Henry Ford Health System

One Ford Place
Detroit, Michigan 48202
U.S.A.
Telephone: (313) 876-8700
Toll Free: (800) 436-7936
Fax: (313) 876-9243
Web site: http://www.henryford.com

Nonprofit Corporation
Incorporated: 1915 as Henry Ford Hospital
Employees: 14,900
Sales: $3.05 billion (2005)
NAIC: 622110 General Medical and Surgical Hospitals; 621491 HMO Medical Centers; 524114 Direct Health and Medical Insurance Carriers

Henry Ford Health System is the second largest health-care provider in the Detroit, Michigan, metro area. The company owns and operates four acute-care hospitals with a fifth under construction as of 2006, and also holds stakes in five other hospitals through two joint ventures. The company also operates two nursing homes and more than two dozen clinics, and owns health maintenance organization Health Alliance Plan. The latter, which accounts for more than half of the firm's revenues, provides coverage for more than 570,000 clients.

EARLY YEARS

The roots of Henry Ford Health System date to 1915, when the 48-bed Henry Ford Hospital was opened in Detroit, Michigan. Financed and built by the founder of the Ford Motor Company, it was located on a 20-acre campus that also included a surgical pavilion and a research lab, as well as power plant, garage, laundry, and kitchen facilities. Many of its physicians had been recruited from the prestigious Johns Hopkins University. Unlike most hospitals, they were paid salaries and formed a closed staff, with outside doctors not allowed privileges to practice. The hospital was also one of the first to ban smoking (because of Ford's personal belief that it was unhealthy), to feature private or semiprivate rooms instead of large open wards, and to use a standardized schedule of fees for services.

Less than two years after its October 1915 opening, Ford began construction of a new, larger patient building, but the still-unfinished structure was turned over to the U.S. government during World War I for use as an army hospital. At the end of hostilities construction resumed, and in 1921 the new 50,000-square-foot, 500-bed building was opened. In 1923 a psychiatric care unit was added, and two years later the Henry Ford Hospital School of Nursing began operations, with students housed in the 300-room Clara Ford Nurses' Home.

In addition to caring for patients, doctors on the hospital's staff performed research to develop new treatments and improve public health. In 1940 Dr. Conrad Lam was the first U.S. physician to treat clotted veins with purified heparin, and in 1942 and 1943 the hospital was designated a trial site for the new "wonder drug" penicillin. In 1947 the Edsel B. Ford Institute for Medical Research was founded to formally coordinate the hospital's research activities.

In the decade after World War II, patient load outgrew capacity, and in 1955 a new 17-story building was added that included 14 outpatient specialty clinics, 20 operating rooms, and a 35,000-volume medical library.

EXPANSION TO THE SUBURBS BEGINS IN 1971

After Detroit's deadly 1967 riots many white citizens fled to the suburbs, which caused a drop in population and tax revenue that had a devastating effect on the city. The hospital sought ways to adapt, and in 1971 it opened a small clinic and computer-operations site in the northern suburb of Troy. Four years later two large outpatient treatment centers were added in Dearborn and West Bloomfield. The new facilities offered family care, pediatric, behavioral, radiology, dentistry, and pharmacy services, with the goal being to draw in new patients who might later need treatment at Henry Ford Hospital.

Over the next decade five similar centers opened in other suburbs, while the hospital campus added the Benson Ford Education and Research Building and a new 190-unit apartment house for resident doctors. In 1982 the 210,000-square-foot Eleanor Clay Ford Pavilion opened with new operating rooms, an emergency room, an intensive care unit, and a radiology unit. Other additions made during this period included Michigan's first sleep disorder clinic; two nursing homes; a home care services firm; and a medical equipment sales and rental company. In 1983 a parent organization called the Henry Ford Health Care Corporation was created to oversee the activities of the various divisions.

In 1986 the company bought 178-bed Cottage Hospital of Grosse Pointe and a 26-year-old health maintenance organization called Health Alliance Plan (HAP), which had originally been founded to serve members of the United Auto Workers union. Its 250,000 members would help fill Henry Ford's hospital beds while boosting the organization's revenues. In 1987 Kingswood Hospital, a psychiatric care facility in Ferndale, was also acquired, and the next year the firm purchased Wyandotte Hospital, which was located in one of Detroit's southern suburbs.

In 1988 Gail Warden was named president and CEO of the organization, taking the place of the departing Stan Nelson. The University of Michigan health administration graduate had previously headed Group Health Cooperative of Puget Sound in Seattle.

