Butzel Long attorney featured at Walsh College’s Entrepreneur-You Conference

DETROIT, Mich. – Butzel Long attorney Rebecca S. Davies was a featured presenter during Walsh College’s Entrepreneur-You Conference on March 20, 2015 in Troy. Her presentation was titled, “How Not to Get Burned by a Bad Hire.” Davies is an adjunct faculty member at Walsh College.

Davies concentrates her practice primarily in the areas of employment law and commercial litigation. She represents employers in federal and state court litigation and before state and federal administrative agencies. She regularly counsels employers regarding compliance under federal and state employment laws (including FLSA, FMLA, ADA and Title VII), drafts policies and procedures, and advises on preventative strategies.

She is a frequent author and lecturer, not only for client in-house trainings and publications, but also outside organizations including the Michigan Chamber of Commerce, Automation Alley and American Society of Employers.

Davies earned an undergraduate degree from the University of Michigan at Dearborn and a juris doctorate, magna cum laude, from the Detroit College of Law in 1995. She completed her master’s degree in 2010 from Wayne State University Law School by obtaining her L.L.M. with a GPA of 3.79 in Labor and Employment Law.

About Butzel Long

Butzel Long is one of the leading law firms in Michigan and the United States. It was founded in Detroit in 1854 and has provided trusted client service for more than 160 years. Butzel’s full-service law offices are located in Detroit, Bloomfield Hills, Lansing and Ann Arbor, Mich.; New York, NY; and, Washington, D.C., as well as alliance offices in Beijing, Shanghai, Mexico City and Monterrey. It is an active member of Lex Mundi, a global association of 160 independent law firms. Learn more by visiting www.butzel.com or follow Butzel Long on Twitter: https://twitter.com/butzel_long

Dykema Lawyer Mark Malven Authors Treatise For Practising Law Institute (PLI)

Mark Malven Authors Treatise on Technology Transaction Agreements for the Practising Law Institute

Ann Arbor –March 24, 2015– Dykema, a leading national law firm, announced today that Mark Malven, Ann Arbor and Bloomfield Hills-based member, authored a treatise published by the Practising Law Institute (PLI) titled, “Technology Transactions: A Practical Guide to Drafting and Negotiating Commercial Agreements.”

As a recognized leader in the area of technology transactions, Malven was contacted by PLI to write the treatise. Fellow Dykema attorneys Kit Winter, Steve Tupper, Joanne Lax, Janet Stiven, Steve Sayre, John Guenther and Jeanne Whalen also contributed chapters on their areas of emphasis.

Presented in a streamlined fashion with an eye toward the transactions an in-house counsel or traditional IP or general practitioner is frequently asked to handle, the treatise provides the reader with the tools necessary to draft, review and negotiate technology transaction agreements while properly addressing the most important issues. It offers many practical examples, including nine different types of form agreements, numerous practice tips on how to avoid common and uncommon legal traps, and a discussion of many regulatory and privacy considerations that must be kept in mind.

Malven is the leader of the Firm’s Technology and Outsourcing Transactions practice. For more than 20 years, he has represented both customers and technology vendors, handling more than 1,000 technology transactions involving outsourcing, licensing, development, consulting, distribution, sponsored university research, manufacturing, value-added reseller, e-commerce, acquisition, and joint venture relationships. He has served as a primary negotiator for some of the largest outsourcing transactions of their kind ever undertaken, involving billions of dollars in services.

Practising Law Institute is a nonprofit continuing legal education and professional business training organization, chartered by the Regents of the University of the State of New York. PLI is dedicated to providing the legal community and allied professionals with the most up-to-date, relevant information and techniques, through seminars and workshops, live Webcasts, On-Demand learning, and published comprehensive treatises and practice-focused Course Handbooks.

“Technology Transactions: A Practical Guide to Drafting and Negotiating Commercial Agreements” is available for purchase at http://www.pli.edu/.

About Dykema
Dykema serves business entities worldwide on a wide range of complex legal issues. Dykema lawyers and other professionals in 12 U.S. offices work in close partnership with clients – from start-ups to Fortune 100 companies – to deliver outstanding results, unparalleled service and exceptional value in every engagement. To learn more, visit www.dykema.com and follow Dykema on Twitter at http://twitter.com/Dykema.

