September 3, 2014 at 10:46 pm

Beaumont Health merger plans no hospital closures or layoffs

Paul E. LaCasse, left, president of Botsford Health Care, Gene Michalski, president of Beaumont Health System and Brian Connolly, president of Oakwood Health System, discuss the benefits of merging. (Clarence Tabb Jr. / The Detroit News)

No hospital closures or layoffs are planned for Beaumont Health — the massive health system created by this week’s merger of Beaumont Health System, Botsford Health Care and Oakwood Healthcare — but it will take months to develop a structure for the new entity, officials said Wednesday.

The health group’s reach — becoming Metro Detroit’s largest health care provider — may lead to lower costs for patients and more customers for the combined nonprofit organization, an independent analyst said Wednesday.

Each of the three health systems will retain their current leaders as a 14-member Beaumont Health board hammers out details of the new management structure, executives said at a Wednesday press conference announcing a finalized deal that was originally reached in March. Details will be announced in January.

The combined health system’s strategy is “to be the high-quality, low-cost provider with geographic coverage, and we have that opportunity,” said Gene Michalski, president and CEO of Royal Oak-based Beaumont Health System and interim chief executive of the new entity.

“We’re going to leverage the economies of scale and economies of skill (of all three health systems).”

The merger is expected to save $100 million in the first three years, and potentially much more in coming years, said Brian Connolly, president and CEO of Dearborn-based Oakwood Healthcare.

The three systems already have saved $10 million on interest payments by refinancing part of their debt under the new entity, Connolly added.

Federal and state regulatory officials have approved the affiliation and granted tax-exempt status for the $3.8 billion operation, the health care providers said Wednesday. The location of the headquarters still needs to be decided, but temporary offices have been set up in Troy.

Completion of the Beaumont-Oakwood-Botsford deal could help Beaumont Health better negotiate lower rates with insurers such as Blue Cross Blue Shield of Michigan, possibly meaning lower medical bills for consumers.

The arrangement’s reach of patients across southeast Michigan creates many “intriguing possibilities,” including the ability to negotiate directly for the business of large employers without an insurance company as the middleman, said Allan Baumgarten, a Minneapolis-based independent analyst who studies Michigan health care trends.

“Employers are always concerned about the cost of benefits and in ensuring that their employers have access to high-quality providers,” Baumgarten said. “There are some significant opportunities that are created by the merger. I think that is part of the motivation for the Beaumont Health initiative.”

The combination is expected to generate about a 30 percent share of the medical market in southeast Michigan, replacing the Detroit-based Henry Ford Health System as the region’s largest health care provider. It will have eight hospitals, 153 patient-care sites, a staff of more than 5,000 physicians and 25,500 workers.

The federal Affordable Care Act is prompting hospitals across the nation to seek mergers or form affiliations with other health organizations to better manage costs and increase efficiencies.

The federal health care law has changed the way hospitals are reimbursed, trying to force hospitals to shift from a fee-for-service model to a value-based model that rewards providers for improving health while saving money.

Beaumont earlier pursued and then dropped a proposed merger with Henry Ford Health System.

The Detroit Medical Center was acquired by for-profit, Tennessee-based Vanguard Health Systems in 2011 and was resold last year to Dallas-based Tenet Healthcare.

The 14-member Beaumont Health board is a blend of representatives from the three organizations. Though Michalski will be a member, the new board will not include Connolly or Farmington Hills-based Botsford Health Care President and CEO Paul LaCasse.

“Beaumont Health will continue the traditions of our legacy organizations as a nonprofit, locally governed organization,” said John Lewis, chairman of the new Beaumont Health board and chairman of Oakwood. “With our combined strengths of patient satisfaction, medical excellence and community focus, we look forward to serving the health needs of patients and families for years to come, with quality and compassion guiding all that we do.”

While 66-year-old Michalski is the initial CEO, his age has prompted questions about whether the new organization would start searching for a successor.

But Michalski said Wednesday he plans to remain in leadership, adding “I intend to be around for some time in the future.”

Connolly and LaCasse will remain in executive leadership positions, though it was unclear what their new titles may be. Connolly will develop the new system’s provider networks, while LaCasse will oversee integration of their medical staffs and programs.

LaCasse said his focus will be on providing high-quality patient care.

“We have clinical strengths all over the organization,” he said. “My role going forward is the leveraging of those clinical strengths.”

kbouffard@detroitnews.com

The merger of Beaumont Health System, Botsford Health Care and Oakwood ... (Charles V. Tines / The Detroit News)