Royal Oak – In a move being labeled by Beaumont CEO Gene Michalski as “a game changer in our market,” Beaumont and Henry Ford officials are planning to merge the two health systems, possibly as soon as in the first half of 2013. The result, say those officials, would be a $6.4 billion organization that would improve efficiency, access to care and outcomes for patients.

Beaumont, with its original hospital in Royal Oak, and Henry Ford have a combined 10 hospitals and another 200 patient care sites. Each health system serves more than one million patients annually, according to officials.

Both Michalski and Henry Ford Health System CEO Nancy M. Schlichting, speaking in a post press conference phone call, said that patients will be able to continue seeing their own doctors, and existing insurances will continue to be accepted.

Schlichting said there will be no changes to Health Alliance Plan, the health insurance program owned by Henry Ford.

Among the efficiencies that are expected to produce improved care is installation of the EPIC electronic system at Henry Ford, which already has been installed at Beaumont. The system allows for the sharing of medical files among doctors, and eventually, between the two systems.

Reasons to merge

The merger was prompted by changes in health care and its fundingunder the Affordable Care Act, among other things. Beaumont began to study it 20 months ago, Michalski said. Henry Ford Health had just begun studying the possibility of a merger “around the same time” that Beaumont approached, Schlichting said. “We were thrilled.”

Health care reform was the “driving force” for Beaumont, Michalski said.

“The future is very ominous,” Schlichting said. “Payment cuts (for Medicare and Medicaid) are on the horizon.” The opportunity to achieve efficiencies through a merger was a real opportunity, she said, adding that both health systems have “strong balance sheets.”

Both said that the two health systems are similar in their cultures and missions. Both are also non-profit organizations.

Michalski said that the merger will not bring about changes in staff, but that health care cuts in the future are unpredictable. He said that cuts in staff made by Beaumont previously “came at the deepest, darkest days of the worst recession in America.”

Both health systems have a substantial economic impact in southeastern Michigan. Henry Ford employs about 24,000 people, while Beaumont employs 14,000 full-time equivalent staff members, according to statistics provided.

Schlichting said that any reduction would be made through “normal attrition. We had great success at Henry Ford when we closed the (Warren) hospital in placing almost all employees” in existing openings.

Beaumont officials began looking at a merger 20 months ago, according to Michalski, saying that the population in Michigan is “stable and stagnant.”

The risk

“When you look at it…competing in every area in every service is not a survivable option. It is risky to go it alone,” Michalski said.

Schlichting agreed, saying that even though the Henry Ford system had doubled in size during the last 10 years, it was “not enough.” She noted that other mergers are being seen throughout the country, including in the Catholic health system.

Each health system brings its own strengths, according to the two CEOs. Henry Ford has no inpatient pediatric program, for instance, but Beaumont does. “There is minimal overlap,” Michalski said.

Schlichting noted that there was some concern among Beaumont physicians, because Henry Ford has salaried physicians. But, she said, that health system also has a “pluralistic care model,” having private physicians as well.

The two said that both health systems “are already national players” in the health care industry, touting their respective awards for excellence. And they each had already been approached by another health care venue, inquiring about affiliation.

Michalski used an analogy to explain how the merger would work. You have a left hand and a right hand that are mirror images, not identical but complimentary, he said.

“Together, we’re stronger” through consolidation, he said.

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