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March 6, 2010

Affiliates cautious about deal

Munson partners watch, weigh partnership talks with Spectrum

BY BILL O'BRIEN

TRAVERSE CITY -- Munson Healthcare's affiliate hospitals in northern Michigan support -- cautiously -- a Spectrum Health partnership, but still have plenty of questions about how it could affect them.

Munson representatives crisscrossed the region in recent weeks to speak with leaders of its far-reaching affiliate health centers. The topic: a proposed deal with Spectrum Health in Grand Rapids.

Discussions with affiliates have been described as cordial and mostly positive, but specific details remain elusive.

Munson Healthcare CEO Doug Deck said Munson partners are "intrigued," and described their reaction as "on the positive side of neutral."

He's traveled to Manistee, Grayling, Frankfort and Kalkaska to talk about the Spectrum proposal, with sessions still to come in Cadillac and Gaylord.

"It's the first time that Munson has talked with anybody that is larger," Deck said. "A few people are worried about control issues."

Munson Healthcare has varying relationships with its local affiliates. Paul Oliver Memorial Hospital in Frankfort is wholly owned and operated by Munson, while Mercy hospitals in Cadillac and Grayling have management agreements with Munson but are owned by Trinity Health, an 8-state Catholic health care system based in Novi.

West Shore Medical Center in Manistee is a county-owned facility that operates as a municipal health care facility corporation, while Kalkaska Memorial Health Center operates as a government entity owned by 12 townships and Kalkaska village.

Those varied ties mean a partnership between Munson and Spectrum will have different impacts on various affiliates. But Deck said affiliates' primary concerns are much the same:

"Basically they want to preserve and enhance the level of care they've received in northern Michigan."

Irene Nugent chairs Paul Oliver's hospital board in Frankfort and said its reaction to the Munson-Spectrum talks "was rather positive." But she's also heard reservations from some in her community.

"I know there's always a concern with a little hospital like ours being swallowed up by somebody bigger," she said.

Nugent said the board sees potential advantages for physician recruitment, and access to more capital to pay for long-term upgrades and expansion, both of which Munson touts as chief benefits of a deal.

"It would probably be a positive for recruiting physicians in the area," she said.

But Munson hasn't produced an organizational chart or discussed possible changes in the role and responsibility of Oliver's board, Nugent said. Munson officials said they're still working on structural aspects.

"We understand that's not on paper yet," Nugent said. "We want to see who's going to be doing what."

Dan Johnson serves as the village representative on the Kalkaska Memorial Health Center Board, and said Spectrum-Munson talks have generated only subdued discussion in the community.

"I've been frankly kind of surprised there haven't been a lot of questions," he said.

Johnson suspects that's because the facility for years has functioned with its Munson affiliation, and is used to operating under larger entities.

Kalkaska's health board does question ownership and management issues in a Spectrum-Munson partnership, particularly about quality of care in the community.

"Local boards know local needs, rather than being dictated to from somebody far away," Johnson said.

In Manistee, West Shore Medical Center President Burton Parks said his hospital and Munson are competitors in some ways, and he acknowledged West Shore has little leverage in the Munson-Spectrum talks.

But West Shore and Munson have collaborated on items like employee training and equipment and supply purchases since the mid-1980s. Parks said the arrangement saves West Shore about $500,000 a year in operating costs, and shows the advantage of hospitals combining some functions.

"Traverse City made sense years ago when we created that relationship," he said. "It has been a valuable relationship, in my view, over the years."

Parks also said he's worked with both Spectrum and Munson over his 35-year career in Michigan's health care field. He's had positive experiences with both and expects that would continue.

"Munson has always been, in my experience, a larger hospital that a smaller hospital can live with," Parks said.

Munson Healthcare System affiliates

Munson Medical Center, Traverse City

Kalkaska Memorial Health Center

Mercy Hospital Cadillac

Mercy Hospital Grayling

Otsego Memorial Hospital in Gaylord

Paul Oliver Memorial Hospital in Frankfort

West Shore Medical Center in Manistee

Source: Munson Healthcare

I know theres always a concern with a little hospital like ours being swallowed up by somebody bigger, -- Irene Nugent, chairwoman of Paul Oliver Memorial Hospital Board in Frankfort

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