LA CROSSE – Logistics Health Inc. needed to cash out a major early investor. Gundersen Lutheran wanted to diversify its portfolio and open doors to new markets, preferably by investing close to home.

The resulting match will strengthen the La Crosse area economy and provide an innovative example for other investment-minded health-care systems in Wisconsin. At a time when many emerging companies are scouring for investors, homegrown sources of capital are welcome news. 

Gundersen Lutheran announced Dec. 30 it has become a minority owner of Logistics Health, a La Crosse-based contractor of health services that has grown from a dozen employees to 750 workers in less than a decade. It reportedly marked the first time Gundersen Lutheran has invested in something other than a traditional portfolio of stocks, bonds and other securities.

Dr. Jeff Thompson, chief executive officer of Gundersen Lutheran, said the deal will help the health-care system by providing above-market returns and creating pathways to provide services nationwide. It will also help La Crosse, he said, by keeping Logistics Health in town.

“So rather than making investments in other parts of the country… we’re taking some of our funds to invest in a local company,” Thompson told the La Crosse Tribune.

Former Gov. Tommy Thompson (no relation to Gundersen Lutheran’s Thompson) is president of Logistics Health and a former federal Health and Human Services secretary. He said the deal kept Logistics Health off the “auction block” by cashing out long-time investors who might have moved the company if not for a local buyout of their shares.

“The great thing about this deal is it keeps the company growing and it keeps it in La Crosse, where it’s a big part of the economic and civic fabric,” Thompson said in a recent interview. “If you lose a corporate headquarters, you wind up losing the management talent, the top salaries, the charitable and volunteer contributions and much more. We didn’t want that to happen.”

About 85 percent of the business at Logistics Health Inc. is built around working with federal agencies. It deals with the Department of Defense to ensure that soldiers receive necessary physical examinations, vaccinations, health profiling and other services. It also works with other federal agencies on homeland security issues, such as preparing for bioterrorism attacks. Logistics Health provides inoculation services, clinical studies and focus groups to help national, state and local authorities prepare for attacks they all hope will never come.

Gundersen Lutheran is a physician-led, non-profit health system with patients in Wisconsin, Iowa and Minnesota. In addition to its national reputation for quality care, Gundersen Lutheran is known in health-care circles as an “integrated delivery system.” That means it offers a full range of medical specialties, regional clinics, a teaching hospital, home care, behavioral health services, pharmacies, vision centers, air and ground ambulances and more.

In the brave and uncertain new world of health care reform, integrated delivery systems are the model because they tend to provide coordinated medical services in an efficient setting that often eliminates costly intermediaries.

Dr. Frank Byrne, president of St. Mary’s Hospital in Madison and a health-care executive who has championed integrated delivery, said the Logistics Health deal is consistent with Gundersen Lutheran’s “forward-looking” approach. At the same time, Byrne noted, the deal isn’t unprecedented: Major health-care systems in Missouri, Ohio and Minnesota have made similar investments. So long as health-care systems don’t stray too far from their core expertise and stay aware of potential conflicts of interest, Byrne said, it makes sense to invest in companies that stand to help their own bottom lines while also aiding the broader community.

In fact, Byrne said, a community’s physical health can be influenced by its economic health – which is why many major hospitals and health-care systems are engaged in civic and economic development efforts.

“Economic development is a community health status issue,” said Byrne, who noted that health-care organizations are already “important economic engines in their communities.”

Former Gov. Thompson said he hopes other health-care systems and major non-profit organizations in Wisconsin think about investing in the state if the right opportunity arises.

“This is a strategy that other companies and non-profits should look at, whether they’re in health care or some other field,” Thompson said. “With the right deal, it’s a win-win for Wisconsin and the companies themselves.”

Finding private equity is a tough chore for many emerging companies these days. The Gundersen-Logistics deal presents a model that could work for others.

Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal.