Maryland Proton Treatment Center refinances through tax-free bonds

The Maryland Proton Treatment Center announced completion of a financing arrangement Wednesday that the center believes will enable it to focus more on treating patients and supporting clinical trials to expand what cancers can be treated.

The treatment center raised $277.4 million through the sale of tax-free municipal bonds, allowing the center to refinance without going through a previously reported conversion to a nonprofit. This bond method allows the center to remain for-profit.

“I think that the biggest thing that we have for us is that we came in with the goal of stabilizing the asset and refinancing the capital stack,” said Jason Pappas, chairman of Maryland Proton Treatment Holdings. “We actually reduced our cost to capital by 60 percent and then elongated it over 30-40 years.”

The $200 million Maryland Proton Treatment Center opened in 2016 in the University of Maryland BioPark. Proton treatment offers a more accurate radiation targeting of tumors, limiting exposure to healthy tissue.

Dr. William Regine, the center’s executive director, estimates that of the 60 percent of cancers treatable through radiation about 20 to 30 percent would be treated more effectively by proton radiation.

Initially, the center projected robust patient growth, expecting that once fully operational it could treat 150 to 200 patients a day and up to 2,000 patients a year. But it has seen slower patient growth and treated its 1,000th patient earlier this year.

The center’s leaders hope reorganizing its capital to reduce debt allows it to have more realistic patient expectations, along the lines of the mid-80s per day they have been averaging, including a high of 106 this summer.

“I think that is one of the main reasons that our offering was so widely accepted,” Pappas said. “Part of it was because they saw a much more reasonable approach”

The Maryland proton center has seen strong growth since it opened. It estimates that it has the fastest growth of any of the 28 proton treatment centers in the country.

The bond sale could allow that growth to continue by increasing the number of treatments available and widening the center’s affiliate network.

There are 122 active proton treatment trials nationally, Regine said, with the expectation that these trials could accrue around 30,000 new patients.

The refinancing also stabilized the company, potentially making it more attractive for potential affiliates. Already, the center has agreements with affiliates such as MedStar Health, Inova Radiation Oncologists and WellSpan Health, along with the center’s ongoing partnership with the University of Maryland, where Regine is chair of the Department of Radiation Oncology.

The potential for stability helped make the center’s bond offering a successful one, said Leigh T. Howe, the center’s president and CEO.

“I really look at the bond transaction as the start, the rebirth where now we can focus on the business and reaching more clients with this life-saving technology,” Howe said.

As it looked to stabilize last year, the center initially explored becoming a nonprofit. But it found the municipal bond sale through the Public Finance Authority to be a better route.

“One of the reasons that we picked not only this route but also our partner in PFA is that they have done a number of proton deals already,” Pappas said.

He put the number of other deals at around a half-dozen and said they helped the proton center realize that the bond sale route was an acceptable alternative. He said he believes, based on anecdotal evidence, that the Maryland Proton Treatment Center had the highest-subscribed deal.