Following Midland-based MyMichigan's acquisition of St. Louis-based Ascension Michigan locations in Standish, Tawas and Saginaw, MyMichigan CFO Mike Rose told Becker's the driving force behind the purchase was to produce efficiencies both administratively and clinically.
The acquisition included Saginaw-based Ascension St. Mary's, which is now MyMichigan Medical Center Saginaw; Saginaw-based Ascension St. Mary's Towne Center, now MyMichigan Medical Center Towne Centre; Standish-based Ascension St. Mary's, now MyMichigan Medical Center Standish; Tawas City-based Ascension St. Joseph, now MyMichigan Medical Center Tawas; and the related Ascension Medical Group care sites and physician practices.
Given that most of MyMichigan's markets are rural, Mr. Rose said the facility purchases will help MyMichigan see more downstream referrals.
"MyMichigan has invested heavily in surgical oncology specialties, including colorectal, breast, endocrine and thoracic," he said. "We need more covered lives for these programs to achieve full scale. These adjacent markets represent a 40% increase in our service area population."
While MyMichigan now comprises 13 owned and affiliated hospitals with around $2 billion in annual revenue, one of the challenges in taking on the Ascension facilities was the significant financial duress they saw over the last few years.
"My understanding is these facilities have been operating at losses for a number of years," Mr. Rose said. "That obviously was of concern as we were contemplating this transaction, but as we dug into due diligence, we felt like there was a path of two to three years to return these facilities to profitability."
Mr. Rose said that MyMichigan recognizes that the acquisition will put pressure on its margins over the next few years, but that it will be worth it in the long run.
The system has also mapped out a recovery plan for the facilities as well.
"We looked at the level of overhead within our organization versus what was being allocated in these facilities, and we think we can bring significant administrative savings."
Following the acquisition, Mr. Rose said that MyMichigan does not have any imminent plans for additional growth, but that the health system generally looks for clinical synergies when evaluating potential opportunities.
Apart from mergers and acquisitions, Mr. Rose pointed to the labor market and physician labor market being a significant challenge across the healthcare industry.
Coming out of COVID-19, MyMichigan significantly increased its use of agency contracts. While the health system has since seen around a two-thirds reduction from its peak use of contracts, it's still not out of the woods yet.
"We still have lingering agency utilization, which is significantly more expensive than our internal costs right now running probably two times our internal costs," Mr. Rose said.
The system has also seen an increase in the use of contract physicians.
"We've seen certain key specialties where we've had some attrition, and it's been very difficult to recruit," he said. "We've had to rely on local physicians to ensure that we've got adequate coverage that's become more prevalent and more expensive over the last three or four years."
To combat this, Mr. Rose said MyMichigan has heavily relied on partnerships with local colleges and universities to help grow the pipeline, particularly for nursing, lab technicians and medical assistance candidates down the line.
"We've been partnering with just about every local educational institution."