The HCA effect: How the hospital giant helped Nashville grow with it

Jerrod Martin of Alexander Metals, right, works with Ken Sharpe, front, and Will Schnure both of Brasfield & Gorie to move a swing stage on the newly built roof of HCA's TriStar Centennial Medical Center.

Waller Lansden Dortch & Davis LLP was already 63 years old when it helped the Hospital Corporation of America incorporate in 1968 — but in many ways it began a new era for the Nashville-based law firm.

“I remember being told by a [former] senior partner that he thought the biggest day in the history of our law firm was the day [HCA co-founder] Jack Massey walked down the 12th floor corridor in the American Trust Building and hired Dick Lansden,” said George Bishop, a Waller partner who was hired in 1976, as the firm’s 15th attorney, to handle HCA mergers and acquisitions.

Today, Waller is one of the city’s largest law firms, with about 230 attorneys, one third of whom specialize in health care. Half of the firm’s total work in 2016 — close to 5,000 cases — was health care related.

“As HCA grew and continued to send us a tremendous amount of business … we just naturally grew, to some extent, alongside them,” Bishop said.

That same story can be retold in offices across the city, as hundreds of Nashville health care companies, professional service firms and financial institutions owe part, or even all, of their success to what is now called HCA Healthcare Inc. and the mammoth health care industry it birthed.

Some of the biggest names in Nashville business, and some of the city’s most iconic attractions, owe their start to HCA.

Countless companies and organizations rely on HCA as a client, an investor or a donor. Not only is HCA one of the region’s largest employers, a long list of former employees has gone on to launch their own businesses, from startups like Hashed Health to industry titans such as Acadia Healthcare Co. Inc. Meanwhile, HCA also has spun off divisions into separate mega-operators like LifePoint Health Inc.

Before HCA was founded in 1968, there was no for-profit hospital operator of scale in Nashville, or anywhere in the world. Today, the health care industry has a $40 billion annual impact on the city’s economy, according to the Nashville Health Care Council.

Nearly 400 health care companies call Nashville home, employing about 250,000 people in 34.7 million square feet of local office space, while generating $144 billion in global revenue. According to the health care council, the industry generates $1.5 billion annually in state and local taxes and contributes $215 million to philanthropic efforts each year.

As a Nashville native, HCA CEO Milton Johnson has witnessed the company’s and the city’s explosive growth firsthand.

“It’s not just coincidence that as HCA has grown, Nashville has grown. The health care industry here is the largest industry in Nashville; it dwarfs the music business,” Johnson said. “What it’s done relative to bringing in professional services — architectural services around health care, construction services, accounting services, legal services, technology — all that growth surrounds the health care system that’s developed here in Nashville.”

Nashville business leaders speak out on HCA's impact

“HCA has had a more profound impact on the local and state economy than perhaps any other single organization. They made Nashville the health care capital of the country. Directly and indirectly, they have driven personal wealth and prosperity for businesses of all kinds in our city...

Building hospitals, companies

When Jack Massey, Dr. Thomas Frist Sr. and his son, Dr. Thomas Frist Jr., founded HCA, they did so with the unprecedented intention to scale it — similar to the way Memphis businessman Kemmons Wilson had done with hotel chain Holiday Inn and what Massey was doing with Kentucky Fried Chicken. To do that, they couldn’t just buy existing hospitals: They needed to build new ones as well.

It just so happened that a year earlier, two Nashville architects, Batey Gresham and Flem Smith, had started their own firm, earning its first commission from a Nashville military academy to design dormitories and an academic building. 

The two young companies formed a partnership that continues today. In its first year, HCA broke ground on five hospitals designed by Gresham, Smith & Partners, with plans to build five more the following year. By 1973, HCA had 57 hospitals in 13 states, many of them designed by Gresham Smith.

Dr. Thomas Frist Jr., from left, with Gresham Smith & Partners founders Batey Gresham and Flem Smith and Dr. Thomas Frist Sr., in 1992. The hospital operator partnered with the architecture firm shortly after both companies launched.

The firm’s chairman emeritus and former CEO James Bearden can’t precisely remember if he was the 76th or 77th employee when he was hired in 1976. But he’s certain that job existed in no small part because of HCA’s growth.

“When I graduated, we were in a recession. There were 32 of us in my class, and only two of us had a job,” Bearden said. “Gresham was poised to continue to grow and provide opportunities that other companies did not verbally express.”

Bearden, in his early 20s at the time, tagged along with Smith, hauling drawings and tracing paper into countless meetings with Frist Jr. at HCA’s new corporate headquarters near Centennial Park, which Gresham Smith designed. Frist expected everyone to bring ideas, “not just take away tasks,” Bearden said. 

Today, Gresham Smith is the second- largest architectural firm in Nashville, with 413 local employees and $175 million in 2017 revenue. The company now has 23 offices in the U.S. dealing in corporate, industrial, transportation and health care design, among others. Bearden said HCA work has taken the firm to nearly every state in the nation. Most recently, the firm designed HCA’s newest Nashville office tower in Capitol View.

