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18 CRAIN’S DETROIT BUSINESS // Nov. 1-8, 2014 CRAIN’S DETROIT BUSINESS // Nov. 1-8, 2014 19
Bloomfield Park: Eyesore or destination?By Kirk Pinho
Nearly six years after con-struction abruptly halted on the Bloomfield Park site on Telegraph and Square Lake roads, a new de-velopment team plans to resume the long-stalled project on 87 acres.
Executives from South-field-based Redico LLC this month purchased the Bloomfield Park foreclosure rights from San Fran-cisco-based Wells Fargo Bank NA as part of a joint venture with Califor-nia-based PCCP LLC. The compa-nies don’t know exactly what they will do with the site, but all signs noted by retail experts point to it being renewed as a mixed-use de-velopment marketed as a destina-tion shopping center.
A rekindled project would re-place what is now an eyesore along a stretch of Telegraph at the Pontiac-Bloomfield Township border that the most recent Mich-igan Department of Transportation traffic data show has more than 45,000 cars per day driving by.
Whatever finally comes to the Bloomfield Park site will have to cater to the mix of communities that surround it, which includes Bloomfield Township, Pontiac, Bloomfield Hills and Waterford Township, said Robert Gibbs, managing principal of Birming-ham-based Gibbs Planning Group Inc.
There are 60,000 people living
within a three-mile radius of the site, while 154,000 live within five miles and 630,000 live within 10, Gibbs said.
The more the redevelopment can attract people living farther away, the greater the annual household income prospects for shoppers. Within three miles, the average is $77,000, while within five miles, it’s $87,000 — and with-in 10 miles it’s $96,000, according to Gibbs.
By 2019, average household in-come is expected to increase to $88,000, $100,000 and $109,000 in those geographic radius areas, re-spectively.
“It’s a great location,” Gibbs said, noting that national retailers like Costco and Target both have prominent locations along that same stretch of Pontiac. “(Bloom-field Park is) going to have to draw people from a 3-5 mile radius, but it should be able to draw from be-tween 5-6.”
Mixed-use optionsBut before going after retail ten-
ants for Bloomfield Park, Redico needs to determine what of the partially built development is us-able and what needs to be demol-ished. Bloomfield Park was origi-nally envisioned as a two-phase, 1.7 million-square-foot develop-ment.
The site review process is un-derway, said Dale Watchows-ki, president, CEO and COO of
Retail experts foresee site as a diverse shopping centerDETROIT 2.0
Nearly six years ago, construction began on Bloomfield Park. Today, more than 45,000 cars a day drive by the unfinished proj-ect. New owner Redico aims to give those drivers something to see. [PHOTO BY LARRY PEPLIN]
Redico.“We are trying to come up with
a good mix of uses that will maxi-mize the value of the site,” he said. “It’s a little premature to pick out individual tenants because they have to look at the whole site.”
Redico has experience with metro Detroit projects catered to areas that straddle multiple com-
munities and attract a diverse mix of shoppers, including the high-profile developments and redevelopments of the Gateway Marketplace at Eight Mile Road and Woodward Avenue, where Detroit’s first Meijer Inc. store opened last summer, as well as the planned redevelopment of the ad-jacent former Michigan State Fair-grounds site.
Configuring the Bloomfield Park site with a combination of attractions, including an in-de-mand retail anchor tenant; small-er, desirable shopping outposts; housing; restaurants; and perhaps even a configuration as a walkable lifestyle center would make sense, real estate experts said. (Think of Clinton Township’s the Mall at Par-tridge Creek but with roads run-ning through it, or the Easton Town Center in Columbus, Ohio.)
“If they turn it into a conven-tional strip center, it’s not going to meet its potential. The place-mak-ing is extremely important,” Gibbs said.
Jim Bieri, president of De-troit-based Stokas-Bieri Real Es-tate, said Redico would do well by trying to “pick off” some of the moderate-end retailers at the Vil-lage of Rochester Hills or The Som-erset Collection in Troy.
“You don’t put up the money to buy something like that without doing some serious looking and understanding. I’m sure they’ll spend the time and money to find out who might want to come there first and put together a merchan-dise mix that makes sense for the property and the customer,” he said.
Michael Cooper, managing principal of the Southfield office of architecture firm Harley Ellis Devereaux Corp., said providing
things like housing and retail in the updated plan will be a signif-icant turnaround for the blighted site, plus could provide a boost for other local sites.
“Hopefully there is some mo-mentum that can come of this, whether it’s at Summit Place Mall or the Pontiac Silverdome that likewise have redevelopment po-tential,” he said.
Previous false startsLast week’s news about the
foreclosure rights purchase con-tinues the long saga of Bloom-field Park, the first phase of which was planned to consist of 533,000 square feet of retail space. n
Twitter: @kirkpinhoCDB
Here’s what might make the plan work
There are 60,000 people living within a three-mile radious of the site, and 630,000 within ten.