Don Tanner Presents on Crisis Communications to MSU/Broad Executive MBAs

Tanner Friedman Co-Founder Don Tanner returned to Michigan State University last week to teach a class of aspiring MBAs on “Leading in Crisis.” The session was part of the Eli Broad College of Business Executive MBA program and was held at the James B. Henry Center for Executive Development in Lansing.

Tanner previously taught the program’s Troy, Michigan-based “sister” class earlier this year.

Focusing on core tenets of adversity management, Tanner’s session examined best (and worst) practices and real-world examples culled from a 30-year communications industry career. Students also were provided the opportunity to serve in crisis team roles, examining and discussing a range of fictitious corporate crisis scenarios.

The Broad Executive MBA  incorporates the rigor of a full-time MBA program with the integrative management curriculum and weekend schedule of an executive program. Since 1964, the Executive MBA program has helped professionals sharpen their business skills and advance their careers without giving up their day job.

Tanner Friedman is a strategic communications firm specializing in traditional and emerging media relations, adversity management and public relations counsel. Tanner Friedman is located in the landmark Tri-Atria Building at 32255 Northwestern Highway, Suite 298, in Farmington Hills, Michigan. For more information, please visit http://www.tannerfriedman.com.

Value-based Care

The market meets medicine

Pages 26 – 27

By Manny Lopez

Despite all the changes in health care, a few things remain constant: Doctors want to deliver exceptional services to make people feel better, and patients want to get the best treatment available.

The advent of value-based care programs in hospitals and hospital systems in Michigan is ensuring that everyone involved not only provides and receives the best care, but also does so at reduced costs and in a more efficient manner.

“This is absolutely a good thing,” said Rob Casalou, president and CEO of St. Joseph Mercy Health System, adding that the switch from volume health care services to value is being driven by economics. Physicians, hospitals and health systems no longer are incentivized to order test upon test to boost the bottom line as traditional fee-for-service plans operate. Instead, value-based programs focus on the quality and value of care, and require that physicians, hospitals and health systems work with insurers to create systems that eliminate repetitive and unnecessary tests or services.

It is a switch from quantity services to quality-specific services, and the result is shared financial rewards for doctors and hospitals, and savings and better care for customers. The value-based reimbursement model requires hospitals and provider partners to create an infrastructure plan that includes an all-patient registry system, according to Blue Cross Blue Shield of Michigan. Doctors and nurses can then better access health records and better track a patient’s progress and needs.

“As more hospitals engage in these arrangements, momentum continues to build behind hospitals and providers, encouraging each to re-evaluate their current care models and begin to make investments that will enable success for their organizations and patients,” said Stephen Anderson, vice president of provider contracting and network administration at Blue Cross Blue Shield of Michigan, which is driving much of the change toward value-based programs.

To date, 18 Michigan hospital systems, which includes 71 hospitals across the state, have value-based contracts with BCBSM. Given that health care costs now account for 20 percent of the nation’s gross domestic product, it is in the best interests of everyone to improve the health care delivery system.

“If the cost of health care doesn’t go down, we will have bigger problems,” Casalou said. “We are now a consumer product. We compete with food, clothes (for people’s dollars).”

That’s a good thing, Casalou said, because it forces more accountability on costs. When people’s wallets are affected, they take notice and their actions change. It is not uncommon for someone who needs an MRI to call around town for the best deal.

“You can be a very educated consumer if you choose,” he added. Some hospital systems now allow patients to access their medical records online. With better access to records, patients are aware of the care they have received and physicians are less likely to request repeat tests. They can identify problems before they become critical, and the access can reduce the need or frequency of hospitalizations.

“In this evolving health care market, success will not be achieved through isolated efforts,” Anderson said. “To encourage and facilitate this collaboration, value-based agreements provide a powerful shared savings incentive for those hospitals and physicians that are able to better collaborate and coordinate care to reduce the overall cost experience for their patients.”

