Health systems to pool resources for growth as one of Summit County's biggest employers agrees to become part of suburban Detroit company.

A Michigan health system is acquiring Summa Health, Akron’s largest hospital system and one of Summit County’s biggest employers.

Summa has agreed to become part of suburban Detroit-based Beaumont Health.

Beaumont Health is Michigan’s largest health-care system, based on inpatient admissions and net patient revenue. It has annual revenues of $4.7 billion, eight hospitals and 38,000 employees.

A letter of intent has been signed for Akron-based Summa — with its $1.4 billion in revenues and 7,000 employees — to become a wholly owned subsidiary of the Southfield, Michigan, hospital system. Both health systems are not-for-profit organizations.

The announcement was made to employees Tuesday morning. The organizations anticipate finalizing the partnership by the end of the year, after due diligence and approval from regulatory agencies.

Summa Health will maintain local leadership, including a local board and current President and CEO Dr. Cliff Deveny. The Summa name also will stay.

Since October, Summa has been looking for a potential partner or opportunity to help Summa grow while maintaining local control, Deveny said in an interview Tuesday at Summa Akron City Hospital with Beaumont CEO John Fox.

“This was really about how to give Summa the opportunity to grow as an organization and expand our footprint,” Deveny said.

“With the headwinds of health-care change that are going on — reimbursement changes, competition and expenses — we knew that cutting our way to sustainability wasn’t something we wanted to do and we’d already gone through that. The board was really focused on how to expand as an organization.”

No money will be exchanged between Summa and Beaumont, Deveny said, but the organizations will pool their resources and buy out Summa’s minority partner, Mercy Health, which merged last year with Maryland-based Bon Secours.

It is important to retain "a community-based health care organization that provides Akron residents, of all income levels, with quality and affordable care," Akron Mayor Dan Horrigan said. "Through this relationship with Beaumont Health, I am encouraged by the decision to retain the Summa name while expanding services in the community. I look forward to continuing to work with Dr. Deveny and the local leadership to make progress on issues that affect our residents including infant mortality, addiction, access to affordable care and emergency services.”

Summit County Executive Ilene Shapiro said as Summa has been "a pillar of the Summit County community for decades," the community has a vested interest in the organization's success.

"I encourage residents and patients to continue their support of this fine institution as Beaumont Health partners its services. Dr. Cliff Deveny has shown steadfast leadership in this process and I thank him for his commitment to our community," Shapiro said.

Akron Children's Hospital, which operates Summa's Neonatal Intensive Care Unit at Akron City Hospital, "believes in the value of collaboration and has long-standing, close ties with the adult health systems in the region,” President and CEO Grace Wakulchik said. “We view Summa’s announcement as positive. Beaumont Health is a well-respected health system from a neighboring state. It’s an exciting time at Summa — with a new medical tower — and we look forward to continuing our partnership with Dr. Deveny and his team on our NICU and other projects.”

Seeking a partner

The Summa acquisition is Beaumont’s first since the health system was formed by bringing together three organizations in 2014, Fox said.

“We were looking for a partner who had strong growth opportunities, was financially healthy — which Summa is — and was really looking at the future and to frankly make sure that Summa Health and what it does here locally is optimized in the future,” he said.

Beaumont does not have a health insurance arm and SummaCare was a strong key, Fox said.

SummaCare will look to expand in its markets in northern Ohio, Deveny said. There are no immediate plans to bring the insurer into the Michigan market.

Summa also will look for other growth opportunities within Ohio, both Fox and Deveny said.

“There’s a lot of unmet needs,” Deveny said. “When you look around certain services like behavioral health services and women's services which have been closed down, there are opportunities to meet those needs.

“We still have a lot of people who leave this community to go to Cleveland, Columbus and Pittsburgh for services,” he said. “With Beaumont’s partnership, we have the ability to fill those gaps. That’s the key right now. What are the local needs that need to be met?"

