Metro Health Corp. and the University of Michigan Health System have signed a final agreement to affiliate.
Terms of the transaction were not immediately available, but sources told Crain's the deal would make 208-bed Metro Health a wholly owned subsidiary of UMHS. The Metro Health board would retain some local control.
In a statement, Metro Health officials in Wyoming, a small town south of Grand Rapids in West Michigan, said they expect the deal will allow them to further grow their inpatient programs and outpatient center reach.
"This is a transformational day for health care in West Michigan," Michael Faas, Metro Health's president and CEO, said in a statement. "Our affiliation with the University of Michigan will help ensure our patients and the people of West Michigan continue to have access to great quality care and choice when they consider their health care needs. UM and Metro Health doctors will work alongside each other to provide the latest, most advanced and most innovative care to patients."
Since 2009, Metro Health has tapped into UM's expertise, including using UM radiation oncologists at its cancer center at Metro Health Village. Other clinical assistance has included UM specialists in pediatric cardiology and pediatric endocrinology.
"Our ability to work together in other areas paved the way for this affiliation," Marschall Runge, M.D., CEO of UMHS and dean of the UM Medical School, said in a statement. "We are excited to further expand UM services in West Michigan and to provide access to the highest quality care available to more Michigan residents. Working together, we will improve the health of our patients and our communities."
UMHS has promised to help Metro Health expand its research programs, primary care, specialty services, including stroke and cancer care, and invest medical technology, although few details were immediately available.
David Spahlinger, M.D., UM's president of clinical enterprises and executive vice dean for clinical affairs, said the university will make a significant capital commitment, but those details will be released at a later time.
"This gives us access to a platform to build on in the second most populous part of the state," Spahlinger said, adding that UM has tried to enter the Grand Rapids market with a hospital for years.
"We get referrals from every county in the state, but much of that will go away with all the consolidation going on," he said. "Beaumont Health, Henry Ford, they are all building systems of care. Eventually patients will be part of narrow networks and systems. We need to have a system of care in the state. We don't need to own everything. We have some affiliations, collaborations. We are doing that with Trinity and Ascension (Together Health Network)."
Spahlinger confirmed Metro Health will become a wholly owned subsidiary of UM Health System, under operations of UM Health. He said the hospital will retain its name, but a new branding campaign will roll out in January.
"Metro is now part of the university and the name will reflect that," he said.
Asked if wealthy alumni helped to fund the Metro deal, Spahlinger said several alumni donated money to the university and encouraged regents to make the deal.
"Regents have received requests from alumni, related to access to care and the community," he said. "There was great support. I don't know of any donations that went directly to (help the Metro affiliation)."
Spahlinger also said he thinks Blue Cross Blue Shield of Michigan is supportive of the UM-Metro Health affiliation. "Any time there is more competition in the market, health insurers think it is good," he said. "They didn't raise any concerns."
Fass said in his statement that he believes the affiliation with UM begins a new chapter for Metro Health, one that began in 1942 when 23 osteopathic physicians opened the Grand Rapids Osteopathic Hospital.
"I can think of no better way to honor our founders than to ensure Metro Health is able to grow and continue serving patients for years to come," Fass said.
Metro Health is the smallest of the three health systems in Grand Rapids, behind Spectrum Health and Mercy Health, which have been expanding operations the past several years. In 2007, Metro Health closed its aging facility in Grand Rapids and moved into a new hospital eight miles away in Wyoming.
Like many independent hospitals, Metro Health's financial picture has become difficult over the past five years under the Affordable Care Act. It attempted to strike a deal in 2013 with Community Health Systems, a Franklin, Tenn.-based investor-owned chain. The transaction fell apart for undisclosed reasons.
From 2011 to 2015, Metro Health lost a total of $189.9 million on operations, according to American Hospital Directory Inc., a Louisville-based data company, based on Medicare cost report data.
When investment income and other revenue are factored in, Metro Health's net income totaled $13 million over that five-year period. However, Metro Health lost $13.3 million in net income and $73 million on operations in the 12-month period ending June 30, 2015, AHD said.
But Spahlinger said Metro Health has turned the corner the past year, posting a 2 percent margin. AHD did not have fiscal 2016 Medicare cost report data.
Metro Health reported total assets of $461.4 million on total liabilities of $329 million, AHD said.
UMHS operates three hospitals in Ann Arbor and Midland, 40 outpatient locations and home care operations that handle more than 2.1 million outpatient visits a year.
"Metro Health looks to grow as it finalizes deal with UM Health System" originally appeared in Crain's Detroit Business.