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Huntington Pursues Health Care Market
Huntington Bank isn’t wasting any time going after the high growth health care market in West Michigan. Some 20 percent of its business banking portfolio is now health care related. Six out of Huntington’s 30 highest profit corporate banking customers are vested in the health care industry, too. On top of that, the company is financing $350 million in new health care developments downtown, including more than $200 million for the Michigan Street Development project.
Jim Dunlap, Huntington Bank’s regional group president for the West Michigan, East Michigan and Northern Ohio regions, headed up Huntington Bank’s health care group during most of the 1980s and 1990s while serving as president of the bank’s Northwest Ohio operations and later its Florida franchise. In both those metropolitan markets, there was heavy consolidation among the hospitals, as well as among the organized physician groups, he said.
When he came to Grand Rapids in September 2001, he started looking into the economic opportunities that existed here. Since health care was a personal and professional interest of his, he commissioned a team to do research on the metropolitan and community hospitals and one to do research on the physician groups.
Since 2001, health care has been the only job creation engine in the Midwest states, Dunlap pointed out. Health services jobs rose more than 60 percent in Michigan, Ohio and Indiana between July 2001 and July 2006, according to the Bureau of Labor Statistics. The health care job market is growing right in the midst of the state’s transition, and it’s important for financial institutions to be a part of that, Dunlap said.
“The interesting thing that emerged from the research was that this was a uniquely unconsolidated industry on the physician side; it was truly a cottage industry,” Dunlap recalled. “The average physician group size in Ohio is 14, in Florida it’s 40, and here it’s four. I lived in two major markets where consolidation happened. The inevitability of consolidation here was obvious; they were going to have to, at some point in time, get together for shared resources.”
That led to the formation of Huntington’s health care group here in early 2003. The group started with the physician community. The goal was to gain an understanding of how $1 moves through the health care industry. After months of research into industry trends and the financial needs of professionals working in the industry, Huntington approached Michigan Medical Professional Corp. about becoming the company’s banking partner.
MMPC, the largest physician practice management group in the state of Michigan, became Huntington health care group’s first significant client in the fall of 2003. Advantage Health followed suit, and now the bank has a very dominant market share in the organized physician practice group, Dunlap said. The relationship includes the full range of commercial banking, Private Financial Group services, and a Huntington ATM machine on the premises.
James Buzzitta, founder and CEO of MMPC, said his organization found Huntington Bank to be technologically savvy.
“We are looking for a way to differentiate our organization in the market and run our businesses at a very high efficiency level,” Buzzitta said. “We’re looking for partners who have the resources to do it, and Huntington’s IT system is a very good system that blends with ours from a money management perspective.”
Buzzitta said Dunlap and his team have always been “willing to look outside the box” for solutions and that philosophy blended well with the MMPC philosophy.
“They were willing to customize things and really willing to go the extra mile to do that,” he added.
Although MMPC does have other banking relationships, Huntington is one of its “preferred” bankers, Buzzitta said.
The other group Huntington focused on were the community hospitals. In Zeeland, for instance, Huntington was involved in the building of the new Zeeland Community Hospital. The bank served as a consultant in the beginning, did the construction financing, and then delivered a full array of aftermarket banking services to hospital employees. Dunlap said Huntington has put together similar relationships with other hospitals in West Michigan, as well.
Henry Veenstra, president of Zeeland Community Hospital, said the total financing package, including the refinancing of some existing bonds, was $29 million.
“As kind of a goodwill gesture, Huntington actually parlayed some of the bonds to three or four other local banks, so they were the lead financial organization, but other community-based banks here had an opportunity to be involved in the financing, as well, which we thought was very positive.”
Another very positive aspect, he said, is that Huntington encourages its people to be involved in community activities and serve on nonprofit boards. Zeeland Community Hospital has had a “wonderful” long-term relationship with Huntington and its predecessor, FMB, Veenstra said. In the past year the bank sponsored a Lunch and Learn series on personal finance for hospital employees.
“This goes well beyond the lending function that financial institutions traditionally approach this with — making the loan and handling the bond financing. You need to understand how to structure and organize and support things for health care because it’s different,” Dunlap explained. “They get paid different, they do different processes relative to other financial services, they have a lot of regulatory issues that you have to support; just the way they have to segment their financial reporting is different from any other industry.”
Huntington approached Christman Co. and RDV Corp., the partners in Michigan Street Development LLC, and presented them with a multi-year plan of what the bank could do for them beyond just the financing portion. The project spans the north side of Michigan Street from North Division Avenue to Coit Avenue and consists of three medical office towers and a 2,300-square-foot parking ramp. The Michigan State University West Michigan Medical School will be situated at the far west end of the development. A fourth tower will house Spectrum Health’s $78 million Lemmon-Holton Cancer Pavilion.
Huntington refers to the project as “City on the Hill.” It will have a banking center on the main level to serve the physicians, interns, medical school students and residents that become tenants of the towers.
“Philosophically, it goes like this: If a dollar moves through City on the Hill, we want that dollar to move through Huntington,” Dunlap said. “From the people doing the construction financing and what resources we’re providing for them, all the way through to the final tenants that will sit in those offices, we have a plan in place with that organization to support that, and it’s all underpinned with the knowledge of how health care works.”
Joe Hooker, development services manager for Christman Co., said the Michigan Street Development partners had solicited offers from several banks, but that Huntington’s was “the clear-cut best” option because it brought more to the table both in terms of the financial package and in terms of its ability to understand the project, Hooker said.
“It wasn’t all about numbers with them. They showed an interest in the project that went beyond just the business aspect. Right from the get–go they wanted office space in the development so they could service the medical community that’s going to grow up there.”
To date, Huntington has exceeded $125 million in financing for the project, Hooker said, and with four years to go, that figure will rise. He said besides putting a branch in the development, Huntington will offer special services and products to employees and tenants of the buildings.
“They’ve shown tremendous creativity throughout this relationship,” Hooker remarked. “They’ve shown flexibility and adaptability to a very dynamic project.”
Huntington’s nearly $350 million investment in Michigan Street projects is significant for a bank of its size, Dunlap acknowledged.
“But it’s an investment we’re very comfortable making — because of the people, because of the community and because of our knowledge of health care,” he said. “You have got to be in this business in some shape or form if you’re going to be on the growth side, particularly as West Michigan is transitioning to life sciences.” HQX