By Josh Thall
The Lansing Star
Lansing — Sparrow Hospital and Carson Health are working on a deal to fully merge with each other to be able to profit from the other’s strengths.
Carson Health has been an affiliate of Sparrow Hospital since 1997. The two boards have signed a letter of intent and hope to have a formal agreement to integrate by the end of 2014, according to a press release issued by Sparrow.
Director of Marketing for Carson Health Jaime Cassady said Sparrow has owned between 30 and 35 percent of Carson Health since 1997, and the two sides have had a strong relationship since then.
Carson Health, located in Carson City which is approximately 47.5 miles northwest of
Lansing is much smaller than Sparrow. Carson Health has approximately 61 beds in its facility, according to the press release, while Sparrow has around 630 beds available for patients, according to Sparrow’s Director of Marketing John Foren.
Financial details of the deal were not released.
Foren said Sparrow and Carson integrating now is partly a result of natural outgrowth of the positive relationship which already existed between the two, and the nature of the healthcare environment.
“What you are seeing in the healthcare environment is people collaborating a lot more,” Foren said. “It is harder for smaller hospitals to stand on their own.”
Matthew Anderson, a professor of accounting and the senior adviser to the dean of diversity and inclusion at Michigan State University, said one reason deals like this typically occur is to consolidate services.
“Industry consolidation is clearly going on right now in the medical industry, where you are seeing big medical groups like the Sparrow Health System go out and join with smaller hospitals to expand their reach,” Anderson said.
For Carson Health the deal is partially for financial reasons, while the main reason remains about bringing more resources to their community, Cassady said.
“With a lot of the changes in health care reform, we have seen inpatient volumes decrease, and we expect that trend to continue exponentially over the next 10 years,” Cassady said. “We just want to secure our services for the community here and want to make sure that our services are available.”
Foren said the integration will bring about a more intense and wide reaching relationship between Sparrow and Carson Health.
“On the marketing side, we had a fairly distant relationship with Carson because we did not own Carson, and could not tell them everything to do,” Foren said. “In a way, they were still a competitor somewhat, even though we owned about one-third of them.”
Anderson said these types of deals are typically beneficial to each of the communities involved.
“It is probably most beneficial for Carson City, with them having access to a much broader range of medical staff and technology,” Anderson said. “The other thing is that you get a larger medical community making decisions for the patients which is always better for everybody.”
Foren said that in addition to the resources which will become available, Carson will also benefit by being a part of the Sparrow brand. He said he could see some of the Sparrow specialists and staff working out of Carson and more of Sparrow’s services being available there.
The main benefit Foren sees for Sparrow is the ability to expand into communities and regions around Lansing.
“We are all about bringing care closer to home,” Foren said. “We aren’t just a hospital in the center of Lansing, we provide care all over the region, in urgent care clinics, family practices and in Ionia and Clinton, and this just extends that care throughout the region.”
Sparrow has a history of bringing in hospitals and health centers from around the region to be a part of the Sparrow Health System, according to Foren.
“We have, in the not too distant past bought Ionia Hospital and Clinton Memorial Hospital,” Foren said. “In addition we work very closely with Hayes Green Beach Memorial Hospital in Charlotte- we do not own them, but we work closely with them on a lot of projects.”
Cassady said Carson Health expects its patient care to improve after the integration with Sparrow because it will give Carson Health more health care services, as well as continuing to improve upon Carson’s nationally recognized patient satisfaction and quality initiatives.
Cassady said she expects the cost of patient care for Carson Health patients to improve after the integration with Sparrow.
“Carson has always been competitive, cost wise, with other like-sized hospitals in our area,” Cassady said. “With a decrease in duplicate services and being able to leverage our relationship with Sparrow, our costs won’t be as high so the health care cost to the community will be lower as well.”
Anderson said that while the hope of most deals like this is to lower the cost of treatment for patients, but can sometimes have the reverse effect.
“As these companies consolidate, you actually get less competition which drives their ability to charge higher prices up,” Anderson said. “So you might end up with slightly higher prices, because now, instead of having people competing they have just a few larger providers, which can actually drive the price up.”