Health Care and Higher Education

Metro, U-M tout ‘choice’ in market

Metro Health CEO predicts five to seven years before full impact of affiliation is felt.

January 6, 2017
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With the finalization of Metro Health’s affiliation agreement with the University of Michigan Health System at the end of 2016, the former underwent a name change.

But officials at newly christened Metro Health: University of Michigan Health don’t expect many shockwaves in terms of operational or management structure with the affiliation — simply better health care.

“I think one of the things we’re probably collectively most excited about is what won’t change,” Metro Health Chief Administrative Officer Floyd Wilson Jr. said. “And that’s the heart of the Metro Health experience, the family culture. I think if there’s anything to remember, it’s that the way we take care of people will never change.”

Metro Health’s affiliation with the University of Michigan comes four years after talks began internally about finding a partner for clinical integration. A proposed joint venture with Community Health Systems fell through in 2015, after it was deemed the Franklin, Tennessee-based health care system wasn’t the “right fit.”

But President and CEO Mike Faas believes Metro Health has found the right fit in U-M.

“We finally ended up with the partnership we should have had,” Faas said. “One of the wonderful things about this relationship with the University of Michigan is we get all of the added values that we’ve been talking about in terms of scale, brand, access and the abilities the university brings in entering the market in West Michigan. They’ve been here before, but not ever in this way.”

Faas said the affiliation is expected to generate between 10 and 20 percent increases in revenue over the short term, with much greater returns expected in the long run. He added increased revenues were not the motivating factor for the affiliation.

In affiliating with the University of Michigan, Metro Health gains access to top-flight health care options, medical research and innovation. Faas is confident the system will be able to increase the quality and capabilities of its health offerings without driving up the price. Additionally, protocols previously only available at the university’s main campus in Ann Arbor now will be available in West Michigan.

Faas said it’s unlikely the full impact of the affiliation will be felt for about five to seven years from now, but there will be some differences noticeable immediately.

“The first eye-opener will be that there’s going to be a real choice in West Michigan for health care,” he said. “You’re going to see another major player in the market, and that’s an evolution in process. It isn’t going to happen on Day 1, but it’ll be here. Starting by the end of our first year, you’re going to see a substantial change in our ability, both in terms in what we’re moving toward and in what we’re going to be able to offer.”

On the opposite end of the spectrum, the University of Michigan Health System gains a foothold in the West Michigan market and access to research in the area. That bodes well for the state of care at Metro Health, board chair Doyle Hayes said.

“This is a health care destination, and I think what’s going to happen is, since we have so much access to consumers, insurance costs are going to go down, and of course, the health care treatments and access to care will go up,” he said.

Under the agreement, the University of Michigan Board of Regents becomes the sole corporate member of Metro Health: University of Michigan Health. Previously, Metro Health Corporation had been the sole corporate member, but Faas said the new structure will have little impact on operation and reporting relationships. The Metro Health boards will remain intact and terms, conditions and benefits remain unchanged for current employees.

“The same people that everyone’s been seeing in West Michigan are still going to be here,” Faas said. “All the decisions are really generated out of West Michigan, and then ultimately, it all passes back up to the new Board of Regents at the University of Michigan.”

The board of regents voted in early December to assume $200 million in bond debt, accrued to help fund construction of Metro Health’s 208-bed hospital in Wyoming. In its action, the board agreed to issue up to $200 million in general revenue bonds to refinance Metro Health’s debt, providing lower financing and reducing or removing “certain restricting covenants” set in place by Kent Hospital Finance Authority when it issued the bonds in 2005 and ’12.

With the university agreeing to refinance those loans, Metro Health will have access to more growth opportunities that previously went unexplored, Faas said. Whereas previously, the hospital would have to choose between expansion and renovation, more access to capital will allow for Metro Health: University of Michigan Health to pursue both.

“I think for the first time, we see the whole raft of potential and possibilities that we had to have blinders on before,” Faas said. “We would say, we’d love to do this, but we can’t. That’s a wonderful opportunity, but we can’t.”

Now, the hurdles toward that growth likely will be one that has hamstrung many companies in West Michigan, Faas said — talent. But Metro Health: University of Michigan Health has a potential pipeline built right into the name, and Faas is hopeful its affiliation with one of the top medical schools in the nation will help fill that talent need.

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