Spectrum merger talks stall up north

May 24, 2010
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Spectrum Health’s talks with two northern Michigan hospitals regarding potential affiliations have stalled.

In the wake of concerns raised by the Traverse City community, Munson Healthcare board members have hired a consultant for another review of its financial situation. Earlier this month, Douglas Deck resigned as the health system’s president and CEO.

In Petoskey, Northern Michigan Regional Hospital President and CEO Reezie DeVet said that the hospital decided to take extra time to review the potential impact of becoming a sister organization to neighboring Munson in the Spectrum family tree.

“We felt we just needed to take a little longer time to look at what implications that might have for us, so our due diligence has been longer than we originally planned,” DeVet said. “It’s definitely ongoing and we’re looking to wrap up in the next 60 to 90 days.”

To the west, Deck has been replaced by Ed Ness, who is also retaining his duties as president and CEO of Munson Medical Center, the system’s flagship hospital. Ness said the board hired Nashville health care consultant FTI Cambio for another look at its financial position in light of plans for a potential $340 million in capital investments and the proposal to join Spectrum Health. The consultant’s report is expected next month.

The transition in Traverse City is the second leadership change with the northern Michigan hospitals since they started talks with Spectrum. DeVet was named to her post in December, following the November death of her predecessor, Tom Mroczkowski, due to heart attack.

 “Tom and I had a very good relationship. He kept me very informed of what was going on,” said DeVet, who had been COO. “I don’t think we missed a beat.”

NMRH’s board chairmanship also has changed hands, from Dr. Wendy Walker to David T. Buzzelli, a retired Dow Chemical Co. executive. Walker remains involved on a board committee, helping the board to keep continuity, DeVet said.

The 234-bed Northern Michigan Regional and the 391-bed Munson “have a little bit of crossover in the marketplace we service. There isn’t a great deal of crossover,” she added.

For the 2009 fiscal year, Northern Michigan Regional is reporting a razor-thin margin, with total revenue of $233.8 million and expenses of $233.7 million.

North Central Michigan College President Cameron Brunet-Coch, a member of NMRH’s community committee, said the proposal hasn’t drawn much reaction from the public. Brunet-Coch’s community college trains nurses who use Northern Michigan Regional and other sites up north for clinical training.

“It’s very, very promising,” Brunet-Coch said. “The fact that our board would continue to be independent, and would maintain that independent status, I think, is important. I haven’t heard one negative comment or even a concern about the affiliation.”

Last year, Mackinac Straits Hospital in St. Ignace entered into an agreement with Northern Michigan Regional to provide radiology and information technology services, CEO Rodney Nelson said.

“We have a working relationship on certain services,” he said. “It has nothing to do with governance, nothing to do with an exchange of assets.”

A rural critical access hospital, the 15-bed Mackinac Straits Hospital opened a new $26 million facility in April, Nelson said. The hospital switched from being governed by an authority to a private nonprofit in order to ease U.S. Department of Agriculture and Rural Development loans and loan guarantees for the construction and to refinance loans for the Mackinac Island clinic.

The hospital has a close relationship with the Sault Ste. Marie Tribe of the Chippewa Indians and maintains clinics on Beaver, Bois Blanc and Mackinac islands and in Naubinway.

“I don’t know what immediate impact it would have on us,” Nelson said of the possible Spectrum-NMRH merger. “There’s a lot going on with the Traverse City and Petoskey organizations and Spectrum. So we’ll just continue to kind of watch it and see what happens.”

In April, the Petoskey hospital broke ground on the $7 million John & Marnie Demmer Wellness Pavilion at the Lockwood-MacDonald campus. The center’s construction is being financed entirely with donations, including a $3 million gift from the Demmer family. It will provide dialysis as well as rehabilitation in the cardiac, pulmonary and pediatric areas; physical and occupational therapy; speech and language pathology, programs for cancer survivors; and wellness counseling and education.

While Munson awaits the new financial assessment, Ness said there has been “a stepping-up of discussions and listening to the community.

“In my new role, I’ve had a number of community meetings, both with our corporate members as well as setting up twice-a-week meetings that I’m having with smaller groups of community leaders…to really have an in-depth discussion,” Ness said.

“What we’re finding is not only the health care issue, but the issue of a relationship with Spectrum, is very complex. It’s something that’s difficult to explain in sound bytes or 30-second TV interviews,” he added. “You really need to sit down and have a face-to-face discussion, not only to explain why we think this is something that is valuable but also to understand what the community’s questions are.”

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