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Beaumont Health System
Beaumont Hospital - Royal Oak

Michigan's Beaumont Health System tries for a merger, again

By Beth Kutscher
Posted: March 21, 2014 - 3:45 pm ET

Beaumont Health System in Royal Oak, operator of Michigan's largest hospital, is attempting another merger less than a year after another deal fell through for it.

Beaumont and two other southeastern Michigan health systems have signed a letter of intent (PDF) to create a $3.8 billion organization that combines their eight hospitals into a single umbrella.

The proposal calls for Beaumont, Botsford Health Care in Farmington Hills and Oakwood Healthcare in Dearborn to combine their balance sheets and operations under a single leadership structure.

It comes less than a year after Beaumont, which operates the largest hospital in the state with 1,070 beds, called off its merger with 10-hospital Henry Ford Health System in Detroit, which would have created a $6.4 billion system.

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Physician discontent and cultural differences were cited for the deal's disintegration after six months of discussions.

The proposed tie-up with Oakwood and Botsford still needs to get through the due diligence process and obtain regulatory approval.

The unified organization would be better able to coordinate care for patients, working off a single medical records platform, as well as increase its operational efficiency through group purchasing and other economies of scale, a news release said.

Oakwood's current chairman of the board, John Lewis, will serve as the initial chair of the new board. Beaumont CEO Gene Michalski will lead the new organization, and will also serve on a CEO Council with Oakwood CEO Brian Connolly and Botsford CEO Paul LaCasse that will oversee the transition and integration.

The hospitals will retain separate medical staffs. However, a physician-led Clinical Leadership Council will work on integration efforts among healthcare providers.

Beaumont last month reported $6.7 million in net operating income for fiscal 2013, which ended Dec. 31, on revenue of nearly $2.3 billion, compared with $57.7 million in income on $2.2 billion in revenue for 2012.

Inpatient admissions (PDF) grew 0.4% year-over-year.

Oakwood reported just under $1.2 billion in revenue for 2013, nearly flat year-over-year, as it struggled with a 2.8% decline in discharges and Medicare payment reductions from sequestration and “take-backs” under the Recovery Audit Contractor program.

Its operating income (PDF) increased $2.5 million to $23.8 million.

Follow Beth Kutscher on Twitter: @MHbkutscher

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