In some cases, Blue Cross Blue Shield of Michigan financially supports hospitals that are developing value-based programs, and it rewards physicians and hospitals that succeed in delivering quality service at lower costs by sharing in the savings, according to a BCBSM press release.

The University of Michigan Health System signed a three-year contract with BCBSM in December to provide value-based care to its patients.

“Though we have a decade’s worth of experience, this new contract will push us to innovate even further, to build on efforts to offer care coordination, communicate directly with referring physicians, and ensure we provide the most appropriate care for each patient,” said Dr. David Spahlinger, a leader of the University of Michigan Health System population health efforts.

The need is not going away. Changing state regulations and the federal Affordable Care Act have altered the entire health care landscape. Add in an aging population that is moving to Medicare and an increasing number of people being shifted to Medicaid, more will need to be done to control costs.

St. Joseph Mercy’s Casalou said the market model will solve that problem. More consolidation in physician practices and health systems will hit the market and allow for economies of scale and the lowering of fixed costs, he said. But value-based systems will evolve as well. Eventually savings will be achieved based on health outcomes rather than simply the lowering of costs of services.

“Another evolution of value-based care is coming because shared savings is a terminal illness,” Casalou said. “You get savings early, but once you are three to four years down the road, it’s harder to get savings, so (health) outcomes will need to be the focus.”

A Medical Mentor

Beaumont’s Gene Michalski reflects on his decades-long career

By Dawson Bell

Pages 20 – 23

Gene Michalski, CEO of Beaumont Health, snared his first job with Royal Oak-based Beaumont while still in college at Wayne State University. A couple of college buddies were working in a lab there and told him there might be an opening for the biology major – who was working on a master’s degree in biology with a concentration in physiology – as a phlebotomist. That was in 1971. Once he earned his master’s degree in 1973, Beaumont made him a supervisor in the lab. And he’s been a health care administrator ever since.

Those two pals from Wayne State said Michalski went over to the dark side, the CEO joked. More than 40 years later that career will end with Michalski’s retirement and the ascension of new CEO John Fox. Michalski, who later earned an M.B.A. in finance from WSU, spent all but five of those years at Beaumont. And he’s seen a lot during that time.

“Medicare as we know it didn’t even exist,” Michalski said of the outset of his career.

The change from cost-reimbursement payment models to fee-based systems driven by government insurance programs has been transformational, he said, and ongoing.

The current adoption of practices brought on by the Affordable Care Act may be the most sweeping yet. Much of that transformation has been salutary, Michalski said, a renewed focus on prevention and wellness instead of acute care for untreated conditions, and an increased emphasis on consumerism and transparency. The attempt to align financial incentives with health care outcomes is all good, he added.

On a more direct level, Michalski said he’s also witnessed – and tried to promote – changes in health care management practices during his tenure as a top executive. In the early days, he explained, medical care was very hierarchical and top down, but has become much more collaborative over time.

“It’s one thing to tell, one thing to sell,” Michalski said. “It’s another thing to partner.”

Beaumont, and the industry at large, has adopted management practices pioneered by the nuclear and airline industry, moving from command-and-control operations to more team-based and safety-oriented approaches.

In the modern operating room, Michalski explained, everybody participates in making sure they get it right. “We have checklists just like airline pilots,” he said, adding that it’s not just giving orders.

“Followership has become important. Everybody benefits from that.”

As an administrator, he’s also had to navigate the changing landscape of competition in health care, and the trend toward consolidation. Contemporary health care is a very capital-intensive industry, with massive investments in technology and highly skilled personnel, Michalski said.

Making those kind of investments has become increasingly difficult for institutions that don’t have significant infrastructure and a wide geographic reach. His goal as a Beaumont executive has been to try to improve quality and safety, while reducing costs in all areas by reengineering the patient care experience. He likened Beaumont’s “backroom” operations to those of retail giants like Costco, which use scale to drive costs down.

“We literally buy boxcars worth of stuff (for health care operations),” Michalski said, which allows the management team to concentrate on improvements in patient care.

While Michalski was COO, Beaumont acquired Grosse Pointe-based Bon Secours Hospital and its affiliated nursing and assisted-living facilities in 2007. And started the medical school and launched an aggressive ambulatory care strategy.

