Wayne State University Physician Group Chairman Jack Sobel, M.D., said he will present an offer from Detroit Medical Center to acquire WSU's 400-physician medical group to the board at its next meeting. The offer was part of a letter DMC delivered to Wayne State on Wednesday.
But Sobel, who is also dean of the medical school, also told Crain's on Thursday that UPG is not for sale.
"The whole letter (from DMC CEO Joe Mullany) came as a shock," said Sobel, adding that DMC has not raised the issue in any of the contract negotiating sessions held the past two months. "I had no time to respond or consider the implications."
Since early March, DMC and Wayne State medical school have been negotiating a long-term clinical services agreement. The last agreement expired March 31 and the partners are on a month-by-month extension.
But in an unusual set of events that began Wednesday afternoon, Mullany sent a two-page letter to Sobel about the UPG offer and later gave a one-hour talk at a 6 p.m. town hall meeting before a group of Wayne State and DMC physicians. UPG was discussed, but officials for DMC and WSU have different recollections of what was said about the UPG offer.
"I attended Joe's presentation for one hour. There was no town vs. gown conflict. He did an extensive job of talking about DMC performance ... ER fixed up, capital improvements, national safety issues," Sobel said. "The last third he talked about the relationship with UPG, but he gave no hint about buying UPG and no mention about a letter."
Sobel said Mullany's talk was reasonable and a cordial presentation before about 80 physicians.
Two hours earlier, about 4 p.m., Conrad Mallett Jr., DMC's chief administrative officer, requested a meeting with Crain's and shared Mullany's letter. At 4:30 p.m. Mallett told Crain's he believed Sobel had received the letter before Mullany's speech and was aware of the contents of the offer.
But this was not the case, Sobel said.
"It was not our intention to in any way to sandbag or surprise Dean Sobel," Mallett told Crain's on Thursday. "There is no upside to that for us. The letter was delayed. I don't know why. I wish Sobel had read the letter earlier."
Mallett also said he was told that Mullany discussed the three options at the town hall meeting that were outlined in the letter to Sobel for DMC to work with UPG in the future. The three structural options are: full employment, professional services agreement or joint venture.
"Joe told me he said (to the group) that 'we put some things on the table' how the various entities would work. He did not go into specifics, but they were expressly referenced."
On Friday, Mullany told Crain's that he talked about UPG's future relationship with DMC in a 13-slide presentation Wednesday. Two of the slides referenced his letter to Sobel and the offer of full employment, joint venture or professional services agreement, he said.
Mullany said officials for investor-owned Tenet Healthcare Corp., DMC's Dallas-based parent, met with Wayne State UPG board members and former CFO Ken Lee last December to present the same three options. While DMC and Wayne State might have not discussed the UPG sale in recent months, Mullany maintains that the offer has been on the table.
Mallett said DMC's public disclosure of the letter to Crain's, the delivery of the offer to Sobel and the mentioning of the offer at the town hall meeting was designed to remind physicians of DMC's desire to include UPG in the transformational changes under discussion.
Sobel, who said he was disappointed to receive the letter without any warning or discussion beforehand, said he would call a meeting of the UPG board as soon as possible.
"We will discuss the offer as we would with any business transaction worth considering," Sobel said. "UPG is not for sale."
Responding to a joint venture or professional services agreement, David Hefner, vice president for health affairs of Wayne State, said he expects UPG could be open to a variety of different strategic alignments if they make sense.
While UPG and the medical school faced a $29 million deficit last year, Sobel said progress has been made with the turnaround plan.
"The physician group was in a bad way when I arrived," said Sobel, who was named dean of the medical school in June. "It took several more months to evaluate the true sense of financial negative status. It is in the process of being reversed. ... We have massively reduced expenses, the bottom line has turned around, and we expect to break even within a matter of months."
On future negotiations, Mallett, Sobel and Hefner said they expect to continue to work together to hash out a clinical services contract.
However, Hefner and Sobel expressed disappointment that it appears the talks probably will not lead to a "transformational relationship" that both DMC and Wayne State had hoped for in the beginning, one that might propel Wayne State into a top 40 medical school and DMC into a top 15 academic medical center.
"We have been dealing with payment issues the past week," Hefner said. "It is clear to us there is no transformational relationship that we will craft. There will be a series of transactions. We go to work to become a great transactional partner with them."
Mallett also said DMC felt the talks so far have not progressed enough or have been "substantive" in nature. He said DMC officials also have experienced some frustration and tension over the talks.
In his letter to Sobel, Mullany made the following point: "We are at a critical juncture that will determine the future success of DMC and the long-term viability of UPG. This is our time to redefine our relationship and allow (the medical school) to focus on academic and research excellence."
Mallett said he believed the offer to acquire UPG or enter into a joint venture or professional services agreement is a transformational offer. "The offer for UPG injects energy into the discussions that would be transformational," he said. "The letter was designed to make sure UPG board and the faculty is aware that these offers are on the table."
Mallett said he didn't want to predict an outcome from the letter. "The letter outlines the circumstance to get to a transformational relationship. We can get far down the road with this. We believe the only way to get there is outlined in the letter," he said.
But if WSU has other ideas, Mallett said DMC is willing to listen. "They should share it with us. But we believe this is the only way, and we want a discussion of that possibility," Mallett said.
Sobel said Wayne State officials believe the talks have so far been professional and pursued in a business-like manner. "We are not frustrated with the talks," he said. "I was troubled and shocked to receive Joe's letter because that doesn't reflect our relations or how to move the transaction."
Hefner said WSU will continue to work with DMC to craft a contract.
"There is disappointment because we want a transformational relationship. For the citizens of Detroit and Michigan, it is indeed a disappointment about what could be," Hefner said. "I appreciate they cannot see their way clear to do it. We are going to be great transactional partners."
"WSU Physician Group chair: We're not for sale" originally appeared in Crain's Detroit Business.
