UM's Michigan Medicine to acquire Sparrow Health in latest hospital system merger

The University of Michigan's Michigan Medicine will acquire Lansing-based Sparrow Health System, the UM Board of Regents said Thursday, the latest merger in a state that has experienced hospital system consolidation.

No purchase price was disclosed, and Michigan Medicine and Sparrow officials indicated they would hold a Friday press conference in Lansing to discuss further details. UM said the addition of the Sparrow Health System would make it a $7 billion operation, with 200 sites of care across Michigan and 115 sites coming from Sparrow.

"This definitive agreement is transformational for Michigan Medicine and, by extension, the University of Michigan," President Santa Ono said at the board meeting.

The agreement will build Michigan Medicine's statewide network and offer medical services to patients who live in the Lansing area, Ono said. It builds on an affiliation agreement that the two systems signed in March 2019, which allowed them to partner to cover pediatric care at Sparrow’s Children’s Center in Lansing.

Michigan Medicine's network of hospitals includes its University of Michigan Medical Center flagship hospital in Ann Arbor, C.S. Mott Children's and its Metro Health hospitals and outpatient medical facilities in the Grand Rapids area.

Sparrow Health has seven hospitals in the Lansing area, including its flagship hospital just east of downtown Lansing, as well as a network of medical providers in mid-Michigan. It has community hospitals in Charlotte, Carson City, Ionia and St. Johns.

As part of the deal, Michigan Medicine now owns the Physicians Health Plan, which provides health care coverage to more than 70,000 members and 300 employers. The UM system had bought a 25% stake in the Physicians Health Plan in 2019.

The Michigan Medicine-Sparrow combination follows the merger of Spectrum Health and Beaumont Health systems in February, forming the state's largest hospital system. The Priority Health insurance plan was part of that merger. In recent years, other mergers have included the combination of the St. Joseph and Providence health systems in 2016, which is now known as the Ascension health system.

The Michigan Medicine-Sparrow merger will benefit both health systems, said Allan Baumgarten, a Minneapolis-based analyst who has followed Michigan hospital systems and health plans for a couple of decades. It also continues the trend of hospital consolidation in Michigan, he said.

The UM health system's purchase of Sparrow doesn’t seem to be in reaction to the Spectrum-Beaumont merger, but allows Michigan Medicine to add a health system that will feed “patients to its specialists in Ann Arbor (in addition to Grand Rapids and Jackson),” Baumgarten wrote in an email.

Sparrow has been struggling financially, has been facing more vigorous competition from the new McLaren hospital in town and has “needed to partner with a larger system for an infusion of capital and to get more specialists practicing there,” he said.

UM Health will become the sole corporate member of Sparrow to form an integrated health system. The agreement is expected to be completed in the first half of next year, but must await final regulatory approvals. Michigan Medicine will also be making an $800 million investment over the next eight years in Sparrow Health Systems, according to a UM and Sparrow statement.

The acquisition will allow Sparrow to continue to support community-based medical care and join forces with UM to form a statewide care system, Sparrow CEO James Dover told The Detroit News.

Patients will have better local access to broader specialists, and Sparrow caregivers will be able to work with UM physicians on research, Dover said, meaning fewer patients will have to drive to Ann Arbor to receive care.

Sparrow ultimately will see its name change further down the road, but the current governance, leadership and operations will all continue to be handled locally, with the added benefit of being a part of a statewide system, Dover said. Sparrow has many existing partnerships with Michigan State University medical students, and those will not be affected.

Marschall Runge, executive vice president of medical affairs and dean of UM's medical school, and Executive Vice President Geoffrey Chatas wrote in an action request to the UM Board of Regents that this acquisition will extend the educational and research capabilities of UM.

“Together, the parties seek to create a statewide UM Health system that is the leading health system in the state with respect to quality, service, and clinical care," Runge and Chatas wrote. “The benefits to the parties’ respective communities will be tangible through enhanced access to care, improved quality, and brand recognition.”

The Sparrow board voted to approve the acquisition Nov. 28, Dover said, but the agreement was made effective Thursday after the UM regents voted to approve it.

LaKeeya Tucker, medical chief of staff for Sparrow Hospital, said in a press release that she is excited about working with UM physicians to improve access to healthcare throughout the region.

“We are doing something special here by combining the community care and know-how that Sparrow has long been known for with the clinical expertise and commitment of UM Health,” Tucker said.

kberg@detroitnews.com