Our goal is to ensure that the highest quality health care services are available to the people of northern Michigan for the long term.
Munson Healthcare has always been about one thing: Local care by local experts. We’ve worked hard to earn our place among the best, and we intend to maintain our excellence well into the future. Our goal is to be as strong in the future as we have been for the past 75 years.
Sustaining what we have and adding beds and services to meet the needs of our growing population in northern Michigan is paramount. Standing alone could mean slower growth and the possibility that some services cannot be sustained in the future. The opportunity to join with the right partner – if they are strong and healthy as we are – could improve our ability to grow at a pace that preserves the level of quality our community has come to expect.
Share Your Thoughts
As the Munson Healthcare Board of Directors weighs the benefits and risks of a proposed affiliation agreement with Spectrum Health, updated information will be posted here. Please let us know if you have additional questions by calling (231) 935-2000, or e-mail your question to voicesandviews@mhc.net.
Why is Munson Healthcare considering a partnership?
In evaluating a partnership we have one overriding goal: To ensure that the highest quality health care services are available to the people of northern Michigan for the long term, and to act from a position of strength.
Aren’t these kind of mergers always bad for the smaller organization?
No. It’s important to consider the ways in which a partnership between not-for-profit hospital systems are different from a corporate merger. In for-profit corporations, there is pressure to perform to the satisfaction of shareholders, and decisions are made based on delivering profits to shareholders. Both Munson Healthcare and Spectrum Health are not-for-profit organizations. There are no shareholders who would earn profits, and the only driving factor is to deliver high quality health care services. There’s a great example right here in our own system. Paul Oliver Memorial Hospital joined Munson Healthcare in 1986 and it continues to offer high quality health care and more services than ever to its community.
If Munson is not in trouble now, why pursue a partnership now?
There are two reasons. First, it’s always preferable to enter negotiations from a position of strength. Because Munson is strong, any negotiations we have right now are a two-way dialogue. If you wait until you’re in financial trouble, it’s a one-way dialogue. Second, Munson has always planned for the future, which is why people in our region today have the services they need. We know we need additional beds and a cancer center to improve care. It takes four to five years to complete a capital project, so we have to think in the long term and build now for the future.
What’s in it for Munson?
The primary purposes of a partnership with Spectrum Health are to improve our access to capital, enhance physician recruiting, create a stronger voice of advocacy, and strengthen the foundation for fulfilling our mission in the decades ahead.
What’s in it for Spectrum?
The advantages to Spectrum Health would be many. By joining with a strong partner such as Munson Healthcare, its financial position would allow for a stronger AA bond rating. Spectrum would add to its high quality system with an award-winning hospital in Munson Medical Center, thus amplifying its reputation for quality. By adding a large, northern Michigan system to its geographic service area, Spectrum would increase local access to care. Last, but not least, is that by increasing its service area, Spectrum would have more ability to advocate for regional and rural health care outside of Detroit. The reality is that with 60 percent of hospital funding coming from federal and state sources, a stronger, larger health system in western and northern Michigan would improve our chances of getting a fair share of government funding.
Do Munson and/or Spectrum executives stand to personally benefit financially once a deal is done?
No. No individual at either organization would personally benefit financially due to a partnership between Munson Healthcare and Spectrum Health.
What is the Board doing right now?
The Board has hired a national health care consultant to provide additional analysis of the proposed agreement. We’re taking the time to give everything another look. The consultant has been asked to do three things: analyze our financial assumptions to make sure we’re on the right track; determine if we’ve missed considering any key issues; and evaluate if the proposed plan is truly the best plan for Munson. At the same time, the Board recognizes that the views of the community are critical to the process of determining whether to proceed with a partnership, so it has focused on helping people understand the reasoning behind a possible partnership, the factors that are driving it, and the process being used to reach the right decision.
What is the new timeline now that you are seeking more analysis?
We expect to have a report back from our consultants by the end of June. The board would then review the report and determine the next step. We will work diligently through all of the issues that remain and take the time that is needed to make the right decision. We have no firm deadlines at this point.
Who will make the final decision on the Spectrum Health proposal?
The Munson Healthcare Board of Directors will make a decision and, under the current proposal, the Munson Healthcare Corporate Members would essentially ratify the decision by voting to adopt a new organizational structure under Spectrum Health.
Would the Corporate Membership cease to exist?
Under the terms of the current proposal, the Corporate Members would transition to a Corporate Advisory Council. Corporate Members, comprised of more than 300 community leaders, currently play a critical role as advocates for quality health care and as the “eyes and ears” of the community. This role would continue and its importance will grow as national health care reforms impact our local delivery system.
What happens to the Munson Healthcare Board?
It continues to exist. It will be responsible for addressing issues related to assuring local access to high quality care for northern Michigan. The current 22 members of that Board would continue to serve, joined by two representatives from Spectrum Health in Grand Rapids. In the future, new members would be chosen from northern Michigan communities. This structure continues a focus on northern Michigan for this Board, and a learning environment for those representatives from the larger organization.
Would you keep the Munson name?
Yes. Munson Medical Center would continue to be known as Munson Medical Center.
Munson’s already big – does it really need to grow?
Yes. Even if we do nothing – we have historically experienced about 3 percent growth in volume every year. Our population is aging, and as we get older we use health care services more frequently. On one recent day, Munson Medical Center had more than 100 admissions. If we don’t continue to add beds, we will once again have the situation of people waiting in hallways, surgeries cancelled, and transfers from other hospitals turned away.
We like Munson just the way it is – why consider such a big change?