Additional retail Both COSTCO and Target have retail locations in the area.
Traffic increasing More than 45,000 cars drive by the incomplete devlopment each dat. Combination of attractions Businesses such as retail, housing, restaurants and a lifestyle center could all be considered for inclusion in the site.
The development compnay plans to conduct extensive research regarding the types of businesses that would attract consumers from within a five-mile radius.
DECISION-MAKERSWDET LISTENERS ARE THE MOVERS AND SHAKERS IN SOUTHEAST MICHIGANSponsoring WDET through corporate underwriting gives you access to well-educated, 25- to 54-year-olds who are employed in management, business or professional occupations.Learn how WDET can help you reach new customers.wdet.org/sponsorship | Michael Perkins 313.577.5855
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reach the
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Editor-in-Chief Keith E. CrainGroup Publisher Mary Kramer,(313) 446-0399 or [email protected] Publisher Marla Wise, (313) 446-6032or [email protected] Jennette Smith, (313) 446-1622 [email protected] Editor Cindy Goodaker, (313) 446-0460or [email protected], Digital Strategy, Audience DevelopmentNancy Hanus,(313) 446-1621 or [email protected] Managing Editor Michael Lee, (313) 446-1630 [email protected] Editor/Custom and Special ProjectsDaniel Duggan, (313) 446-0414 [email protected] Managing Editor Kristin Bull,(313) 446-1608 or [email protected] Editor Beth Reeber Valone, (313) 446-5875 or [email protected] Editor Gary Piatek, (313) 446-0357 or [email protected] and Data Editor Sonya Hill,(313) 446-0402or [email protected] Support (313) 446-0419; YahNica Craw-ford, (313) 446-0329Newsroom (313) 446-0329, FAX (313) 446-1687 ,TIP LINE (313) 446-6766
REPORTERSJay Greene, senior reporter Covers health care, in-surance, energy, utilities and the environment.(313) 446-0325 or [email protected] Halcom Covers litigation, the defense indus-try and education. (313) 446-6796 [email protected] Henderson Covers banking, finance, tech-nology and biotechnology. (313) 446-0337 [email protected] Pinho Covers real estate, Oakland and Ma-comb counties. (313) 446-0412 [email protected] Shea, enterprise editor Covers media,advertising and marketing, the business ofsports, and transportation.(313) 446-1626 or [email protected] Snell, reporter Covers city of Detroit and regional politics. (313) 446-1654 [email protected] VanHulle, Lansing reporter. (517) 657-2204 or [email protected] Walsh, senior reporter Covers the busi-ness of law, auto suppliers, manufacturing andsteel. (313) 446-6042 or [email protected] Welch, senior reporter Covers nonprofits,services, retail and hospitality. (313) 446-1694 or [email protected]
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Sales Inquiries (313) 446-6032; FAX (313) 393-0997Sales Manager Tammy Rokowski Senior Account Executive Matthew J. LanganAdvertising Sales Christine Galasso, CatherineGrace, Joe Miller, Sarah StachowiczClassified Sales Manager Angela Schutte, (313)446-6051Classified Sales Lynn Calcaterra, (313) 446-6086Events Manager Kacey AndersonCreative Services Director Pierrette TempletonSenior Art Director Sylvia KolaskiMarketing Coordinator Ariel BlackSpecial Projects Coordinator Keenan CovingtonSales Support Suzanne Janik, YahNica CrawfordEditorial Assistant Nancy PowersProduction Manager Wendy KobylarzProduction Supervisor Andrew Spanos
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Main Number: Call (877) 824-9374 or [email protected] $59 one year, $98 two years. Out ofstate, $79 one year, $138 for two years. OutsideU.S.A., add $48 per year to out-of-state rate for sur-face mail. Call (313) 446-0450 or (877) 824-9374.Single Copies (877) 824-9374Reprints (212) 210-0750; or Krista Bora [email protected] find a date a story was published (313) 446-0406 or e-mail [email protected]
Crain’s Detroit Business is published by Crain Communications Inc.Chairman Keith E. CrainPresident Rance CrainTreasurer Mary Kay CrainExecutive Vice President/OperationsWilliam A. MorrowExecutive Vice President/Director of StrategicOperations Chris CrainExecutive Vice President/Director of CorporateOperations KC CrainVice President/Production & ManufacturingDave KamisChief Financial Officer Thomas StevensChief Information Officer Anthony DiPonio G.D. Crain Jr. Founder (1885-1973)Mrs. G.D. Crain Jr. Chairman (1911-1996)Editorial & Business Offices1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000Cable address: TWX 248-221-5122 AUTNEW DETCRAIN’S DETROITBUSINESS ISSN # 0882-1992 is pub-lished weekly,except fora special issue the third weekofNovember,and no issue the third weekofDecemberbyCrain Communications Inc.at 1155 Gratiot Ave.,DetroitMI 48207-2732.Periodicals postage paid at Detroit,MIand additional mailing offices.POSTMASTER: Send ad-dress changes to CRAIN’S DETROITBUSINESS,Circula-tion Department,P.O.Box07925,Detroit,MI 48207-9732.GST# 136760444.Printed in U.S.A.Entire contents copyright 2015 byCrain Communica-tions Inc.All rights reserved.Reproduction oruse ofedi-torial content in anymannerwithout permission isstrictly prohibited.