HENRY FORD HEALTH SYSTEM FORMED IN 1989

In 1989 the company became known as the Henry Ford Health System (HFHS). Its holdings included four hospitals, 33 outpatient clinics, six 24-hour emergency centers, and the 400,000-member HAP, which was the nation's seventh largest HMO. The 15,000-employee firm reported revenues of $1.2 million and net income of $33 million for the year. As a nonprofit corporation, all income was put into improving the system.

In 1990 HFHS issued $49 million in bonds to help pay for the acquisition of Wyandotte Hospital and upgrades to medical equipment system-wide, while the Henry Ford Health Sciences Center was founded to unite the organization's academic and research activities. It would be housed in a new 150,000-square-foot building that included the existing 1,000-student School for Health Sciences and a research institute.

The year 1990 also saw a joint venture formed with Mercy Health Services in which HFHS would manage that firm's 375-bed Samaritan Hospital in Detroit and six walk-in clinics, while taking equity in four other Mercy hospitals that would begin to accept HAP members. Samaritan, which served a largely indigent patient base, had been in danger of closing. A major reorganization of management structure was undertaken at this time as well, which added four senior vice-presidents who reported to Warden.

In the fall of 1991 HFHS laid off several hundred workers, made cuts to programs, and instituted other cost-cutting measures as earnings fell because of the stalled U.S. economy and changes to the healthcare industry. Only HAP and a medical equipment sales company were operating in the black. The firm also announced plans to begin educating medical residents from Case Western Reserve University of Cleveland, Ohio, which would help it recruit future doctors.

COMPANY PERSPECTIVES

Mission: To improve human life through excellence in the science and art of health care and healing. Vision: To put patients first by providing each patient the quality of care and comfort we want for our families and for ourselves.

In late 1992 another $150 million bond offering was completed, with funds used to expand facilities and refinance debt. Early the next year HAP acquired full ownership of the 35,000-member Medical Value Plan of Toledo, Ohio, which it had partly owned since 1986. In the fall of 1993 the company also formed an alliance with Children's Hospital of Michigan to boost HAP's child healthcare offerings, and in 1994 HFHS launched a six-year, $150 million fund-raising campaign to support its research, academic, outreach, and renovation programs.

HORIZON HEALTH SYSTEM PURCHASED IN FALL OF 1995

In October 1995 HFHS bought Horizon Health System, which owned two osteopathic hospitals in the southern suburbs of Detroit with more than 400 beds, plus several ambulatory care centers, doctors' offices, a home health-care agency, and a teaching program. In December new bonds worth $193 million were issued.

In 1996 HAP formed a new for-profit subsidiary, Alliance Health and Life Insurance Company, to offer point-of-service and preferred provider organization health plans that were targeted to midsize employers. HFHS also opened the William Clay Ford Center for Athletic Medicine in Detroit, and merged its optometry department with First Optometry Eye Care Centers of Roseville.

In 1997 HAP formed an alliance with William Beaumont, an operator of several large hospitals in Detroit's suburbs, to join its network of healthcare providers. A possible merger with rival Detroit Medical Center was called off in the fall, however, though some of the two companies' programs began collaborating. The firm also became affiliated with St. Joseph Mercy–Oakland Hospital of Pontiac, giving HFHS doctors access to a hospital in neighboring Oakland County for the first time. A 15-year legal fight to win state approval to build a hospital in that area was subsequently dropped. For the year, revenues increased to $1.9 billion and net income topped $38 million.

In early 1998 Josephine Ford donated $10 million to HFHS to make improvements to its cancer center, which was renamed in her honor. In May the company announced it would close underperforming medical clinics in Roseville, Allen Park, and Dearborn, with a total of 150 jobs lost. Meanwhile, four new centers were under construction in Canton, Plymouth, Hamtramck, and the Detroit State Fairgrounds, while the new $75 million, 185,000-square-foot Henry Ford II Pavilion was opened. In the fall, a merger between Cottage Hospital and nearby Bon Secours in Grosse Pointe was completed to create Bon Secours Cottage Health Services, of which HFHS would own a 20 percent stake.

With revenues hurt by a 26 percent reduction in fees paid by Michigan's indigent care program (Medicaid), as well as federal cuts mandated by the Balanced Budget Act of 1977, in October 1998 HFHS announced 350 layoffs and a wage freeze for executives. Another 200 jobs were cut a month later, while the firm also stopped accepting Medicaid patients into HAP and sold the money-losing Medical Value Plan HMO. HFHS reported a loss of $44 million for the fiscal year, its first red ink since 1982.

In March 1999, 425 additional job cuts were announced, followed in July by 250 more, as HAP also cut 3,000 Medicaid patients from its rolls. Another round of staff reductions in the fall brought the total to nearly 2,000 for the year, mostly accomplished through a hiring freeze and a voluntary separation program.

KEY DATES

1915:

Automaker Henry Ford founds a private hospital in Detroit, Michigan.

