Before Spectrum Health grew into what it has become today, Rick Breon first had to tackle a fundamental issue that he saw standing in the way: culture.
In 2000, Spectrum Health was just a few years into its existence, after it was created through the merger of the Butterworth Hospital in Grand Rapids and Blodgett Memorial Medical Center in East Grand Rapids. The two hospitals had been “warring factions” for decades in the Grand Rapids-area health care market.
Breon’s first task after coming aboard as president and CEO was to rid any lingering bad sentiments within the combined health system so it could create a singular “culture of Spectrum Health.”
“You had these great legacy organizations, and so when you bring them together, what’s created? It was not one acquiring the other. It was a bringing together of like-sized, like-thinking organizations, so you had to create the culture,” Breon recalled in interview with MiBiz as he prepared to retire on Aug. 31 after 18 years leading Spectrum Health.
He was succeeded by Tina Freese Decker, who previously served as Spectrum Health’s chief operating officer.
“When I came in, there was still a lot of Blodgett versus Butterworth going on, but I think there was a willingness to try to figure out a way to merge the two together,” Breon said. “That’s what I saw, a willingness and anticipation. And if we did that, we might be able to have something pretty special here.”
That “something” ultimately became one of the largest health systems in Michigan.
Breon came to Grand Rapids just after Labor Day in 2000 from St. Mary’s Hospital and Medical Center in Evansville, Ind., where he served as president and CEO. At the time, Spectrum Health had three hospitals, 7,500 employees and a budget of $710 million.
Under his leadership, Spectrum Health grew into a 12-hospital health system — and will grow to 15, presuming the proposed merger with Lakeland Health in St. Joseph goes through this fall — with more than 3,400 physicians and more than 26,000 employees.
Over the years, the health system expanded clinical services and specialty care — including initiating heart, lung and bone marrow transplants. As the health care industry consolidated, Spectrum also acquired a number of community hospitals across West Michigan, in Greenville, Ludington, Fremont, Zeeland and Hastings, and now in St. Joseph with the proposed deal with Lakeland.
Spectrum Health declined other deals and potential suitors, including “more than one” Detroit area health system that inquired about a merger, according to Breon.
“We have turned down several opportunities with other organizations — to either acquire, merge or any of that — because we feel strongly we wanted to be West Michigan-based,” Breon said.
GROWING WHILE HEALTHY
The period also saw massive investments to develop new facilities, often with the support of major benefactors who donated millions to each project. They included the Fred and Lena Meijer Heart Center, Lemmen-Holton Cancer Pavilion, and the Helen DeVos Children’s Hospital at the Butterworth campus on Michigan Street.
In recent years, Spectrum Health has developed several integrated care campuses across the region that consolidated primary and specialty care into single locations and added diagnostic services such as labs and CT and MRI scans.
Along the way, Spectrum Health created its own medical group that acquired several physician practices, including the former MMPC in Grand Rapids in 2010, and it forged research partnerships with Van Andel Institute and the Michigan State University College of Human Medicine.
Along with Mercy Health Saint Mary’s, Spectrum Health also partnered with MSU to relocate the College of Human Medicine to Grand Rapids from its prior home in East Lansing.
Spectrum’s health plan, Priority Health, grew significantly as well and became a statewide provider following the 2007 acquisition of Care Choices from Trinity Health.
As it grew, Spectrum Health earned numerous awards over the years for clinical quality and consistently has performed well financially. Spectrum’s current budget projects $6.38 billion in revenue with $274 million in operating income for the current 2019 fiscal year.
With the organization in good shape financially and preparing to position itself to meet major trends in health care, Breon decided now was the time for him to step aside.
“That’s one of the reasons it’s a great time to retire: The place is in good shape,” Breon said. “This health system is very healthy right now.”
ADAPTING TO CHANGE
Yet Breon acknowledges the organization faces “a lot of headwinds that are out there blowing around,” from adjusting to value-based reimbursement from insurers and the uncertainty it brings to adapting to an era of precision medicine and accommodating greater consumerism and cost transparency. All are areas that Spectrum Health has focused on in recent years.