CRAIN’SDETROIT BUSINESS
Achatz Handmade Pie ...................................... 4Adamo Group ................................................... 24Amherst Partners .............................................. 9Arbor Hospice & Palliative Care .................... 22Blue Cross Blue Shield of Michigan .................. 1Cascade Partners .............................................. 9City Hall Artspace Lofts.................................. 26Dalsey & Associates........................................ 26Detroit Symphony Orchestra ......................... 14Detroit Zoological Society ............................... 11Dick Scott Chrysler Dodge Jeep.................... 20Downtown Detroit Partnership..................... 25eCycle Opportunities ....................................... 13Fiat Chrysler Automobiles .......................... 1, 20Fox Hills Chrysler Jeep .................................... 20Fred A. and Barbara M. Erb Family Foundation . 12Fund for Medical Research and Education .... 3George P. Johnson Co. ........................................ 1Gibbs Planning Group ..................................... 26Grandmont Rosedale Development.............. 15Grow Detroit’s Young Talent .......................... 25
Hospice of Michigan ........................................ 22Just Baked Cupcakes ........................................ 4JVS ...................................................................... 13Kresge Foundation .......................................... 25Livonia Chrysler Jeep ...................................... 20Mercer ............................................................... 26Michigan Manufacturers Association........... 19Michigan Unemployment Insurance Agency ... 17North American International Auto Show... 1, 28Olympus Fare .................................................... 21Pitt, McGehee, Palmer & Rivers..................... 18Plunkett Cooney ............................................... 19Quarton Partners............................................... 9Skillman Foundation ....................................... 25Small Business Association of Michigan ...... 18University of Michigan ...................................... 6Wayne Metropolitan CommunityAction Agency 14Western Michigan Univ. Cooley Law School..... 17Wolfson Bolton ................................................. 19Wayne State University .................................... 3Wayne State University Physician Group....... 3
INDEX TO COMPANIESThese companies have significant mention in this week’s Crain’s Detroit Business:
who came from Augusta, Ga.-basedGeorgia Regents Health System andhas known Wilson for many years,was given the job of reviewing themedical school’s financial condi-tion, Sobel said.
Within 45days, Hefner dis-covered com-municationproblems be-tween the med-ical school,FMRE, the Uni-versity PhysicianGroup and prac-tice plans thatwere hurtingtheir ability to
generate revenue, Sobel said. Thoseincluded a lack of joint strategicplanning and coordination of hiringand compensation plans.
“The university had to pay thecosts of the professors because themoney was not covered by UPG,”said Sobel, noting that UPG thisyear lost $9 million, despite the $27million sale of a 175,000-square-foot corporate office and ambulato-ry surgery center in Troy.
Losses for the medical school infiscal 2015 totaled $7 million andlosses for FMRE were $13 million,Sobel said. Combined revenue forthe medical school and UPG in2015 was about $640 million.
“I am not here to point fingers,”Sobel said. “There are too manyfingers to point, and the fingershave grown long” over the past 20years.
Sobel said a turnaround team ledby Hefner is exploring various op-tions this month to cut costs and in-crease revenue.
“We cannot have a burn rate of$1.5 million in January, not even a$1 million” per-month loss rate,Sobel said. “We have already fleecedthe university more than what isreasonable.”
Starting next year, Sobel said,there will be a period of austerity forsome departments at the medicalschool.
“There will be a (hiring) freeze inmany departments. There will be(expense) cuts,” he said. “I amagainst the concept of across-the-board cuts. We cannot cut success-ful individuals.”
Total employees at the medicalschool and UPG are 3,285, with985 at UPG and 2,300 at the med-ical school. Total clinical, scienceand research faculty is 827 profes-sors.
“We don’t know about (employ-ee) reductions. Things are thin now.We are looking possibly at attrition,”Hefner told Crain’s on Tuesday.“On the faculty side, there will be re-deployments and cuts in overheadareas.”
To turn around operations, Hefn-er said, the medical school and UPGalso must increase revenue in a va-riety of areas.
Immediately, he said, UPG hastaken action on improving billingand collections and in renegotiatingsupply and management servicevendor contracts.
“We are opening up (physician)schedules and removing barriers tosee more patients and beginning tointeract and share information withfaculty,” Hefner said. “We need totake systemic actions, but some ofthat does require more planningand design work.”
