Michigan is not known for earthquakes. But the earth moved last week in Detroit when the nonprofit Detroit Medical Center (DMC) announced a deal with for-profit Vanguard. This possible deal to take over one of our region’s largest nonprofit employers shifted the ground.
On the surface, this proposed deal seems to be good for the Metro Detroit region. The large debt load of the DMC can be reduced. Plus, an infusion of cash can fund the needed upgrades the facility has been struggling for years to implement. But when the earth moves as violently as it is from this potential deal, those living in an area need to look beneath the surface to identify possible fissures. So what do we make of the threatened loss of a major nonprofit for our region?
Looking specifically at the DMC, some are concerned that the focus on charity care may not be the same under a for-profit regime. Fortunately, at this time Vanguard seems to be sensitive to DMC’s nonprofit origins as it tries to provide venues to preserve some of the intent of the many donors who have invested in this Detroit institution. Vanguard also has proposed maintaining the current management. However, in this time of increasing needs and diminishing resources, we know that charity care will likely increase, at least in the short term as we work to understand the impact of recent national legislation. Unfortunately, however, some studies have shown that there is little change in the amount of charity care delivered by nonprofit hospitals that have been acquired by for-profits.
As people who live in Michigan, we also need to look more broadly at how this earthquake of a deal will ripple through the ground beneath us but also the integrity of our social safety net. For example, we cannot overlook the invaluable role that DMC has played as one of our region’s – and indeed, one of our nation’s – largest teaching hospitals. The doctors trained here did not all stay in Detroit; many settled elsewhere in Michigan providing quality health care across our state. We need to ask ourselves what in this deal could undermine that vital educational role of this essential institution. The same research referred to earlier showed that of all the hospital transfers studied, the teaching institutions were the least likely to maintain their nonprofit missions of education.
Looking even more broadly at the social safety net nonprofits hold, for more than three decades, society has been calling more on nonprofits to fill a role previously served by government: caring for those in need. Governments, trying to save taxpayers billions of dollars, have turned to nonprofits to deliver services government used to deliver, but providing the same or better service with greater efficiency—doing more with less.
Unfortunately, governments seem to forget that they rely on nonprofits as silent partners in providing public services. As a just released national report reveals, state and local governments across the country have been slashing funds for programs they expect nonprofits to deliver, withholding payments from nonprofits for contracted services already delivered on behalf of government, and seeking revenue from nonprofits through new fees and taxes. These short-sighted actions hurt the community at large.
Equally unfortunate is that local, state and even federal units of government seem to be taking these actions without recognizing that nonprofits are major contributors to our state’s economy. The nonprofit sector is the state’s third largest employer. One of every ten workers in Michigan is hired by a nonprofit organization, and nonprofits generate an additional 161,000 jobs as a result of spending by the organizations. Undercutting nonprofits directly undercuts our economy.
So before we celebrate the proposed transfer of the DMC from one of our region’s most valuable charitable nonprofits into a for-profit entity, we all need to take a deep breath and thoughtfully examine the potential consequences. While this may remove the financial burden of the DMC in the short term, we cannot be certain that its larger philanthropic mission will endure.
We may look back in ten years to the earthquake that moved the ground in Detroit and across Michigan last week and see two things. First, that charity care is expanded or at least maintained in the region. Second, hopefully it wakes us as citizens and the policymakers we elect to the real threat: that we are in danger of losing something of great importance – not only DMC, but also the nonprofits upon which we all rely for Michigan’s quality of life.
Recent articles about the Detroit Medical Center and Vanguard announcement:
+DMC-Vanguard deal likely to receive close scrutiny (Crain’s Detroit Business)
+Vanguard Health plans to buy DMC (WDIV 4)
+ DMC and Vanguard Health Systems release rundown of the partnership (Detroit Free Press)
+ Vanguard, DMC announce sale (Detroit News)
Submitted by Kyle Caldwell, President and CEO for Michigan Nonprofit Association.
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Filed under: Planning, Sector Issues, Strategic Alliances, Transparency and Accountability | Tagged: Detroit Medical Center, nonprofit blog, nonprofit sector, Vanguard Health Systems | Leave a Comment »