CHICAGO — Detroit-area hospitals plan to spend up to $1.3 billion on capital projects over the next several years in the hopes of creating a medical industry to help replace the city’s vanishing manufacturing base, according to a new report.
The bulk of the spending would come from the city’s two main health care providers, the Detroit Medical Center and the Henry Ford Health System. Nearly all the funding would be spent on facilities located in the city itself.
It’s part of an effort to make Detroit a medical destination that attracts patients from across the country, giving the city a boost similar to what Cleveland receives from the prestigious Cleveland Clinic, said Alwyn Cassil, director of public affairs for the Center for Studying Health System Change, which wrote “Detroit: Motor City to Medical Mecca?”
The report, written after interviews with dozens of Detroit-area hospital managers, was funded by the big three automakers.
“There is this belief that if they can create a medical destination and draw patients from outside the area, it can become an economic engine and create good-paying jobs,” Cassil said. “There’s nothing in Detroit that has [the Cleveland Clinic’s] kind of drawing power, and their vision is to create something like that.”
The ambitious capital programs could end up increasing health costs for local patients if the systems cannot significantly widen their patient bases, Cassil said.
“There’s going to be a lot of infrastructure to deliver health care in Detroit, and if they end up relying on the existing patient base, which is declining, it’s not hard to imagine that’s going to add costs to the system,” he said.
It’s an important time for the Detroit health care industry. In March, for-profit Vanguard Health Systems Inc. announced its intent to acquire DMC, Michigan’s largest charity-care provider and Detroit’s largest safety-net hospital, for $1.5 billion. Vanguard agreed as part of the deal to spend $850 million on capital projects in the city, where all but one of DMC’s facilities are located.
Officials from the city and Wayne and Oakland counties agreed to create a tax-free zone around the eight-hospital campus, exempting Vanguard from most city, county, and state taxes for 12 years.
The deal still awaits approval from state Attorney General Mike Cox, who is expected to announce his decision by Oct. 1, a spokesman said.
The Henry Ford system in April announced plans to spend up to $1 billion in a massive expansion plan that would include a $500 million investment in its flagship Detroit facility. Tax-exempt debt would likely finance some of the plan.
Most Detroit-area health care systems have expanded their presence in the suburbs over the last 10 years to capture more private-payer patients, and shrunk their inner-city services, the report said.
But that could change over the next decade if Vanguard and Henry Ford follow through on their capital plans.
“For the folks at DMC, it was probably do the deal or die,” Cassil said. “But the only way it’s going to work for the community is if they can attract people from outside the area. Otherwise, there will be nobody to pay the bills.”