Sobel said plans call for renegoti-ating contracts with such partnerorganizations and increasing re-search funding and philanthropy.Efforts are also underway to de-crease overhead costs and tie physi-cian pay to productivity.
“We need to fundamentallychange how we operate,” Sobelsaid. “The chairs have not been heldaccountable, and that will stop. Weneed to increase faculty productivi-ty and reduce administrative over-head. We need to create a high-per-forming team across theorganization.”
Sobel said one disturbing find-ing was the low percentage of clini-cal faculty and basic science facul-ty that are contributing fundedresearch grants to the medicalschool.
In a Thursday interview withCrain’s, Sobel said the lack of re-search and grant dollars is a “domi-nant factor” in accounting for the$29 million in losses.
For example, the national aver-age for tenured faculty with grants isabout 40 percent, but Wayne State’saverage recently has been about 14percent.
“Most (science and clinical) fac-ulty don’t have grants. This has gotto stop,” Sobel said in the town hall
WSUFROM PAGE 3
video. “They can go to another hos-pital, not here. … We have too many(faculty) who are unable to supportthemselves with clinical services orresearch.”
Sobel estimated “we have 200FTEs (full-time equivalent) in ex-cess of what we are doing.” He saidthe Wayne State turnaround team isclosely looking at the clinical andscience departments to identify fac-ulty who either have no researchgrants or grants with small amountsof funding.
“We have to redeploy, resize andright-size,” Sobel said at the townhall meeting.
Hefner said Thursday the med-ical school will have a plan some-time in January to address what todo about the differential in facultysalary and research grants.
It is standard practice at mostmedical schools that when re-searchers receive grants, part oftheir salaries is paid from thosegrants.
However, in fiscal year 2015,medical school faculty brought in$117 million in research grantsand sponsored awards, but only$12 million of salary was recov-ered from these grants, Hefnersaid. If Wayne State moved to anational median, $5 million to$15 million more could be recov-ered, he said.
However, in the last three quar-ters, Sobel said, the amount of re-search grants alone has picked upby at least $10 million. For example,research grants increased to $70million in the first nine months ofthis year from $60.3 million duringthe same period in 2014.
“We have a lot of wonderful re-searchers here,” Sobel said, addingthat the medical school is workingon a way to increase incentives andshare resources to encourage de-partments and faculty to increasetheir research capabilities withoutaffecting their educational and clin-ical responsibilities.
While in the making for 20 to 30years, financial problems started tobecome serious in 2009, whenWayne State settled a contract dis-pute with the Detroit Medical Centerthat led to a reduction in funds fromDMC to the medical school anduniversity.
Hefner said the DMC contractand lower payments was a signifi-cant contributor to the financialdownturn at Wayne State. He saidthe school is still researching howmuch less the medical school hasreceived from DMC since 2009.
The DMC contract with the med-ical school expires in March and willbe renegotiated “to make it fairer,”he said.
“It is very difficult to manage theschool of medicine and take care ofour commitments with thatamount” of money from DMC,Sobel said.
But Hefner said the financialproblems facing Wayne State arealso due to reductions in fundingfrom the state, the National Institutesof Health and more recently, a de-cline in clinical services revenue,primarily because of declining re-imbursement for care.
“We did not address these de-creases with commensurate cost re-
ductions,” Sobel said.Hefner said Wayne State now is
focusing on mostly non-labor ex-pense improvement. However,Nicole Mascia, UPG’s chief of cor-porate affairs and COO, resigned inearly November.
Sobel and Hefner said therecould be more resignations at themedical school before January,when the full turnaround plan is ex-pected to be in place.
Hefner said historically themedical school — as most med-ical schools nationally — has lostmoney as part of the university,but the affiliated entities havegenerated enough revenue tokeep the school in the black. In2014, for example, the WayneState medical school and its relat-ed entities lost about $8 million,Hefner said.
But UPG, the medical school’sfaculty practice plan, which wasfounded in 2006 as a 501(c)(3) non-profit organization by former DeanRobert Mentzer, M.D., traditionallyhas been profitable and helpedcontribute revenue to the medicalschool.
While UPG is affiliated with themedical school, the board is inde-pendent with seven communitymembers and six medical schoolmembers, including Sobel.
Each year, UPG contributes anannual “dean’s tax” that has rangedfrom 8.7 percent to 17 percent ofprofessional fees annually to FMREto support research and medicaleducation. That dean’s tax hasamounted to between $10 millionand $14 million per year.
From 2009 to 2012, UPG wasprofitable, averaging about $2 mil-lion to $3 million a year. But begin-ning in 2013, UPG has lost an in-creasing amount of money,culminating in a $9 million loss in2015.The discovery of financial loss-es led to a delay in construction thissummer on a $60 million, 125,000-square-foot ambulatory care andadministrative building for WayneState’s UPG at 3750 Woodward Ave.The new office would enable UPGto consolidate its various officesaround DMC into a central loca-tion.
