With the passage of the historic health care legislation, coverage for the uninsured is now at the center of the national conversation around health care as the new law that, among other benefits, will prohibit denying insurance to patients with preexisting conditions.
Covering the uninsured and low-income earners has been the hallmark of the Detroit Medical Center for decades.
And now as DMC prepares to be under the new ownership of the Vanguard Health Systems, moving from a nonprofit to for-profit status, DMC officials say the health system will continue providing medical care to the underserved — a role that has long distinguished the DMC from every other health system in the state — in Detroit.
DMC President/CEO Mike Duggan, accompanied by four of the health system’s top executives, including Dr. Iris Taylor, president of Detroit Receiving Hospital; Dr. Herman Gray, president of Children’s Hospital; Conrad Mallett, president of Sinai Grace Hospital; and Cassandra Smith Gray, corporate executive director of Community Affairs for DMC, visited the offices of the Michigan Chronicle on April 1 for an editorial meeting.
All five executives said the reason for the immediate transfer of ownership to the Vanguard is to get the best deal for DMC while it still remained a profitable institution.
“We are the hospital system that treats everybody regardless of their ability to pay. That’s who we are and that’s really our core. The reason we are doing this deal is we think it’s a whole lot more likely that DMC will be around for future generations,” Duggan said.
For the last six years, according to Duggan, DMC has remained profitable — in the black — unusual in such a dire economy which triggered some of its board members, such as Roger Penske, to explore the idea of getting investors.
“When you are a nonprofit that means you have no investors. You have no one to turn to when things are going badly,” Duggan explained. “The only way you can get money for the latest equipment or modern facility is you go to Wall Street and borrow it.”
Going to Wall Street, Duggan said, would mean having to repay those loans in 20 years.
“We think Detroit is going to lose population, remain poor and therefore we can’t borrow any money at all to modernize,” Duggan said.
However, he said the irony is that some of the suburban health systems that have lost money have not had any trouble borrowing huge amounts of money which in itself has affected Detroit.
“The nonprofit model has been a disaster for the city of Detroit in health care. You’ve seen all of these nonprofits either close their hospitals or moved into the suburbs,” Duggan said.
“And it is not because the managers of these hospitals are bad people. Its that if you have to go to Wall Street to borrow, you are borrowing for investment in a community Wall Street doesn’t think has a 20-year good horizon.”
The DMC chief cited as an example Northwest Oakwood Hospital, which he said two years ago was going to shut its doors until the hospital doctors came together and decided to become investors to keep the hospital open.
That is a sign of the times for Duggan who insisted DMC has to be ahead of the curve and not have to wait until its in dire straits to look for investors.
Vanguard Health Systems, known as an urban based hospital system that operates in five states, is currently the eighth largest investor-owned hospital system in the country. The purchase of DMC will make the health conglomerate the fifth largest.
According to the Vanguard/DMC agreement, the operations in Michigan will be overseen by a board comprised of four members appointed by Vanguard and three members from DMC.
DMC will continue to operate under its legacy names and the current management team of hospital presidents and its CEO, Duggan, will remain in place.
In the next five years Vanguard agrees by contract to infuse $850 million into DMC, making it the largest private investment in Detroit’s history. Of that amount $500 million will go toward major capital projects and $350 million will be used for routine capital and equipment.
Duggan said also DMC’s board was able to get Vanguard to put $500 million of its own stock in escrow.
Their failure to fulfill their part of the agreement would mean DMC’s board, which exists as a separate entity, will take Vanguard stock.