Beaumont, Henry Ford Announce $6.4 Billion Partnership

Beaumont Health System and Henry Ford Health System sign letter of intent to combine operations.

Beaumont Health System and Henry Ford Health System announced Wednesday that they are taking the first steps toward entering a multi-billion dollar partnership.

While the hopsitals will combine operations after a 120-day period of negotiations and due diligence, the two systems will retain their respective brand names and separate identities, officials said.

Today's announcement at Beaumont Hospital's Royal Oak campus, is the result of Beaumont's board of directors developing a strategic plan over the past 20 months to transform its system from providing procedures to promoting health and wellness among the population. To make that transformation, Beaumont sought a like-minded partner, said Steve Howard, Chairman of the Board of Trustees, Beaumont Health System.

It found that partner in Henry Ford Health System.

Changing landscape

Health care is changing rapidly and requires bold moves. The need for strong partnerships has never been greater, said Gene Michalski, president and CEO, Beaumont Health System.

“I don’t think it’s a secret to anyone that there are rapid changes in the health care landscape across the country,” Michalski said. “There’s a monumental shift from in-patient care to out-patient care, that is part spurred by health care reform but is also enabled by technology. And, there is a demand for greater value in health care today.”

With the kind of payment reductions both systems plan to see over the next several years its essential to have a larger platform to spread fixed costs, said Nancy Schlichting, CEO, Henry Ford Health System.

"Coming together allows us to create a 'Pure Michigan' community-based system that will serve as the engine of innovation," Schlichting said. "We have an amazing vision, I think, for the future.” 

Is it a marriage made in heaven? 

After giving brief remarks, the CEOs, chief medical officers and chairs of the two organizations exchanged praise and gifts in what some joked gave the impression of an engagement party.

Exchanging teddy bears and logo wear, Nancy Schlichting, CEO, Henry Ford Health System, joked about Daimler and Chrysler's short-lived merger. “We’re never going to call this a marriage made in heaven,” she said. 

There is still a lot of work that needs to be done. A leader has not yet been named and the governance structure, which will have equal representation from both systems, does not have names and the number has not yet been picked.

A plan also needs to be developed to combine the Beaumont Foundation and the Henry Ford Foundation into a single foundation, and the two organizations plan to have a collaborative research program.

Other aspects of the merger call for independence. The medical staffs will remain independent and Beaumont plans to keep its relationship with Oakland University, while Henry Ford sticks with Wayne State University.

And, Beaumont's name won't be changing. While a name for the new joint organization still needs to be developed, Beaumont and Henry Ford plan to continue using their highly respected brand names.

What about jobs?

Both Michalski and Schlichting said the merger was about creating quality outcomes, service, access and value for patients—and not about cutting jobs.

“One of the experiences we’ve had at Henry Ford over the last decade is the fact that we have closed three hospitals,” said Schlichting.  “We have gone through the process to learn how to protect our people and that is something we are very committed to. After closing the Warren campus of Henry Ford Macomb this past March, we placed 90 percent of the people in our organization. And, frankly the others were looking for other opportunities."

Partnership by numbers

  • 10 hospitals
  • 200 patient care sites
  • $6.4 billion in operations
  • 7,000 physicians across southeast Michigan
  • 2 Medical school affiliations
  • 1 Children’s Hospital
  • Numerous awards
Frustrated Old Man October 31, 2012 at 09:42 PM
Monopoly comes to mind.
Judy Davids October 31, 2012 at 11:03 PM
The agreement is for a new, not-for-profit organization.
J. Jacobs October 31, 2012 at 11:14 PM
Which means no taxes will be realized from the Royal Oak hospital. I was hoping that Beaumont would merge with a for profit operation, so that tax revenues could flow into city coffers, like the children's hospital proposed at the I-696 site.
MsMaidstone October 31, 2012 at 11:38 PM
Agree with J Jacobs re tax impact; agree with Schlicting that "merger of equals" term has a bad history; forecast that one of the hospitals will emerge as the big cheese while the other starts to salute.
Bryan November 01, 2012 at 05:40 PM
My favorite line of the article is the last one: "And, frankly the others were looking for other opportunities." I doubt it.


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