Affiliating with the University of Michigan Health System would give Metro Health scale and the access to expertise and capital needed for breaking out of the shadows of its larger competitors in Grand Rapids.
After signing a definitive agreement a couple of weeks ago, the two health systems are working out the final details on issues such as corporate governance, short- and long-term strategies and financial terms that include a capital commitment to Metro Health. They also need to determine the kinds of clinical services that U-M Health System can extend into the Grand Rapids market.
Metro Health President and CEO Mike Faas expects a final deal to come no later than the end of the year, ending the health system’s four-year search to find a partner. That process included a proposed joint venture with a for-profit Tennessee hospital chain that fell apart a little more than a year ago.
“We believe we have finally locked onto the lightning-in-a-bottle magic in this partnership with the University of Michigan,” Faas said. “With the University of Michigan, we have now found a partner that hits our mission and vision right at its heart.”
Through an affiliation, Metro Health would join a major health system that has a strong brand and is renowned for quality and clinical expertise.
Metro Health’s medical staff has identified for U-M Health System some 18 clinical service lines it wants to expand or begin offering but “were held back from doing,” either because of a lack of capital or the inability to attract the needed physicians, Faas said.
“It wasn’t always money that was slowing us down. There’s also the human capital side of this,” he said. “We didn’t have the right kinds of doctors or enough of the right kinds of doctors or the right talent elsewhere in the organization. Scale hits you not only in your ability from a financial perspective.”
Among the clinical services Metro Health would like to launch or further build are women’s health, orthopedics, neurosurgery, bariatrics, primary care, oncology, and heart care. The latter is of particular interest to Metro, which six years ago failed in a bid to obtain state certificate-of-need approval to launch open-heart surgery, a service that is now provided in Grand Rapids only at Spectrum Health.
As Metro Health, which has a heart and vascular practice, and U-M Health System plan out their future together in Grand Rapids, they could consider open-heart surgery, Faas said.
“You can assume that we will look at everything where it would make sense (for there) to be choice in the market,” he said. “If open heart is on that list, then you better believe that we will look at it again.”
Whatever U-M Health System brings to the Grand Rapids market hinges on needs in the community, said David Spahlinger, vice dean for clinical affairs at the U-M Medical School and president of the U-M clinical enterprise.
Spahlinger cited an array of clinical services that U-M Health System extended into mid-Michigan through affiliations with four health systems. Each was based on market needs, he said.
In Grand Rapids, a clinical steering group will look at what medical services U-M Health System could deploy locally through Metro, Spahlinger said.
“We want to define it based on what Metro defines is important and what the community defines as a need in the community,” he said. “We have to work with the community as to what the needs are and what makes sense.”
ADAPTING TO CHANGES
The definitive agreement with U-M Health System came 14 months after Metro Health abruptly pulled out of a joint venture with Franklin, Tenn.-based Community Health Systems Inc. after two years of due diligence.
U-M Health System originally put in a proposal when Metro Health began seeking a partner four years ago. After a brief period of about two months to regroup following the collapse of the Community Health Systems deal, Faas reached out to his counterparts in Ann Arbor and found that U-M Health System was still willing to talk.
“That quickly turned into, ‘We’re very interested,’” Faas said. “The conversation began and all of a sudden I saw the potential, as did they, and that we’re a lot more alike than we are different and there is a great possibility here of a great friendship.”
The two signed a letter of intent in June, followed by last month’s definitive agreement.
U-M Health System’s interest in Metro Health stems from a need to branch out across Michigan as the health care industry adapts to changes that have been driving consolidation.
“We get patients from all around the state and it’s my belief that we will need to have a statewide system of care,” Spahlinger said. “Over time, the health care market will continue to consolidate. I believe probably in 10 years, there will be maybe four systems in the state of Michigan and I think that we will need to be one of those systems to provide care throughout the state.”
GROWING WITH GRAND RAPIDS
Contributing to the interest is Metro Health’s presence in a “good location” in Grand Rapids and a 208-bed hospital that’s less than a decade old, Spahlinger said, adding that “we know a little bit about Metro.”
Metro Health also operates a dozen outpatient and primary care centers in Kent and Ottawa counties.
The three-hospital U-M Health System and Metro Health, the smallest of the three health systems in Grand Rapids, have collaborated for nearly a decade on a radiation oncology center at Metro Health Village in suburban Wyoming. U-M Health System also provides pediatric cardiology and pediatric endocrinology care at Metro Health.
“It’s an important market for us, it’s a growing community, and it’s a provider that we know and have worked with over the years,” Spahlinger said. “(Metro) presented the opportunity and we thought it was a good opportunity to pursue.”
Metro Health would likely become a wholly-owned subsidiary of U-M, Spahlinger said.
The affiliation would surely better position Metro Health to compete with the larger Spectrum Health and Mercy Health in the greater Grand Rapids area, Faas said.
“One of the things people and major employers in West Michigan want is choice and a balancing act so that there isn’t just one choice in any market,” he said. “Can there be a balancing and a choice in the market? This allows that to occur.”
Metro Health and U-M Health System also were part of the Pennant Health collaborative with Trinity Health — the parent company of Mercy Health Saint Mary’s in Grand Rapids and Mercy Health Muskegon — that went dormant when Metro began seeking a partner.
What happens with Pennant Health is one of the issues for Metro Health and U-M Health System to decide along with Mercy, Faas said.
“The first logical piece is what does Pennant become?” he said. “What’s the evolution of that?”
U-M Health System is also part of Together Health, a partnership between Trinity Health and Ascension Health.