Meridian Health Plan, owned and operated by the Cotton family, plans to build a $111 million, 16-story office tower, depicted above, in downtown Detroit. )
A Grosse Pointe family has maneuvered vast changes in federal and state health care laws into a booming business.
And the more the Cotton family thrives, the more millions it invests in Detroit and Grosse Pointe Park.
Kercheval Avenue in Grosse Pointe Park is abuzz with the new upscale Red Crown restaurant in what had been a closed gas station. A dying church is being resurrected as a brew pub and biergarten. And a bakery soon will open in a family-run market that was about to shut.
Downtown Detroit, meanwhile, will get its first new office building in seven years with a $111 million, 16-story glass tower planned near Campus Martius.
“Health care is like the wild West right now. We will not see these opportunities for another 100 years,” said Jon Cotton, chief operating officer of Meridian Health Plan. Meridian is the state’s largest Medicaid HMO, founded by his parents, David and Shery Cotton, in 1997.
The company’s revenue for 2011, the latest year information is available, was $960.2 million.
Meridian serves more than 300,000 Medicaid clients in five states. In Michigan, it has a five-year, $4.7 billion contract, according to the state’s Department of Technology, Management and Budget.
Last month, Meridian’s pool of potential customers grew by 450,000 in Michigan alone. That’s when Gov. Rick Snyder approved the expansion of Medicaid in Michigan under the Affordable Care Act.
Meridian is growing so fast that it can’t fit its 620 Detroit workers into one downtown building. Most are in One Kennedy Square in Campus Martius. Jon Cotton can look out the window of his small, cramped office to the 1001 Woodward building across the street and see some of his workers.
“By the time we open our new building, we will have over 1,000 workers,” Cotton said. Construction could begin next year, and the building may open in 2017. Meridian would occupy virtually all the space in the 320,000-square-foot building.
The Cottons — David, Shery and their sons Jon, Sean and Michael — are expanding their philanthropy and game-changing real estate deals as their health care business flourishes.
“Me, my family, we are in position where we can give back to our communities. We know that and because of the housing crash, and the other challenges, we want to be among the group of people who can make significant change,” Jon Cotton said.
David Cotton, former chief specialist of obstetrics and gynecology at Detroit Medical Center, and his wife Shery founded Health Plan of Michigan, now named Meridian, 16 years ago. The three Cotton sons hold executive positions at Meridian.
In the late ’90s, states including Michigan began to privatize management of federal Medicaid contracts. Meridian is a physician-operated group of health plans and related companies. It has expanded to 10 lines of related businesses, such as one dedicated to pharmacy benefits, and employs 1,300 people in seven states.
Whole family involved
The Cottons’ philanthropy and land deals tend to involve the whole family. In 2008, they underwrote a conference center at Providence Park Hospital in Novi. In 2011, the Shery L. & David B. Cotton M.D. Family Birth Center opened at Beaumont Hospital in Grosse Pointe.
The Detroit Zoo has the Cotton Family Wetlands. Shery is on the zoo’s board of directors. The Cottons were major donors to the expansion at St. John’s Providence Health System and continue to support programs.
Several years ago, the family turned its attention toward the border of Grosse Pointe Park and Detroit along Kercheval Avenue, one of the starkest examples of divides between the impoverished city and the affluent Grosse Pointes. In 2011, Cottons launched the nonprofit Detroit Crime Commission, aimed at fighting crime and blight.
The housing crash resulted in more than 70 vacant or foreclosed properties near the city border, according to Grosse Pointe Park city officials.
The Cottons played a major role in filling those units with college students. They helped form and now provide support to the Grosse Pointe Housing Foundation. About 150 students from nearby colleges, with at least 2.5 grade point averages, get up to $150 a month in rental assistance. There’s a waiting list. Now, fewer than 15 properties are vacant, city officials said.
Kercheval center of activity
It’s on Kercheval where they have major plans. Through various entities, the Cottons began to buy retail properties in the fall of 2011. Their acquisitions include such well-known spots as the now-shuttered Janet’s Lunch, and the Grace United Church of Christ, on Lakepointe Street, which will become the brew pub run by Atwater Brewery.
The former Standard Oil gas station at 15301 Kercheval is now the Red Crown restaurant. The former Mulier’s Market, which is being partially razed, will become the site of a bakery and a restaurant.
“The Cottons are very supportive of local Michigan products, ingredients. I can’t say enough about them,” said Bobby Nahra, president of Lakeland Banquet and Event Centre in St. Clair Shores. His firm has been working with the Cotton family for more than a decade and will operate the Kercheval restaurants, Nahra said.
Not all their plans and partnerships work out as intended. The Cottons initially wooed Birmingham restaurateur Mindy Lopus to run Red Crown and the bakery, as well as another restaurant, but that relationship ended over differences in how to run the businesses, said Rob Ermanni, the Cottons’ commercial real estate broker.
The Cottons also were interested in buying property on the Detroit side of the border, but the process proved “frustrating,” said Jon Cotton. “It was hard to get a consensus on what we could do. We didn’t want to be seen as some group coming in as outsiders and getting attacked for that.”
Their plans for Kercheval have just begun. “Really what you are seeing now is Phase 1 of up to three phrases,” said Ermanni. The Cottons have spent about $7 million in acquisitions and renovation of properties, he said.
The overall plan is for Kercheval to become a pedestrian-only strip full of shops, Ermanni said.