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Sunday, 26 November 2017 15:48

Trinity Health to combine Michigan operations to optimize costs, share best practices

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GRAND RAPIDS — The planned union of Mercy Health with a sister health system across the state follows the idea that bigger is better in health care. 

Combining Mercy Health in West Michigan with Canton-based Saint Joseph Mercy Health System — both owned by Livonia-based Trinity Health — creates a single, statewide health system that will collectively have $3.2 billion in annual revenues and an extensive statewide clinical network.

Once formed on Jan. 1, the statewide health system will consist of 10 hospitals, nine outpatient centers, 12 urgent care centers, and a medical staff of nearly 4,000 physicians. The combined company will employ more than 22,500 people. Included in the plans are Mercy Health’s Saint Mary’s hospital in Grand Rapids and the Mercy and Hackley hospital campuses in Muskegon.

The Mercy Health-Saint Joseph Mercy combination is the culmination of efforts by Trinity Health to integrate its regional health systems around the nation to optimize and reduce costs, eliminate administrative duplications, share clinical expertise, and leverage collective strengths in contract negotiations with health insurers and suppliers.

Mercy Health President and CEO Roger Spoelman and Saint Joseph Mercy Regional President and CEO Rob Casalou have been working on statewide collaboration for more than a year, “saying, ‘Let’s do this, let’s see what this looks like when we’re strong and can we get even stronger,’” Spoelman said.

“We are part of a system, and as we look at the system, Southeast Michigan and West Michigan are very strong parts of Trinity,” said Spoelman, who will become senior vice president of strategic and operational integration for Trinity Health. “It gives us a more defined, statewide, coordinated presence. Anything we can do together will be stronger than we can do individually.”

Trinity Health recently combined five hospitals and facilities in Connecticut and Massachusetts to create Trinity Health of New England. 

In Michigan, Trinity Health already has been working for a few years on statewide initiatives such sharing executive teams, strengthening clinical ties with the University of Michigan Health System through the clinically integrated network Together Health, and negotiating statewide contracts with insurers.

Casalou, who will become president and CEO of the statewide system, terms the pending combination as “the end of a process, more than the beginning.”

‘UNIFYING OUR BRAND’

One driver of the move is the push to value-based contracting with health insurers that pays care providers based on quality, efficiency and outcomes, rather than for the volume of procedures they perform. That ongoing change in the economic model for health care generates greater risk for health systems, which seek to mitigate their risk by becoming larger and serving a larger patient pool.

“It’s important if you’re going to enter into those that you do negotiate as an entire system because now you’re serving populations in communities,” Casalou said. “You’re not just worrying about what you get paid in a single hospital. You’re really looking at the comprehensive service of the whole system.”

Trinity Health in Michigan first negotiated a value-based contract four years ago with Blue Cross Blue Shield of Michigan and recently completed talks on a new deal, Casalou said.

As the new statewide health system comes together at the start of the new year, Trinity Health will decide on a name for the entity. The trick to that process is crafting something that creates a unified brand identity across the state without eroding the brand equity that Mercy Health and Saint Joseph Mercy each have in their local markets.

“We’re working on that right now and we have to make sense of coming together and unifying our brand,” Casalou said. “There’s great equity in Saint Mary’s, there’s great equity in Muskegon, there’s great equity in Saint Joe Ann Arbor. How do we endorse those to a unified brand? I can’t imagine a future in which we’re not going to recognize those local names that communities identify with. At the same time, we have to pull them together in a unified brand.”

In West Michigan, Mercy Health was created four years ago as Saint Mary’s in Grand Rapids and Mercy Health Partners in Muskegon integrated business and clinical operations and created a single brand. The health system retained the names of the local hospitals, each of which dates back generations.

Mercy Health consists of the Mercy and Hackley hospital campuses in Muskegon, Saint Mary’s hospital in Grand Rapids, and long-term care centers. It also includes Mercy Health Partners, a regional medical group that employs about 500 physicians and advanced practitioners.

Saint Joseph Mercy’s operations are concentrated in Southeast Michigan in Wayne, Oakland and Washtenaw counties. The health system operates hospitals in Ann Arbor, Pontiac, Livonia, Howell and Chelsea, plus five outpatient health centers, six urgent care facilities and more than 25 specialty centers.

ACQUISITIONS POSSIBLE

A united health system between Mercy Health-Saint Joseph Mercy could better share best practices and medical specialists across the state, as well as offer a larger operation for graduate medical education, Spoelman said.

“We offer quite a bit,” he said. “It makes us a much more attractive place to do training because we have such a coordinated network all over the state. Wherever someone wants to end up, that gives them an entrée into a very large system with opportunities.”

Likewise, a larger statewide system could become more of a lure for community hospitals and independent physician practices that want to seek a partner or buyer, although “we’re going to be selective,” Casalou said.

The new statewide health system will look to make acquisitions to drive growth, especially in the area of ambulatory care, he said.

“In today’s day and age, it isn’t about buying more hospitals and buying more beds because we know as you try to lower the cost of care, it’s really about trying to keep people out of the hospital,” Casalou said. “But we will be looking very carefully at opportunities for further consolidation. We’re looking at some now. All hospitals are.” 

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Mark Sanchez

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msanchez@mibiz.com

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