by James A. Bacon
In February Inova Health System announced its intention to create a $100 million venture fund dedicated to precision medicine, an initiative timed to coincide with an Obama administration event highlighting the nascent science, and designed to support Inova’s own $300 million plan for a center for personalized health just outside Tysons Corner.
From an economic development perspective, such a fund is just what the doctor ordered for a Northern Virginia economy overly dependent upon defense, intelligence and homeland security funding. The giant health system has signaled its willingness to spend what it takes to build a nationally recognized medical R&D hub centered on preventing disease by understanding patients’ unique genetic make-up, and there are plenty of interests, from George Mason University and Virginia’s biotech industry to the McAuliffe administration and real estate companies hungry for the next development play, who want to see Inova succeed.
“We think it’s transformational, something that can really propel this region,” Josh Levi, vice president of policy for the Northern Virginia Technology Council told the Washington Business Journal. “It’s not just the money. It’s the acceleration, the incubation of partners. The thing they’re really bringing is the expertise.”
When questioned by the WBJ, Inova officials declined to provide the most basic details about the fund. Who will manage it? What kind of companies will Inova back? Most importantly, where will the money come from? The company says that it will share more information as it becomes available.
From what I’ve seen, it appears that the WBJ is the only Washington-area media entity asking questions. And the scope of its questions are very narrow, befitting the focus of a business publication.
But there are even bigger questions that no one is asking. Is this an appropriate business for Inova to be in? Is it appropriate for a health system to be allocating such a large sum to an enterprise (a) in which it has no experience, and (b) is so divorced from its mandate of delivering health care services to the citizens of Northern Virginia?
I am truly of two minds on this issue. On the one hand, I can see a great future for the Center for Personalized Health as a job and wealth creator. On the other hand, the initiative seems to be barreling ahead with no questions whatsoever. The only skepticism I’ve seen are in the comments section of this blog, when Reed Fawell has asked what massive commercial development in the Merrifield area of Fairfax County implies for traffic along the already congested Interstate 66. I’ll let Reed continue to examine the traffic/land use implications in the comments section. In the meantime, I will continue to ask how appropriate it is for Inova as a not-for-profit entity serving the community to undertake this initiative at all — not because I am adamantly opposed to what Inova is doing but because the enterprises seems to be making multi hundred-million dollar commitments without any pushback whatsoever, and somebody has to ask the questions.
As I observed in December:
The not-for-profit Inova, which exercises near monopoly dominance in the Northern Virginia health care market, generated operating income of $218 million in 2014 on $2.7 billion in operating revenue. That’s a profit margin of about 8%, more than twice the profitability that non-profits normally need to maintain healthy operations. That translates into about $109 million in what one could classify as excess profit.
Unlike a for-profit company, Inova is not obligated to maximize profits. To the contrary, insofar as the company is exempt from taxes and has a community mission, one could argue that it is morally obligated to (a) reduce charges to patients afflicted by ever-escalating medical bills or (b) provide more care to low-income patients not covered by Medicaid.
How has Inova been allowed to morph from a community hospital system into a budding underwriter of Northern Virginia economic development? Perhaps we can find some clues by examining the NoVa board, a Who’s Who of the Northern Virginia business and political establishment. Here is a list of the men and women who are, in Inova’s own words, “responsible for oversight of Inova’s finances, strategic planning and management”:
J. Knox Singleton: Inova CEO
Lydia Waters Thomas, PhD: Inova Treasurer, former CEO of Noblis Healthcare
Wesley Bush: CEO of Northrup Grumman Corp.
Nicholas Carosi III: CEO of Arban & Carosi, Inc., a manufacturer of architectural precast concrete.
Allan Dabbiere: Co-founder and senior vice president, AirWatch
Jack C. Ebeler: Principal at Health Policy Alternatives, member of the National Academy of Sciences
Penelope Gross: Member of the Fairfax County Board of Supervisors, representative of the Mason District
Katherine Hanley: Former chair of the Fairfax County Board of Supervisors
Paul M. Harbolick Jr.: Former CFO of Alliance Bank Corporation
Sudaker Kesavan: CEO of ICF International, a consulting firm with expertise in infrastructure and health programs
Donna Morea: President of CGI Group, a major information technology firm
Tony Nader: CEO of NEW, a provider of buyer protection services
Paul C. Saville: CEO of NVR, Inc., one of the nation’s largest home building firms
Charles H. Smith: Real estate developer (?)
Mark Stavish: President, Evergreen Venture Partners
Joe Travez: Co-owner of boutique manufacturer PPI
There are many prestigious names on the board but none represent the perspective of Inova’s medical professionals, much less Inova’s patients.
At the risk of sounding like a populist, you couldn’t have hand-picked a better cross-section of a regional business-political elite that would be more likely to get enthused about a money-making mega-project like the Center for Personalized Medicine that puts Northern Virginia on the biomedical map. Nor could you have picked a body more divorced from the concerns of everyday Northern Virginians who, I dare say, would love to see a reduction in their health care bills.
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