Health Care and Real Estate

Questioning a health system's expansion

November 30, 2015
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A local health system has money to spend.

This is not news. In my many years of reviewing Spectrum Health’s finances, there has never been a year when Spectrum Health or its forerunners have not had a year-end fund balance.

This means that all bills have been paid and money has been left over. The money must stay with the corporation, and ongoing fund balances simply mean the amount of extra money must grow each year. Year after year, the hospital has defended its rates by saying that the sky will fall next year due to any number of “threats.” Yet, the sky hasn’t fallen, and the hospital’s balances have grown continuously since at least 1972, when I first was able to follow the year-end reports.

Clearly, some spending is needed. But other spending — well?

Recently, Spectrum Health, West Michigan’s largest health care vendor, announced several new projects. These include comprehensive service centers in Grand Haven, Ionia and Muskegon. Normally, this would not be worthy of comment. However, in looking at the specific communities involved, some questions arise.

In Ionia, the local hospital, Sparrow Ionia Hospital, recently relocated the entire hospital from the center of Ionia to a new site south of the town. The new facility includes considerable space for ambulatory services. In its community needs assessment, the hospital has identified a priority to work on greater access to primary care services.

The Spectrum Health Ionia facility will be located virtually across the street from the new Sparrow Ionia Hospital. It will mostly feature primary care services, although access to higher tech services will be made available at the site.

In Grand Haven, Spectrum Health, in cooperation with Holland Hospital, will build a new facility primarily intended to house physician practices in a concentrated facility in the Grand Haven area. This comes on the heels of renovation projects at North Ottawa Health System that have been directed toward greater primary care physician services.

Several years ago, Spectrum Health had a major stake in Muskegon. It controlled Hackley Hospital. However, as a result of less-than-desired financial performance, Spectrum Health abandoned its stake in Muskegon, and Hackley Hospital then merged with Mercy Hospital, entering the Muskegon Health Partners combine. Now, Spectrum Health appears to have re-assessed its position with regard to Muskegon by announcing a service center on the north side of Muskegon. This was labeled part of the Spectrum Health growth vision.

Spectrum Health is West Michigan’s largest vendor of hospital and related services. Already having a dominant share of the market, questions can be raised as to how much of the market Spectrum Health wants. Would 80 percent be enough? Ninety percent? Or is the vision to have 100 percent of the local market? Sometimes the question must be asked: how much is enough?

Do the local residents accept the Spectrum vision of domination? Do they discount the services of Mary Free Bed Rehabilitation Hospital, Mercy Health Saint Mary’s, Metropolitan Hospital, Mercy Health Partners, North Ottawa Community Hospital, Sparrow Ionia Hospital, Sparrow Carson Hospital, Sheridan Community Hospital, Allegan General Hospital, Holland Hospital and others? Unless the market for health care services increases, expansions by some will undercut others.

In many industries the aggressive approach taken by Spectrum Health can be considered poaching. But do health care vendors have exclusive territory rights?

Has there been any joint planning with the existing providers to lead to a consensus that the new Spectrum Health facilities are needed and will complement the existing services?

Is this a case similar to Walmart forcing smaller retailers out of business? Are bigger boxes what we want in health care?

Some of these questions are causing some uneasiness in the health care sector.

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