Traverse City Record-Eagle

Region

July 28, 2010

Petoskey hospital ends Spectrum talks

BY BRIAN McGILLIVARY bmcgillivary@record-eagle.com

TRAVERSE CITY — Northern Michigan Regional Health Systems pulled out of affiliation talks with Spectrum Health, citing a potential loss of local control — the same issue that looms large over Spectrum's partnership talks with Munson Healthcare.

Petoskey-based Northern Michigan Regional Health Systems began talks with Spectrum in March 2009. But when it came down to hammering out details of a governance structure the two sides couldn't agree, said Reezie DeVet who heads the northern Michigan hospital system.

"In terms of the vision for the delivery of services for our local health care system, kind of how decisions would be made ... the process and the degree of control we might have around those decisions was just not either clear enough or not how we felt they should be done," said DeVet, president and CEO of Northern Michigan Regional Health Systems. "It was a gap there we did not feel would be resolved."

Ed Ness, president and CEO of Munson Healthcare in Traverse City, said he was "surprised" by the Petoskey hospital's decision, but that it wouldn't necessarily derail Munson's partnership talks with Spectrum which he described as "separate, independent discussions."

Still, Ness said the pull-out by the Petoskey hospital will impact decision-makers at Munson.

"It is one factor among many as the Munson Healthcare Board evaluates all of the factors," Ness said. "It is a different environment if Northern Michigan Hospital is part of the system or is not part of the system."

DeVet said the Petoskey hospital put a lot of time and energy into the discussions, and the board felt it needed to make a decision this summer. The board vote was unanimous to end negotiations effective Monday.

"Spectrum Health is a highly-respected, quality health system," said board chairman Dave Buzzelli in a release. "We are disappointed that an agreement could not be reached but we are looking forward to working with Spectrum on other future initiatives."

Richard Breon, president and CEO of Spectrum Health, said he too was disappointed in Northern Michigan hospital's decision to end negotiations. Breon said the issues DeVet highlighted weren't yet finalized.

"Part of what you get is deal fatigue working on something for a very long time," Breon said. "Whenever you start these conversations they have many starts and stops, sometimes the timing isn't right, sometimes there are issues you just can't overcome.

"We are still going to have discussions and relationships and the door's always open," he said. "We parted as friends."

Both Breon and DeVet said Munson's decision in January to begin merger discussions with Spectrum complicated matters but the decision was based solely on Spectrum and Northern's proposed relationship.

"They weren't contingent on each other, the trick was trying to work them both at the same time," Breon said. "It's a complicated thing when you are talking to both Munson and Northern and how would they play together."

Breon said from Spectrum's perspective, Northern's decision has no impact on its discussions with Munson.

"We keep talking and we're getting close to a decision," he said. "They are going to have to make a decision in the not too distant future."

DeVet said they won't close the door on future discussions with Spectrum, but their organization needs to focus its efforts in a different direction. She said Northern will continue to pursue more regional health care partnerships and affiliations in the northern Lower Peninsula and Upper Peninsula with other hospitals, including Munson.

"While we're proud and strong as an organization, what we need to be focusing on is what do our patients and communities need and how do we provide that in the best way possible," she said. "Where it makes sense to collaborate on certain initiatives we need to do that."

Business editor Bill O'Brien contributed to this report.

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