Michigan Attorney General Frank Kelley scored a victory earlier this month when Michigan Capital Medical Center in Lansing decided to abandon talks with Columbia/HCA Healthcare Corp. and affiliate with a not-for-profit system.
Although Kelley's war on Columbia apparently hasn't quashed the desire of for-profit hospital companies to do business in the state, Michigan Capital's decision leaves in legal limbo the status of joint ventures between for-profit and not-for-profit hospitals.
This month Columbia ran full-page advertisements in Lansing and Detroit publications aimed at softening its image in a state that is dominated by not-for-profits. One depicts a nun at a West Virginia hospital under the tagline: "She needed people who care as much as she does. She found them at Columbia."
Three top Columbia officials-President and Chief Operating Officer David Vandewater; General Counsel Stephen Braun; and Jay Grinney, president of Columbia's eastern group-visited Kelley's office last fall in an effort to mend fences, according to Assistant Attorney General Fred Hoffecker.
But Michigan's attorney general of 35 years wasn't moved. Last week Kelley railed against Columbia during a speech at the Catholic Health Association's annual meeting in Chicago, where he basked in praise for filing a lawsuit to block Columbia's proposed joint venture with Michigan Capital.
The deal would have made Michigan Capital the only for-profit general acute-care hospital in the state. Michigan has some for-profit specialty hospitals.
Kelley told MODERN HEALTHCARE it wouldn't upset him if Columbia-or any other for-profit healthcare company-never set foot in Michigan again.
"I don't think they'll be back for a while. Not when I'm around," he said.
Said Hoffecker: "We've slowed them down to a walk."
The deciding factor will be hospital boards, which could be swayed by growing public opposition to for-profit ownership.
"A lot of people portray those companies as vultures swirling over hospitals and trying to eat them up, but in many cases they are sought by the hospitals," noted Don Potter, president of the Southeast Michigan Hospital Council.
Adverse publicity was a factor in the decision of Michigan Capital's board to cut off talks with Columbia, hospital executives said (See chronology).
And earlier this month, King of Prussia, Pa.-based Universal Health Services lost a bid for Saginaw (Mich.) General Hospital to a local not-for-profit (June 9, p. 24). Universal General Counsel Bruce Gilbert said Saginaw General's board members might have had cold feet about doing business with an investor-owned company.
"There has been a lot of adverse publicity related to one company in our industry. Certainly, that would make people think twice," he said.
An Ingham County judge deemed illegal the proposed joint venture between Michigan Capital and Columbia last fall, and it's expected that Michigan Capital will withdraw its appeal of that ruling now that it has a new partner-two-hospital McLaren Health Care Corp. in Flint, Mich.
Withdrawing the appeal would leave the lower court decision on the books. That decision said state law precluded joint ventures between for-profits and not-for-profits. The hospital has argued that the ruling threatens numerous smaller for-profit ventures involving hospitals.
However, no third parties have entered the case to keep it alive.
Columbia was dismissed as a defendant and its request to submit a friend-of-the-court brief denied by the Michigan Court of Appeals. The Michigan Health and Hospital Association declined to submit a brief in support of Michigan Capital; a spokesman for the hospital association said the case did not have "widespread industry application."
Kelley's office has pledged not to oppose for-profit joint ventures that don't involve a hospital's "core assets."
In the opinion of Robert Stocker, Michigan Capital's attorney, that still leaves a gray area.
If Michigan Capital drops the case, "that means the battle would have to be fought again on joint ventures in the state," Stocker said.
The publicity surrounding Michigan Capital's controversial proposed deal with Columbia, along with its improving financial picture, helped McLaren come forward with a proposal last December.
Under that deal, expected to close by October, Michigan Capital will become a subsidiary of McLaren and will maintain its own board of trustees and chief executive officer. McLaren has committed to funding most of the proposed capital improvement projects at the Lansing hospital's two campuses, said McLaren President and CEO Phil Incarnati.
McLaren's two hospitals are 436-bed McLaren Regional Medical Center in Flint and 205-bed LaPeer (Mich.) Regional Hospital, both with similar subsidiary arrangements. It also has 54 ambulatory facilities in nine counties. With Michigan Capital, its assets will be $550 million and annual revenues $850 million.