In 2014, Beaumont, Oakwood Healthcare of Dearborn and Botsford Hospital of

Farmington Hills announced a megamerger, creating the largest hospital network in Southeast Michigan, with nearly $4 billion in annual revenues. But Michalski is quick to point out that bigger is not always better. “Sometimes it’s just bigger,” he said.

He believes the unification of the geographically diverse institutions has already paid dividends (e.g., the consolidation Beaumont’s debt that was available through the affiliation coming together, which saved $13 million), and will continue to deliver higher quality, more cost-effective health care for years to come.

A financially stable system of quality health care organizations is also absolutely critical for the overall prosperity of the region, Michalski said. Health care is a key component of the local economy – a nearly $30 billion industry in Southeast Michigan – employing hundreds of thousands of well-paid workers. Beaumont itself is Oakland County’s largest employer.

Spending on health care largely stays in the community, multiplying its economic impact. In addition, thousands of other Michiganders contribute to the system as volunteers, he said, amplifying the connection between health care and the community, which is vitally important for the region’s growth.

“Why do people move to certain areas?” Michalski asked. “Jobs, a good transportation system, quality schools. But health care is right up there.”

Indeed, Michalski is something of a health care evangelist, touting the industry’s myriad contributions to a healthy community. Health care organizations are obligated to be “good corporate citizens,” providing millions of dollars each year in charity care, being active participants in community organizations and local economic development. Michalski himself is a member of the Detroit Regional Chamber’s Board of Directors.

That is especially true of those organized as nonprofits, he said, like Beaumont Health. “The communities own these nonprofit hospitals,” Michalski explained. “We serve the whole community.”

By the end of May, Michalski’s decades long service as a Beaumont executive will end, but he said he expects to remain active – both in health care and in the community. With two grandchildren in Minneapolis, Minn., and another on the way in Boulder, Colo. Michalski said he also expects to travel a bit more. But the trail from phlebotomist to CEO is wrapping up, and Michalski can rightly say he’s glad he took it.

Eds and Meds

Activity post-bankruptcy

Pages 14 – 18

By Jacquie Goetz Bluethmann

Patients receiving care through Henry Ford Health System (HFHS) already know what innovation looks and feels like – not to mention what it conceals. Their very attire while in residence represents the promise the Henry Ford Innovation Institute holds. The hospital’s new patient gowns address the common complaint that typical hospital gowns fail to provide coverage where patients want it most.

Known as “Model G,” in honor of Henry Ford’s iconic Model T, the new gowns are the brainchild of HFHS staff and students from the College for Creative Studies working in collaboration through the Innovation Institute. The gowns are to be manufactured by Detroit-based Carhartt and will be available nationwide come early spring.

“The Henry Ford Innovation Institute is designed to rapidly assess ideas for innovation and then vet them for novelty, commercialization and intellectual property development,” explained Dr. Scott Dulchavsky, CEO at the Innovation Institute.

In the process, Dulchavsky maintains, the institute is helping to grow the local ecosystem.

“Once an innovation is to the point of being commercialized, we’ll work with – or even develop – a local company to fulfill the integration component if possible,” he said.

In addition to the hospital gowns, an interactive avatar designed as a patient education tool for new mothers is in the works. As is Stat Chat, a tool for multiple teams to communicate with one another more efficiently on a patient’s care. Both ideas were born of HFHS employees identifying an unmet need.

The entrepreneurial mindset fueling the Innovation Institute and the larger HFHS network is shared by the other major health care and educational institutions in town: the Detroit Medical Center and Wayne State University. Ned Staebler, vice president at WSU’s Office of Economic Development, is excited to see the university’s efforts at driving economic growth take wing.

“We work to extrovert the university,” said Staebler, who was appointed this March as CEO of TechTown. “A university’s reputation is often that of an ivory tower – teaching, research – without a whole lot of regard for what’s happening in the community. We’re looking at how to get people on campus off campus, and people off campus onto campus.”

To that end, Staebler’s team focuses its efforts in three areas: place, business and talent. With regard to the former, his office is leading a group of stakeholders in the development of a public bike-sharing program for the city that’s planned to launch in spring 2016.

