41791687; Robert Adcock and Kayda Wescott, “FY23 Budget Presentation Fragile-Yet Persevering – in a World of Chaos,” https://gmcboard.vermont.gov/sites/gmcb/files/documents/GMCB23Presentation%20FINAL%20081222.pdf.

[20] Chip Holmes, “How QHR Health Helped Springfield Hospital Navigate a Financial Turnaround,” QHR Health (blog), August 23, 2022, https://web.archive.org/web/20230131034638/https://qhr.com/resources/how-qhr-health-helped-springfield-hospital-navigate-a-financial-turnaround/.

[21]Click “Turnarounds” next to Octave Leadership Advisory Services to read, “In working with Octave, Springfield Hospital in Vermont went from having one day of cash on hand to over 40 days cash and $18 million in net income.”

[22] Ovation Healthcare. “Ovation Healthcare & Idaho Hospital Association Partner to Strengthen Idaho Hospitals,” April 10, 2023. https://ovationhc.com/ovation-healthcare-idaho-hospital-association-partner-to-strengthen-idaho-hospitals/; Ovation Healthcare. “Ovation Healthcare & Illinois Critical Access Hospital Network Partner to Strengthen Illinois Hospitals,” April 3, 2023. https://ovationhc.com/ovation-healthcare-illinois-critical-access-hospital-network-partner-to-strengthen-illinois-hospitals/.

[23] Ovation Healthcare. “Ovation Healthcare & Idaho Hospital Association Partner to Strengthen Idaho Hospitals,” April 10, 2023. https://ovationhc.com/ovation-healthcare-idaho-hospital-association-partner-to-strengthen-idaho-hospitals/

[24] Ovation Healthcare. “Ovation Healthcare & Illinois Critical Access Hospital Network Partner to Strengthen Illinois Hospitals,” April 3, 2023. https://ovationhc.com/ovation-healthcare-illinois-critical-access-hospital-network-partner-to-strengthen-illinois-hospitals/

[25] Ovation Healthcare. “Ovation Healthcare | Our Solutions.” Accessed April 21, 2023. https://ovationhc.com/solutions/.

[26] Ovation Healthcare. “Ovation Healthcare | Our Solutions.” Accessed April 21, 2023. https://ovationhc.com/solutions/; QHR Health. “Hospital Shared Services & Consulting Solutions.” Accessed November 29, 2022. https://web.archive.org/web/20230131031831/https://qhr.com/solutions/.

[27] O’Grady, Eileen, Mary Bugbee, and Michael Fenne. “Private Equity Descends on Rural Healthcare.” Private Equity Stakeholder Project, January 2023. https://pestakeholder.org/wp-content/uploads/2023/02/PE_Rural_Health_Jan2023-compressed.pdf.

[28] Ovation Healthcare. “QHR Health Announces Rebrand to Ovation Healthcare,” March 7, 2023. https://ovationhc.com/qhr-health-announces-rebrand-to-ovation-healthcare/.

[29] Ovation Healthcare. “Ovation Healthcare | Our Solutions.” Accessed April 21, 2023. https://ovationhc.com/solutions/; QHR Health. “Hospital Shared Services & Consulting Solutions.”https://web.archive.org/web/20230131031831/https://qhr.com/solutions/.

[30] Ovation Healthcare. “QHR Health Announces Rebrand to Ovation Healthcare,” March 7, 2023. https://ovationhc.com/qhr-health-announces-rebrand-to-ovation-healthcare/.

[31] QHR Health. “Strategic Hospital Management Services.” https://web.archive.org/web/20221208204511/https://qhr.com/solutions/hospital-management/.

[32] Ovation Healthcare. “QHR Health Announces Rebrand to Ovation Healthcare,” March 7, 2023. https://ovationhc.com/qhr-health-announces-rebrand-to-ovation-healthcare/.

[33] For example, the following case studies are unavailable on the new website: Chip Holmes, “How QHR Health Helped Springfield Hospital Navigate a Financial Turnaround,” QHR Health (blog), August 23, 2022, https://web.archive.org/web/20230131034638/https://qhr.com/resources/how-qhr-health-helped-springfield-hospital-navigate-a-financial-turnaround/; QHR Health. “QHR Case Study: Sierra Vista Hospital,” October 10, 2020. https://web.archive.org/web/20220519184626/https://qhr.com/resources/distressed-hosptial/; QHR Health. “QHR Health Client Success Story: Jennie Stuart Health,” November 5, 2021. https://web.archive.org/web/20230126160040/https://qhr.com/resources/qhr-health-client-success-story-jennie-stuart-health/.