A Well-Thought Out Strategic Focus Brings Two Michigan Health Systems to the Bargaining Table

A key leadership lesson can be found in the proposed integration of two Michigan health systems: The need for a disciplined strategic planning process.

As the CEO of a financially strong health system with a sound credit rating, Rick Breon of Spectrum Health is not surprised when he is approached by financially stressed organizations looking to benefit from a business arrangement with a stronger partner.

What does impress Breon are those occasional inquiries from organizations like Northern Michigan Regional Health System (NMRHS) that stress a strong strategic rationale for joining or becoming part of Spectrum Health.

It’s Mission, Not Money

“One of the obvious questions we always ask is, ‘Why are they seeking us out? What are they looking to do?’” says Breon.

“NMRHS has an answer that is very impressive, he says. “It is not just, ‘We want your money,’ They came from a much more strategic perspective in which they have analyzed what they need to do, and where they need to be going forward, and strongly felt they needed to partner with someone going forward.”

“In my thirty-five years in this business, I find about 5 to 6 percent of organizations want to integrate in that way,” says Breon. “The rest of them will integrate if they want access to money.”

Aiming Larger

NMRHS first envisioned joining a larger health system about three years ago, says Tom Mroczkowski, president and CEO. Around that time, leaders and board members committed to turning NMRHS into a first-class organization and adopted a balanced-scorecard strategic management approach to achieve that goal.

“We were looking ahead and looking at the research data, and it seemed clear that very large health systems have the capability of delivering the best health care and achieving quality, financial, and other successes,” says Mroczkowski.

“NMRHS is doing fine financially, and there is nothing to indicate that we would not be doing fine in the future. But we believe we can do better and provide higher quality patient care by becoming part of a fully-integrated health system. When we look down the road, we envision creating the health care of the future.”

Begin with the Basics

The proposed NMRHS-Spectrum Health deal is currently in due diligence. If it all plays out as planned, NMRHS will eventually convert to a membership corporation with Spectrum as the sole member. This form of integration enables NMRHS’ board to remain in place and ensures local decision-making oversight. (Spectrum and NMRHS are about three hours apart.)

Any major partnership like this must begin with the basics, says Mroczkowski. “You really need to understand your organization, your market, and whether your organization can achieve what it needs to achieve.”

Read the full NMRHS-Spectrum Health story on HFMA’s Healthcare Financial Pulse web site—in addition to other case studies related to leadership and planning.