“This program is modeled after similar successful programs in cities around the world,” he explained. “The idea is that there will be stations around the city where people can check out bikes for point-to-point transportation. If you want to go to Belle Isle after work, you can check out a bike and leave it at a station there.”

Access to transportation is also evident in the arrival of Zipcar to Detroit. “The first two Zipcars in the city were on campus,” Staebler said. “We, with the help of Rock Ventures, pushed and pushed the conversation with Zipcar to expand elsewhere in the city. Now there are 40 some cars.”

In the area of business, the university saw its fourth cohort of the Goldman Sachs 10,000 Small Businesses program start in February. “Approximately 100 small businesses have gone through it,” he said of the program that assists second-stage businesses.

Current WSU undergraduate and graduate students can find momentum for their entrepreneurial endeavors through the university’s LaunchPad program, too. “The program has helped start 137 companies in four years,” Staebler said. “We’ve vetted 445 new venture ideas from approximately 900 students.”

Businesses born from LaunchPad range from mobile apps and medical devices to tea and social ventures. “More than 70 companies that started through LaunchPad are now hiring and/or making revenue,” Staebler said.

The soon-to-be complete Multidisciplinary Biomedical Research Building near Tech Town may play a part in nurturing certain innovations born at WSU and helping them become commercial realities. The building’s official opening will take place in May or June and will be home to approximately 450 scientists.

 

DMC investments making an impact

For many reasons, DMC CEO Joe Mullany is enthused by the organization’s 2014 market share growth – not the least of which is its ability to be a good employer and a force for economic growth in the city.

“We take our responsibility as the city’s largest employer seriously,” he said.

“We encourage our employees to live here by subsidizing their housing.”

Mullany is referring to the Live Midtown program that provides incentives to employees of DMC, WSU and HFHS to rent or buy downtown.

“We’ve invested $200,000 a year into the program, and it has been such a successful one,” he said, noting that 364 DMC residents and nurses currently participate.

The DMC is driving economic development in other significant ways through major investments in Southeast Michigan, including a new $140 million patient tower at Children’s Hospital for which construction will commence this spring.

In addition, construction is underway for the new Troy Children’s Hospital of Michigan. This 60,000-square-foot facility will employ 100 people and represents a $42 million investment by the DMC. The facility will be complete by year’s end.

“We’ve had a real mindset change,” Mullany said. “We view ourselves as a leader in business development. That is not the view of most in health care nationally.”

A Unique Vision

Henry Ford Health System CEO Nancy Schlichting on fostering health care innovation and talent

By Dawson Bell

 Pages 10 – 13

Henry Ford Health System CEO Nancy Schlichting is on a glide path to retirement after 16 years with HFHS and four decades in health care, with stops in New York City, Chicago, Akron, Columbus and Philadelphia. Schlichting is leaving on a high note, with the system recognized for a Malcolm Baldrige National Quality Award, the revival of its iconic Detroit hospital and Midtown neighborhood, and the successful launch of Henry Ford West Bloomfield. Schlichting is on the Detroit Regional Chamber’s Executive Committee, having previously served as board chair and chair of the 2012 Mackinac Policy Conference. She recently sat down with the Detroiter to discuss her retirement, health care innovation and what comes next.

What attracted you to the field?

My career actually started when I was a 15-year-old volunteer at a hospital in Akron, Ohio. I originally wanted to be a physician, but I passed out at the sight of blood too many times. So, I found this thing called health care administration … and really felt that it fit me very well. It was complex. It was interesting. It just seemed like important, rewarding work.

What is the most critical component of effective leadership?

I think my fundamental job as a leader is to create a great environment for the people who work in the organization, and I have a basic philosophy in health care that we have to take care of the people who take care of people.

What’s your assessment of the overall health care system. Is it working?

No. I’ve always had concerns about the model11 of how we drive cost, access, quality. I think the quality curve has gotten a lot better. I think the Affordable Care Act has allowed better access. I think the payment model continues to reward the wrong thing, but we’re moving now toward a more rational approach. The difficulty is … that transition. Health care has become a huge portion of the American economy … 18 percent of GDP. As we work to reduce unnecessary (costs), we end up taking a hit on the revenue side. And yet others in the marketplace (doing the opposite) end up with more revenue. It’s a crazy world. To say that the health care system is working, probably not the way it should.

