One of the affiliation proposals included in the letter of intent signed Wednesday by Detroit-based Henry Ford Health System and Michigan State University calls for the creation of a joint operating company to oversee a new health sciences center that would undertake research, education and clinical activities.
It was the joint operating company, a third entity creation that would be governed and managed jointly with a separate budget and staff, that scuttled the proposed deal last year between Henry Ford and Wayne State University, Crain’s reported in February 2019.
Officials for Henry Ford and Michigan State said the details of the management and governance structure of the proposed health sciences center are still being worked out in the definitive agreements that are under negotiation and don’t foresee similar problems ahead with the boards closely involved.
Another option under the nonbinding 22-page letter of intent calls for the creation of a simple contractual relationship for a joint operating committee to oversee joint services and activities between Henry Ford and MSU.
If it is a joint operating company, decisions need to be made on whether it would be a tax-exempt, not-for-profit or limited liability corporation that would hold reserved powers outside the jurisdiction of the controlling entities.
The joint operating company would be governed by an unspecified number of board members made up of senior executives of both organizations. It would be led by a chair from one of the organizations who would serve alternating two year terms.
In an interview with Crain’s on Thursday, MSU President Dr. Samuel Stanley Jr. said the MSU board has approved the general concept of the letter of intent. He said the boards want to look more closely at the final language before making final decisions.
“The letter of intent says we’re going to work on these things. We’re going to explore it,” he said. “We haven’t made decisions on how this would be structured it yet.”
Dr. Norman Beauchamp Jr., MSU’s executive vice president for health sciences, said the boards of MSU and Henry Ford will be closely involved in helping decide the structure and authority of the new company or committee that would oversee the proposed health sciences center.
“The role of both of the boards of our organizations are really important,” Beauchamp said. “We want to make sure we don’t take away the important authority they have in helping us be successful.”
Stanley described the proposed affiliation, still in its early stages, as a great opportunity for MSU and Henry Ford.
“When I first came to MSU (August 2019), one of the things I looked at was how could we expand our impact in the healthcare area,” said Stanley, adding that MSU has hundreds of medical and osteopathic students serving clerkships in hospitals across the state, including Henry Ford, Detroit Medical Center and Ascension Health in metro Detroit.
“But as I looked at kind of our clinical impact and what we were doing in biomedical research, I thought there were opportunities to grow that,” said Stanley, an infectious disease specialist.
“I really set out then to try and find partners who we could work with who could help us really expand in those areas. Henry Ford, I think, is an ideal fit for that. We’re excited about the opportunity to sign this letter of intent and start working on an agreement.”
Wright Lassiter III, Henry Ford’s president and CEO, said the plan is to complete negotiations this fall of the necessary affiliation agreements, which include a master agreement, a primary academic agreement and a governance agreement.
“Partnerships with the potential for greater impact are more important than ever before,” Lassiter said in a statement. “The COVID-19 pandemic and the ongoing injustices and recent protests in cities across our nation have amplified the importance of and urgency for innovation and discovery that radically improves the health of all of the communities we serve.”
Executives said the proposed affiliation, which builds on Henry Ford and MSU’s long-term medical education and research partnership, will focus on the goals of improving access, affordability and outcomes for Michigan’s underserved populations.
“We must seek solutions to address disparities across cultural, racial and socioeconomic lines,” Stanley said in a statement. “This pandemic has demonstrated the willingness of individuals from multiple disciplines and from different organizations to unite — the time to build upon that is now.”
Project Leapfrog II?
The outline of the Henry Ford-MSU LOI is very similar to a proposal between Henry Ford and Wayne State University that was negotiated mostly during 2018.
While the Wayne State board of governors approved the LOI in September 2018, four current members of the WSU board opposed the outline of the proposed deal as it was being refined in definitive agreements. The affiliation talks collapsed in March 2019.
Last April, after it appeared the partnership was dead in the water, as WSU board member Dr. Michael Busuito, described it, Lassiter said he asked Henry Ford staff to go back to the drawing board. He wanted a comprehensive academic strategy plan for Henry Ford, similar in scope to the Project Leapfrog with Wayne State, that could help the six-hospital system launch an academic health system that could rival Michigan Medicine, the University of Michigan’s hospital, medical group and medical school enterprise.
