For-Profit Medical Schools

An Uncommon Practice
David Whelan 09.29.08, 12:00 AM ET

Yife Tien knows a medical school can be hugely profitable offshore. Now he wants to make a buck training osteopathic doctors in the U.S.

Beatrice Taylor, 41, worked in computer support for years but yearned to be a doctor. After taking organic chemistry classes at Colorado State University near her home in Fort Collins, Taylor applied to three medical schools. She was accepted by one: brand-new Rocky Vista University in Parker, Colo. The school, where tuition runs $38,000 a year, is so happy to have her in its first class of 150 students it offered Taylor a $20,000 cut in the tuition. She got a loan from Sallie Mae for $45,000 to pay the rest of the tuition and to cover living expenses. She doesn't have to pay Rocky Vista back if she spends five years working with needy patients after she graduates. Recently, after finishing her first week at Rocky Vista, she said: "I'm glad I made the gamble."

Yife Tien bought the 24-acre Colorado property and built Rocky Vista, a 145,000-square-foot building tricked out with bright anatomy labs, patient simulators and fully wired classrooms, with $30 million from his father, Paul Tien, a wealthy 80-year-old Taiwanese immigrant who started the American University of the Caribbean medical school in 1978. Tien's grand plan, revealed in an application with state accreditors, is to have tuition revenue explode from $2.7 million this year to $25 million in 2012 as four classes of students arrive on campus. In 2012 net income is supposed to be $3 million. Still, at a $152,000 list price for a degree in osteopathic medicine (D.O.), which is what Rocky Vista is offering, this could be a tough sell, even though a Yale M.D. costs $169,000 before discounts. Tien describes the popular perception of higher education this way: "If you're for-profit, that means the product is not as good."

The Tiens have shown that education can turn a profit. In the islands the AUC, where students pay some $30,000 a year, has low overhead and margins that are thought to hover around 20%. Expenses will be higher in Colorado, and there will be more scrutiny. Rocky Vista won't qualify for accreditation until Taylor's class graduates. And osteopathic medicine has a certain disreputable tinge going back a century when osteopaths believed all disease sprang from the spine or the skeletal system. Today the D.O. curriculum is harder to distinguish from an M.D. curriculum.

Ten years ago a hospital in Denver shut down a residency program for D.O.s, and there were whispers that a group of osteopath-hating M.D.s played a role. Even so, Tien knew a for-profit school for osteopathic medicine was the only way to win accreditation--and make money. The American Medical Association nixed a plan by Ross University, which operates on the island of Dominica, to open a for-profit M.D. school in Wyoming in 1999. Charles Modica, a Tien family rival who owns St. George's University in Grenada, looked into starting a for-profit medical school in the U.S. more recently and found that accreditors insist the facility spend as much per student--up to $100,000 each--on labs, clinics and research facilities that are part of most medical centers. The economics don't work for profit-seekers.

In talking up Rocky Vista, Tien, 53, who came to the U.S. from Taiwan in 1964, speaks often of the need in the U.S. for more primary care physicians--most osteopathic physicians practice primary care. One report he mentions forecasts that the U.S., with its aging population, will need 60,000 more primary care physicians than it is expected to have in 2015. "This isn't just about money," says Tien of the school, which is the only for-profit osteopathic school among 25 in the U.S. "I see a need."

Tien also clearly feels a need to step out of his father's shadow. Living in Coral Gables, Fla. with his wife--an M.D. oncologist--and son, he helped his father, Paul, run the Caribbean school for 30 years. His dad had a successful career running technical colleges in Ohio, where he specialized in turning around schools that had lost accreditation. He wanted Yife to go to medical school, but the younger Tien disappointed his dad by posting bad grades at the University of Cincinnati, ruling out admission to an American medical school. When Paul saw a newspaper ad for a medical school in the Dominican Republic that was accepting American students, the family flew down to enroll Yife in 1977. His son recalls there were hundreds of students lined up outside the school, which was in a dilapidated building in a dirt-poor village. Yife's mother cried as she left him. Paul was happy: He had spotted a business opportunity.

While Yife hit the books at the Universidad Central del Este, Paul quit his job as president of Belmont Technical College in St. Clairsville, Ohio to start an English-language offshore medical school that would put Yife's bare-bones school to shame. Paul, a fierce anticommunist who as a teen fought with Chiang Kai-shek's army against Mao Tse-tung before his family fled to Taiwan, flew from island to island, avoiding those, like Jamaica, with communist movements. He pitched local governments on the spending power of a school filled with American students. He found the best real estate deal on teeny Montserrat. It offered a 99-year lease for $2,000 a year. Many students in the AUC's first class of kids were poached from Yife's school. The new medical school, which moved to St. Maarten after a volcanic eruption on Montserrat in 1995, is now considered among the top 3 of 30 medical schools in the Caribbean. Most of its graduates land in residency programs in the U.S.

Yife dropped out of med school after only one year and went to work helping his father run the Montserrat school. When his father retired and moved back to Taiwan in 2003, his son decided to start a new venture. "You get to a certain age, and you get to do things you want to do," says Tien the younger. Paul doesn't have an ownership stake in Rocky Vista despite the money he lent his son to start it. Yife owns 100% of the equity.

He zeroed in on Colorado as a good site because there are 5 million residents and only one medical school. (In Pennsylvania there are 1.5 million residents per med school.) As he was closing on the property near Denver, Tien started wooing supporters. It took some schmoozing. A lobbyist Tien hired found a booster in Richard Krugman, dean of the University of Colorado's medical school, after the lobbyist and Krugman lunched together. Krugman even spoke at Rocky Vista's ribbon cutting over the summer. Krugman says he has gotten some calls from both D.O.s and M.D.s urging him to somehow stop the school from opening, but he's refused. "It's unseemly to suggest that we shouldn't be training more physicians," he says.

"Why does it matter what tax structure it has?" shrugs Tien, who dreams of adding nursing and perhaps dental degrees to the product catalog. It does matter to the first crop of students. Until Rocky Vista is accredited, its students must make do with commercial loans rather than the subsidized ones available to most medical students.

So far Beatrice Taylor doesn't have any gripes. She's looking forward to working in a hospital or a clinic after she graduates. Says she: "From what I understand there are a lot of places that are very glad to have our students."

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