Med School Impact Analysis Sought

July 9, 2004
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GRAND RAPIDS — In seeking an independent analysis of the proposition, community and business leaders want to better understand what they’re getting into before jumping fully into efforts to move much of Michigan State University’s medical school to Grand Rapids.

The accounting firm Deloitte & Touche will analyze MSU’s conceptual proposal to develop a full, four-year medical school campus in Grand Rapids, and the associated $309 million cost, and conduct an economic impact study.

Business and community leaders are embarking on a due-diligence process in what would undoubtedly become a massive financial and logistical undertaking. Their goal is to better prepare themselves for the task ahead and identify the implications of having a medical school in Grand Rapids.

“It’s so everybody in West Michigan can understand more fully the economic impact of this thing and what it’s going to take to make it happen,” said David Frey, co-chairman of the Grand Action Committee, which will oversee the study. “It’s a big project and it’s got lots of moving parts to it. We’re just making sure there are no surprises.”

The coalition of community and business leaders wants to at least verify MSU’s cost estimates, or perhaps refine them, before becoming engaged in a massive capital campaign to help raise the millions needed to pay for the development of and to sustain a local campus for the College of Human Medicine.

Parties within the private and public sectors are “ready to embrace this” and offer significant contributions to the venture, but “we’ve got to know what we’re hugging before we embrace it,” Grand Rapids Mayor George Heartwell said.

By getting a clearer picture of what it will take to develop a Grand Rapids medical school campus, advocates of the move will have a greater ability to answer the hard questions they will undoubtedly receive from potential major benefactors, who will want to know how MSU would use their money and the potential return on investment for West Michigan.

An independent analysis that takes “a good hard look” at MSU’s financial estimates would give “legitimacy” to requests for financial backing for the medical school, Heartwell said.

“This community is nothing if not cautious and thoughtful and careful in how it does business,” said Heartwell, who coordinated the formation of the loose-knit coalition of local power brokers this spring after MSU trustees decided to develop a medical school campus in Grand Rapids.

“We’ve got our due diligence work to do here. We want to look at Michigan State’s numbers and just understand where that $309 million figure comes from or come to a different conclusion and a number we can feel more comfortable with,” he said. “We think we’ve got a great opportunity here but we’re not ready to jump until we fully understand what it’s all about and what our role would be.”

MSU trustees in early May unanimously endorsed a conceptual proposal to move much of the College of Human Medicine from East Lansing to Grand Rapids over a 10-year period and start classes as early as the fall of 2005.

Heartwell days later began assembling a team of key players involved in health care and medical education in Grand Rapids to mount a coordinated, collaborative response to help MSU pull off the move.

The coalition that came together includes representatives from Spectrum Health, Saint Mary’s Mercy Medical Center and Metropolitan Hospital; the Van Andel Institute; the Grand Rapids Medical Education and Research Center for Health Professions; Grand Valley State University, Grand Rapids Community College and Aquinas College; the Alliance for Health; Grand Action Committee, the city of Grand Rapids and Kent County.

The coalition behind the study will seek to have the results back in time to meet MSU President Peter McPherson’s self-imposed timeline to have a plan finalized by the end of the year. Deloite & Touche believes it can complete the study by Labor Day.

“We’re hoping to do this with a reasonable timeline so it’s compatible with that of the university,” Frey said.

Grand Action, which conducted the initial economic assessments in the 1990s that led to the development of Van Andel Arena and DeVos Place convention center, is arranging private funding for the medical school study.

From MSU’s perspective, an independent review of the financial aspects of the medical school proposal would help to generate support in Grand Rapids for the project.

“If it enhances the ability to be certain in the minds of those who need certainty, that’s good. And if it’s a clarifying venture, that’s good,” MSU Director of University Relations Terry Denbow said.

Ultimately, the development of a College of Human Medicine campus in Grand Rapids hinges on two vital issues: MSU securing an affiliation agreement with Spectrum Health and, probably more importantly, the financial support to cover the projected capital and ongoing costs.

The two issues are “very much” connected, Spectrum Health President and CEO Rick Breon said.

Spectrum Health’s position is that MSU needs to identify how it will pay for the medical school campus in Grand Rapids before the health system signs an affiliation agreement with the College of Human Medicine.

“We’re anxious to see if this money situation can be identified. If it can’t, all bets are off,” Breon said.

Another significant issue to work out is the integration of medical school faculty into clinical practices in the Grand Rapids area.

Discussions with Spectrum Health are continuing. MSU had hoped to have a conceptual affiliation agreement nailed down by this month, but Spectrum Health trustees did not discuss the issue at their regular bi-monthly meeting on June 29.

Given the costs associated with MSU’s proposal and the complexity of the issue, Breon agrees with the conducting of an independent financial review.

“There’s a lot of numbers and I think they need to be verified,” he said. “It’s a necessary step.”

Spectrum Health trustees have said that an affiliation agreement with MSU’s medical school must make good business sense and not affect the health system’s finances in a way that it drives up the cost of providing care.

The independent analysis will examine the medical school move from two perspectives: the costs to develop and sustain a Grand Rapids campus; and the economic impact of job creation and spin-off investment and any potential cost for hospitals and health-care providers involved with the College of Human Medicine.

“What does it mean for our community and what are some of the costs it represents?” Heartwell asked. “What does it mean for medical costs for you and me and everyone else who depends on the good hospitals of our area for medical care?”

In bringing much of the College of Human Medicine to Grand Rapids, MSU sees an opportunity to tap into a generous philanthropic base in West Michigan and align the medical school with a major tertiary care center in Spectrum Health and a major research center in the Van Andel Institute.

To Grand Rapids, a local medical school campus holds benefits directly for Spectrum Health and other health-care providers, as well as for the Van Andel Institute, which would have a greater ability to tap major research grants. There’s also the potential for untold spin-off benefits for the area, where building the biosciences and life sciences sectors have been identified as top economic development priorities.

“I think it’s enormously significant from an economic development standpoint but it is certainly a very different undertaking,” Frey said. “It’s a rare opportunity most cities and most regions would be extremely envious of.”           

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