Traverse City Record-Eagle

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Statement from U-M on Munson partnership talks

The University of Michigan Health System partners with many hospitals around the state to bring our nationally ranked health care services to communities beyond those where we operate our own facilities.
We are always looking for opportunities to strengthen our foundation as a leading health care resource for the state of Michigan through new partnerships and relationships.
We have proposed an expanded relationship with Munson Healthcare, to build on the partnerships we already have in certain specialties.
This proposal will not involve UMHS merging with or taking a controlling interest in Munson, but rather will provide unique opportunities for collaboration and strategic investment while enabling Munson to preserve its independence and further invest in its buildings, people and programs.
The proposal would allow the creation of clinical and business relationships that would be mutually beneficial for Munson and UMHS, and would enable optimal care delivery for patients in northern Michigan. It would also enable both systems to appropriately prepare for health care reform.
For instance, an expanded relationship between UMHS and Munson could provide northern patients better access to UMHS specialists, either in their communities via telemedicine, or at our own facilities, for care they could not obtain locally. The relationship would also include opportunities for educational and training programs, clinical research and physician recruitment. And, it would enable Munson to meet its need for capital projects that will help it maintain its already strong financial footing.
In general, we seek to improve access to the care we provide, to ensure our role as an important health care resource in Michigan.
If this proposal moves forward, UMHS will offer further information at an appropriate time.

Munson Healthcare timeline

-- January 2010 — Munson Healthcare and Spectrum Health unveil partnership talks that began in late 2008; parties confirm 120-day “due diligence” period with a decision possible by July 1.

-- March — Local banker Harry “Scrub” Calcutt III, president and CEO of Northwestern Bank, warns of “catastrophic” local economic fallout with a Spectrum-Munson merger.

-- May — Munson Healthcare president and CEO K. Douglas Deck, point man for the merger talks with Spectrum, stuns community with abrupt resignation, and is replaced by Munson Medical Center head Ed Ness; Munson hires FTI Cambio of Nashville, Tenn., to review financial projections and organizational options; Munson lays out “deal breakers” with Spectrum that include maintaining a private practice model with doctors and keeping “sufficient” local control over operations.

-- June — Munson releases names of more than 300 “corporate” members in the region that would have to approve an ownership change for Munson. Five members decline to be publicly identified.

-- July — Northern Michigan Regional Health Systems in Petoskey pulls out of affiliation talks with Spectrum that began in March 2009. Hospital board unanimously votes to end discussions, citing a potential loss of local control over operations; Munson hires a Lansing-based consulting firm to survey its corporate members and others in the community to gather feedback on the Spectrum talks.

-- August — University of Michigan Health Systems confirms approaching Munson Healthcare about “an expanded relationship” short of merging or taking “controlling interest” in Munson.

Related Photos

  • Munson Medical Center. Record-Eagle/Jan-Michael Stump

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  • Ed Ness

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August 29, 2010

U-M seeks partnership with Munson

University approaches local officials as decision-time nears on Spectrum deal

By Bill O'Brien bobrien@record-eagle.com

TRAVERSE CITY — Munson Healthcare nears a decision on linking with Spectrum Health amid new partnership overtures from another major health care provider.

University of Michigan Health Systems recently approached Munson officials about an “expanded relationship” for clinical and business services — just as Munson draws close to a decision on affiliation talks with Spectrum Health in Grand Rapids.

Munson’s affiliate hospitals expect word on a Spectrum deal in September.

“We’ve still got some homework to do, but I think we’re getting close to a decision,” Munson Healthcare board Chairman Tom McIntyre said.

Speculation is growing that Munson and Spectrum are working toward a scaled-back partnership, something less than a full-fledged merger that would make Munson a division of Spectrum. The parties discussed a deal wherein the Spectrum health board would become Munson’s sole corporate member, essentially taking ownership of the Munson Healthcare system.

But other options with Spectrum are being considered, Munson Healthcare CEO Ed Ness said.