The newly appointed chairmanof UPG, Michael Busuito, M.D., aTroy plastic surgeon, told Crain’s onThursday that the UPG board is tak-ing aggressive action to reduce costsand modernize business practicesand its information technology sys-tem.
“UPG is still in its infancy, stillevolving,” Busuito said. “There arechanges (in health care) that arehappening at the speed of light. Insurgery, we say, there can be com-plications.”
Over the next 30 days, Hefnersaid more data will be collectedfrom University Physician Groupand the medical school to makedecisions early next year on how toimprove operations and breakeven.
“We have 30 to 40 people todayworking together to developthe data that we didn’t have before,” Hefner said. “This is longoverdue.” �
Jay Greene: (313) 446-0325Twitter: @jaybgreene
David Hefner:Found problems incommunication.
20151207-NEWS--0029-NAT-CCI-CD_-- 12/4/2015 5:02 PM Page 1
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Editor-in-Chief Keith E. CrainGroup Publisher Mary Kramer,(313) 446-0399 or [email protected] Publisher Marla Wise, (313) 446-6032or [email protected] Jennette Smith, (313) 446-1622 [email protected] Editor Cindy Goodaker, (313) 446-0460or [email protected], Digital Strategy, Audience DevelopmentNancy Hanus,(313) 446-1621 or [email protected] Managing Editor Michael Lee, (313) 446-1630 [email protected] Editor/Custom and Special ProjectsDaniel Duggan, (313) 446-0414 [email protected] Managing Editor Kristin Bull,(313) 446-1608 or [email protected] Editor Beth Reeber Valone, (313) 446-5875 or [email protected] Editor Gary Piatek, (313) 446-0357 or [email protected] and Data Editor Sonya Hill,(313) 446-0402or [email protected] Support (313) 446-0419; YahNica Craw-ford, (313) 446-0329Newsroom (313) 446-0329, FAX (313) 446-1687 ,TIP LINE (313) 446-6766
REPORTERSJay Greene, senior reporter Covers health care, in-surance, energy, utilities and the environment.(313) 446-0325 or [email protected] Halcom Covers litigation, the defense indus-try and education. (313) 446-6796 [email protected] Henderson Covers banking, finance, tech-nology and biotechnology. (313) 446-0337 [email protected] Pinho Covers real estate, Oakland and Ma-comb counties. (313) 446-0412 [email protected] Shea, enterprise editor Covers media,advertising and marketing, the business ofsports, and transportation.(313) 446-1626 or [email protected] Snell, reporter Covers city of Detroit and regional politics. (313) 446-1654 [email protected] VanHulle, Lansing reporter. (517) 657-2204 or [email protected] Walsh, senior reporter Covers the busi-ness of law, auto suppliers, manufacturing andsteel. (313) 446-6042 or [email protected] Welch, senior reporter Covers nonprofits,services, retail and hospitality. (313) 446-1694 or [email protected]
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Sales Inquiries (313) 446-6032; FAX (313) 393-0997Sales Manager Tammy Rokowski Senior Account Executive Matthew J. LanganAdvertising Sales Christine Galasso, CatherineGrace, Joe Miller, Sarah StachowiczClassified Sales Manager Angela Schutte, (313)446-6051Classified Sales Lynn Calcaterra, (313) 446-6086Events Manager Kacey AndersonCreative Services Director Pierrette TempletonSenior Art Director Sylvia KolaskiMarketing Coordinator Ariel BlackSpecial Projects Coordinator Keenan CovingtonSales Support Suzanne Janik, YahNica CrawfordEditorial Assistant Nancy PowersProduction Manager Wendy KobylarzProduction Supervisor Andrew Spanos
CUSTOMER SERVICE
Main Number: Call (877) 824-9374 or [email protected] $59 one year, $98 two years. Out ofstate, $79 one year, $138 for two years. OutsideU.S.A., add $48 per year to out-of-state rate for sur-face mail. Call (313) 446-0450 or (877) 824-9374.Single Copies (877) 824-9374Reprints (212) 210-0750; or Krista Bora [email protected] find a date a story was published (313) 446-0406 or e-mail [email protected]
Crain’s Detroit Business is published by Crain Communications Inc.Chairman Keith E. CrainPresident Rance CrainTreasurer Mary Kay CrainExecutive Vice President/OperationsWilliam A. MorrowExecutive Vice President/Director of StrategicOperations Chris CrainExecutive Vice President/Director of CorporateOperations KC CrainVice President/Production & ManufacturingDave KamisChief Financial Officer Thomas StevensChief Information Officer Anthony DiPonio G.D. Crain Jr. Founder (1885-1973)Mrs. G.D. Crain Jr. Chairman (1911-1996)Editorial & Business Offices1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000Cable address: TWX 248-221-5122 AUTNEW DETCRAIN’S DETROITBUSINESS ISSN # 0882-1992 is pub-lished weekly,except fora special issue the third weekofNovember,and no issue the third weekofDecemberbyCrain Communications Inc.at 1155 Gratiot Ave.,DetroitMI 48207-2732.Periodicals postage paid at Detroit,MIand additional mailing offices.POSTMASTER: Send ad-dress changes to CRAIN’S DETROITBUSINESS,Circula-tion Department,P.O.Box07925,Detroit,MI 48207-9732.GST# 136760444.Printed in U.S.A.Entire contents copyright 2015 byCrain Communica-tions Inc.All rights reserved.Reproduction oruse ofedi-torial content in anymannerwithout permission isstrictly prohibited.
