Golden-touch lender majors in hospital quality In Apollony's view, numbers secondary


When investment firms advise "hold" on profitable health care stocks, and the Clintons' health care reform leaves the most adept companies on shifting sand, what's the guy who finances the industry to do?

Same thing William N. Apollony always does. The man who started health care banking on the East Coast and has one of its best records is still trying to pick winners to underwrite.

Mr. Apollony is senior vice president of the health care banking division at First National Bank of Maryland. He specializes in financing for hospitals, an industry that has done poorly overall since the 1980s, and long-term care facilities -- nursing homes and chronic care facilities -- that also have had their ups and downs.

But in more than a decade, Mr. Apollony hasn't lost a dollar to a bad loan. Neither Mr. Apollony nor his employer will say how much his specialty is worth, but over the years the banker has lent hundreds of millions of dollars.

Some attribute his unblemished track record to an unusual background. Mr. Apollony came to banking by way of social work, and as a result, some say, he has an intuitive understanding of how health care works. Others say it is his thorough approach.

"He doesn't make bad loans because numbers are not first. It's the quality of care that is first. Then, if the numbers work, it's a deal," said Steven S. Silver, one of his customers.

Mr. Silver, who owns a Delaware long-term care company, has borrowed $14.7 million from First National since 1986. He found out about Mr. Apollony from New York bankers who told him "Bill knew more about hospitals and long-term care banking than anyone in the mid-Atlantic region."

"We went to him and after paperworking us to death, really

making us think about everything -- we thought we had thought of everything -- he forced us to reconsider everything. He says as we close, 'you know, you guys, you have to be right. This will ruin your family if you're wrong. You're betting a lot more than your business. You're betting your family. Not that you won't recover [from a bankruptcy], you will, but. . . .,' " Mr. Silver said.

In addition to instilling fear and trembling -- Mr. Silver says he has become more conservative than his banker after such lectures -- Mr. Apollony has patience.

He can court a client for six months or a year, offering advice and professional assessment before the client has a need for financing. Rejection by Mr. Apollony comes often, but softly.

"You can't be all things to all people," the 45-year-old banker said. "If you honestly believe there are going to be winners and losers and that there is going to be some closures and some consolidations, then you need to have an opinion about things."

Almost every time, however, he tries to explain why in a "nice fashion, because we don't want anybody to walk away from us and say that we weren't professional in the way we dealt with them . . . but that we just might not in that particular instance see eye-to-eye."

His approach is backed by extensive research on the marketplace and a staff of nine. He knocks on the doors of some clients to check on loans at least once a year and after his associates twice have been out to check on the loan.

One of his first loans was to a group of men who were setting up a nursing home business. He liked what he saw and stuck with what grew to be Meridian Healthcare, the Towson-based nursing home chain.

"He has always been there when we needed it," said Edward A. Burchell, president of Meridian. Last month Meridian owners sold their business in a $205 million deal to Genesis Health Ventures Inc., of Kennett Square, Pa. Genesis wants to refinance Meridian loans, and Mr. Apollony has let it be known he would like to be the banker.

His path to banking came by way of a degree in sociology in 1969 and five years as a social worker at Prince George's County Hospital. The University of Maryland was "kind enough" to accept him in a master's finance degree program, and he graduated tops in his class.

His first job was in Equitable Bank's credit department. Soon after he began submitting thick analyses of hospitals' creditworthiness, Mr. Apollony was asked to set up the health care banking specialty.

He focused on hospitals, which account for 40 percent of the national $1 trillion health care bill, and nursing homes, which account for 8 percent.

In 1988, his reputation hot, Mr. Apollony was lured away by FirstNational. Many clients, including part of Meridian's business, followed.

Today Mr. Apollony and his team finance or refinance the bulk of the Maryland market in long-term care facilities. The bank also has a large share of the hospital market, if not most of it.

What is different today is the pace and magnitude of change. Instead of a single hospital or nursing home, Mr. Apollony is facing an industry that is about to develop entire networks of care, perhaps with a nursing home or hospital as its hub, and things such as pharmacy, physician services, supplies, or dialysis as the spokes.

"When you are talking about restructuring 14 percent of the GNP [gross national product], I mean it is a huge undertaking. I don't think it will happen quickly.

In the meantime, even within shrinking industries, it's possible to pick the cream.

"We continue to look at hospitals with strong management teams," Mr. Apollony said. As the market changes, he added, "you hope the investment you made in management will pay off." In the end, he said, "I have no crystal ball."

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