Health care is, as you say, a huge part of the economy. What is the role of HFHS in the local economy, in economic development?

The economic importance of health care is incredible. If you look at most communities today, health care is the major employer, but we are a true anchor organization in Detroit. We not only looked at some of the more traditional ways we could contribute – whether it’s jobs, obviously improving the health status of the community – but also the neighborhood around us. It’s a very symbiotic-type relationship. There’s a reason we’re called anchors. We don’t move … or relocate. We want to be part of the solution in Detroit.

How about the Detroit Innovation District, for which you serve as chair of the advisory committee?

This kind of came out of the Midtown work that we’ve been doing – how we buy locally, job creation. We started building our Innovation Institute a few years ago. We now have well over 300 projects. We’ve had our first commercially developed product, the (more patient-friendly) gown. We’ve now produced 35,000 of these with Carhartt for our patients. The idea … is that we create a physical, geographic area called the Detroit Innovation District and focus on three things. One is the real estate itself, to create better coordination and collaboration in the planning of the space. The second is commercialization. And the third is the knowledge economy. An example of that is the College for Creative Studies – the reason we have the new patient gown. We had students that came over … and they looked at things from a different lens.

What are the keys to attracting and retaining talent at a big urban health center?

I think it is your culture, the environment you create. People are looking for opportunity, a place where they can develop their careers. Frankly, it’s a lot about leadership, too. Leaders attract great people. Sometimes organizations want to put their people in a box. We try to keep that box expanding. I think that’s how you attract talent and keep talent. You create an environment that they love working in every day, with leaders who support them.

What can you tell us about Wright Lassiter, your designated successor?

I began talking to the board about leadership succession several years ago. They asked me to look around. It was a bit of happenstance. Wright and I served on a panel over a year ago, and he got up and talked about the innovation work he was doing in California. I was taken aback. So, when I got back I did what we all do. … I Googled him. Then I called him, and I said, “We’re doing succession planning, and I would really like the opportunity to get to know you.” The more I talked to him, the more I got to know him. … His demeanor, his style, his values, his intellect and strategic approach to things were all very intriguing to me. … He’s been here now for a few weeks, and I think people are taking very well to him. I think he’ll be a great fit.

What do you think of as your most lasting accomplishment?

I think probably the most important thing was changing the culture of the organization… to be more people-focused. I think the approach I’ve taken has always been to put people fi rst, patients and staff. The three most significant distinct accomplishments are the turnaround of

Henry Ford Hospital, the investments we’ve made. We made decisions to make investments in Detroit when others were not. Second, was the Baldrige Award. I think the quality journey we’ve been on has made a fundamental difference. Third is building a brand new hospital (in West Bloomfield) in 2009 and having it work. Those are things that I hope will be lasting and positive changes.

What’s next for Nancy Schlichting?

I don’t want another big job. I want to contribute in a meaningful way intellectually. That could be on boards, it could be teaching, some consultation. I want to contribute more to the community … to kids or people in need, and to take better care of myself. I love playing tennis, golf. I love to swim, and I’m trying to be a boater … but that’s really a stretch.

The Roads and Michigan’s Health

Page 6

By Sandy K. Baruah

When it comes to your health, there are things you sometimes have to do in the interest of your well-being. Whether it is taking a pill or an exhausting treatment regimen, you do them because they positively impact your quality of life – not because you necessarily want to.

When it comes to Michigan’s economic health, there is something that Michiganders need to do for their collective well-being:

Vote “yes” on Proposal 1 on May 5. While no one is excited about increasing the sales tax from 6 to 7 percent, it is critical to Michigan’s future as a place to live, work and play.

A “yes” vote will ensure Michigan’s roads are safe for motorists. It will prevent crumbling roads from undermining Michigan’s reinvention and protect motorists whose safety is in question daily. It is a critical step to ensuring Michigan has the transportation infrastructure to continue to grow its economy.

