CHICAGO — Henry Ford Health System could spend up to $1 billion in a massive expansion plan that would include a $500 million investment in its flagship Detroit facility, the provider said this week.
A chunk of the plan would be financed with tax-exempt debt, though the overall financing remains uncertain. Henry Ford’s board still needs to approve the project.
The current plan calls for the system to spend $500 million on expansion and renovation of its existing Detroit campus and to raise another $500 million in private money to help fund construction of a 300-acre community health park in a nearby blighted area.
It’s the second time in two weeks that a health care system has announced it would consider making a major financial investment in the struggling city. On March 19, a for-profit hospital system looking to buy the nonprofit Detroit Medical Center said it planned to invest $800 million in DMC’s Detroit campus.
DMC is Michigan’s largest charity-care provider and Detroit’s largest safety-net hospital. Henry Ford is one of the largest health care providers in the region and the primary health care provider in the Detroit area, with facilities in all three metro counties, Wayne, Oakland, and Macomb.
Henry Ford officials had not planned to announce their expansion project until the board approved it, but began discussing some details after the Detroit News published a story Monday.
The two systems compete for patients, though Henry Ford attracts more patients from the suburbs and across the state. Both systems have seen a rise in uninsured patients over the last two years as the automobile industry has shed jobs and unemployment has risen across Michigan.
Pending board approval, Henry Ford’s capital project calls for a major expansion and renovation of its main Detroit campus and construction of a community health park. The health park would feature housing, retail, and commercial businesses, according to Bill Schramm, senior vice president of strategic business development.
“We’re looking at developing more of an urban university atmosphere where it’s more of a walkable campus,” he said.
The system already owns about 85% of the property needed for the project, according to local reports.
“We would be making up to a $500 million investment in new facilities as part of a campus development plan, and we thought we’d be able to leverage that money, dollar for dollar, to attract other investment,” Schramm said.
The board is not expected to consider the expansion plan before the third quarter of the year, he added.
“Each of these projects would come with its own business and financing plan,” Schramm said. “None of those details have been developed. The majority of our major capital investments have been financed with some combination of cash from reserves, debt, and philanthropy. There is no reason to expect that these projects would be any different.”
Henry Ford’s flagship hospital is the 903-bed facility in Detroit, and it also operates six other acute-care facilities, including a new hospital in the suburb of West Bloomfield, and the 560,000-member Health Alliance Plan of Michigan, one of the largest health maintenance organizations in the country.
Standard & Poor’s rates the system’s debt A. Moody’s Investors Service rates it A1. It has roughly $873 million of outstanding debt.
Meanwhile, the sale of DMC to Vanguard Health Systems of Tennessee advanced last week when Wayne County commissioners approved a plan to set up a tax-free renaissance zone around DMC. The letter of intent signed between Vanguard and DMC requires the establishment of a 100-acre tax-free zone that would allow Vanguard to avoid paying local taxes for up to 12 years. The Detroit City Council must also sign off on the renaissance zone.
The measure passed the Wayne County board 14 to 0, with one commissioner, Laura Cox, abstaining. Cox’s husband, Michigan Attorney General Mike Cox, is reviewing the plan after a group of nonprofit organizations sent him a letter last week asking him to investigate the sale. The group says that the sale could violate a state law that prohibits nonprofits from allowing their assets to be used for non-charitable purposes.