Gresham Smith designed and later updated HCA Healthcare’s Nashville headquarters, as seen in this rendering from the 1980s.

HCA’s family tree

If you spend much time talking about health care in Nashville, someone is bound to bring up the health care council’s family tree. The diagram illustrates the more than 150 companies that have spun off from HCA or been started by former HCA employees. Executives like Acadia’s Joey Jacobs, Chris Holden of Envision Healthcare, David Vandewater of Ardent Health Services, serial entrepreneurs John Bass at Hashed Health and Michael Burcham of Narus Health and Martin Ventures Chairman Charlie Martin, founder of former hospital operator Vanguard Health Systems, have all spent time at the company.

LifePoint Health, the city’s third- largest publicly traded health care company, spun off from HCA in 1998 following a failed merger with Columbia Hospital Corp. Diversicare Healthcare Services Inc., Brookdale Senior Living Inc. and Sarah Cannon Research Institute also are all linked to HCA in various ways. 

“HCA has always been supportive of the people who leave,” said Pete Bird, Frist Foundation CEO and former HCA Foundation senior program officer. “They’ll say, ‘We not only wish you good luck, but can we invest with you?’”

Massey was one of the first former HCA executives to create a new company when he co-founded Correct Care Solutions in 1983. Today, Correct Care has more than 12,000 employees and posted nearly $1.2 billion in revenue in 2017, making it one of the city’s largest privately held companies, according to NBJ research.

“You can’t overestimate the impact HCA has had on Nashville. Not only are they one of the biggest companies in the country, but the number of companies that have spun out of HCA or been started by former HCA employees is remarkable,” said Kevin Wagley, head of health care banking for Fifth Third Bank in Nashville.

Without the network of health care companies that have grown out of HCA, Wagley said groups like his wouldn’t be in Nashville.

“If they weren’t here, this city would look a lot different,” he said. “Our health care group wouldn’t be in Nashville because without HCA, [the city] wouldn’t be a [health care] hub.”

‘The right place’

For all of the credit HCA gets for helping Nashville’s business community grow, Frist Jr. said HCA would not have been as successful had it been headquartered in another city. He credits the city’s abundance of local financial institutions at the time as one of the reasons the company was able to grow quickly — the company’s four original investors borrowed $5.25 million to start HCA from Third National Bank and Capital City Bank — as well as the “business friendly” city and state governments.

“It was the right place. Nashville, Tennessee, was a fabulous place to start it,” Frist Jr. said. “We kind of take the approach that being a successful company is a privilege that’s given to you, and only if you’re a good corporate citizen and handle it properly will you continue to have that right.”

That includes promoting the city as a destination for businesses across industries.

Butch Spyridon, who’s led the Nashville Convention and Visitors Corp. for nearly three decades, has worked closely with HCA executives who have served on the organization’s board, like Jana Davis, the company’s vice president of corporate communications and marketing. Spyridon said it’s difficult to sum up how important HCA has been to Nashville, but he cites Johnson as an example of how the company and its leaders can wield influence.

Johnson has served as chairman of both the Nashville Area Chamber of Commerce and the Nashville Health Care Council, and in 2015, he gave $10 million to his alma mater, Belmont University, to create a scholarship fund.

HCA has lent its clout to a host of civic and business efforts. More recently, Johnson was a member of the “London pursuit” team, which helped Music City land nonstop air service to England last year after a decade of longing. 

“He just provided great guidance, oversight leadership … and showed up to meet with airlines,” Spyridon said. “He wasn’t a figurehead; he was active.”

Executives from British Airways, as many outsiders do, initially viewed Nashville as a music hub and little else, the tourism chief said. But the presence of the CEO of the country’s largest hospital operator — which also owns and operates facilities in the United Kingdom — added “instant credibility” to Nashville’s pitch, Spyridon said.

With all of the success, it’s easy to forget that the 250,000 health care jobs and billions in revenue were almost lost to Nashville’s neighbor to the north: Louisville.

In 1994, after HCA merged with Columbia Hospital Corp., the company moved its headquarters to Kentucky, where new CEO Rick Scott and the Columbia operations were located.

A year later, when the combined companies bought HealthTrust, its chairman, Clayton McWhorter, stipulated as part of the deal that HCA/Columbia move its operations back to Nashville, said Scott Rayson, a Waller partner who was involved in the HealthTrust transaction — calling it one of the most significant deals of his career.

“That is the most important thing that has happened to Nashville’s economy in the last 30 years. No question about it,” Rayson said. “There’s a huge difference between a business that’s located in Nashville and one that’s owned by Nashvillians. … HCA staying in Nashville had an incredible impact on the city.”

— Reporters Meg Garner, Eleanor Kennedy and Adam Sichko contributed