South Haven Health System could become a part of Bronson Healthcare Group if the two can agree on a final deal and persuade voters to do the same.
After soliciting offers this spring for a partner, trustees at South Haven decided to pursue a partnership with the Kalamazoo-based Bronson Healthcare. The two will spend the next several months in due diligence, working out the details.
A potential partnership or merger would follow more than 30 years of collaboration between South Haven Health System and Bronson Healthcare. South Haven is already connected to Bronson’s electronic health records system and contracts with Bronson for pathology services and hospitalists.
The two also share a “very similar” culture, according to South Haven President and CEO Joanne Schroeder.
“I’ve always referred to them as, ‘they’ve always been a good neighbor,’” Schroeder said. “It’s just a natural evolution of our relationship. It just makes a lot of sense.”
South Haven Health System consists of a 65-bed acute-care hospital, an urgent care clinic, a medical office building, and a wellness and rehabilitation center, plus a primary care office in Bangor.
In the 2015 fiscal year that ended last June, the community health system generated a $2.3 million operating loss on total operating revenue of $38.6 million, according to an annual audit report filed with the Michigan Department of Treasury.
South Haven trustees began seeking a partner in late January after several years of study and deliberation, according to Schroeder.
As South Haven is a public authority hospital owned by two cities and seven townships in Van Buren County, a merger with Bronson would require a public vote in addition to standard regulatory approval. The question could go on the ballot locally this November or in 2017, Schroeder said.
Shrinking reimbursements from Medicare, Medicaid and private insurers, and the increased use of high-deductible health plans that contribute to bad debt, combined to drive the need to seek a partner. The health system’s Medicaid reimbursement shortfall in FY 2015 alone totaled $714,000 below the cost of providing care, according to an annual report issued in December.
“Like many health care organizations, we have had some economic challenges,” Schroeder said. “So we really are looking for a partner to help us with those areas, as well as to provide some scale to help mitigate some of that risk.
“Our board’s ultimate goal in moving in this direction and on this journey was to preserve local health care and to have local health care here in South Haven and the surrounding communities long into the future.”
Becoming part of Bronson would also help South Haven with access to capital, as well as improved access to medical specialties and diagnostics.
In return, Bronson would expand its reach further across the region. Excepting the present collaborations with South Haven, Bronson lacks a presence in the lakeshore market of western Van Buren County, although it does own and operate LakeView Hospital in Paw Paw on the county’s east side.
“It is a good strategic location that complements our existing location,” Bronson President and CEO Frank Sardone said.
Bronson has sought over the years to become a “truly regional institution and we have looked at relationships throughout Southwest Michigan,” Sardone said.
He cited the 2007 acquisition of LakeView Hospital and a majority stake in Battle Creek Health System in 2011 as examples of this regional network, as well as the 2013 deal for the physician group HealthCare Midwest in Kalamazoo.
“(A South Haven partnership) is consistent with the approach of creating access throughout Southwest Michigan and developing a system which we can build upon the strengths of each institution and ultimately provide the best possible care for patients in the region,” Sardone said. “It really further extends Bronson’s reach throughout Southwest Michigan.”
The exact form of a partnership is still to be determined, although “it will be a significant combination of the organizations” that goes beyond an affiliation agreement, Sardone said.