New Effort For Muskegon Hospitals

September 17, 2007
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MUSKEGON — Hackley Health and Mercy General Health Partners announced intentions to merge operations into a $500 million regional health care system to be owned and operated by Catholic health care conglomerate Trinity Health. Effectively ending a century of competition in the Muskegon market, the long-rumored move is a direct response to growing financial pressures and increased regional competition, primarily from health care providers in Grand Rapids.

Leaders from both hospitals were candid about intentions to elevate Muskegon as a regional health care destination that would provide an alternative to Grand Rapids for both lakeshore residents and outlying areas.

A letter of intent was signed by the two hospitals on Sept. 4 and made public last week, stating the two organizations’ intentions and the approval of the respective boards of trustees of Hackley Health, Mercy General and Trinity Health, which owns Mercy General and dozens of hospitals across the country, including Saint Mary’s Health Care in Grand Rapids.

Beginning with a shared cab ride at a health care conference 18 months ago, Mercy General President and CEO Roger Spoelman and Hackley Hospital President and CEO Gordon Mudler have been quietly leading discussions toward bringing the majority of the health care services in the Muskegon area under one roof.

“I suppose Hackley really started looking at this eight or nine years ago, when we realized that we just were not strong enough to weather the ups and downs of the health care industry today,” said Mudler. Hackley initially became affiliated with Spectrum Health in Grand Rapids, but severed the relationship after four years in 2004. In 1998, the merger of Muskegon General Hospital and Mercy Hospital in Muskegon created Mercy General Health Partners.

“What makes sense for Mercy and Hackley together, as opposed to Spectrum and Hackley, is that we can together rationalize our programs in a way that is more beneficial to the Muskegon community,” Mudler said. “Muskegon does not need two separate oncology programs, for instance, and a relationship with a hospital in Grand Rapids, Kalamazoo or another community would not have changed that.”

If the two hospitals were to continue competing with each other and, at times, unnecessarily duplicating services and investment, reasoned Mudler and Spoelman, delivery of service would increasingly suffer. This concern grew over the past two years with the declining Muskegon and Michigan economies and declining Medicaid reimbursement.

The number of Medicaid, self-paid and charity cases has grown dramatically at both hospitals. Mercy General provided $12.4 million in charity care last year. Hackley Health provided nearly $18 million in charity care last year, leading to a $2.3 million loss.

“If we lost either hospital in Muskegon, the other couldn’t pick up all those cases,” said Spoelman, the Mercy General CEO. “We need the resources of both hospitals together to be successful and grow.”

Although roughly a fourth the size of Spectrum Health, the as yet unnamed health care system will become Muskegon County’s largest employer. With an estimated 4,000 employees, it will become West Michigan’s fifth largest employer and its second largest health care provider. Pending due diligence and approval by federal and state regulators, the hospitals will begin merging operations in January. The largest obstacle will be the threat of an anti-competitive environment in the Muskegon market. Due to the rapid expansion of other regional providers, particularly Spectrum Health, and the declining economic picture, the hospitals are confident the merger will not be disputed.

“Things have evolved in the Muskegon market to the point where it’s very appropriate to look at whether there is duplication of services and whether things can be more efficient,” said Lody Zwarensteyn, president of the Alliance for Health, the Grand Rapids-based health care watchdog organization.

The hospitals have hired attorney David Ettinger of Detroit-based Honigman, Miller, Schwartz and Cohn, a specialist in hospital mergers and related anti-trust issues.

“I think we have an opportunity to make two different programs that have been marginally successful, but nationally recognized, to become very, very high-quality programs,” said Spoelman. “I would love to be viewed as a destination hospital, at least along the lakeshore. I’ve already received comments from people about the different services we have and how we might be able to adapt them for the smaller hospitals in the surrounding area.”

An immediate goal will be pulling local patients needing advanced care back into Muskegon. There are a handful of specialized services that are available in Grand Rapids that are not available in Muskegon, such as neonatal care, which the two smaller organizations cannot support alone. The larger scale should allow investment in these areas and advancement in services currently offered.

Also, there are services currently available in Muskegon that are being overlooked by patients because of brand confusion in Muskegon and highly successful marketing efforts by Grand Rapids providers. There are even a handful of niche programs in Muskegon that are exclusive or superior to those available in Grand Rapids.

“We are seeing patients leave or bypass our community for Grand Rapids,” Spoelman said. “And it’s been partly our fault.”

Likewise, the larger hospital and combined branding efforts will aid in attracting physicians to the area and in keeping local physicians affiliated with the Muskegon system, as opposed to Spectrum Health or a physician network with competing outpatient facilities.

“What is going on in Grand Rapids is a good thing for everyone,” Mudler said of the growth in the area known as the Medical Mile. “It can only be a positive for everyone, but if we are to have any participation in these efforts, we need to be as strong and viable as possible.”

According to Mercy General Health Partners, the merger will in no way involve Saint Mary’s Health Care.

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