University Physician Group files for bankruptcy reorganization

Karen Bouffard
The Detroit News
The University Physician Group — which represents hundreds of doctors at the Detroit Medical Center, Karmanos Cancer Center and other Metro Detroit health care institutions — has filed for Chapter 11 bankruptcy reorganization in the federal bankruptcy court in Detroit.

The University Physician Group — which represents hundreds of doctors with faculty positions at Wayne State University who practice at the Detroit Medical Center and other Metro Detroit health care institutions — has filed for Chapter 11 bankruptcy reorganization in Detroit federal court.

The nonprofit, multi-specialty physicians practice group is comprised of many members associated with Wayne State University's School of Medicine and provides primary and specialty care across Metro Detroit. The group has 873 employees, including 300 physicians as well as other clinicians and support staff, who work at institutions including the Karmanos Cancer Center.

"We’ve been doing everything we can to avoid reorganization under Chapter 11," Charles J. Shanley, who became CEO of the group in March, told The Detroit News Thursday. "It was a difficult decision but it was the right one.

"Our patients are still going to be able to see their doctors, and our doctors are going to be able to see their patients," Shanley added.

"This is a restructuring — this is not a liquidation, it’s not a closure. ... Our operations will continue (and) our employee compensation and benefits will continue." 

The physicians' group, known as UPG, provides health care services for patients at major teaching hospitals such as the DMC's Harper University Hospital and Children's Hospital of Michigan, as well as hospitals in the Beaumont Health, Henry Ford, St. Joseph Mercy and Ascension St. John-Providence health systems.

In an affidavit filed with the court, Shanley said the group's clinical operations are no longer sustainable "in the absence of long-term external subsidy" due to a 50 percent decline in the number of its physician members over the past decade. 

The group asked the court to release UPG from leases it holds on six properties where UPG clinics are located. The clinics were either vacant, provide services that duplicate those at clinic locations, or are priced above their market value, the group claims.

UPG also asked the court to allow it to continue paying employees' salaries and benefits, claiming $1,681,000 in workforce obligations, including $131,400 that will become due before the bankruptcy is resolved. Jeff Lutz, a spokesman for UPG, said the physician group has enough revenue to continue paying employees. 

Asked why so many physicians left UPG over the past decade, Shanley alluded to a period of instability that culminated in the near-split with DMC last spring. Negotiations for a new contract stalled, and both sides said they were ready to end their 100-year partnership.

The standoff ended in September when the parties entered into a new five-year contract. 

"What I would say is that over the course of the last decade or so there have been a lot of financial challenges for UPG, there’s been a lot of instability," Shanley said.   

"One of the wonderful things about what we just completed with the Detroit Medical Center was establishing a platform for dialogue and collaboration to create some stability.

"I think we’ve got a new start, and this is about becoming a stronger, financially more stable partner for the Detroit Medical Center." 

The DMC supported the UPG's move.

“The DMC is committed to our collaboration with the Wayne State University Physician Group, and we value the access, expertise and specialized care that these physicians provide to our patients," said Dr. Anthony Tedeschi, chief executive officer for the Detroit Medical Center.

"We share a longstanding history and mission of serving the health care needs of the Detroit community, and we plan to continue in doing so.”  

Hospital affiliations

Wayne State University Physicians Group doctors have affiliations at hospitals and health systems across Metro Detroit including Oakwood Healthcare Inc. and St. Joseph Mercy Oakland. 

"UPG has relationships with multiple health systems and this will not affect those," Shanley said Thursday. "We intend to continue those."  

Independent of UPG, Henry Ford Health System and Wayne State University in September signed a non-binding letter of intent to expand their long-term partnership. They hope to finalize the agreement in early 2019.

The envisioned partnership would designate Henry Ford Hospital as the primary institutional affiliate for the Wayne State University's School of Medicine, College of Nursing, and College of Pharmacy and Health Sciences.

"(The UPG filing) has no impact on Wayne State’s relationship with Henry Ford," WSU spokesman Matt Lockwood said in an email.   

In Wednesday's filing, UPG claimed it has assets of $10 million to $50 million and liabilities in the $10 million to $50 million range.

The physician group began with a simple mission to serve the Detroit Medical Center and the Detroit community, Shanley said. The goal of reorganization will be to return to that basic mission. he said. 

"UPG began as an academic referral practice on the DMC campus — we’re really just going back to our roots," Shanley said. "We have a very expansive portfolio of leases in the periphery which we can no longer support, and so we’re going to reorganize to a clinical footprint that is supportive of our missions — that’s the need of the restructuring.

"At the end of the day, 80 percent of our clinical work and revenue occurs on the DMC campus, so what we’re going to restructure is a relatively small proportion of our total clinical revenues and activity," he added.

"And we’re going to do it in a way that maintains our top values, which are patient care and access to the physicians, and our education commitments to the residents and the medical students that we teach."

Twitter: @kbouffardDN