Henry Ford Health System is the latest not-for-profit health system to partner with investor-owned Acadia Healthcare, this time to open a behavioral health hospital in suburban Detroit.
Detroit-based Henry Ford said the 192-bed hospital, slated to open in late 2022, would fill a critical need for modernized inpatient behavioral health services there. The health system would own a roughly 20% minority stake in the joint venture with Acadia, which will pay for the hospital's estimated $50 million construction, equipment and annual operating costs.
Henry Ford chose Franklin, Tenn.-based Acadia for its treatment philosophy and access to capital, said Robert Riney, Henry Ford's president of healthcare operations and chief operating officer.
"I feel it's actually a very good example of meeting community need in a way that's responsible," he said.
Investor-owned Acadia currently has seven similar joint ventures and two more in the works, including a planned facility in the San Diego area with Scripps Health and one in the Knoxville area with Covenant Health. Acadia is the country's largest standalone behavioral health provider, with 582 facilities in 40 states, including Puerto Rico and the U.K. The company drew $37 million in net income to shareholders and $833 million in revenue in the quarter ended Sept. 30, 2020, compared with net income of $42.6 million and revenue of $777.3 million in the prior-year period.
Henry Ford is providing the land for the project, which is adjacent to its Henry Ford West Bloomfield Hospital campus. Local leaders this week approved a rezoning that allowed the plans to move forward. The next step is securing a Certificate of Need from Michigan's Department of Health and Human Services. Construction is slated to begin once all regulatory approvals are met.
Once the new hospital opens, Henry Ford plans to close two inpatient units containing 184 beds total, resulting in a net gain of eight beds initially. The health system is closing Henry Ford Kingswood Hospital, an inpatient psychiatric facility, and the inpatient psychiatric units at Henry Ford Macomb Hospital-Mt. Clemens. The health system said both facilities are aging and no longer support necessary technology upgrades.
Acadia will staff the hospital's roughly 200 therapists and other ancillary providers, with staff from the shuttering Henry Ford units getting first dibs at the positions, which they would fill as Acadia employees. The staff count is projected to grow to about 300 employees within the first two years, Riney said. Psychiatrists will come from Henry Ford.
Acadia CEO Debra Osteen says partnerships like this work because they allow the health systems to focus on what they do best: providing medical care for the communities they serve, while Acadia handles behavioral health services. And with services in 40 states, Osteen said the company is at the cutting edge of mental health and substance use treatment.
"Together I think we accomplish more with their expertise in physical health and ours in mental health," she said.
Scripps CEO Chris Van Gorder told Modern Healthcare last year that one benefit of partnering with Acadia is that its facilities aren't required under federal law to accept government-insured and uninsured patients because they don't have emergency rooms, unlike traditional acute-care hospitals, so they "can fill a majority of its hospital with commercially insured patients."
Riney said this facility will be open to all patients that need services, and it will not look to achieve a specific ratio of privately-insured patients.
Some logistics still need to be worked out, such as the hospital's name and the exact equity stake of both parties, Riney said. The facility's board will be split 50-50 with representatives from both organizations.
An important part of a venture like this is retaining Henry Ford's existing base of referral sources, even though Acadia will oversee its day-to-day operations, Osteen said.
Despite its service area in Detroit being hit hard by the COVID-19 pandemic, Henry Ford generated $264 million in operating income on $4.8 billion in revenue in the nine months ended Sept. 30, 2020, a 5.5% operating margin. That includes the recognition of $357.2 million in federal stimulus grants in the period.