In recognizing the headwinds, Breon said he’s reminded that after 40 years in health care, the industry has constantly adapted to change.
“At any point in time, you have tremendous things you have done, and tremendous challenges that lie ahead,” said Breon, who credits the health system’s staff with keeping Spectrum Health pointed in the direction it needs to go.
“You set the tone at the top. You sort of lay out a direction or a vision for where you need to go, but you have to have a lot of good people to make this kind of place work,” he said.
Allan Baumgarten, a Minnesota-based health care consultant who tracks the Michigan market, calls both Spectrum Health and Priority Health’s growth through the years “very impressive.” Spectrum Health has gone from a few local hospitals to become a regional system in Michigan, following the strategy “we’ve seen in a number of places” across the country, Baumgarten said.
Spectrum Health has positioned itself well strategically for the future in an ever-evolving industry, he said. And the health system did it while maintaining solid financial performance.
“The profitability of both branches of the organization has been very impressive,” Baumgarten said.
He believes that Spectrum Health, following the Lakeland Health deal, could even move across borders and into neighboring states in the years ahead as industry consolidation continues.
However, as Spectrum Health grew, it at times angered its competitors in West Michigan. Executives at Mercy Health Saint Mary’s, for example, objected publicly a few years ago when Spectrum Health left a 15-year-old consortium for graduate medical education that coordinated the placement of medical residents in the Grand Rapids area, and instead sponsored its own program.
In Grand Haven, Spectrum Health drew the ire of North Ottawa Community Health System with the development of the $50 million Health Pointe medical center in a joint venture with Holland Hospital, which signed a clinical affiliation with Spectrum a few years earlier.
As the Health Pointe project went through a contentious local zoning review in 2016, Roger Spoelman, then the president of Mercy Health in West Michigan, wrote an op-ed for local publications that stated Spectrum Health “had historically been an important collaborator in the community,” but its “style has become aggressive and self-serving.”
Other executives in the region also have privately complained that Spectrum Health has become too big and exerts too much influence over the market.
Breon dismissed those kinds of complaints as “sour grapes.” He noted the parent corporations of Spectrum Health’s main competitors in Grand Rapids — Trinity Health, which owns Mercy Health, and the University of Michigan Health System, which acquired Metro Health in 2016 — are much larger than Spectrum, although neither has the same concentration in the local market.
In discussing Spectrum Health’s growth and expansion regionally, he said the health system needed to become much larger to bring the kinds of specialized medical care to the market that had been missing, often requiring patients to travel to access care.
“The ability to be the size that we are is the ability to bring things into this community that otherwise wouldn’t happen,” Breon said. “It’s enabled us as a community to be able to develop services and keep services local.”
BECOMING A CARE DESTINATION
Breon saw “possibilities” of what Spectrum Health could become early on, even as he interviewed with a search committee for the CEO position. There was no specific “light switch” moment that turned Spectrum Health down the path of becoming a large regional system, other than “trying to get people to think bigger.”
He recalls discussions 15 years ago about how geographic expansion was needed if Spectrum Health was going to initiate specialty medical services that had been unavailable in the market. A broader reach would allow Spectrum Health to generate the patient volumes needed to sustain specialized medical services such as organ transplants, and retain patients in market. Prior to Spectrum Health launching heart transplants in 2010, patients had to travel to Chicago or Southeast Michigan for the procedure and their follow-up care.
“We said, ‘All right, we need a bigger geographic footprint if we want to do more exotic things to keep people here in Grand Rapids,’” Breon said.
From that point, Spectrum Health began moving toward becoming a regional health system and pursued a strategy of “destination care,” where patients from elsewhere would come to Grand Rapids for specialized care. In speaking to the Economic Club of Grand Rapids, he told business leaders at the time about the vision for Spectrum Health to become another Mayo Clinic, only in a town that has more to offer than Rochester, Minn.
Breon recalls getting “lot of crap” from people who saw Spectrum Health as shooting too high for a town the size of Grand Rapids.
