Detroit Medical Center announces potential sale to Tenn.-based Vanguard Health Systems
By David Runk, APFriday, March 19, 2010
DMC: Potential sale to Vanguard Health Systems
DETROIT — The Detroit Medical Center said Friday it has signed a letter of intent that opens the door for it to be purchased by a private Nashville, Tenn.-based health system.
The nonprofit Detroit health system announced the deal with Vanguard Health Systems in a statement. Terms of the deal include Vanguard agreeing to make $850 million in capital improvements during the next five years.
Mike Duggan, the DMC’s president and chief executive, said the deal will allow the hospitals to maintain their commitments to charitable care and medical education while boosting investment in the company’s facilities. Despite six years of profitability, the DMC was unable to get investment from the Wall Street bond market as a nonprofit, he said.
“The nonprofit hospital model is killing health care in the city of Detroit,” Duggan said at a news conference at the Children’s Hospital of Michigan.
Under terms of the letter, Vanguard will buy Detroit Medical Center’s assets for a price that includes $417 million to retire all outstanding DMC bonds and other long-term debts. Vanguard also assumes all other DMC liabilities.
The final purchase price has not been disclosed.
Capital projects Vanguard has agreed to include a new Children’s Hospital tower and expansion and improvements to several other facilities. The hospitals also said that Vanguard has committed to keep all hospitals open and maintain DMC’s charity care policy for 10 years.
The hospitals will be owned by a Vanguard subsidiary known as VHS Michigan and will continue to operate under the Detroit Medical Center name.
Trip Pilgrim, Vanguard’s chief development officer and senior vice president, said the company was impressed by the DMC’s profitability, given the difficult economic climate in the Detroit area. He also said the work of DMC’s management team, which will remain in place after the sale, was key.
“We know that this industry is challenged. We want to find ways to be successful,” Pilgrim said.
DMC board chairman Stephen R. D’Arcy, Mayor Dave Bing, Wayne County Executive Robert Ficano and DMC board member Roger Penske also attended the news conference.
The DMC operates eight hospitals and is affiliated with the Wayne State University School of Medicine and the Barbara Ann Karmanos Cancer Institute. Vanguard operates 15 hospitals in Illinois, Arizona, Texas and Massachusetts.
The letter of intent is contingent upon the approval of a low-tax or tax-free “renaissance zone” approved by the city, county and state for DMC’s central campus. The agreement also must be approved by the two health systems’ boards and the state attorney general.