Any expansion would be under the Summa name because “the Summa brand is recognized here locally. The Beaumont name is not,” Fox said.

Deveny said Summa will have "local decision making on clinical services, unlike other models we've seen. The board here will be accountable for operations, performance and meeting community need. Where Beaumont parent will have super-majority rights is if we sell assets, our budget, naming of the CEO and if we're going to acquire anything or spend over a certain amount."

"We have control over the operations here and what we choose to do. Obviously, they'll let us do that as long as we are successful," Deveny said. "This is exactly what the board was looking for."

The move positions Michigan’s biggest health system in the highly competitive Northeast Ohio market, where health care giant Cleveland Clinic and University Hospitals dominate. The Cleveland Clinic owns Summa’s cross-town rival, Akron General.

Room to grow

Fox said Summa has done well with competition, which will continue.

“I think there’s plenty of growth opportunity here. We’re going to have good, healthy competition here. We’re going to have good healthy competition in Michigan,” he said. “I don’t think it’s bad and if we’re doing well, in terms of taking care of patients and families with quality service and staying affordable, we’ll continue to do well.”

In its search, Deveny said the health system looked at “literally everybody within the region and large health systems within 200 to 300 miles.”

Beaumont was not on the radar for many industry watchers theorizing about Summa's potential new partner. Many thought other systems such as UPMC, based in Pittsburgh, or University Hospitals, MetroHealth or Cleveland Clinic might be strong suitors.

But Tom Campanella, director of the health care MBA program and a professor of health economics at Baldwin Wallace University, said having an out-of-state parent company without a presence in the state is probably the best scenario for Summa.

Beaumont's star in Ohio will be Summa, with additional growth opportunities, he said. From Summa's perspective, "if it was somebody already in the area, they would be playing second fiddle."

Summa's health system includes Akron City, Barberton and St. Thomas hospitals, SummaCare insurance, standalone emergency departments and outpatient and physician offices.

Summa is still recovering from a rough 2017. It went into a financial free-fall after an abrupt switch of its longtime emergency medicine physician group on New Year's Day 2017.

Then-CEO Dr. Thomas Malone resigned weeks after hundreds of doctors voted no confidence in his leadership. A national accrediting agency ultimately revoked the hospital's ability to train resident emergency department doctors because of numerous deficiencies following the staffing switch.

Summa has been turning its financial numbers around. Through May 2019, Summa has generated operating income of $9 million. Fiscal year 2018 ended with operating income of $24 million — a $52 million turnaround from fiscal year 2017. Summa's creditworthiness was also upgraded in November by Moody's Investor Services to "stable" from "negative" a year earlier. Moody's cited Summa's significant operating improvement achieved in 2018, strong liquidity and cash reserves, leading market position and ongoing growth strategies.

But challenges remain. The emergency medicine residency program application to restart was denied in September by the Accreditation Council on Graduate Medical Education. Summa has declined to release the reasons and has said it is still the health system’s goal to have residents again in 2020. Summa confirmed recently that it has reapplied a second time and is awaiting a decision in the fall.

In June 2017 as Deveny was cutting hundreds of jobs and facing a $60 million loss, he warned employees and the community that unless the health system could right itself, "I can assure you the name on our badges will no longer say Summa Health, our employees at all levels of the organization and our community will see unprecedented change, and our independent physicians will be faced with the reality of what it means to practice in a community that no longer has an independent, local option for them."

Deveny on Tuesday said Summa was able to right itself and find the right partner to maintain Summa’s name and local control.

Fox said he did not see the challenges Summa faced as negatives.

“More important is how they managed their way through it and did it so successfully. We’re all going to hit air pockets of turbulence.”

Beacon Journal consumer columnist and medical reporter Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@thebeaconjournal.com. Follow her @blinfisherABJ on Twitter or www.facebook.com/BettyLinFisherABJ and see all her stories at www.ohio.com/topics/linfisher