GRAND HAVEN — North Ottawa Community Health System would become part of Trinity Health, the parent company of Mercy Health in West Michigan, if the two are able to finalize a merger agreement that was announced today.
Trinity Health Michigan and Grand Haven-based North Ottawa Community Health System say they have signed a non-binding letter of intent to “discuss the feasibility” of the small Grand Haven health system becoming part of the Livonia-based Trinity Health.
The letter of intent “allows us to begin a due diligence process to fully assess the viability of a formalized agreement and to ensure that this is the right next step for our health systems,” the two said today in a joint statement.
The move comes as state lawmakers consider legislation that would allow the transfer of North Ottawa’s ownership without a public vote.
As MiBiz has recently reported, legislation proposed in the state House and Senate would eliminate the need for a second public vote to sell or lease a hospital like North Ottawa that was previously transferred from a public authority to a private, nonprofit corporation.
Among a declining number of independent health systems in the state, North Ottawa dates back 103 years and at one point was owned by a public authority consisting of six municipalities in northwestern Ottawa County. The health system includes the 81-bed acute care hospital in Grand Haven.
In 1996, more than two-thirds of local voters approved transferring North Ottawa to a private, nonprofit corporation. Under the existing law, North Ottawa would have to go through another public vote to again sell or lease the hospital.
Senate Bill 944, sponsored by Sen. Roger Victory, R-Hudsonville, and House Bill 5876, sponsored by Rep. Greg Van Woerkem, R-Norton Shores, would do away with the requirement for a second public vote. Both bills passed House and Senate committees last week.
North Ottawa President and CEO Shelleye Yaklin earlier this month urged legislators to enact the legislation to help the health system pursue a partner as smaller community hospitals cope with significantly higher costs from the COVID-19 pandemic, lost revenue from deferred procedures and surgeries, tight reimbursements and staffing shortages that have driven up wages.
“While NOCHS’ unwavering commitment continues, the viability of operating an independent community hospital in the current health care environment is becoming increasingly challenging for mid-sized hospitals faced with staffing shortages, ever-changing reimbursement models and limited, essential operating capital,” according to today’s joint statement. “We want to do all we can to ensure health care access remains in the Grand Haven community, while seeking the best possible outcome for our patients and our communities.”
The hospital in the 2020 fiscal year lost $762,630 on total revenue of $52.1 million, according to an annual filing to the IRS. 2020 was the most recent fiscal year for which data was available.
Financial filings indicate that North Ottawa Community Hospital recorded net losses in several prior fiscal years going back a decade.
In her March 17 testimony to legislative committees, Yaklin cited legacy pension obligations as one of the financial issues facing North Ottawa, which at the end of the 2020 fiscal year had $30.6 million in what’s listed as “employee benefit obligations.”
Adding North Ottawa would solidify and extend Mercy Health’s position in Ottawa County and the lakeshore health care market. North Ottawa in 2018 sold its physician practice to Mercy Health, and the two have since sought to collaborate more under a strategic alliance first formed in 2016.
“In working together, our two health systems have had the privilege of offering improved access to specialists, primary care and health care services, while improving care delivery and access close to home,” today’s joint statement said. “Health care is always about meeting the patient where they are. Through our health systems’ collaboration, we’ve elevated the choices available to our community to access high-quality specialty and primary care. This next step has the potential to advance our work together as a fully integrated health system, innovating and delivering care like never before.”
Trinity Health Michigan owns and operates eight hospitals in West and Southeast Michigan, including Mercy Health Muskegon and Mercy Health Saint Mary’s in Grand Rapids.