“There are many different forms of partnerships out there,” Ness said. “We have to look at all the options.”



U-M ties

Options include expanding Munson’s relationship with U-M Health Systems, which approached Munson officials amid Spectrum talks, Ness said. U-M pitched an affiliation plan that would be less than merging or assuming a controlling interest in Munson’s operations.

Ness said Munson already has ties with U-M in several areas, including pediatric services, cancer treatment, visiting specialists and clinical trials.

Ness said U-M has a $200 million “pool” available for joint ventures with other health care systems.

“They view Munson Healthcare as a strong system with very good quality,” Ness said. “Wherever the Spectrum discussion goes, I’m interested in exploring how we can expand our relationship with the University of Michigan.”

Health care consultant A. Michael LaPenna, of Grand Rapids, said U-M Health Systems is pushing hard for a Munson partnership. U-M doesn’t want Spectrum tying up out-state health systems with exclusive agreements that would limit U-M’s ability to provide referral health care services across a wide area, he said.

“They consider Spectrum a threat, and they should,” LaPenna said of U-M. “They’re extremely concerned about the referrals in these out-state areas.”

LaPenna said U-M is playing catch-up with Spectrum on setting up affiliations with other health care systems around the state.

“They’re trying to capitalize on their brand,” he said. “They feel like they’ve been late to the game”

LaPenna also isn’t surprised by speculation over a scaled-back partnership with Spectrum that wouldn’t replace Munson’s 270-plus member corporate body. LaPenna said it’s a challenge for hospitals set up like Munson to convince large corporate memberships to give up local ownership of their facilities.

“It’s very, very difficult to get a consensus without a campaign,” LaPenna said.



Communication wanes

Some of Munson’s corporate members said communication has dried up since they responded to surveys last month designed to gauge their reaction to a potential Spectrum merger.

“We went like blazes with information, and then we’ve had none,” said Ralph Soffredine, a Traverse City commissioner and long-time Munson corporate member. “That concerns me.”

Corporate member Lynne Moon, a Traverse City real estate agent, echoed Soffredine’s comments.

“I haven’t heard anything,” she said. “There’s been no e-mails, no nothing.”

Ness said that’s because Munson officials are analyzing survey data and hammering out details of partnership options for the Munson Healthcare board to consider. Munson would release a summary of its survey results within a couple weeks, but it’s clear Munson’s corporate members and others surveyed want more information about Spectrum and Munson’s long-term operating plans, Ness said.

“Wherever this goes, we need to do a better job of communicating with them what we need to do and why,” Ness said.

Soffredine said he’s “kind of on the fence” over a Spectrum partnership, but hopes corporate members remain informed of discussions regardless of whether they’ll have to sign off on a deal.

“If it doesn’t include the corporate board, they’re asking for difficulties,” Soffredine said.

Spectrum Health officials declined comment on negotiations, other than to say they and Munson are “still talking” and “there isn’t anything new to report.”

Representatives of Munson’s local partner hospitals said they expect word soon on a Spectrum Health deal. Dean McCulloch, chairman of the Munson-affiliated Kalkaska Memorial Health Center Board, said his board recently was told to expect a decision from Munson within a month.

“They did not give any specifics on which way it could go,” McCulloch said. “We’re pretty well assured that we can live with whatever way they want to go.”

Irene Nugent, chairwoman of Frankfort’s Paul Oliver Hospital Board, also said she expects Munson’s affiliates will receive a proposal on which to vote sometime in September.

“I understand it will be two to three weeks until the (Munson) board digests all the information they’ve got,” Nugent said.

In addition to the University of Michigan’s overture, Munson-Spectrum talks have been complicated by Petoskey-based Northern Michigan Regional Health Systems’ July decision to pull out of its affiliation talks with Spectrum.

Ness said Munson officials are speaking with the Petoskey hospital about shared services and other potential links.

“There’s all kinds of things we need to be working on as two of the biggest hospitals in northern Michigan,” Ness said.

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