Munson Healthcare serves 500,000 people spread over 11,000 square miles. Maintaining the high level of care Munson Healthcare provides in northern Michigan for the long term is going to require a large investment. Quality is dictated by the physicians, facilities, and technology we have available. In order to attract physicians, we know we are going to need additional beds and the new technology that physicians require. We’re considering a partnership that would help position Munson Healthcare to ensure the highest quality health care services to the people of northern Michigan for the long term.
Munson has always been successful on its own – why does that need to change?
Munson Healthcare is not alone in considering this alternative – it’s being explored by hospitals all over the country as they look for new ways to stay strong and accomplish their goals. For smaller, regional hospitals, partnerships are going to be increasingly attractive in coming years because of reduced Medicare and Medicaid reimbursement rates. At Munson, government payers make up more than 60 percent of our business and the cuts in payments just keep coming. Reduced revenue directly impacts our ability to fund growth. Hospitals that act and respond to the changing environment, sooner rather than later, will be those that are more likely to grow and thrive in the long term.
What is the risk of doing nothing?
We will never do nothing. We can accomplish some of what we need to do on our own. But, the risk is that our growth will be much slower and quality could pass us by. We could find ourselves in a position where health care in northern Michigan might not continue to be all that it can and should be.
What is the estimated cost to meet the needs in the future?
The total capital needs over the next five years are estimated at $343 million. This figure represents a major expansion of facilities, including a new bed tower and cancer center at a cost of $170 million.
Munson has always been successful with fundraising. Couldn’t we raise the money needed?
Because of great community support, the Munson Healthcare Regional Foundation typically raises $2 million per year, or about $10 million over a five-year period. This is a tremendous amount of support, but would need to be supplemented with borrowing to build the facilities we need.
What is the difference in the interest rates available based on Munson Healthcare’s credit rating and Spectrum Health’s rating?
First, it’s important to note that a partnership with Spectrum Health would not only affect the cost of borrowing, but it would provide greater access to capital. Even if Munson Healthcare was able to borrow all the money it needs, there would be a favorable difference in interest rates between our A1rating and Spectrum’s AA rating.
What is a joint obligated group?
A joint obligated group has consolidated debt – all debt is the responsibility of all parties.
Would the community lose jobs if Munson affiliates with Spectrum?
No. If we have the money to build a bed tower and a cancer center – we will need to add a significant number of clinical and support jobs. As it is, we add 75 to 100 jobs each year to accommodate our current growth of about 3 percent. In fact, there could be a greater risk of job loss without a partnership, because financial challenges would continue to mount and we could see a contraction of health care services in northern Michigan.
What is the likely future impact on real estate, retail sales, and the service industry?
The proposed partnership is part of a growth strategy. And growth means jobs and opportunity. The construction of a new bed tower and cancer center would result in construction jobs, and once completed, these facilities would need to be staffed and served by suppliers. Whenever possible and economically feasible, Munson Medical Center buys locally, and this guideline would not change. In FY 2009, Munson paid invoices to approximately 1,500 northern Michigan vendors. The additional jobs created as a result of planned growth would have a positive impact on real estate, retail sales, and the service industry. If Munson’s growth were restricted because it would not have access to the required capital, there would actually be less opportunity for economic expansion in the region.
If you add 100 beds at Munson, will you close Paul Oliver? Would Spectrum have the right to make that call?
Paul Oliver is one of the finest small community hospitals in Michigan. Under the terms of the proposed partnership with Spectrum, it would continue to be run by its local Board of Trustees and its local administration. People who come to Munson Medical Center need a higher level of care than is provided at POMH. Adding beds at Munson won’t change the kind of services provided at Paul Oliver.
If Spectrum has capacity, why wouldn’t they just transport patients to Grand Rapids rather than add beds in Traverse City?
Spectrum has a strong belief in local access to care for rural communities. Additionally, the 100 beds we need to add at Munson are critical care beds. Spectrum does not have the capacity to take on northern Michigan’s critical care business, and no one wants patients to have to drive 2.5 hours for their care. The Board is confident that a partnership with Spectrum would improve and enhance access to local care in northern Michigan.
Will Spectrum’s Foundation take over fundraising locally?
No. Munson Healthcare Regional Foundation will continue as the fundraising arm of Munson Medical Center, Kalkaska Memorial Health Center, and Munson Home Care and Hospice. The Paul Oliver Foundation is the fundraising arm for POMH, and our Foundations will continue to support local health care.
Will an agreement with Spectrum mean donors’ money goes to Grand Rapids or somewhere outside the community?
No. Gifts have always been allocated at the discretion of the donor and that will not change, regardless of the outcome of our discussions with Spectrum Health.
Will fundraising projects continue as planned?
Absolutely. Support will continue to be needed for building and renovation projects at Paul Oliver, Munson Medical Center, etc., and for program and operational support for Munson Hospice, Munson Manor, as well as for many special funds such as the Patient Needs Funds and Women’s Cancer Fund.
Munson has not addressed the emotional aspect of the community’s attachment to its prize jewel – the hospital system. How will you be more open about your talks and intentions with Spectrum?
The views of the community are critical to the process of determining whether to proceed with a partnership. Our communications are focused on helping people understand the reasoning behind a possible partnership, the factors that are driving it, and the process being used to reach the right decision. We have spoken to the Record-Eagle editorial board, and new Munson Healthcare President and CEO Ed Ness has been interviewed on WTCM radio and IPR radio. We have set up small group lunch discussions between Mr. Ness and members of the community. We also have established a web site and an e-mail address and telephone number to specifically invite public comment. We want to hear what the concerns are and we want the community to know we are listening. To leave a voice comment, call (231) 935-2000 or e-mail comments to voicesandviews@mhc.net.
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