University of Michigan Health, Sparrow combine to form $7B system

The Lansing-based Sparrow Health System has officially become part of University of Michigan Health, overcoming regulatory approvals to become one of the state's largest health care systems, valued at $7 billion with 11 hospitals and 43,820 employees — 3,844 of whom are physicians.

The deal, completed Saturday, folds in Sparrow's Physicians Health Plan, which provides insurance coverage to more than 70,000 members and 300 employers in Michigan, as well as a Medicare Advantage plan.

"Today is just an absolutely historic day for us," James F. Dover, president and CEO of the Sparrow Health System, said during a Monday afternoon news conference. "We've worked so long and hard in order to prepare ourselves to be able to officially join the University of Michigan Health System. (I am) very proud of this moment, as well as what the future now offers for us."

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This deal extends the University of Michigan's reach into a larger part of the state, said Dr. Marschall S. Runge, CEO of Michigan Medicine, dean of the University of Michigan Medical School and executive vice president for medical affairs at the University of Michigan.

"This expands our long-term vision of having a statewide system of highly coordinated care so that every citizen in our combined geographies will have access to these top-line procedures ... as well as improvement of health. So we hope to create and we will create a clinical care network that builds on the strengths of both Michigan Medicine and Sparrow. ... I can't wait to see the future."

What are other details of the deal?

The Ann Arbor-based University of Michigan Health pledged to provide an $800 million investment over the next eight years in Sparrow's six hospital campuses, funding facility projects, operations and other "strategic investments."

Among them are renovations to the neonatal intensive care unit at E.W. Sparrow Hospital in Lansing and upgrades to services in cardiology, oncology, orthopedics and neuroscience.

"Within the first 100 days, we'll see expansion first in plastic surgery," Dover said. "Our goal is we want to treat complex cancer patients here, like head and neck, breast cancer, etc., as well as complicated reconstructive surgeries.

"No. 2 is anesthesia. Believe it or not, we're very short on anesthesiologists in our region. We've had trouble recruiting. We actually have a couple of ORs (operating rooms) that are shut down right now because of our lack of anesthesiology."

Will the health system get a new name?

No new name for the combined health system was announced Monday, though Dover said: "We expect there to be a brand change over time — within the next year or less.

"Both brand names are highly regarded. University of Michigan Medicine is probably the top recognized and highest-regarded brand name in health care across the entire state, based on the research I've seen in the past. Sparrow is the highest in our region. The question is how do we get the best of both worlds? So that's still being worked through."

Will I lose my Sparrow doctor?

"No patient will lose access to their current physician, except for ... normal retirement and turnover and those sorts of things," Dover said.

Will labor contracts at Sparrow Health and the University of Michigan Health continue?

"They all stay in effect. There's absolutely no change or modification whatsoever to the labor contracts" as part of the merger, said John Pirich, Sparrow Health System Board chairman.

How big will the newly merged health system's market share be?

Runge said he didn't know what percentage of Michigan's overall health care market is likely to be served by the newly combined system.

"We don't yet have an analysis of what the potential is," Runge said.

However, an analysis from the Michigan Inpatient Database compiled by the Michigan Health and Hospital Association showed that in September of 2021, Michigan Medicine had a 7.8% market share and Sparrow had a 3.2% market share. Combined, it means that the newly formed health system could serve as much as 11% of the state’s population.

Mary Masson, a spokesperson for Michigan Medicine, said she couldn't confirm Monday whether that analysis — which was published in a 2022 bond prospectus when Spectrum Health and Beaumont Health combined to form Corewell Health — remains accurate or includes hospitals under the University of Michigan Health-West umbrella.

What about hospital boards?

All of the health systems' current boards will continue, Pirich said.

"The Sparrow Health System board will ... will add two members, going from 15 to 17 members with (the University of) Michigan adding two members to that board. All of the local hospital boards also will continue to stay in existence and will continue to do the things they've always done — credentialing, safety, quality — exactly the same way." For the University of Michigan Health System Board, Pirich said he will be among three new members added.

Will the cost for patients rise because of this deal?

Runge said no.

"In some cases with megamergers, which this is not what I call a megamerger, ... there has been an increase in costs," Runge said. "Actually, we think that we can deliver care less expensively by combining our assets. And so that is certainly a goal of what we do.

"All these things do get looked at by the FTC (Federal Trade Commission) and also by the governor's office and the state legislative process. And so we've been through ... those processes."

What other Michigan health systems have merged recently?

This is the latest in a series of recent acquisitions and mergers among Michigan hospitals.

The 2022 megamerger of Beaumont and Spectrum to form the new Corewell Health created Michigan's largest health system with 22 hospitals and more than 60,000 employees.

More: Beaumont and Spectrum Health plan to merge, forming Michigan's biggest health system

Additionally, the former North Ottawa Community Health System, based in Grand Haven, was acquired in October by Trinity Health. It became Livonia-based Trinity's ninth Michigan hospital.

Correction: An earlier version of the story should have said that a 2021 analysis compiled by the Michigan Inpatient Database showed Sparrow Health System had a 3.2% market share.

Contact Kristen Shamus: kshamus@freepress.com. Follow her on Twitter @kristenshamus. Subscribe to the Free Press.

This article originally appeared on Detroit Free Press: Sparrow Health merges with U-M Health, becoming $7B system