UM acquiring Sparrow Health System: What we know

The University of Michigan's Michigan Medicine network is acquiring Lansing-based Sparrow Health System, which has had financial problems in part because of declining patient volumes and rising labor costs.

The deal is intended to improve Sparrow's health care while making Michigan Medicine a $7 billion organization with more than 200 care sites, U-M officials said.

The deal also includes Sparrow's Physicians Health Plan, which U-M had a minority interest in. The health plan provides health care coverage and a Medicare Advantage plan to more than 300 employers and 70,000 members in Michigan.

Here's what we know about the deal:

When did this happen?

Sparrow Health System's Board of Directors approved the agreement Nov. 28. The University of Michigan Board of Regents approved the agreement Thursday.

U-M President Santa Ono pointed out that an affiliation agreement signed by the two organizations in 2019 for pediatric services paved the way for ongoing collaboration.

When does the agreement take effect?

The deal is expected to be completed in the "first half" of 2023, pending regulatory approvals.

Is this another chapter in the UM/MSU rivalry?

Yes and no. Locally, Sparrow has been competing with McLaren Greater Lansing for years for patients, nurses, doctors and in other ways. Go Green, Go Blue fervor may heighten for Greater Lansing, since McLaren Greater Lansing Hospital is a teaching facility that opened in March with affiliations with MSU's medical colleges. Sparrow officials said Friday they will retain their faculty training agreements with MSU through 2027.

How do they stack up?

In addition to its main campus in downtown Lansing, Sparrow operates the St. Lawrence campus, and hospitals in Charlotte, St. Johns, Ionia and Carson City.

According to Sparrow's website, "Sparrow provides patient-centered care at practices across the region. With 526 providers, Sparrow Medical Group is mid-Michigan’s largest care network."

Officials also noted there are 4,000 babies delivered each year at Sparrow, and 90,000 urgent care and walk-in care visits. Sparrow has a Level One trauma center in Lansing and is the ninth-largest health system in Michigan.

Michigan Medicine is one of the largest hospitals in Michigan and a premier academic medical center that includes the U-M Health System, U-M's Medical School and its U-M Medical Group practice. The university has one of the nation’s largest biomedical research communities

In the present fiscal year, it claimed 1,107 licensed beds, participation in 2.6 million patient care visits and 111,247 emergency department visits, with about 30 campuses across Michigan.

What propelled this agreement?

U-M President Santa Ono pointed out that an affiliation agreement signed by the two organizations in 2019 for pediatric services paved the way for ongoing collaboration. Officials from both organizations said that relationship and their mutual pursuit of increased quality of care sealed the deal. On Friday, they said it will mean expanded access to clinical care, including specialty and complex care that patients would previously have needed to travel for.

What does that mean in terms of accessible care?

James Dover, president and CEO of Sparrow Health, has said patients won’t see any immediate changes. The first areas of focus are supposed to be cardiology, orthopedics and neurosciences.

Officials foresee a future in which patients receive initial consultations in Ann Arbor, but are then able to stay in Lansing for the specialized care currently available only on U-M’s campus.

“When your loved one’s in the hospital and you have to travel two hours to get there, or an hour or whatever it is, that's not good for their care,” Marschall Runge, Michigan Medicine's CEO, said Friday. “Having their family there is good for their care.”

Dover said patients at Sparrow’s current sites of care won’t see any immediate changes. Over time, he expects them to see “the enhancement of special services becoming more available here locally.”

What is Michigan Medicine promising?

U-M officials said they want to invest $800 million in Sparrow, funded in part by facility projects, operations and other strategic investments over the next eight years.

Sparrow has been in the midst of a six-year, $800-million investment plan that included a September debut of a 12,000-square-foot Sparrow Emergency Center Okemos. Dover said those plans will be reviewed with U-M and priorities will be set.

Weeks after conducting a ceremony for its opening, at which officials promised improved patient care and a greater presence because of the new location, Sparrow announced plans to layoff hundreds of employees.

Sparrow Spokesperson Corey Alexander said then that the health system had suffered a net loss of $90 million in the first six months of 2022 as supplies, salaries, wages and benefits rose, but patient volumes declined and "cost of contracting agency labor has skyrocketed."

Can we call this a merger?

No.

Sparrow Health System and Michigan Medicine will remain separate corporate entities, officials have said. Instead of a purchase, the two nonprofits will be combining in what is called a “member substitution.”

The two organizations' liabilities and assets would remain separate.

What are employees saying?

The executive committee of the Professional Employee Council of Sparrow Hospital - Michigan Nurses Association represents employees in more than 50 job classifications, including nurses, therapists and laboratory scientists.

"We learned of the agreement with Michigan Medicine (Thursday) evening and will be seeking more information,” the union said in a statement. “We are hopeful that this will lead to a renewed investment in front-line patient care that will benefit nurses, healthcare professionals, and our community."

This article originally appeared on Lansing State Journal: UM acquiring Sparrow Health System: What we know