Safe and effective roads are not luxury items. Our employees, customers and goods rely on functional roads to navigate the marketplace. Michigan cannot cut corners on critical infrastructure and expect to compete globally. Roads are a base requirement for a sound business environment, and unfortunately, they cost money. Yet, the Legislature – both parties – has failed to lead on this issue.

For years, it has been well known that Michigan’s roads are crumbling. Thirty-eight percent of Michigan’s state and locally owned urban roads and 32 percent of Michigan’s state and locally owned rural roads are in poor condition, according to the national transportation research group TRIP. Despite these facts, Michigan has not acted to solve this growing crisis. Michigan invests less per capita in transportation than any state in all of America. Ohio, a state with a similar climate and road system to Michigan, invests more than $1 billion more in its roads each year than Michigan does.

A big reason Michigan has lagged behind competitor states is due to the current tax system that requires that taxes on gasoline be diverted someplace else in the state budget. Proposal 1 not only modernizes our road funding system, it guarantees in the constitution that every penny paid at the pumps in fuel taxes must go to transportation. That will go a long way to address the lack of investment our state has made.

Additionally, waiting longer to fix Michigan’s roads will only cost more. For every $1 invested in maintaining our roads and bridges, there is a savings of at least $6 in reconstruction costs. While there is no number that can tie investment to lives saved, there can be agreement that one life lost due to poor road conditions is one too many.

Proposal 1 is far from perfect – the Chamber Board of Directors was less than enamored with it – but it is the only option. There is nothing else on the table, and Michigan does not have time to wait for another long drawn-out battle on this issue. The political gridlock over road funding is now threatening to paralyze Michigan’s economy with the uncertainty of an election.

On May 5, voters will be asked to do something that is not going to be popular in some circles. But voting “yes” is the right decision – for the safety of our motorists and the future of Michigan’s economy.

Sandy K. Baruah is president and CEO of the Detroit Regional Chamber.

New Leads, Insight from Chamber Trip to Phoenix

Detroit Region Draws Positive Reviews from Phoenix Site Selectors

A recent site selector trip to Phoenix, Ariz. is yielding some positive results for the Detroit Regional Chamber’s Business Attraction program.

The two-day trip, held March 3-4, provided Chamber representatives the opportunity to showcase the region’s assets. Firms included Binswanger Technology Group, Foote Consulting Group, Jones Lang LaSalle and Webster Global Site Selectors. Additionally, Chamber representatives met with CBRE, the largest global commercial real estate services firm.

Monique Claiborne, business development representative for the Chamber, said many of the firms were eager to learn about the Detroit region in order to pass information on to prospective businesses looking to expand or relocate operations in Michigan. Claiborne said following the site selector trip, Business Attraction received an immediate lead from CBRE for a client considering expanding in Oakland County or relocating to Tennessee. The Chamber has already begun meeting with the client, as well as partners in Oakland County, the Michigan Economic Development Corporation (MEDC) and DTE Energy.

“It’s really going to come down to incentives to get the client to move here,” she said.

Claiborne said the trip also served as an opportunity for the Chamber to learn what businesses outside of Michigan are looking for when considering establishing a presence in the state.

“One of the firms we spoke with works with numerous financial services and information technology companies and informed us that Detroit doesn’t do a good job of publicizing the success of information technology and similar white collar companies,” she said.

From those conversations, Business Attraction will use the feedback to highlight information technology success stories and case studies in Michigan to provide future site selectors, she said.

Additional inquiries focused on infrastructure and asset availability to accommodate aerospace and aviation companies. Claiborne said the team is planning to attend the MRO Americas 2015 trade show in Miami, Fla. in April in order to continue the conversations from the Phoenix trip with decision makers in both industries.

Overall, the firms expressed excitement with the transformation taking place in Detroit and the region.

“Site location is about connecting companies to the right community. Workforce, available properties and certified sites are critical drivers for projects. It is so important for communities to reach out like the Detroit Regional Chamber has to keep us updated about what’s going on and what is available across the region,” said Heather Maxwell, site selector consultant for Webster Global Site Selectors.

