Supporters of a controversial joint venture between a Lansing, Mich., hospital system and the nation's largest for-profit hospital chain took their case to the public last week as they wait for a legal go-ahead.
Meanwhile, state Attorney General Frank Kelley declared he wants "clear and specific answers" to questions about the proposed deal between Michigan Affiliated Healthcare System, which operates 369-bed Michigan Capital Medical Center in Lansing and Columbia/HCA Healthcare Corp. of Nashville, Tenn. Kelley has sued to block the deal.
Last week, the controversy generated a standing-room-only crowd of more than 250 people at a state government auditorium in Lansing. About 50 in attendance spoke out.
"This is the first time in Michigan that a for-profit corporation has proposed acquiring a nonprofit acute-care hospital, and operating the hospital on a for-profit basis," Kelley told the public hearing. "I have oversight responsibilities with respect to nonprofit charitable organizations, including nonprofit hospitals, to ensure that they fulfill their charitable obligations."
Under the proposal, Columbia would purchase 50% interest in Michigan Capital and obtain control of its facilities. Columbia would pay $43.7 million, which would go toward relieving Michigan Capital's debt of $50 million. A fairness opinion issued by Dean Witter Reynolds put the value of Michigan Capital's assets at $87.5 million. Michigan Capital's parent company would retain $18 million in assets in addition to its 50% interest in the medical center.
Another $7.5 million would be transferred to the Michigan Capital Foundation, a charitable organization. Columbia and Michigan Capital also pledged to invest about $20 million in facility and equipment improvements during the first two years of the partnership.
Representatives from Michigan Affiliated and Columbia told the audience of mostly hospital officials, investors and business leaders that the planned venture would benefit Columbia and the Lansing community.
"No hospital regardless of tax status will remain viable if they don't provide quality care," said Keith Groty, board chairman of the Capital Area Health Alliance. The group co-sponsored the hearing. "This is the most significant decision (on local healthcare) between now and the year 2000," he said.
Dennis Litos, Michigan Capital's president and chief executive officer, called the merger a "significant step forward" and "a new model of partnership."
"Each (Columbia and Michigan Capital) must continue to do good and do well," Litos said. "Accepting the way things used to be done is not in the community's best interest."
Kelley's lawsuit is scheduled for a hearing Sept. 5 before Ingham County Circuit Judge James Giddings. The judge dismissed parts of the suit July 2 but denied motions to throw out the entire challenge (July 8, p. 6).
The joint venture talks have sparked concern that more for-profit hospitals could mean less money for medical research, physician education and charity care commonly provided by not-for-profits. They also have prompted worries that Columbia may expand in the state, sharply cut healthcare costs and drive smaller hospitals out of business.