One of the ventures that I started after stepping down from my clinical practice is called Memory Care Communities of Illinois, LLC. After experiencing first-hand the anguish and devastation that Alzheimer’s and dementia has on a family and the caretakers involved, I knew that this kind of endeavor would fulfill my mission of “doing well by doing good”.
It all started in 2008 with an introduction from my oldest son Joshua, who now is the Managing Director of the Healthcare Finance Group of Pillar Capital Finance, a division of Guggenheim Partners in Bethesda, Md. Joshua and I completed the MBA in Healthcare program at Hopkins together and now I can truly say that it was money well spent! Joshua introduced me to two gentlemen from the Midwest who were interested in syndicating a portfolio of senior housing assets and needed someone to raise the equity and put the deal in motion.
When performing my due diligence on these senior housing developers, they took me to visit a facility that they had built several years before and subsequently sold to a larger operator in the Midwest. As they walked in the door, three resident octogenarians shuffled over to them, hugged and kissed them and said “Where have you been….we have missed you so much!” I recognized that hug. That was the hug I used to get in the Recovery Room from a grateful spouse when delivering good news about their loved one, or from an appreciative teenager who was convinced that a minor correction of a facial feature changed their entire outlook on life. That was the passion and dedication I was looking for in a development partner and it turns out that my instincts were correct.
Starting a ground up healthcare related real estate asset based venture during the depths of the worst recession we have had in decades proved to be a daunting task. Banks were very reticent to lend to anyone, despite my very logical and impassioned presentations as to why this venture made absolute sense. But what was even more surprising was the reaction I had from a pool of previous patients who expressed “interest” in hearing about my future endeavors and their potential willingness, as high net worth individuals, to participate in these offerings. When presented with an actual Private Placement Memorandum and Subscription Documents, the vast majority had a variety of reasons why they would not participate in this undertaking. The bottom line is that people, who once trusted their lives in your hands as their physician, don’t necessarily trust you with their cold hard cash! Think of it this way….you equate a certain character actor with a specific role that he has had on your favorite TV drama for the last many years. It takes a very long time for your audience to see that actor and accept him in a new role with new surroundings and unfamiliar relationships. Providing excellent care for our residents along with clear and open communication with their families, coupled with an outstanding return on investors' initial capital outlay has led to a track record of success that is now recognized by those seeking this type of alternative investment vehicle. This leads me to the salient points I want to share with you on this most fortunate occasion of my “oversubscription” for the fourth Memory Care Community asset:
Three Things Every Entrepreneur (including Physicians) Must Remember:
Patience (along with dogged perseverance)
The colloquial saying “don’t get sick in July” is a parlance known mostly to healthcare providers who have been there and done that before. Just as we were all once green behind the ears and anxious to “see one, do one and teach one” we soon came to realize that while it may only take an hour or two to perform a particular surgical procedure, it took years of practice to perfect it. When beginning your new venture in the business of medicine, you must recapture that sense of desire and curiosity that enveloped you after graduating medical school, and recognize that it takes a long time to engender the kind of trust that investors must have in you before risking their capital on your idea. Be patient, perseverant, and adopt a temperament that makes the air right for bees to make honey.
Remember how you felt after working well over 100 hours a week and having to ask your spouse to bring your newborn child to the hospital so that you can remember what he/she looked like? Don’t treat people in your newly formed organization like that. Take a page from the Google and Facebook playbook and try to mesh the cultures of medicine and business creativity to optimize the potential for nurturing innovation and ingenuity in your organization.
Probably the single most important factor that I have seen in determining the ultimate success or failure of a young enterprise is the composition and dynamic of the management team. As the leader of this effort, you must take extra time in seeking out and vetting those you wish to share this journey with. Don’t be afraid to ask hard questions and investigate potential partners with background checks, personal and business references, as well as a statement of net worth. While these may seem like difficult conversations to have with potential partners, it is better to have this disclosure and transparency disclosed up front, rather than lamenting afterwards and having others tell you that “desperate people do desperate things”.
This journey is exhilarating, confusing, frustrating and life-fulfilling at different times during the process. The one thing you cannot forget is that whatever you are offering, whether it is a service, diagnostic, med-tech device, therapeutic or health IT application, your number one priority is to bring value and utility to the patients that will use your product or service. There will be many stakeholders that you will have to satisfy along the way, some in alignment and some who seem to want to thwart your progress at every possible opportunity. Do not allow these competing interests to take your focus away from your main goal…to bring a new product/service to the marketplace that will improve the human condition, alleviate pain and suffering, and advance the state of healthcare globally for years to come. All the rest is commentary.
I look forward to sharing your stories with the rest of the SoPE community. Wishing you the best of luck in your ventures and that you too will soon be “oversubscribed” for your next round of financing!
Jeffrey N. Hausfeld MD, MBA, FACS
Chairman and Founder – Society of Physician Entrepreneurs