CRAIN’SDETROIT BUSINESS
Achatz Handmade Pie ...................................... 4Adamo Group ................................................... 24Amherst Partners .............................................. 9Arbor Hospice & Palliative Care .................... 22Blue Cross Blue Shield of Michigan .................. 1Cascade Partners .............................................. 9City Hall Artspace Lofts.................................. 26Dalsey & Associates........................................ 26Detroit Symphony Orchestra ......................... 14Detroit Zoological Society ............................... 11Dick Scott Chrysler Dodge Jeep.................... 20Downtown Detroit Partnership..................... 25eCycle Opportunities ....................................... 13Fiat Chrysler Automobiles .......................... 1, 20Fox Hills Chrysler Jeep .................................... 20Fred A. and Barbara M. Erb Family Foundation . 12Fund for Medical Research and Education .... 3George P. Johnson Co. ........................................ 1Gibbs Planning Group ..................................... 26Grandmont Rosedale Development.............. 15Grow Detroit’s Young Talent .......................... 25
Hospice of Michigan ........................................ 22Just Baked Cupcakes ........................................ 4JVS ...................................................................... 13Kresge Foundation .......................................... 25Livonia Chrysler Jeep ...................................... 20Mercer ............................................................... 26Michigan Manufacturers Association........... 19Michigan Unemployment Insurance Agency ... 17North American International Auto Show... 1, 28Olympus Fare .................................................... 21Pitt, McGehee, Palmer & Rivers..................... 18Plunkett Cooney ............................................... 19Quarton Partners............................................... 9Skillman Foundation ....................................... 25Small Business Association of Michigan ...... 18University of Michigan ...................................... 6Wayne Metropolitan CommunityAction Agency 14Western Michigan Univ. Cooley Law School..... 17Wolfson Bolton ................................................. 19Wayne State University .................................... 3Wayne State University Physician Group....... 3
INDEX TO COMPANIESThese companies have significant mention in this week’s Crain’s Detroit Business:
who came from Augusta, Ga.-basedGeorgia Regents Health System andhas known Wilson for many years,was given the job of reviewing themedical school’s financial condi-tion, Sobel said.
Within 45days, Hefner dis-covered com-municationproblems be-tween the med-ical school,FMRE, the Uni-versity PhysicianGroup and prac-tice plans thatwere hurtingtheir ability to
generate revenue, Sobel said. Thoseincluded a lack of joint strategicplanning and coordination of hiringand compensation plans.
“The university had to pay thecosts of the professors because themoney was not covered by UPG,”said Sobel, noting that UPG thisyear lost $9 million, despite the $27million sale of a 175,000-square-foot corporate office and ambulato-ry surgery center in Troy.
Losses for the medical school infiscal 2015 totaled $7 million andlosses for FMRE were $13 million,Sobel said. Combined revenue forthe medical school and UPG in2015 was about $640 million.
“I am not here to point fingers,”Sobel said. “There are too manyfingers to point, and the fingershave grown long” over the past 20years.
Sobel said a turnaround team ledby Hefner is exploring various op-tions this month to cut costs and in-crease revenue.
“We cannot have a burn rate of$1.5 million in January, not even a$1 million” per-month loss rate,Sobel said. “We have already fleecedthe university more than what isreasonable.”
Starting next year, Sobel said,there will be a period of austerity forsome departments at the medicalschool.
“There will be a (hiring) freeze inmany departments. There will be(expense) cuts,” he said. “I amagainst the concept of across-the-board cuts. We cannot cut success-ful individuals.”
Total employees at the medicalschool and UPG are 3,285, with985 at UPG and 2,300 at the med-ical school. Total clinical, scienceand research faculty is 827 profes-sors.
“We don’t know about (employ-ee) reductions. Things are thin now.We are looking possibly at attrition,”Hefner told Crain’s on Tuesday.“On the faculty side, there will be re-deployments and cuts in overheadareas.”
To turn around operations, Hefn-er said, the medical school and UPGalso must increase revenue in a va-riety of areas.
Immediately, he said, UPG hastaken action on improving billingand collections and in renegotiatingsupply and management servicevendor contracts.
