Cure Michigan

Metro Detroit’s large, nonprofit hospitals get an infusion of private sector competition


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About 20 percent of systems nationwide are for-profit. Until now, Michigan’s hospitals have nearly all operated as nonprofits. The one exception is Doctors’ Hospital of Michigan in Pontiac. In 2008, the former North Oakland Medical Center was bought by a group of physicians, with McLaren Health Care as a minority partner, to prevent the safety-net hospital from closing its doors.

But for any hospital network to gain market share, “it will have to come at the expense of other systems,” Baumgarten says. And in Detroit, that’s easier said than done.

Metro Detroit’s hospital systems have shown unanticipated toughness in hard times, says Lutz, of Deloitte. If the rest of the nation’s hospitals started to feel the pain of recession two years ago, those operating in Detroit have been managing hard times for eight years. As a result, the region’s health care providers have become savvy operators.

“Hospitals and doctors have been pretty darn resilient,” Lutz notes. Overall, “they have strong balance sheets ... which has allowed them to go through this difficult period without going out of business, and go through this awful economy with extraordinary amounts of investments.”
Nonetheless, Lutz says, “just putting capital into the market won’t guarantee market share.”

It’s a particular quirk of Detroit that, despite being mired in ongoing economic upheaval, the city is home to some of the nation’s best health care providers — many born when Detroit was symbolic of American innovation. Detroit-based Henry Ford Hospital was financed and developed by automotive pioneer Henry Ford on the same model as the Mayo Clinic. The DMC’s Harper Hospital was founded in 1863 and, in 1952, it was the site of the first open-heart surgery — using a mechanical heart designed by a General Motors engineer and hospital physicians. Over the years, hospitals and engineers introduced dozens of other innovations and medical devices.

What’s more, half of metro Detroit’s eight systems ranked in the top 30 nationwide of U.S. News and World Report’s 2009-2010 list of best hospitals, across specialties including cancer, neurology, cardiac care and heart surgery, and pediatrics. The University of Michigan ranked 14th in the nation, overall.

In turn, Henry Ford Health System’s West Bloomfield hospital has been held up by business author and Fast Company co-founder William Taylor as the hospital of the future. One reason is because the hospital sought to create a healing environment that is centered on wellness and holistic health care. “West Bloomfield was a huge opportunity,” Schlichting says. “You don’t get to build a new hospital very often. We want to think as innovatively as we can and set the pace for health care.”

The emphasis on preventive care may have been prescient. As strong as the competition is to attract patients, another promise of national health care reform — better, but cheaper, care — is stoking competition on another front. “With health care reform, the focus is on costs,” says St. John Health President and CEO Patricia Maryland. “The question becomes, how do you organize your system to provide the most value? There will be more competition, but more on the cost side.”

Health care reform will not only focus on primary care and prevention but, Maryland adds, it will also boost efficiency, lower costs, and produce better patient outcomes by making disparate health care providers — personal physicians, specialists, and hospitals — work together as a team to provide the right care for each specific patient.

To that point, nearly 80 percent of the $2.5 trillion spent on health care nationwide last year went to managing chronic illnesses such as diabetes, hypertension, cancer and heart disease, and related illnesses. The idea of health care reform, supporters say, is to funnel more patients to primary care physicians to emphasize preventive care, but also to better manage patient care across all providers.

“It’s like an air traffic controller — managing and tracking a particular patient, from primary needs to specialists,” Maryland says. “It’s about providing the right care in the right setting.”

Such an approach could help drive down spiraling health care costs by avoiding duplication of costly medical tests, and eliminating prescription drug errors and treatment of patients in expensive emergency rooms for long-festering illnesses that could have been caught early on, providers say. “The better the communication is, the better the outcome [for the patient],” says Brian Connolly, president and CEO of Oakwood Healthcare System in Dearborn. “There’s no days missed and there’s no dropped balls when there is much more effective communication along the continuum of care. It’s good now, but more improvement is needed.”

The effort to integrate care between hospitals, physicians, specialists, long-term care facilities, and other providers is being codified with the creation of a new kind of legal entity. The so-called Accountable Care Organizations (ACOs) — something allowed under one of the provisions of the Accountable Care Act of 2010 — are sprouting across southeast Michigan and the nation.

The provision allows ACOs to receive bonus payments for delivering higher-quality care at lower costs. Hospitals are pushing to create the organizations. In June, Oakwood announced its ACO — something Connolly says would provide “a new framework” for the system to “partner more closely with physicians to provide high-quality, cost-effective care.” In the same month, Henry Ford Health System announced the creation of its Henry Ford Physician Network, a physician-led subsidiary that includes involvement from private practice doctors as well as the system’s employed medical group.

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