1921:

A new, larger building opens with 500 beds.

1947:

The Edsel B. Ford Institute for Medical Research is founded.

1955:

A new 17-story building dramatically expands hospital's capacity.

1975:

Two large clinics are opened in Detroit suburbs; others follow.

1986-88

Cottage, Kingswood, and Wyandotte Hospitals and the Health Alliance Plan (HAP) are acquired.

1989:

The firm is renamed Henry Ford Health System (HFHS).

1990:

HFHS forms a joint venture with Mercy Health to run Samaritan Hospital, clinics.

1995:

The purchase of Horizon Health System adds two osteopathic hospitals.

2001:

SelectCare HMO is acquired; HFHS posts record loss of $87.7 million.

2002:

Riverside hospital closes, and the firm cuts 1,700 jobs.

2005:

Construction of a new West Bloomfield hospital begins.

2006:

HAP buys the 200,000-member CuraNet preferred provider organization.

In March 2001 HAP completed the acquisition of an HMO owned by SelectCare, and in April the company accepted a $20 million donation to support prostate cancer research and education via the new Vattikuti Urology Institute. With losses again climbing, HFHS outsourced its information technology and food-service operations, shifted the duties of several top managers, and hired hospital turnaround consultants The Hunter Group to improve efficiency at Henry Ford Hospital. For 2001 the firm reported revenues of $2.5 billion and a record loss of $87.7 million.

COST CUTTING, LAYOFFS CONTINUE IN 2002; RIVERSIDE HOSPITAL CLOSED

As the U.S. economy worsened, the level of uncompensated care in the struggling city of Detroit rose, with 24 percent of HFHS patients uninsured or covered by Medicaid. At the same time the payments dictated by some managed-care plans were falling, while labor and drug costs were steadily going up. In January 2002 a new cost-cutting plan was announced that included the shedding of 1,000 more jobs, three clinic closures, the consolidation of two suburban hospitals, and the scuttling of plans to build a new joint venture hospital in Trenton. The company would also work to boost the use of profitable specialties such as cardiology, neuroscience, cancer, and orthopedic care; increase donations; and sell unneeded buildings. The plan was expected to save $58 million during the first year and increase revenues by $12 million.

After its union workers agreed to a hiring freeze, HFHS agreed to spare one of the clinics that was scheduled to close, while also revealing plans to convert Riverside Osteopathic Hospital into an outpatient facility and transfer its inpatient services to Wyandotte Hospital. Later in the year this plan was amended to a full closure of Riverside.

In November HFHS announced it would form an educational partnership with Wayne State University School of Medicine, with its teaching doctors receiving faculty status there and researchers from both institutions sharing facilities and collaborating. Ties with Case Western Reserve of Cleveland were later severed. By year's end the 1,000 job cuts announced in January had increased to 1,700, and the company's total workforce had dropped to 16,192.

In January 2003 a new $112 million bond offering was made that would be used to reduce interest by paying off two older issues. HFHS head Gail Warden had earlier announced plans to depart, and in April Henry Ford Hospital CEO Nancy Schlichting was chosen to succeed him as president and CEO of the health system. She was known for her focus on quality patient care and for engineering a financial turnaround at the company's flagship medical center.

NEW SUBURBAN HOSPITAL APPROVED IN 2003

In June HFHS won long-sought approval to open a new hospital adjacent to its outpatient care center in the wealthy northern suburb of West Bloomfield, where its well-insured patients would help balance the many patients in Detroit with little or no insurance. The move was vigorously contested by other hospitals in the area, but their legal challenges proved unsuccessful.

The company also implemented a new strategic plan during the year that included expanding profitable clinical areas such as cardiology, orthopedics, and bariatric surgery; reducing waiting times for appointments; and seeking to increase the number of referrals from primary care physicians to HFHS. Operational efficiencies were targeted as well, with registration streamlined and the process of moving patients from emergency rooms to hospital beds improved.

For fiscal 2003 the company reported a net profit of $11.7 million, up from a near-equal loss the year before. Revenues increased by 8 percent to $2.6 billion, more than half of which came from HAP, though uncompensated care grew to a record $111 million.

In May 2004 HFHS announced it would open a new $1 million clinic on the east side of Detroit to serve insured, non-Medicaid residents of the city who typically sought treatment in the suburbs. It would have a staff of five doctors and offer several primary care specialties as well as a lab and other outpatient services. Soon afterward the company also announced plans to build a $41 million ambulatory care center in Brown-stown Township to relieve overcrowding at Wyandotte Hospital.

