Rex Burgdorfer is an experienced investment banker who has spent over 15 years in the institutional securities industry. He is a Managing Director at Juniper Advisory, providing merger and acquisition advice to nonprofit healthcare systems. Over the last decade, he has worked on many of the transformative business combination transactions in the industry. He spent the early part of his career at Morgan Stanley. Rex has authored over 20 research articles analyzing the ownership structure of U.S. hospitals and speaks regularly about the trend toward sector consolidation. He holds an MBA from Northwestern’s Kellogg School in Evanston, IL.
Outside of work, Rex is an active angel investor both personally and as part of the investment committee at Purple Arch Ventures. He is a native Chicagoan.
What was your best/favorite subject in school?
History. Financial analysis in our world is reasonably straight forward – the underlying math calculations feed into pretty well developed excel models. Interpreting the numbers, though, and how they fit into the story is the more fun and challenging aspect. Understanding the history of a company and how it fits with and compares to today’s market is the experience people seem to value more. We’ve worked with all forms of non-profit hospitals – – academic, faith-based, local Government-sponsored, and traditional community 501c3’s so have a broad understanding of the way in which they’re positioning themselves for the future.
What was your first job?
Dingy boy at the neighborhood marina. It was a blast. Sailboats were moored on cans and to get to and from the dock we had to swing the owners back and forth in little 10hp motorboats. The engines swiveled 360 degrees so you could really whip around into tight spaces.
It was a good lesson to observe how people treated one another. There were plenty of Caddyshack “Spaulding” types, but also some really nice owners that treated us 15-year-old goofballs well. Interestingly, there seemed to be a direct correlation between kindness and those who were professionally successful.
Where and how did you first get into the industry you currently work in?
Like many things, it happened by accident. As an undergrad, I struck up a friendship with one of my professors. When he traveled, I looked after his two dogs. Somehow he had a line into recruiting at Morningstar, the financial research firm. I interned there during summers in college, which provided visibility into different aspects of the financial services industry.
A few years later, a good friend of mine from boarding school in the Boston area was an executive recruiter. He had a mandate in Chicago and put my name in the hat. I interviewed for the job but didn’t get it. However, in a good lesson in humility, the guy who interviewed me had a friend from the Princeton wrestling team who worked at Morgan Stanley. We met for a beer at “Stocks and Blondes” off LaSalle street in the financial district in Chicago – I’ll never forget it.
How have those jobs prepared you for what you do now?
M&A transactions are a team sport. Our job is to serve the board and top management and to coordinate the completion of strategic transactions. That usually means working alongside legal counsel (both internal and external), auditors, actuaries, and involves unions, physician groups, regulators, and the like. Juniper, in particular, is unique in that we provide one product: M&A Advice, to only one industry: acute-care nonprofit hospitals. That means we have deep expertise and can benefit from comparisons across geographies and types of participants.
Describe the best day of work you’ve ever had.
August 31, 2012. We were fortunate enough to advise the board of Marquette Health System in the Upper Peninsula of Michigan on a sale to Duke LifePoint. Marquette was formerly a prosperous iron ore mining town on Lake Superior. It was the only tertiary hospital in the ~200 mi wide swath of territory for ~300k people. The community hadn’t received major a major economic infusion in decades, though. The hospital provided high quality but had an old plant and limited capital access.
We managed the first robust market clearing process in the state, approaching ~25 companies simultaneously both in the region and nationally. They received 10 offers, narrowed the list to five finalists, conducted reverse due diligence on each (traveling both to headquarters and comparably situated hospitals), solicited refined proposals, and in the end selected a new joint venture between Duke Medicine and LifePoint Hospitals. The transaction was valued ~$500m and included a commitment to construct a new ~$300m hospital. Today, patients have a new campus, more doctors practicing more specialties, and the coordinated care of a top 10 U.S. News and World Report hospital company. Very rewarding looking back.
How do you keep yourself motivated?
The hospital industry needs a lot of help. We spend a multiple of any other industrialized country on care and, in aggregate, receive pretty mediocre results. A spotlight is being shone on the fragmented, inefficient ownership structure of the ~4,000 hospitals in the U.S. Each is trying to alone raise capital, recruit doctors, harness IT, and deliver high-quality care at an accessible price. Very few do it well. The largest hospital company, for example, has less than 4% market share. The top 50 combined still have less than 25%. In most industries that would be over 75%. Going forward, experts believe that improved network coordination is going to be required to be successful. We live that daily alongside our clients and it’s a privilege to help them navigate that changing environment.
What kind are your clients doing that excites you?
My sense is that motivations underlying health system partnerships today are markedly different than the past. The industry used to fall along for-profit and nonprofit lines. Equity-backed companies pursued growth in varied regions to achieve market diversification – so one hospital in PA, TX, and CA to balance out state regulatory exposure, employer concentration, etc. “Dots on a map,” basically. By contrast, nonprofits were all densely clustered within an isolated area, almost always confined to one state with the notable exception of Catholic companies. Today, most people believe that elements of both are going to be necessary for success. Forming network density and scale is necessary to control the continuum of care and be at-risk for accountable care economics. Simultaneously, having national know-how and expertise is equally important to improve the cost/quality equation.
Are there any trends that concern you?
Like demographic statistics and politics, there’s a clear polarization. The top decile is doing great. Their medical and financial measures are as strong as they’ve ever been. We’ve written about this pretty extensively. Big city academics and sizable regionally prominent systems (call it ~$2b+) are not the ones we’re worried about. The rest of the industry, though, is struggling. The majority grapple with the colliding forces of escalating costs and declining prices. We were fortunate to advise Santa Clara County California recently on the acquisition of three bankrupt, former Daughters of Charity hospitals in the Bay Area. There are hospitals across the country that fill a vital role yet are in a precarious condition – not just in financial performance but their governance structure and overall readiness for change.
What is the best book you’ve read recently and why?
Educated by Tara Westover. It highlights the huge and unfair disparities in our society. Access to basic services – educational, medical, financial, everything is skewed against the little guy. As hospitals move away from fee-for-service work and become more vested in holistic treatments, they have an opportunity to tackle these important issues; and we’re excited to be a part of that.