Leaders from University of Michigan Health and Sparrow Health System spoke on the organizations’ new partnership at a press conference Friday, following a Thursday evening announcement surrounding the deal.
The UM Board of Regents approved the agreement at its Dec. 8 meeting after the Sparrow Health System Board of Directors did the same on Nov. 28.
“The mission, the vision and the values of the two organizations are very aligned,” CEO of Michigan Medicine Dr. Marschall Runge said.
The joining of the two health systems is a part of UM Health’s mission to expand healthcare options beyond southeast Michigan. With an $800 million investment, UM Health plans to expand clinical care services to Mid-Michigan residents. The investment will be funded through facility projects, operations and strategic investments over eight years.
“For UM Health, this is an important step toward our vision of a statewide system of highly coordinated, extraordinary care,” UM Regent Ron Weiser said.
The addition of Sparrow will make UM Health a $7 billion organization with over 200 care sites across the state. The $800 million comes from Sparrow’s own operations as well as the University of Michigan Health. The deadline for regulatory fines is the end of December.
Sparrow CEO Jim Dover clarified that the deal is not a purchase of Sparrow, but rather a membership substitution.
“What that means is as two nonprofits working together, we have commitments,” Dover said. “But it's a measure of substitutions. Two nonprofits coming together is not a purchase like you see in the for-profit world.”
Sparrow has been in rocky financial straits in recent years. In September, the company opened a $20 million emergency room in Okemos. Later that month, they confirmed they would be laying off hundreds of employees.
In November 2021, Sparrow's local branch of the Michigan Nurses Association, or the Professional Employees Council of Sparrow Hospital, authorized a strike due to stalled contract negotiations. The union eventually agreed to a new three-year contract in December 2021.
Runge reiterated the difference between a nonprofit collaboration into one organization.
“Several of us have been involved in many of these member substitutions, they really reflect a different kind of relationship, which is that we're all one.” Runge said.
To simplify, the bank accounts of the two are remaining separate. In this collaboration, the two organizations have their own assets and liabilities.
“In some cases, even within Michigan, there have been other health systems that they create a new corporation, and they will transfer their assets into that corporation,” Dover said. “That's not the case here.”
This member substitution is the same kind of relationship that UM Health has with Grand Rapids hospital UM Health West, previously known as Metro Health before their partnership began.
“We become one of the same organization, and we are able to … plan around patient needs (and) capital needs, and make it possible for people to receive the care that they need closer to home.”
The partnership will build on UM Health’s minority investment in Sparrow’s Physicians Health Plan, which provides healthcare coverage to more than 70,000 members and 300 employers across Michigan and includes a Medicare Advantage plan.
“We’re excited for patients to be able to access their [care] closer to their homes so that they don’t have to travel to sources,” Sparrow Chief of Staff Dr. Lakeeya Tucker said.
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