“(I wanted Henry Ford) to accomplish the goals that we had set out in Project Leapfrog with Wayne State,” said Lassiter.
WSU President M. Roy Wilson said Tuesday that the announcement of a Henry Ford-MSU affiliation was not unexpected. He expressed regret WSU couldn’t have struck a similar deal.
“I respect and support both Wright Lassiter and President Stanley, both of whom are strong leaders and personal friends, and I have confidence they can build a health model that will be good for them and our community,” Wilson said in a statement.
“I wish we could have continued on our earlier path to becoming Henry Ford’s academic partner. I remain convinced that our proposed partnership would have been transformational, and would have benefited Wayne State, Henry Ford and the community far into the future. The good news is that we still maintain a strong partnership with Henry Ford Health System that serves our respective organizations and the people of Detroit.”
Details of the LOI
One key long-range aspect of the proposed affiliation calls for MSU faculty physicians working in metro Detroit to join the 1,900-physician Henry Ford Medical Group. Other MSU doctors could also participate in managed care contracts and other integration efforts with the Henry Ford Physician Network, the LOI said.
Beauchamp said MSU currently doesn’t have any faculty physicians practicing clinical medicine working in metro Detroit, but one of its goals would be to recruit doctors to the region with Henry Ford.
“Our practice is largely in East Lansing with Sparrow and McLaren and all those individuals belong to the MSU Healthcare team,” he said. “If we were together with Henry Ford, we would look at expanding the number of practitioners. They would join Henry Ford practice and have MSU faculty appointments. That’s the intention.”
Under the health sciences center platform, Henry Ford and MSU would to jointly undertake education and clinical activities.
The LOI calls for the HSC to establish a governance and administrative structure with joint research and clinical service commitments. It would develop multiyear financial, capital and operating plans with budgets and recruiting and hiring plans. Accountability goals and milestones would be set for the new entity.
Lassiter said none of the plans with Michigan State would interfere with any existing relationships either organization has with other partners.
“We want to do a number of things together to raise the bar for clinical research, raise the bar for talent attraction, medical and scientific talent attraction” and jointly develop research and clinical programs that help the community, Lassiter said.
Besides Henry Ford in Southeast Michigan, MSU has a variety of medical affiliations with Sparrow Health, Spectrum Health, Ascension Health and Detroit Medical Center.
Michigan State has several regional campuses across the state operated by its College of Human Medicine and the College of Osteopathic Medicine in Grand Rapids, Flint, Traverse City, Marquette and Midland.
MSU faculty physicians work at Sparrow Hospital in East Lansing and will be developing a deeper clinical relationship in the coming years with McLaren Healthcare Corp. in Lansing, especially when McLaren opens its new $450 million hospital campus on property purchased from MSU.
But Stanley said he wants to increase the size and scope of MSU Healthcare, the new name for the university’s faculty practice plan. It has 200 physicians in practically every medical specialty with strengths in radiology and obstetrics and gynecology, he said.
“There’s other areas like cardiology, where we have very few physicians. That’s one of the opportunities we are looking at (with Henry Ford) to expand the numbers of physicians that are affiliated with MSU,” he said.
“One of our goals would be to get Henry Ford of physicians and physician scientist appointments as MSU faculty to expand our interface in the clinical and translational area,” Stanley said.
New construction for medical education and research
Overseen by the proposed joint operating company or committee, the new entity also would build a new research center and a regional health campus building in Detroit to train MSU’s medical, osteopathic and nursing students and possibly students from other academic departments, including engineering and information technology, the LOI said.
Stanley said the research center building will be modeled after the Grand Rapids Innovation Center that MSU is constructing in phases over the next several years. MSU has partnered with Health Innovation Partners, a real estate development joint venture between MB Real Estate, Walsh Construction/Walsh Investors and Rockford Construction.
“We’ve done these public private partnerships where we build those buildings and then used revenue with the rentals” and generated research to pay for the building costs, Stanley said.
But he added that because of the COVID-19 pandemic, MSU and Henry Ford are fiscally challenged.
“We have had some impacts on enrollment and housing and Henry Ford has absorbed a lot of costs,” he said. “Both of us are dealing with those dollars right now. So I don’t seek major capital investments early on at this stage because I don’t think we have the resources right now.”
