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The State of Health Care

Southeast Michigan is rising as an international leader in health care.

By Ilene Wolf

Pages 14-15

Like people who cruise untouched through serious flu epidemics, Michigan’s health care industry stayed relatively healthy throughout the recent Great Recession.

Ironically, one big reason was the health of much of the state’s population.

A large number of Michiganders are beset with chronic illness or are part of an aging population. The combination means more sickness and, therefore, more growth in the health care industry, said Brian Peters, executive vice president of the Michigan Health & Hospital Association.

“There was also a fair amount of pent-up demand,” Peters said.

At the height of the recession, Peters explained, even insured employees put off getting care if it meant taking time off work for fear of being let go. And, with the number of people insured by Medicaid and Medicare steadily rising, there’s even more demand for doctor visits and hospitalization, Peters said.

That’s why it pays to pay attention to the health care sector.

After all, health care is Michigan’s largest private-sector employer, providing about 555,400 jobs in 2012 compared with 515,700 jobs in 2008. This is an increase of almost eight percent according to MHA’s numbers. Wages, salaries and benefits for those employees in 2012 were more than $31 billion, up from $26.3 billion in 2008 — an increase of almost 18 percent.

Of those employees counted by the MHA, Michigan’s 21,000 physicians provided 121,419 jobs in their offices in 2009, which accounted for $20.1 billion in wages and benefits according to a report prepared for the American Medical Association.

The poor economy even helped some high-tech health care companies, such as CareTech Solutions, a health information technology firm in Troy, said President and CEO Jim Giordano.

“The recession increased the talent pool,” he said, explaining that CareTech was able to hire network engineers and other IT personnel downsized from Tier 1 or 2 automotive suppliers and the banking industry.

The downturn also helped Giordano grow his business to 200 clients in 33 states as financially-challenged hospitals and health systems realized CareTech could take care of their IT needs more cheaply than doing it in-house, he said.

Among the Detroit area’s largest systems — Beaumont, Henry Ford and St. John Providence health systems, Detroit Medical Center (DMC) and McLaren Health Care Corp. — CareTech has DMC as a client.

According to one of DMC’s partner hospitals, the Barbara Ann Karmanos Cancer Institute, recent changes in its payor mix confirm the MHA’s Peters’ assertions about Michiganders moving to federal health insurance.

In recent years, the Institute’s commercially insured patient population has fallen, while its Medicare and uninsured patient count has risen, says Dr. Gerold Bepler, president and CEO.

Bepler said that in order to make up for falling revenue from third-party payors, Karmanos has tweaked staffing levels, negotiated better contracts with insurance companies and become more aggressive about challenging rejected insurance claims.

Karmanos, one of Michigan’s two National Cancer Institute-designated Comprehensive Cancer Centers and one of 41 in the nation, has also found new sources of revenue and created jobs.

It opened an 11-bed intensive care unit with 30 new professional hires in 2012 that was paid for with $3.8 million from donors, and is setting up a clinical laboratory due to open next year with 40 new positions, primarily lab technicians. In addition, it brought its medical records function in-house, accounting for 40 clerical jobs.

Karmanos also increased its research funding, from $75 million in 2009 to $90 million in 2012, Bepler said.

“We created focus groups and internal review processes,” Bepler said. “[We told researchers] if you want to get funding, you have to put a new twist on what you’re doing.”

The approach is working. Karmanos researcher Dr. Patricia LoRusso received a private $6 million Stand Up to Cancer grant to lead a national team of melanoma experts in late 2011.

Karmanos also continues to put a new twist on patient care.

The Food and Drug Administration is reviewing an ultrasound-based breast cancer screening technology developed at Karmanos, called SoftVue. Delphinus Medical Technologies, a Karmanos spinoff created in 2009, hopes to commercialize SoftVue.

Surprisingly, some automotive suppliers have also trod a similar, medical-based path to recovering from the crippling bout of economic flu that almost wiped out the automotive industry.

That’s because the Granholm administration saw a major diversification opportunity for such companies and, using Michigan Economic Development Corporation (MEDC) funding, sought help from expert Christophe Sevrain, owner and CEO of CJPS Enterprises, a medical device consulting firm in Bloomfield Hills.

Sevrain had previously helped Delphi Automotive in its attempt to diversify into manufacturing medical devices.

“Everybody was on the fence and our job was to get them off the fence,” Sevrain said of the 100 or so companies in the state-funded diversification program that enlisted his know-how.

Of those companies, about one-third overcame the hurdles to becoming medical device manufacturers, Sevrain said. Those hurdles included understanding a different market, a supply chain largely controlled by a few group-purchasing organizations, insurance reimbursement requirements, a complicated regulatory process, and even a psychological block — in the way the companies viewed themselves.

“People are used to being a supplier to an OEM,” Sevrain said, referring to the large automotive original equipment manufacturers. “But in the medical industry you can be a $2 million company and be an OEM. The concept that you could have your own brands is foreign to them [suppliers].”

Sevrain wishes the state had expanded the program to help the companies with hiring the professionals needed for their new ventures through tax breaks or direct assistance.

“The ones that could have done it, some just couldn’t afford it,” he said.

But some of those companies short on cash for new hires might have benefited from a more recent program that offers help to small and medium businesses, established in late 2011, that subsidizes student internships and cooperative education for students from six of the state’s public universities.

Known as the Michigan Corporate Relations Network, the program is the nation’s first statewide university — business engagement network, and includes the three schools in the University Research Corridor (URC) — Michigan State and Wayne State universities and the University of Michigan in Ann Arbor – along with Western Michigan and Michigan Technological universities and the University of Michigan-Dearborn.

The corporate relations network’s role is to make it easier for businesses to find and collaborate with expert faculty and knowledgeable students on research and development, partly through establishing business engagement offices at the three non-URC schools. The program’s $3 million in funding comes from the MEDC, the Michigan Strategic Fund and private industry.

“It’s the right channel to tap into the resources at universities,” said Jeff Mason, executive director of the URC, an alliance established in 2006 to foster statewide economic growth. “It’s to match up companies with existing resources.”

Ilene Wolf is a metro Detroit freelance writer.