Client News: Oakwood Healthcare has resurrected its plans to build a new hospital

Source: Crain's Detroit Business
http://www.crainsdetroit.com/article/20100718/FREE/307189966

Oakwood revives plans for Canton Twp. hospital:
St. Joseph Mercy to oppose bid
By Jay Greene

Oakwood Healthcare, a four-hospital system in Dearborn, has resurrected its plans to build a new hospital in Canton Township in western Wayne County where it has operated an outpatient center for more than 30 years.

Oakwood, which bought a 144-acre tract of mostly farmland at the corner of Beck Road and Michigan Avenue in August 2008 for $12 million, is working with the architectural firm SmithGroup in Detroit on creating a master plan for the project.

“We just began planning again and everyone in the community is involved — community leaders, business groups, Oakwood physicians and other physicians in the community,” said Paula Rivera-Kerr, Oakwood's media relations manager.

A decision on the scope of the project is expected in October, said Rivera-Kerr.

“(The master plan) will then determine the number of beds, square footage, scope of services, budget and what the design of the campus will look like,” Rivera-Kerr said.

An improving economy, patient demand and financial turnarounds at many health care systems in Southeast Michigan in 2009 has led to announcements of $2.4 billion in health care construction projects over the past nine months.

But Rob Casalou, CEO of St. Joseph Mercy Health System in Ann Arbor, said St. Joseph will oppose Oakwood's plans to build a new hospital.

St. Joseph, part of Novi-based Trinity Health, operates two hospitals that serve the Canton Township market.

“We have an overcapacity of medical resources, and putting the most expensive resource (a hospital) in a region that already has major health systems makes no sense,” Casalou said.

“We are supposed to be investing in ambulatory care, medical homes and primary care,” Casalou said. “Inpatient care may make a lot of money in the short term, but the movement is to outpatient care in the future.”

Under state certificate-of-need regulations, Oakwood would be required to submit an application for a CON.

Last month, McLaren Health Care Corp. in Flint began talking about building a 200-bed hospital in Independence Township.

Sources have told Crain's that McLaren and Oakwood could possibly team up to get a bill introduced in the Legislature that would allow both organizations to bypass the CON process.

In 2002, Henry Ford Health System and St. John Providence Health System won special legislative approval to transfer beds from existing hospitals to new hospitals in Oakland County.

“The only thing we can say about it is we have no plans to circumvent the CON process,” Rivera-Kerr said.

Roy Sexton, Oakwood's corporate director of strategic communications and planning, said Oakwood is considering options that include transferring beds from one of its hospitals.

“The CON standards are fairly specific about what can and cannot transpire around hospital beds, so we hope to work with (state regulatory officials) to understand what our options are to serve this community and meet the community's needs,” Sexton said.

Larry Horwitz, president of the Economic Alliance for Michigan, said building a fourth hospital to serve the Canton market would add costs for employers, consumers and taxpayers.

”There are multiple hospitals in all directions from the Oakwood proposed site in Canton,” Horwitz said. “Collectively those hospitals have a vacancy rate on an average day of about one-third.”

The three hospitals that serve the bulk of Canton inpatient needs are the University of Michigan Hospitals in Ann Arbor, Trinity's St. Mary Mercy Hospital in Livonia and St. Joseph Mercy Hospital in Ann Arbor.

Within the next year, St. Joseph Mercy plans to add 24-hour emergency care and a 23-hour short stay unit to its outpatient center in Canton, Casalou said.

“We have almost all the services there to take care of 99.9 percent of all the health care needs,” Casalou said. “Why build very expensive inpatient resources under the argument that the community needs it when most care is not delivered at hospitals?”

Last year, three-hospital William Beaumont Hospitals began working with a developer to extend its outpatient center network to the I-275 and Michigan Avenue area of Canton.

However, Bob Ortlieb, Beaumont's media relations coordinator, said plans for the outpatient project in Canton have been set aside.

Since 1982, Oakwood has operated an outpatient center in Canton, the Oakwood Canton Medical Center, which is 5.7 miles from the proposed new hospital campus.

In early 2008, Oakwood officials talked with community leaders in Canton about long-range plans of building a variety of health projects.

At the time, Oakwood's multiphase project included a hospital, emergency care, outpatient services, imaging, primary and specialty care clinics, senior care housing, a medical research facility and an outpatient surgery center.

But economic downturn in the fall of 2008 put a damper on those plans in Canton and an expansion project at Oakwood Heritage Hospital in Taylor. In 2008, Oakwood also incurred financial losses of $76.2 million.

As the economy has started to rebound and Oakwood's finances improved to $64.1 million net income in 2009, Oakwood decided to ramp up both projects.

In April, Oakwood announced plans for a $31 million surgical services expansion project at Heritage Hospital that is intended to create an orthopedic center of excellence and a bone and joint center.

Oakwood, which employs 9,000 people and has 1,300 physicians on its medical staffs, also operates Oakwood Annapolis, Oakwood Southshore and flagship Oakwood Hospital and Medical Center in Dearborn.

It also operates a network of 45 primary and specialty care outpatient centers.

Jay Greene: (313) 446-0325, jgreene@crain.com

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