Detroit Medical Center hopes a new governance and management structure will help transform it from a cumbersome giant into a nimble, integrated system.
On Jan. 1, the formidable DMC, which provides teaching hospitals for the Wayne State University School of Medicine, will reduce its nearly 60 boards and committees to 18 and consolidate its 16 corporate organizations into three.
All but two of its hospital boards will be scrapped. Hospital presidents have been eliminated, with managers reassigned to clinical and geographic initiatives (See chart).
The overhaul is notable both for its massive scope-involving seven hospitals with 2,500 acute-care beds-and its hybrid design, which includes advisory boards both for regions and clinical services.
DMC leadership said easier decisionmaking will be essential as managed care grows in Southeast Michigan. DMC was created in 1985 as a holding company, but only recently has there been an effort to market and run it as a system.
"If it takes you twice as long to reach or implement a decision as compared to your competitors, you're in trouble," said DMC Board of Trustees Chairman Alfred R. Glancy III.
David Campbell, DMC president and chief executive officer, presented a slide to the hospital boards and staffs showing that 18 to 20 committees reviewed and signed off on the budget each year, a process that will be whittled down to five organizations under the new structure.
Still, persuading the boards to relinquish their century-old fiefdoms was no easy task, especially because the DMC is not in a financial crisis, Campbell said.
"There was a sense that we have been successful to date, so why do we need to change? That was probably the biggest challenge," he said.
Four hospital boards voted unanimously for the new structure, but two re-fused to dissolve themselves. One board didn't vote, Glancy said. The restructuring received final approval in October.
One of the remaining boards is that of Detroit Receiving Hospital and University Health Center, a former municipal hospital. To dissolve that board would require a consensus of the city of Detroit and Wayne State University, which appoint some of the board members.
The other remaining board is that of Children's Hospital of Michigan, which must vote to dissolve itself, according to the terms under which Children's joined DMC in 1987. That board also agreed to serve as the advisory board for children's services.
"I would certainly like to see in time that the Detroit Receiving and Children's Hospital boards would go away and in fact we would end up with a structure of just one parent company board plus the advisory structure," Glancy said.
But Campbell said even with two hospital boards remaining, "the model will still work and we're moving forward."
He said he's encouraged that, so far, all but 20 of the system's 240 trustees have said they want to continue to serve on DMC boards.
DMC's major aim is to be more cost competitive by reducing its $1.3 billion annual operating budget by up to 12%, or $150 million, in three years.
The new structure clears the way for coordinating clinical services among its campuses, centralizing functions such as human resources and finance, and marketing carve-out contracts for high-volume procedures.
Consolidation particularly makes sense on the central campus near downtown Detroit, where DMC has five hospitals. For example, the Rehabilitation Institute of Michigan will be moved from its old facility into nearby Hutzel Hospital.
DMC also is developing its outpatient services. It has purchased 60 physician practices in the last two years, in addition to 90 it had. It hired Daniel P. Schmidt, former administrator of Ochsner Clinic in New Orleans, to fill a new position: senior vice president for ambulatory services.
Gail Warden, president and CEO of the competing Henry Ford Health System in Detroit, said DMC's new structure, along with attempts to reduce its cost structure, will help make DMC a strong managed-care player.
The new structure is not without possible pitfalls. There's a risk that even advisory boards can pose an obstacle to swift decisionmaking.
"If the advisory boards are by accident or by practice given more authority than they really have, they may slow (governance)," said consultant Edward A. Kazemek, president of Accord Ltd. in Chicago, who helped implement the structure.