Lassiter said it could take up to five years for Henry Ford and MSU to develop a regional campus and the research institute, given the COVID-19 pandemic and the challenges surrounding financing projects.
Stanley said MSU has long wanted to develop a larger presence in Detroit where it draws lots of students and has many alumni. He also said the university wants to contribute to the renaissance of the city.
“We have strong connections there. We’ve done great things for rural Michigan (with education and other outreach efforts) and we’d like to be able to do more for the urban areas in Michigan as well,” Stanley said. “It fits in with our mission of extension and the land grant university.”
The new research center would be 200,000 square feet and located either on a 300-acre parcel south of Henry Ford Hospital off Grand Avenue, where a new outpatient cancer center is nearing completion, or in the Midtown area of Detroit. Wayne State’s medical school is located on the campus of Detroit Medical Center in Midtown.
Beauchamp said MSU envisions the investment for research center to be built at no cost to either partner.
“You do this by finding partners that are interested public private partnerships. Then you ask (businesses) if they want to sign a 10-year lease to be a part of it,” Beauchamp said. “If you get enough organizations to be a part of it and commit to a lease, then you go to a developer and ask them if they will build the building.”
Beauchamp said the model is compelling to potential partners. “We’ll be able to largely fund it through a public private partnership and through philanthropy,” he said.
Dr. Adnan Munkarah, Henry Ford Health System’s executive vice president and chief clinical officer, said the partnership will also enable the expansion of translational research, a major emphasis for Henry Ford that brings clinical research to practical medical care.
Henry Ford and MSU plan to engage in combined research areas that will address health inequities and disparities, social determinants of health, primary care, implementation sciences, precision health and cancer.
As one of the region’s major academic medical centers, Henry Ford receives nearly $100 million in total annual research funding, including about $41 million from the National Institutes of Health. When combined with MSU’s total research portfolio of $700 million, including $40 million on NIH funding, the combined research enterprise could total $800 million.
Currently, Michigan State is 32nd on the National Science Foundation’s top research institutions based on 2017 dollars, the last year data was available. With Henry Ford’s total research funding, Michigan State would rise to 26th, right behind the University of Florida with $801 million.
The combined research funding for a HFHS-WSU affiliation would have been about $344 million, ranking 74th. Wayne State’s total research portfolio ranked 99th in 2017 with $227 million.
“Together, we have a tremendous opportunity to think about the whole care continuum,” Munkarah said. “From accelerating the speed at which patients benefit from new discoveries to working with our health plan on innovative care models to drive down costs — we will partner with patients, families and communities across their whole health care journey, including primary care and prevention to complex specialty care and chronic disease management.”
Oncology and cancer programs have been a major growth area for Henry Ford the past several years. The partnership is expected to create a fully integrated cancer program that will combine clinical care, research and clinical trials with “substantial investments,” the LOI said.
Executives said the partnership will include efforts to achieve National Cancer Institute designation. Karmanos Cancer Institute is one of 47 U.S. comprehensive cancer centers recognized by the National Cancer Institute and the only one in metro Detroit.
Another component of the LOI calls for Henry Ford to make unspecified “academic support payments” to Michigan State.
Beauchamp said the amount of support payments hasn’t been negotiated, but it could take the form of investments in recruiting faculty or building infrastructure as opposed to monthly payments.
One of the key reasons Wayne State sought an affiliation with Henry Ford was the academic support payments to help subsidize WSU’s School of Medicine.
Over the years, academic support payments dwindled from DMC, its primary hospital partner, especially after DMC became an investor-owned hospital under Dallas-based Tenet Healthcare Corp.
“We didn’t lead with trying to figure out what those support payments would be or if they would be,” said Beauchamp, adding that the important aspect of the affiliation is working for the mutual benefit of both parties.
Henry Ford Health System is a $6.5 billion integrated health system comprised of six hospitals, a health plan, and more than 250 sites including medical centers, walk-in and urgent care clinics, pharmacy, eye care facilities and other health care retail.
Michigan State University is one of the nation’s top research universities and has affiliations with major academic hospitals in Michigan, including Detroit Medical Center and Spectrum Health in Grand Rapids. It has more than 200 programs of study in 17 degree-granting colleges.