Traverse City Record-Eagle

November 1, 2012

Big changes in the health care industry

Beaumont, Henry Ford health systems eye merger


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---- — DETROIT (AP) — Two of Michigan's largest health systems announced Wednesday that the harsh economic climate for health care providers drove them together in a plan to merge into a single, $6.4 billion nonprofit organization with 10 hospitals and 200 other facilities.

Royal Oak-based Beaumont Health System and Detroit-based Henry Ford Health System said the nonprofit medical care companies aim to reach a final agreement next year to merge their operations.

Officials say the two southeastern Michigan systems would keep their names and medical staffs and would remain independent. But the combined organization would get a new name, and it would be led by a single board with equal representation from both systems.

"Our shared vision is to form a new organization that will develop improved approaches to patient care that will lead the nation in quality outcomes, service, access and reliability," Henry Ford chief executive Nancy Schlichting said in a statement. "It is a bold and exciting vision that will mean easier, more accessible and more integrated care for our patients." State regulators expressed no immediate concerns about the merger.

Officials of both health systems said the merger is driven by big changes to the health care industry, including declining reimbursement for care and a shift away from treatment at traditional hospitals.

"We are a strong, profitable and growing organization today, but the world of health care delivery is changing, so we are taking proactive steps to ensure continued growth and success," Beaumont chief executive Gene Michalski said in a statement. "Beaumont and Henry Ford are perfect partners because of our shared values, history of innovation and strong leadership in value, quality and safety." The hospitals intend to maintain their existing medical school relationships but combine their foundations. Beaumont operates a medical school with Oakland University, while Henry Ford collaborates with the Wayne State University medical school.

Henry Ford employs about 24,000 people and operates seven hospitals. It also operates Health Alliance Plan, a health maintenance and insurance organization.

Beaumont has 14,000 full-time equivalent employees and operates three hospitals.

The health systems didn't immediately indicate whether the merger faced regulatory requirements. Joy Yearout, a spokeswoman for Michigan Attorney General Bill Schuette, said the state's top lawyer had no immediate concerns about the merger.

Michigan's Department of Community Health has not yet received any applications from the health systems regarding their certificates of need to operate their hospitals, said department spokeswoman Angela Minicuci. She said a change in ownership might require a department review, depending on how it is structured.

Any "change in control in any of the entities' insurance-related subsidiaries" would require approval from the state Department of Licensing and Regulatory Affairs, said spokesman Jason Moon.

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