McLaren plans to acquire Bad Axe hospital
McLaren Health Care Corp. is expected to sign a letter of intent next week to acquire Huron Medical Center in Bad Axe, a 58-bed rural hospital in Michigan's Thumb region. The deal is expected to close in three or four months.
McLaren CEO Phil Incarnati said Huron Medical Center fits in well with the 12-hospital system's regional strategy. Grand Blanc-based McLaren owns three hospitals near the Thumb region in Port Huron, Bay City and Lapeer.
"Most standalone hospitals have to be part of a larger organization for better capitalization, better scale and to be in a better position" to improve finances and operations, Incarnati said.
Huron Medical Center, which was founded in 1906 and serves Huron, Sanilac and Tuscola counties, chose McLaren over several other bids from competing hospital systems, including Beaumont Health, MidMichigan Health in Midland and Covenant HealthCare in Saginaw.
"Providing the best possible healthcare opportunities for our community is critical to our hospital's mission," William Mayes, CEO of Huron Medical Center, said in a statement. "We look forward to offering the best in expanded health care for our citizens through this relationship with McLaren Health Care."
Mayes said the board decided in May to seek a larger health system partner.
"After reviewing the financials and looking at what we had to offer we came to realization we needed to consider aligning with a larger medical system," said Mayes, who said the hospital is losing money but is in the black with $10 million in investment income.
"All across the U.S., medicine is changing and operating a small full service hospital becomes more difficult," said Mayes, who was the former chairman of Huron and called out of retirement after the then-CEO William Castle resigned in May.
Incarnati said McLaren has promised to renegotiate Huron's tax-exempt financing debt and provide capital to complete several projects. He declined to specify the amount of debt refinanced and capital promised.
"We will provide them with integration opportunity, create savings to improve their bottom line and we promised them some capital for projects they have," he said. In addition, McLaren will install a Cerner electronic health record system to link with the McLaren system.
"One of the reasons they chose us is we are the largest and most established system" in the Thumb area of Michigan, Incarnati said. "They looked at our track record with our health plan and our history in managing risk."
Incarnati said McLaren will also help recruit primary care physicians for Huron so they can grow additional market share.
"We have another hospital in our Thumb strategy. It is coming to fruition faster than we expected," he said.
Mayes said the board was surprised at how many health systems made proposals to Huron. "The quality of the health systems was impressive. It was a difficult choice," he said.
Over the past several years, Huron's six-member medical staff dwindled to only a few. "We lost one through retirement and another to the VA, and we had a couple setbacks," he said. "We were stifled with a lack of downstream revenue."
While not a money-maker, Huron's obstetrics department was delivering about 600 babies per year, down from about 1,200. "It is a loss leader, but a good community service. McLaren will help us with our recruiting and that should put us back on track," he said.
Earlier this month, McLaren acquired MDwise Inc., a 360,000-member Medicaid health plan in Indianapolis, for an unspecified amount. The deal is expected to close later this year. MDwise, which has annual revenue of $1.5 billion, is a nonprofit HMO jointly owned by Indiana University Health System and Health and Hospital Corp. of Marion County, a public health organization.
The McLaren system includes 12 hospitals, ambulatory surgery centers, imaging centers, a 450-member employed primary care physician network, commercial and Medicaid HMOs covering more than 620,000 lives in Michigan and Indiana, home health and hospice providers, retail medical equipment showrooms, pharmacy services, and a wholly owned medical malpractice insurance company.
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