“We are opening up (physician)schedules and removing barriers tosee more patients and beginning tointeract and share information withfaculty,” Hefner said. “We need totake systemic actions, but some ofthat does require more planningand design work.”
Sobel said plans call for renegoti-ating contracts with such partnerorganizations and increasing re-search funding and philanthropy.Efforts are also underway to de-crease overhead costs and tie physi-cian pay to productivity.
“We need to fundamentallychange how we operate,” Sobelsaid. “The chairs have not been heldaccountable, and that will stop. Weneed to increase faculty productivi-ty and reduce administrative over-head. We need to create a high-per-forming team across theorganization.”
Sobel said one disturbing find-ing was the low percentage of clini-cal faculty and basic science facul-ty that are contributing fundedresearch grants to the medicalschool.
In a Thursday interview withCrain’s, Sobel said the lack of re-search and grant dollars is a “domi-nant factor” in accounting for the$29 million in losses.
For example, the national aver-age for tenured faculty with grants isabout 40 percent, but Wayne State’saverage recently has been about 14percent.
“Most (science and clinical) fac-ulty don’t have grants. This has gotto stop,” Sobel said in the town hall
WSUFROM PAGE 3
video. “They can go to another hos-pital, not here. … We have too many(faculty) who are unable to supportthemselves with clinical services orresearch.”
Sobel estimated “we have 200FTEs (full-time equivalent) in ex-cess of what we are doing.” He saidthe Wayne State turnaround team isclosely looking at the clinical andscience departments to identify fac-ulty who either have no researchgrants or grants with small amountsof funding.
“We have to redeploy, resize andright-size,” Sobel said at the townhall meeting.
Hefner said Thursday the med-ical school will have a plan some-time in January to address what todo about the differential in facultysalary and research grants.
It is standard practice at mostmedical schools that when re-searchers receive grants, part oftheir salaries is paid from thosegrants.
However, in fiscal year 2015,medical school faculty brought in$117 million in research grantsand sponsored awards, but only$12 million of salary was recov-ered from these grants, Hefnersaid. If Wayne State moved to anational median, $5 million to$15 million more could be recov-ered, he said.
However, in the last three quar-ters, Sobel said, the amount of re-search grants alone has picked upby at least $10 million. For example,research grants increased to $70million in the first nine months ofthis year from $60.3 million duringthe same period in 2014.
“We have a lot of wonderful re-searchers here,” Sobel said, addingthat the medical school is workingon a way to increase incentives andshare resources to encourage de-partments and faculty to increasetheir research capabilities withoutaffecting their educational and clin-ical responsibilities.
While in the making for 20 to 30years, financial problems started tobecome serious in 2009, whenWayne State settled a contract dis-pute with the Detroit Medical Centerthat led to a reduction in funds fromDMC to the medical school anduniversity.
Hefner said the DMC contractand lower payments was a signifi-cant contributor to the financialdownturn at Wayne State. He saidthe school is still researching howmuch less the medical school hasreceived from DMC since 2009.
The DMC contract with the med-ical school expires in March and willbe renegotiated “to make it fairer,”he said.
“It is very difficult to manage theschool of medicine and take care ofour commitments with thatamount” of money from DMC,Sobel said.
But Hefner said the financialproblems facing Wayne State arealso due to reductions in fundingfrom the state, the National Institutesof Health and more recently, a de-cline in clinical services revenue,primarily because of declining re-imbursement for care.
“We did not address these de-creases with commensurate cost re-
ductions,” Sobel said.Hefner said Wayne State now is
focusing on mostly non-labor ex-pense improvement. However,Nicole Mascia, UPG’s chief of cor-porate affairs and COO, resigned inearly November.
Sobel and Hefner said therecould be more resignations at themedical school before January,when the full turnaround plan is ex-pected to be in place.
Hefner said historically themedical school — as most med-ical schools nationally — has lostmoney as part of the university,but the affiliated entities havegenerated enough revenue tokeep the school in the black. In2014, for example, the WayneState medical school and its relat-ed entities lost about $8 million,Hefner said.
But UPG, the medical school’sfaculty practice plan, which wasfounded in 2006 as a 501(c)(3) non-profit organization by former DeanRobert Mentzer, M.D., traditionallyhas been profitable and helpedcontribute revenue to the medicalschool.
While UPG is affiliated with themedical school, the board is inde-pendent with seven communitymembers and six medical schoolmembers, including Sobel.
Each year, UPG contributes anannual “dean’s tax” that has rangedfrom 8.7 percent to 17 percent ofprofessional fees annually to FMREto support research and medicaleducation. That dean’s tax hasamounted to between $10 millionand $14 million per year.
