Legacy DMC, the nonprofit board created to monitor the sales agreement with the owner of Detroit Medical Center, has triggered a clause in the 2010 contract that requires six-hospital DMC to negotiate a new charity and indigent care agreement.
The original 10-year agreement, which was part of the sale of nonprofit DMC to for-profit Vanguard Health System Inc., a Nashville-based hospital chain, expires Dec. 31. All 20 restrictive covenants, including the charity care agreement, also expire. Vanguard was sold to Dallas-based Tenet Healthcare Corp. in 2013.
The agreement’s covenants prohibit Tenet from selling or closing DMC’s hospitals or closing core clinical services, and requires it to maintain a strong commitment to teaching and research missions and continue DMC’s historic charity care and indigent policies.
“It is essential that DMC continue their commitment to maintain a patient friendly approach to indigent and low-income care across the metro area and we look forward to seeing the new and innovative ways they seek to improve upon that care as a result of these negotiations,” Michigan Attorney General Dana Nessel said in a statement.
The DMC said it intends to “continue to stay true to our mission.”
“The Detroit Medical Center is proud of its historical and ongoing commitment to the Detroit community, including to those in need,” DMC Chief Executive Officer Audrey Gregory said in a statement. “Over the last 10 years, the DMC has transformed from a struggling institution to being a stable pillar of health care in our community. This has happened with a more generous charity and uncompensated care policy than existed before the DMC became a private entity. The current policy was selected by the combination of the Legacy Board and the DMC working together. The Legacy Board’s monitoring has confirmed that we have fully and continually met our obligations under that policy. We look forward to working with the Legacy Board, at their request as they wrap up their oversight period, to consider an appropriate policy for the future.”
Stephen D’Arcy, former board chairman of DMC, has been appointed to oversee negotiations with Tenet DMC and request input from city, county, state and community health care leaders.
“The safety net for charity care long provided by DMC’s hospitals has proven essential for our residents” Richard Widgren, chairman of Legacy DMC, said in a statement. “We appreciate that the attorney general shares our view that this should be a priority for the DMC beyond Legacy’s term of oversight and look forward to Steve D’Arcy’s leadership and knowledge, as he steps forward to work with Tenet and the DMC on this effort.”
Legacy DMC was an independent organization created in 2011 to monitor certain operational aspects of DMC and annually report to the state attorney general.
Over the several years, Crain’s has reported that DMC’s charity care and bad debt expenses have dropped from about $100 million annually to less than $40 million, mostly due to the Affordable Care Act, which enabled more patients to enroll in Medicaid.
In June, Legacy’s annual report concluded that Tenet has complied with the majority of the sales agreement. Concerns, however, included the amount of research spending, continuing layoffs and diminished investments into facilities, property and equipment.
DMC told Crain’s that it has spent more than $850 million in capital improvements, continued to invest in health care services and clinical research, maintained an extensive supplier diversity program and enhanced graduate medical education programs.
The Legacy DMC report also expressed concern that DMC might be sold sometime in the near future “in light of Tenet’s recent sales of urban hospital systems.”
Crain’s has reported previously that McLaren Health Care Corp. in Grand Blanc, Wayne State University and Henry Ford Health System or a consortium of nonprofit health systems have discussed acquiring DMC or parts of it if and when it becomes available. But some of same sources now say it is unlikely Tenet can garner what had been a projected $1.5 billion to $2 billion price for DMC over the next several years because of the COVID-19 pandemic.