In early 2005 HFHS revealed plans to construct a new $8.2 million clinic in downtown Detroit to house dermatology, internal medicine, obstetric, and pediatric units, freeing up space for other specialties at Henry Ford Hospital. In the fall ground was broken on the new $310 million West Bloomfield medical center, which was the largest part of a five-year, $910 million capital plan that also included $100 million to improve information technology. Projected to open in 2008, the hospital would include such amenities as 300 private rooms with Internet access and flat-screen televisions, a spa, a business center, 24-hour gourmet room service, and an auditorium for healthy cooking classes. The firm subsequently recruited the general manager of Dear-born's Ritz-Carlton hotel to run it in a bid to make the facility's hospitality meet the expectations of its well-to-do patrons. HFHS also began putting its entire staff through Ritz-Carlton hospitality training. For 2005, revenues topped $3 billion and net income hit $112 million.

In the spring of 2006 HFHS announced plans to invest $300 million over three years at Henry Ford Hospital for more patient rooms, improved emergency care, and to add 400 more employees at the facility, which had a 90 percent occupancy rate. In June a $600 million bond offering was sold to help fund the many improvements planned, and in August HAP bought CuraNet, an Okemos, Michigan-based preferred provider organization with 200,000 members. The acquisition would broaden HAP's geographic reach to Ohio, Indiana, Illinois, and Wisconsin.

More than 90 years after its founding, Henry Ford Health System had become one of the largest and most prestigious regional medical care providers in the United States, serving the residents of southeastern Michigan through its network of hospitals, clinics, nursing homes, an HMO, and other healthcare units. Efforts to cut costs and enhance revenues had proved successful, and the firm appeared set to serve the needs of its community for many more years.

Frank Uhle

PRINCIPAL SUBSIDIARIES

Health Alliance Plan; Henry Ford Hospital; Henry Ford Wyandotte Hospital; Henry Ford Bi-County Hospital; Henry Ford Behavioral Services; Henry Ford Medical Group; Henry Ford at Home; Bon Secours Cottage Health Services (50%); Henry Ford Mercy Health Network (50%).

PRINCIPAL COMPETITORS

Trinity Health; Detroit Medical Center; Ascension Health; William Beaumont Hospital; Oakwood Health-care, Inc.; University of Michigan Health System; Blue Cross Blue Shield of Michigan.

FURTHER READING

Barkholz, David, "A Final Challenge for Henry Ford CEO," Crain's Detroit Business, February 4, 2002, p. 29.

——, "Ford Health to Cut 350; Exec Pay Freeze Also Planned to Cut Anticipated $7.5M Loss," Crain's Detroit Business, October 5, 1998, p. 1.

——, "Henry Ford Health System Hires Hunter Group to Boost Efficiency," Crain's Detroit Business, August 20, 2001, p. 31.

——, "Job Cuts Continue at Henry Ford," Crain's Detroit Business, October 11, 1999, p. 3.

Harrison, Sheena, "Henry Ford Expands Downriver," Crain's Detroit Business, November 29, 2004, p. 3.

"Henry Ford Health Cutting 425 Jobs After $44 Million Loss," Associated Press Newswires, March 24, 1999.

"Henry Ford Targets PPO, POS Plans at Mid-Sized Employers in Michigan," PPO Letter, September 19, 1996.

Martinez, Michelle, "Building an Experience; Henry Ford Health Works to Make New Hospital a Lab for 'Retail' Philosophy," Crain's Detroit Business, October 30, 2006, p. 14.

Merx, Katie, "Henry Ford Health System to Close Trenton Hospital," Crain's Detroit Business, October 14, 2002, p. 6.

——, "Into the Health Care Fire—Schlichting Takes Reins at Henry Ford Health amid Regional Debate," Crain's Detroit Business, June 2, 2003, p. 3.

Norris, Kim, "Finances Improve at Ford Health," Detroit Free Press, March 30, 2004.

——, "Henry Ford Health, WSU to Join Forces," Detroit Free Press, November 20, 2002.

——, "Layoffs, Closings Coming at Henry Ford Health System," Detroit Free Press, January 16, 2002.

Raphael, Steve, "Henry Ford Health Plans to Raise $150M," Crain's Detroit Business, October 31, 1994, p. 1.

——, "Henry Ford Health System Grasped the Future," Crain's Detroit Business, February 27, 1995, p. 82.

——, "Henry Ford Remedy: Let's Do Deal," Crain's Detroit Business, November 15, 1993, p. 16.

——, "Henry Ford to Acquire Horizon Health System," Crain's Detroit Business, March 20, 1995, p. 3.

——, "Henry Ford Will Downplay Acquisitions, Mergers," Crain's Detroit Business, July 30, 1990, p. 3.

——, "Warden's Plan for Henry Ford Now in Place," Crain's Detroit Business, June 22, 1992, p. 1.