Deals in Michigan's competitive healthcare market continue as Detroit's Henry Ford Health System announced Tuesday it is acquiring Jackson-based Allegiance Health, which is the dominant provider in its market.
Mergers and other deals have consolidated the Motor City market in recent years. Beaumont Health System, Oakwood Healthcare and Botsford Hospital merged last September to create a $3.8 billion system in the area. Henry Ford had previously sought to merge with Beaumont. And Ascension Health and Trinity Health formed a clinically integrated network in Michigan in May 2014.
Regional markets across the U.S. have seen more hospital consolidation in recent years, from hospital mergers to deals that combine local health systems to create new regional giants.
The deal for Allegiance Health would give Henry Ford a dominant hospital about an hour west of Detroit. Allegiance is the only hospital in Jackson County, Mich., with almost 60% of the market, Standard & Poor's said in June. The deal is expected to close in the first quarter of next year.
The Allegiance hospital would be Henry Ford's sixth. The system also owns a health insurance company and an employed physician group.
Allegiance would expand Henry Ford's geographic market for ambulatory services as well as hospital care, said Henry Ford President Wright Lassiter III. Consolidation in a competitive market without population gains has made growth a priority for Henry Ford. “Detroit is certainly one of the more competitive markets around the country,” he said. “I have been very focused on strategic growth.”
Separately, Henry Ford's Health Alliance Plan would grow by 11% and enter a new market with the pending acquisition of insurer HealthPlus of Michigan, Lassiter said.
Lassiter declined to discuss a recent Crain's Detroit Business report that the health system is in talks with Kaiser Permanente. The magazine reported that Oakland, Calif.-based Kaiser may be seeking to expand nationally. “We don't comment on potential partnerships or rumors,” Lassiter said.
Allegiance Health went looking for a partner because it was not big enough to have its own health insurance company, said Georgia Fojtasek, president and CEO of Allegiance. With an insurance company, Allegiance would be able to finance changes in healthcare delivery, such as new services that promote health and are not limited to treating those who are sick, she said. With Henry Ford, Allegiance gained a health insurance company, she said.
Fojtasek said Allegiance may also benefit from Henry Ford's experience adopting an electronic medical record. The system put its adoption on hold as it seeks a partner.
Allegiance Health ended the fiscal year in June with an operating surplus of $14 million on revenue of $483.5 million. The prior two years, it operated at a loss.
Henry Ford ended the last fiscal year in December with an operating gain of $27.8 million on revenue of $4.7 billion, after a loss the prior year.