Why new hospitals are being built in difficult financial times

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To do that, it needs to keep up with UM, said Allan Baumgarten, a Minneapolis-based health consultant who also publishes the Michigan Market Review.

“Henry Ford wants to be seen as the premier center for medical education, research and specialized patient care in the state and region,” Baumgarten wrote in an email to Crain’s. “He sees his key competitor as the University of Michigan Health System, which has spent over a billion dollars replacing and expanding its Ann Arbor campus and acquiring hospitals in the Lansing area. more attractive for both patients, doctors and researchers. He can make small investments and incremental improvements, or he can swing behind fences.”

HFH decided to hit a home run. But times are hard.

The healthcare industry is facing its first true recession during the COVID-19 pandemic. Many health systems have been bolstered in 2020 and 2021 with massive government assistance and stimulus investments that have filled the financial gaps in skyrocketing healthcare costs due to overcrowded emergency rooms and full beds.

But 2022 has turned out to be a sobering reality. Labor costs have risen exponentially due to staff burnout and nurses leaving hospitals for lucrative business trips.

Even today, contracted care costs remain at least 60 percent higher than they were before the pandemic. Consulting firm Kaufman Hall predicts that 53 percent of hospitals nationwide will lose money in 2022.

Raini said the hospital is confident in its fundraising capabilities and its portfolio provides excellent fundraising opportunities. The project is also likely to be supported by yet-to-be-determined public funding and tax revenue.

“A project of this magnitude will require multiple sources of funding, including our own capital investment,” Rainey said in a statement. “In addition, we seek financial support from generous donors and the community who share our mission and vision. We will also explore opportunities for grants and other relevant funding sources.”

Laura Appel, executive vice president of government relations and public policy for the Michigan Health and Hospital Association, compared investing in health care to other public goods that need to be realized regardless of current financial hardships.

“Regardless of the financial situation in the state, we always work on the roads. You cannot leave them unemployed,” Appel said. “It’s the same logic why systems are always working on their infrastructure – you have to keep up even in times of great financial hardship.”

It will take decades for the system or the public to know if the HFH bet was financially worth it, but aside from a crash, such an investment is always beneficial for the community, said Alex Calderone, president of Birmingham-based consulting firm Calderone. Advisory group.

“I think this is good for the state, city and region as a whole,” Calderone said in an email to Crain’s. “Local residents will have access to a world-class facility, and its activities will attract more people to the city center, whose dollars will flow into other businesses. The infrastructure is outdated and in need of replacement, and to some extent our capacity is limited. The facility’s exploration is also likely to attract top medical and scientific talent to the area. That being said, time will tell if there will be a return on investment in dollars and cents.”

Henry Ford and most of Michigan’s health care systems are non-profit organizations and also have a duty to the community.

To recap, the primary purpose of healthcare, at least in terms of the society it serves, is not necessarily to rake in money,” Calderone said. part of the project will be funded through philanthropic efforts.”

This story first appeared in Crane’s Detroit business.