“The resiliency and commitment shown by area leadership and businesses during Detroit’s recovery will certainly influence future growth for the region,” Maxwell added

The Cadillac Tax

Employers should prepare for the ACA’s approaching Cadillac tax

Pages 28-29

By Edward M. Murphy

Perhaps one of the more controversial and least discussed aspects of the Patient Protection and Affordable Care Act (ACA) has been what is commonly referred to as the Cadillac tax. The reason it has been under the radar is two-fold: One, it doesn’t go into effect until the plan year’s beginning on or after Jan. 1, 2018, and two, to date employers have been more focused on implementing and dealing with the other regulatory requirements of the ACA.

In a nutshell: What is the Cadillac tax?
The Cadillac tax imposes a non-deductible 40 percent excise tax if a medical plan’s premiums (insured)/premium equivalents (self-insured) exceed $10,200 for single coverage and/or $27,500 for someone with family coverage (some exceptions apply). We note that the limits include all employer and employee contributions to a medical Flexible Spending Account (FSA) and/or a Health Savings Account (HSA) when such contributions are made through a Section 125 Cafeteria Plan.

All amounts above the limits, whether paid by the employer or employee, are subject to the 40 percent excise tax. For insured plans, the insurance company pays the tax. For self-insured plans, the employer/plan sponsor pays the tax.

The real impact: What does this mean for employers?

From an employer perspective, the tax actually creates a “race to the bottom.” Essentially, whether a plan is insured or self-insured, the responsibility for paying the tax will trickle down to the employee. No insurance company of which I’m familiar will benevolently pay the tax without expecting compensation from the plan sponsor. The same is true of employers with self-funded plans. Ultimately, cost increases beyond some predetermined threshold get passed along to the employee. As a result, the impact on employer and employee are inextricably linked.

As the dollar limits are either trigged or get closer to current premium/premium equivalents, a cascade of changes will likely surface. The first and most obvious is to reduce benefits in an attempt to lower premiums and avoid the tax. From that point, subsequent changes come from multiple directions. They include:

  • Employers begin to lose their ability to attract and retain employees, leading to a potential talent drought.
  • Productivity is impacted, driven by increased costs being passed on from employer to employee.
  • Employees may attempt to demand increased “cash compensation.” With lesser benefits aimed at avoiding a tax comes a shift in medical expenses to the employee in the form of high deductibles, copays and coinsurance. Employees won’t sit still forever while absorbing greater costs, and as such, inflation is fueled.
  • The equivalent of benefit plan “gridlock” that occurs due to no longer being able to reduce benefits enough to avoid the tax and still meet the minimum essential coverage requirements imposed by the ACA. Remember, the ACA also charges non-compliance penalties for employers that either don’t offer a plan, or the plans they do offer don’t meet certain minimum standards.

Ultimately, an employer may decide to no longer provide any medical benefit plan, and instead opt to pay the ACA-imposed Shared Responsibility penalty ($2,000 for each full-time employee).

  • Once enough employers opt to exit providing medical benefits, we will likely see swift macroeconomic changes impacting individual and corporate taxes, total compensation, overhaul in health care purchasing and delivery systems, etc.

Overall, the Cadillac tax will likely produce a downward spiral that with each step produces ever more restrictive efforts to lower premiums and shift costs, so that medical plans remain below the limits before the Cadillac tax applies

What’s the prescription?

Employers and employees should:

  • Educate employees that medical care is not free and increased consumption drives increased premiums.
  • Understand the links between lifestyle, medical care consumption and cost. This includes a focus on eliminating the things we can change that directly impact cost, such as smoking, obesity, diet and exercise. Changes here impact costs; costs that are left unchecked will only go up. As they go up, the 40 percent excise tax becomes more likely.
  • Finally, understand that once the tax hits, someone has to pay it. The cost of the tax will either be direct – employers will likely pass the tax on to the employees in the form of increased premium contributions – or indirect, as employers modify plans with higher employee deductibles, copays and coinsurance. At the end of the day, unless we communicate and understand the economics of the situation, the direct or indirect cost increases will simply be passed on to employers who will, in turn, pass them along to employees. Your best choice is to begin to make changes now and extend the time before the tax applies. Unfortunately, either way, it’s change now and pay me later.