The affiliation that could have been

While it is unclear what Wayne State's response will be to Henry Ford's decision to halt negotiations, sources tell Crain's that the WSU board should quickly issue a statement of unity, recommit to restarting talks with Henry Ford and hope Henry Ford isn't so turned off that it will agree.

Other sources, who also asked for anonymity, said they believe Henry Ford has lost patience with the Wayne State's board and doesn't trust restarting affiliation talks would lead to a different outcome among those three or four members opposed to a deal.

Most agree, however, that the inevitable alternative for Wayne State going alone is that its medical school will continue to struggle, recruiting a new dean and replacing lost faculty over the years will become even more difficult, and the university will be required to continue financial subsidies, draining money from other projects.

Wayne State and Henry Ford officials have declined further comment.

But last September when a letter of intent to affiliate was announced, both sides called a potential final agreement "transformational," one that could lead to benefits on each sides and bolster both organizations' national standing.

Lassiter explained in his statement to employees last week that the agreement could have had "a transformational impact on the health of our communities, as well as the economic success and national recognition for our region." He said that substantial progress was being made on the talks, but this was before four objecting board members halted them in February.

Then, 10 days ago at a board meeting the three WSU board members — Michael Busuito, M.D.; Sandra Hughes O'Brien; and Dana Thompson — read statements that publicly blasted Wilson's handling of the affiliation talks. Thompson called Wilson "unfit to serve as president."

New board member Anil Kumar, M.D., has sided with the three objecting board members. That split the board as the other four members support Wilson and efforts to complete talks with Henry Ford. A final agreement was projected to be completed by March 31.

The proposed affiliation agreement was called "Leapfrog," as it was intended to create a powerhouse academic health center that would exceed eight-hospital Beaumont Health in scope and rival the University of Michigan Health System.

The WSU board approved the preliminary agreement in two 8-0 votes last year.

Here are highlights of the proposed affiliation, according to a Crain's analysis.

Create $2 billion enterprise over 30 years through a limited liability corporation and other agreements between the partners. During the first five years, the partnership could generate annual revenue of $50 million to $250 million.

Boost clinical service revenue, expand educational opportunities for students, increase research funding and innovative breakthroughs and expand access to care to Detroit's inner city population and specialty care throughout Michigan and the immediate Midwest region.

Study creation of a new academic health science center and public health school that would open up new training opportunities for students. Each partner would initially invest $10 million to fund the health science center and another $1 million each to explore the feasibility of the new public health school.

A proposed Henry Ford-Wayne State health sciences center LLC would oversee at least three clinical and research institutes, enable joint recruiting of preeminent physicians and scientists, provide capital for buildings, establish a cancer consortium with Barbara Ann Karmanos Cancer Institute and create a combined research enterprise committed to reducing health disparities and expanding chronic disease treatments.

Henry Ford would become the primary teaching hospital system for the WSU medical school, replacing DMC. Wayne State medical students would increase at Henry Ford from about 105 now to 125 in 2019 and 150 in 2022.

Henry Ford Medical Group would offer employment opportunities to any WSU medical or health professional who qualifies.

WSU and HFHS would recruit more than 100 more clinical and research faculty to build and expand the partnership, doubling current research portfolio to more than $700 million over the next 10 years.

Henry Ford would also make an estimated $10 million to $20 million in annual payments to Wayne State for branding and rights, primary institution affiliate payments, academic support and shared incentive payments. The payments had yet to be negotiated, but they were intended to help make up for reduced payments from DMC over the years.

Wayne State would explore creating a multi-facility cancer consortium with Henry Ford Cancer Institute, the Barbara Ann Karmanos Cancer Institute and the federally funded Perinatal Research Branch, which is on the DMC campus and managed by Wayne State.

Officials insist the agreement was never intended to be a merger. Each organization would retain autonomy and control over their institutions. Employees of each organization would remain with their current employers, and governance would remain separate.

But by closely aligning research, certain clinical service line planning and investment decisions, both institutions would benefit well into the future, Henry Ford and WSU executives had said.

However, it is not clear what options Wayne State has left.

Besides belt-tightening, sources told Crain's that one short-term strategy could be for Wayne State to ask the state of Michigan for permission to use an additional amount of the $10 million it is paid in enhanced Medicaid funds to rebuild parts of its delivery system that takes care of Medicaid and indigent patients.

The bulk of the funding, estimated at 90 percent to 95 percent, goes to faculty doctors who treat Medicaid patients. Wayne State receives a small administrative fee to cover costs but also a small amount is allowed by the state to develop strategies to expand access to care for Medicaid patients.

But the problem is that Wayne State is in danger of losing the $10 million to Central Michigan University, which has applied to the state Department of Health and Human Services, to manage the funds as the designated public entity, on behalf of University Pediatricians, a private group affiliated with DMC. No decision has been made yet and Wayne State and Central are both lobbying the state.

Meanwhile, Henry Ford has a backup plan without Wayne State. Its ongoing strategic plan calls for further building out its outpatient medical center network, further expanding its oncology, neurology and heart programs to make them destination programs for patients living in the Midwest and using its employed medical group and health plan to negotiate direct contracts with employers.

Officials have told Crain's that Henry Ford will continue to wring out unnecessary costs, increase efficiencies and work on quality initiatives to improve patient care.

Although Henry Ford's net income in 2018 dropped by 42 percent, net patient revenue grew by 9 percent and quality improvement and cost-reduction efforts are paying off, said CFO Robin Damschroder of Henry Ford.