Traverse City Record-Eagle

Region

July 2, 2010

Munson, Petoskey hospital may become partners

BY BRIAN McGILLIVARY bmcgillivary@record-eagle.com

TRAVERSE CITY — A proposed merger between Munson Healthcare and Spectrum Health of Grand Rapids may bring the Traverse City hospital into the same system as its oldest rival.

Northern Michigan Regional Health System in Petoskey began affiliation talks with Spectrum over two years ago and it's likely they'll eventually merge, a board member said. Now each organization must weigh the impact of the other's decision to determine how a new northern Michigan division of Spectrum would govern both systems.

"Those two hospitals have been traditionally competitors so there is some element of duplication, and if the mergers come to pass, there will be some form of consolidation," said Michael La Penna of Grand Rapids, whose firm provides strategic and financial consulting to the health care industry. "It's just a matter of common sense that would occur."

Consolidation likely would occur in some medical specialties, affiliated businesses such as home health care, and back room operations such as accounting and billing, La Penna said.

"One community is probably going to sense a loss and one community is going to perceive a gain," La Penna said. "The larger, more robust hospital will become a larger gravitational force."

La Penna said Petoskey already is losing doctors and it makes economic sense for the two hospital systems to join forces.

Thomas Moran, a board member with Northern Michigan Regional Health Systems, said the old competition between Traverse City and Petoskey hospitals is counter-productive. He believes the public will benefit from having both hospitals in the same system.

"Small independent hospitals are a thing of the past, and we want to continue to provide quality health care to our community," Moran said. "We need to all work together."

Representatives from all three hospital groups have met to discuss how the alignment would work if Munson and Northern Michigan Regional hospitals join Spectrum.

"We are talking to both organizations and all three have met and talked together and are hoping we can reach substantial agreement, but we're not going into detail at this time," said Bruce Rossman, spokesman for Spectrum. "When we have something a little more solid, we'll be happy to share it."

One scenario under consideration put Munson in charge of all Spectrum operations north of U.S. 10, which would appear to include Petoskey, though it wasn't specifically mentioned in documents shared by Munson officials.

"The governance structure has yet to be determined, but I trust that we will all be in the same family," Moran said. "Speaking for myself, I don't mind who's head of the household."

Ed Ness, Munson Healthcare President and CEO, said changes in health care will necessitate increased efficiency and finding different ways to continue providing high quality and expanded health services. He pointed to the closing of three obstetrics programs in northern Michigan in the last six months as the type of issue local health care leaders must overcome.

"Whether we are all in the same family or not, it will make sense for all of the hospitals in northern Michigan to work together," Ness said. "Sharing those ties the more integrated you become, but it isn't an all or nothing. There are probably other advantages to different models.

"It's too early to tell how that would play out," he said.

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