Talks between Michigan's premier academic medical center and a major Roman Catholic healthcare network have many eager to see what, if anything, they will unveil next fall.
The University of Michigan Medical Center in Ann Arbor and Farmington Hills-based Mercy Health Services have agreed to study possible collaboration over six months, with goals of reducing costs, developing a statewide integrated system, and cooperating in education and research (May 29, p. 4).
"You're talking about some pretty creative people," said Donald Potter, president of the Southeast Michigan Hospital Council. "Whatever they do will be quality-enhancing and cost-effective."
One goal is integrating services in the Ann Arbor area between the medical center and Mission Health, a four-hospital system owned by Mercy and Daughters of Charity National Health System-East Central (See chart).
Mission Health was created by the Collaborations
recent joint venture of Providence Hospital and Medical Centers in Southfield and Ann Arbor-based Catherine McAuley Health System, whose hospitals and primary-care outposts compete with the university medical center.
"The community would probably benefit from them getting together and rationalizing services," said Gail Warden, president and chief executive officer of Detroit-based Henry Ford Health System.
But Mercy and the University of Michigan Medical Center also have statewide reach, which they want to strengthen. Mercy owns or manages 17 hospitals in several major cities as well as nursing homes, home care, hospice care, rehabilitation services, a 146,000-enrollee HMO, and a PPO.
About 35% of patients at the seven university hospitals are state residents from outside southeast Michigan. Joining a statewide integrated system could preserve the medical center's referrals as managed care blossoms, Executive Director John Forsyth said.
HMO penetration is still low in the state-18.7% as of mid-1994.
Unlike some academic institutions, the University of Michigan Medical Center negotiates from a position of financial strength. Last year the occupancy rate was just more than 83%, and admissions grew by 1,500 to almost 38,000, Forsyth said. In fiscal 1993-1994, revenues exceeded expenses by $52 million.
"We may be one of the most, if not the most, successful teaching hospitals in the country. We are not doing this because the sky is falling," Forsyth said.
Under consideration is merging the medical center's M-Care HMO and Mercy's Care Choices, the only statewide provider-owned HMO in Michigan, and partnering with an insurance company.
"We have a joint commitment to view the financing as an important incentive to align the delivery system," said Mercy's president and CEO, Judith Pelham. Implementing clinical protocols is another mutual priority, she said.
The resulting plan could compete with Blue Cross and Blue Shield of Michigan's traditional plan, which enrolls 45% of the state's residents. The Blues' success at holding down premiums has helped restrict HMO growth in the state.
"If they can achieve efficiencies and get the price below the (Blues') product-and there are some that believe they can-they'll be in a position to become the product of choice," Potter said.
Obstacles include Catholic ethical concerns, such as fetal tissue research at the university medical center, and the challenge of integrating academic research with Mercy's orientation toward clinical care and training.
Also, both sides say antitrust implications of an agreement between the Ann Arbor-area facilities must be studied.
Warden said he doesn't think these talks will spark a drive to form statewide networks. Often the same providers compete in one area and cooperate in another.
"It isn't as if everyone's running out and drawing lines in the sand," he said.