Michigan's largest healthcare system, Mercy Health Services, has agreed to partner with Traverse City's dominant system to serve that growing market.
The deal is part of Mercy's statewide strategy to strengthen its existing operations by banding with strong partners-a strategy that includes collaboration with Henry Ford Health System in Detroit (See related story, this page).
Traverse City-based Munson Healthcare will manage 98-bed Mercy Health Services North-Grayling (Mich.) and 89-bed Mercy Health Services North-Cadillac (Mich.) under a memorandum of understanding approved by Munson's board last week.
Both systems independently considered building outpatient facilities to serve the region's growing population of retirees, said Stephen Shivinsky, Mercy's associate vice president for corporate communications. Now they will cooperate on that front.
Munson is expected to make an undetermined capital investment at Mercy North.
Munson and Mercy also plan to link their clinical and financial information systems and enhance services in rural areas.
Munson manages one hospital and owns three others, including the only tertiary facility within 60 miles, 368-bed Munson Medical Center. Affiliation talks are under way between Munson and 54-bed West Shore Hospital in Manistee, Mich., said Munson Chief Executive Officer John Rockwood.
Munson now owns or manages hospitals responsible for 17,961 of 37,875 inpatient admissions in a 14-county area. If the Mercy deal goes through, that number will climb to 25,709, or 67%. Adding West Shore will increase the figure to 27,467, or 72%. If both deals are completed, Munson will own or manage seven hospitals.
The Munson-Mercy deal is similar to one Mercy struck with Henry Ford to manage Mercy Hospital-Detroit.
The Mercy hospitals will retain their Catholic identity, and Mercy will have a say in strategic decisions, including the appointment of CEOs. The CEOs will be employed by Munson, while other staff will remain on Mercy's payroll.
The systems will share operating profits and losses. However, financial terms will not be worked out until a definitive agreement is reached. That is expected in late May, Rockwood said.
Because the deal will be a partnership, not a merger, no regulatory approvals are needed, officials of both systems said.
Mercy, based in the Detroit suburb of Farmington Hills, operates 15 regional health systems in Iowa and Michigan. Its Michigan holdings include 16 acute-care hospitals. Both systems reported healthy operating margins last year. Mercy had net income of $133.9 million on total revenues of $2.4 billion for the year ended June 30, 1997, and total assets of $2.6 billion.
Munson reported net income of $17 million on revenues of $200 million for the same period. It has $240 million in assets.
Munson also owns about a 30% interest in the region's largest HMO, NorthMed, with 21,000 enrollees.