The Detroit Medical Center’s owners met all of their community commitments except one under an agreement that accompanied the medical system’s transition to for-profit ownership, an oversight board said in a final report to the state this week.
The DMC Legacy Board, formed as part of a 10-year agreement reached as part of the health system’s sale to Vanguard Health System Inc. a decade ago, reported to the Michigan Attorney General’s Office that it was unable to monitor the quality of care at the health system, which has been owned by Tenet Healthcare since 2013. Tenet inherited the community commitments agreement when it bought Vanguard.
“All of the covenants that we were monitoring were achieved except for one,” Legacy Board chairman Richard Widgren told The Detroit News. “The one they fell short on was related to reporting.
“We had some concerns on whether there was cost-cutting in staffing such that services were not at the level that we would expect them to be,” Widgren said. “We believe that the metrics we were asking for information on were indicators of whether or not the level of services and quality was being maintained.”
In response to a request for comment, the DMC said in a statement that the hospital system faced the most challenging time in its history in the early 2000s, and only a $50 million grant from the state helped it avoid bankruptcy.
Though the health system made financial improvements over the following five years, it wasn’t able to generate enough income to fund “desperately needed” major capital improvements needed to become competitive. By the end of 2009, the DMC’s net working capital was a negative $45 million.
According to the DMC, the health system’s for-profit owners paid out $391 million to retire DMC bonds, and assumed approximately $335 million in unfunded employee pension and physician medical malpractice liabilities.
“The DMC has not only met but in many cases exceeded the commitments made to Legacy Board and the people of our region and the state,” the health system said in its statement.
As part of the purchase agreement, the DMC promised to invest millions in capital improvements to the health system’s eight hospitals and continue the hospital system’s historic commitments to teaching, research and health care for Detroit’s indigent and low-income residents — obligations the DMC fulfilled over the past decade, the board said in this week’s report.
Now that the purchase agreement has concluded, Tenet/DMC is no longer legally obligated to invest in its facilities, or continue its commitments to research, medical education or charity care, the board noted. Tenet/DMC is also free to sell the DMC or any of its hospitals.
“We encourage state and local governments to essentially pick up where we left off in working with DMC management to ensure health care will continue to indigent Detroiters and those who fall through the Medicaid and Affordable Care Act cracks,” Widgren said in a press release.
The health system agreed to continue providing charity care to the indigent during negotiations late last year. Those discussions were facilitated by Troy-based The Quantum Group and Steve D’Arcy, a former chairman of the DMC during its time as a nonprofit health system.
“For more than 150 years the Detroit Medical Center has been a part of the fabric of the Detroit community,” the DMC said Thursday in a statement sent to The Detroit News.
“While the Legacy Board’s oversight is ending, the DMC remains committed to the communities we serve and staying true to our mission of providing the highest quality, most compassionate and safest health care people expect and deserve.”
In its report this week, the Legacy Board expressed concerns about whether the health system will continue to invest in its facilities and historic commitments now that the oversight board has dissolved.
The health system and Wayne State University nearly severed their 100-year partnership two years ago, and the DMC has aligned with Central Michigan University as an academic partner.
“It’s a shame that … Wayne State and the DMC aren’t strongly intertwined with each other as they were at one time,” Widgren, the Legacy Board chair, said in an interview with The Detroit News.
“It would be great if there were a way to make those two (institutions) come together and work more closely together … .”
One of the board’s concerns, Widgren said, is whether Tenet/DMC will continue its commitment to being the safety net health system in Detroit if the health system faces financial challenges. Since the purchase agreement has expired, there’s nothing to prevent Tenet from selling the DMC or any of its hospitals.
“With us gone, and if they have change of circumstances, their commitment to (indigent care) is something I think the community needs to make sure is not lost,” Widgren said.
“It would do the community well — the community being defined as perhaps the state of Michigan, city of Detroit and Wayne County — to define what the safety net is and how hospitals in the area are going to … address that safety net issue.”
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