TRAVERSE CITY —
Munson Healthcare will seek a second opinion on its financial projections and will more closely — and publicly — study how a merger with Spectrum Health might affect local management.
Munson's decision to take another look at those topics will push beyond early summer a final decision on a deal with Grand Rapids-based Spectrum. Munson officials also pledged to become more transparent and share more information about the proposed merger with the public.
Officials said those steps preceded last week's sudden parting with K. Douglas Deck, Munson's CEO and president. Munson said Deck resigned, but offered no details. He was replaced by Edwin Ness, president and CEO of Munson Medical Center.
"We all realized that this was moving way too fast. We can't put a time line on this," said Tom McIntyre, chairman of the Munson Healthcare board. "It's too big of a deal, too big of a transaction."
The Munson Healthcare board hired FTI Cambio, a health care consulting firm from Nashville, Tenn., to review its long-range capital projections, expansion cost estimates and other information pertinent to the proposed Spectrum merger.
Munson has plans for more than $340 million in expansion projects over the next five years, and Spectrum's financial clout and AA bond rating are considered the primary incentive to merge operations.
Munson's expansion plans include $127.8 million for a 100-bed tower at Munson Medical Center, and a $40 million-plus cancer treatment center.
"The capital adequacy is the biggest point we need to address," McIntyre said. "Is the financing gap what we think it is?"
Second opinion needed
Consultants also will review the proposed organizational structure between Munson and Spectrum and compare how it stacks up with other health care system affiliations around the country.
"The industry is very complex, and this is a very, very important decision for Munson Healthcare," McIntyre said. "I think it's just good stewardship. It's good to have a second opinion."
Skeptics of the Munson-Spectrum merger applauded the move to slow the process, and said the community needs more details to fully evaluate the partnership.
"I think it's an excellent idea," said Ronald Sondee, a Traverse City attorney and former Munson board chairman who has questioned the merger. "I think it's extremely important to look at the options."
Sondee said a third-party review of financial information is important, but added a more detailed look at potential management changes is equally critical.
"Is it a partnership or is it a pure acquisition by the larger entity?" Sondee said. "I think it's an extremely important question that should be looked at closely."
Munson and Spectrum have been in behind-the-scenes talks for more than a year, and hoped to reach a deal by June 1. That won't happen now, and McIntyre said Munson officials will take as long as necessary to make a decision.
"We're going to take the time we need," he said.
Munson also will shift gears in its public relations efforts and plans to share more details about the advantages of a partnership and consequences of maintaining Munson as a stand-alone entity.
McIntyre expects Munson will soon hold a series of community meetings to share some financial information and fully express reasons for pursuing a Spectrum link.
"We really have to be much more transparent and informative with the community," McIntyre said.
'Essential before a vote'
Former Munson executives said they're encouraged by the decision to further evaluate financial projections.
"I'm aware that they're going to do this, and I applaud it," said Traverse City resident Ralph Cerny, a former Munson Medical Center president and CEO. Cerny said Munson needs to better document the "gap" between its own borrowing power compared with what Spectrum can provide.
"Far and away the most important issue here is access to capital," Cerny said. "Everything else pales in comparison."
Ex-Munson Healthcare president and CEO John Rockwood also said he's glad new eyes will review Munson's financial assumptions.
"In my mind, it's essential before a vote is taken on the merger," Rockwood said. "It is the most important decision the board will ever make, so it's important to have as much information as possible."
Spectrum officials declined comment on Munson's new approach.
"Any review Munson Healthcare conducts of their operations is their prerogative and does not warrant a comment from Spectrum Health," Spectrum spokesman Bruce Rossman said in an e-mail.
McIntyre acknowledged community skepticism about the merger proposal. But he said those who hear a full explanation have warmed to the concept.
"This isn't a 30-minute conversation; it's a 3-day conversation," McIntyre said. "It's not surprising the community feels strongly about this; Munson is a jewel."
Sondee hopes Munson's recent move means the merger isn't a foregone conclusion.
"They're good indicators that there's still a lot to be determined," he said. "At least I'm hopeful it's not a done deal."