“I just think that if people think bigger about those kinds of things, it’ll be a self-fulfilling prophecy,” he said. “If you think small, guess what, that’s all you’ll ever be.
“We are better than that, we can be better than that, and we have to think like that.”
A QUESTION OF SIZE
As to the question of how big is too big for a health care organization, Breon responded: “I think it all depends on what it is you’re trying to do.”
Breon expects health care industry consolidation to continue, given the pressures health systems face to drive higher quality, bring costs down, and mitigate the risks of insurance reimbursements that are increasingly based on outcomes, rather than volume.
“We’ve asked this question internally about how big do we need to be? It isn’t a matter of, ‘Are we too big?’ It’s a matter of, ‘How big do you need to be to be able to deal with all of the things that are going on, mostly coming at you on a national basis?” he said. “I think that question is still unanswered. I don’t think there’s a great sense of urgency or need to get really bigger, but on the other hand, I certainly think that’s a question you need to leave open to see what occurs.”
Sidebar: For Spectrum Health, holding on to health plan paid off, Breon says
For years, one of the most persistent rumors in the Grand Rapids health care market had Spectrum Health either about to sell or looking to sell its health plan, Priority Health.
As is often the case, the rumor mill didn’t quite get it right.
Spectrum Health has no intention of selling — nor has it ever actually sought to sell — the insurance plan, according to retired President and CEO Rick Breon.
However, the health system got calls “all the time” and at one point considered the question, Breon said.
The issue arose in the mid 2000s at a time when health systems across the U.S. were divesting their health plans. Although he personally “never had any interest in selling it,” Breon wanted to answer whether Spectrum Health should follow the trend.
“We looked at it. We did a white paper internally to evaluate it. It was only prudent back in the 2000s when everybody was selling,” he said. “We came to the conclusion ‘no, absolutely not.’”
The internal review concluded that owning a health plan was a core part of being an integrated health system, particularly as Spectrum Health began pursuing a regional growth strategy and sought to improve quality and reduce costs.
“We said, ‘You know, this could be a real strategic part (of a health system). If you could get that, and the physicians and the health plan to work together, you’re going to have something rather special.’ That was the point of not selling at a point when everyone else was doing it,” said Breon, who considers keeping Priority Health one of the best strategic decisions of his 18-year tenure as Spectrum Health’s CEO.
“I think we were smart keeping it and growing it and diversifying it into Medicare and Medicaid and the exchanges,” he said.
Priority Health today has nearly 800,000 enrollees across all products and is the second-largest health plan based in Michigan behind Blue Cross Blue Shield of Michigan. Through the first half of 2018, Priority Health recorded $84.7 million in net income. The health plan’s Medicaid HMO, Priority Health Choice Inc., had $2.6 million in net income at midyear.
A health system’s ownership of a health plan “lends a different conversation” when considering issues of health care access, quality, cost and wellness, Breon said. The health plan also can pilot innovations by reimbursing for services that are not traditionally covered by insurance.
Breon recalls a meeting several years ago when Spectrum and Priority Health staff were “sitting around a table” discussing MRIs. The Spectrum representatives contended that more MRI machines were needed in the market because patients in some cases were having their scans done in the middle of the night.
Staff from Priority Health had a different take. They said their analysis of data found an overutilization of MRI and CT scans by doctors in the market, rather than a lack of capacity.
“You would never have that discussion without a health plan. That would never be an element to the discussion,” he said. “It would always be about, ‘All right, what do you build? Let’s build something,’ as opposed to, ‘Is it really necessary? Is that really the answer? Is the answer maybe we need to look at utilization and how we utilize those kinds of things?’”
Spectrum Health owns a 93.9-percent share of Priority Health, which was created several years ago with the merger of the former Butterworth HMO and Lakeshore HMO. Munson Healthcare in Traverse City owns a 5.5-percent stake, and Northern Michigan Regional Hospital in Petoskey owns 0.6 percent.
Holland Hospital at one point held a stake in Priority Health, but divested its share several years ago.