Name of Innovative Program:
New Jersey Business Development Project
Name of Innovative Program Lead:
E-mail Address of Innovative Program Lead:
Diana Ramsay assumned Woods' CEO post in July, 2011. Ms. Ramsay faced an imposing challenge upon assuming her new position: transforming Woods from a provider of congregate care services to children and adults in Pennsylvania to an organization offering community-based health, education and residential services in the Tri-State area (Pennsylvania, New Jersey and New York). The transformation process required a sense of urgency stemming from the expressed determination of public authorities and New Jersey and New York to return their residents from Langhorne to in-state, community based service providers.Faced with this circiumstance, most nonprofit chief executives would have commenced a strategy targeting de novo development of new Woods-owned service capacity in New Jersey and New York. Ms. Ramsay opted instead for an innovative strategy centered on negotiating change of control agreements (hereafter "affiliations") with two of New Jersey's most respected nonprofit organizations. The two transactions closed in a 15 month period, and were made possible in part by multi-million dollar transfers of capital from Woods to the respective new affiliates on the Closing Date. Once created, this expanded service capacity will be used, in part, to serve New Jersey residents previously served on Woods' Langhorne campus.
Creativity and Innovation:
The Project's success was a product of creative vision augmented by a strategic plan that incorporated the following:1. Affiliation prospects were sourced thru a contractual agreement with a broker, an approach employed by private equity firms but uncommon in the nonprofit behavioral health field;2. A business development team and process were put in place and focused on closing transactions in 120 days, an extraordinarily agressive timetable for such transactions;3. Letters of intent ("LOI") detailing proposed business terms of the proposed affiliations - including the establishment of Woods as the sole member of the each prospective affiliate - were presented after not more than two meetings;and4. Cash transfers on the Closing Date were incorporated into each LOI to facilitate a timely conclusion of the process and to provide expansion capital to the affilitaes - an innovation that contributed significantly to Woods' ability to close the transactions.
Ms. Ramsay succeeded in securing trustee support for an aggressive growth plan involving entry into a new state via change of control transactions, and closed the initial transaction less than twelve months from her hiring as chief executive. Woods subsequent transaction closed exactly a year later in 2013.Ms. Ramsay's leadership was critical to securing broad support from Woods' 2,000 staff as well, especially because a less open leadership style would have invited resistence from those believing that investments in new services in new states was indicative of a lessened committment to Pennyslvania clients and staff.Finally, as chief executive Ms. Ramsay necessarily served as the "face" of Woods to the boards and staff of Woods' prospective new affiliates. Ms. Ramsay succeeded in conveying her personal comittment to the behavioral health mission of the affiliates - sometimes by reference to her earlier experiences as an occupational therapist .
Woods' New Jersey Business Development Project led to an increase in Woods' annual revenues from $130 million to $180 Miliion while reallocating excess capital to mission-focused uses. Broadly speaking, Woods New Jersey Project has demonstrated the benefits of business combinations for clients and providers in the behavioral health realm, potentially prompting wider adoption of such approaches in the fragmented nonprofit sector.
Scale is an important and timely consideration in the evolution of the fragmented behavioral health industry. Changes in the industry’s operating environment are harbingers of rapid consolidation, especially within the fragmented nonprofit provider sector. These changes include differences in the way services are delivered and financed, shifts in legislation, regulation and consumer preferences, and frequently, transitions to new provider leadership. As in other industries, these circumstances encourage industry consolidation and hence, the evolution of a market for corporate control. Yet very few nonprofit organizations possess the capital, competencies or experience required to execute a consolidation strategy. Woods' New Jersey Business Development Project has demonstrated the utility of an affiliation business model and transaction process that can readily adapted by other behavioral health consolidators to enter new maretplaces at scale in a confined time frame with substantive benefits to the consolidator, its new affiliates, and the public .
The fair value of the assets of Woods new affiliates in New Jersey approximated $26 million, and the combined annual revenues of the new affiliates approximated $50 million. These incremental amounts will be reflected in the consolidated financial statements of Woods each year post-closing.As a consequence of Woods cash transfers to the affiliates, their annualized revenued in the years to come are expected to increase by approximately $18 million.