From 2009 to 2012, UPG wasprofitable, averaging about $2 mil-lion to $3 million a year. But begin-ning in 2013, UPG has lost an in-creasing amount of money,culminating in a $9 million loss in2015.The discovery of financial loss-es led to a delay in construction thissummer on a $60 million, 125,000-square-foot ambulatory care andadministrative building for WayneState’s UPG at 3750 Woodward Ave.The new office would enable UPGto consolidate its various officesaround DMC into a central loca-tion.
The newly appointed chairmanof UPG, Michael Busuito, M.D., aTroy plastic surgeon, told Crain’s onThursday that the UPG board is tak-ing aggressive action to reduce costsand modernize business practicesand its information technology sys-tem.
“UPG is still in its infancy, stillevolving,” Busuito said. “There arechanges (in health care) that arehappening at the speed of light. Insurgery, we say, there can be com-plications.”
Over the next 30 days, Hefnersaid more data will be collectedfrom University Physician Groupand the medical school to makedecisions early next year on how toimprove operations and breakeven.
“We have 30 to 40 people todayworking together to developthe data that we didn’t have before,” Hefner said. “This is longoverdue.” �
Jay Greene: (313) 446-0325Twitter: @jaybgreene
David Hefner:Found problems incommunication.
20151207-NEWS--0029-NAT-CCI-CD_-- 12/4/2015 5:02 PM Page 1
YOUR AD HERE
1/3 Page >Vertical: 2 column x 13.5”(4” x 13.5”)Horizontal: 3 xolumn x 9”(6” x 9”)
29C R A I N ’ S D E T R O I T B U S I N E S S // D E C E M B E R 7, 2 0 1 5
www.crainsdetroit.com
Editor-in-Chief Keith E. CrainGroup Publisher Mary Kramer,(313) 446-0399 or [email protected] Publisher Marla Wise, (313) 446-6032or [email protected] Jennette Smith, (313) 446-1622 [email protected] Editor Cindy Goodaker, (313) 446-0460or [email protected], Digital Strategy, Audience DevelopmentNancy Hanus,(313) 446-1621 or [email protected] Managing Editor Michael Lee, (313) 446-1630 [email protected] Editor/Custom and Special ProjectsDaniel Duggan, (313) 446-0414 [email protected] Managing Editor Kristin Bull,(313) 446-1608 or [email protected] Editor Beth Reeber Valone, (313) 446-5875 or [email protected] Editor Gary Piatek, (313) 446-0357 or [email protected] and Data Editor Sonya Hill,(313) 446-0402or [email protected] Support (313) 446-0419; YahNica Craw-ford, (313) 446-0329Newsroom (313) 446-0329, FAX (313) 446-1687 ,TIP LINE (313) 446-6766
REPORTERSJay Greene, senior reporter Covers health care, in-surance, energy, utilities and the environment.(313) 446-0325 or [email protected] Halcom Covers litigation, the defense indus-try and education. (313) 446-6796 [email protected] Henderson Covers banking, finance, tech-nology and biotechnology. (313) 446-0337 [email protected] Pinho Covers real estate, Oakland and Ma-comb counties. (313) 446-0412 [email protected] Shea, enterprise editor Covers media,advertising and marketing, the business ofsports, and transportation.(313) 446-1626 or [email protected] Snell, reporter Covers city of Detroit and regional politics. (313) 446-1654 [email protected] VanHulle, Lansing reporter. (517) 657-2204 or [email protected] Walsh, senior reporter Covers the busi-ness of law, auto suppliers, manufacturing andsteel. (313) 446-6042 or [email protected] Welch, senior reporter Covers nonprofits,services, retail and hospitality. (313) 446-1694 or [email protected]
ADVERTISING
Sales Inquiries (313) 446-6032; FAX (313) 393-0997Sales Manager Tammy Rokowski Senior Account Executive Matthew J. LanganAdvertising Sales Christine Galasso, CatherineGrace, Joe Miller, Sarah StachowiczClassified Sales Manager Angela Schutte, (313)446-6051Classified Sales Lynn Calcaterra, (313) 446-6086Events Manager Kacey AndersonCreative Services Director Pierrette TempletonSenior Art Director Sylvia KolaskiMarketing Coordinator Ariel BlackSpecial Projects Coordinator Keenan CovingtonSales Support Suzanne Janik, YahNica CrawfordEditorial Assistant Nancy PowersProduction Manager Wendy KobylarzProduction Supervisor Andrew Spanos
CUSTOMER SERVICE
Main Number: Call (877) 824-9374 or [email protected] $59 one year, $98 two years. Out ofstate, $79 one year, $138 for two years. OutsideU.S.A., add $48 per year to out-of-state rate for sur-face mail. Call (313) 446-0450 or (877) 824-9374.Single Copies (877) 824-9374Reprints (212) 210-0750; or Krista Bora [email protected] find a date a story was published (313) 446-0406 or e-mail [email protected]
Crain’s Detroit Business is published by Crain Communications Inc.Chairman Keith E. CrainPresident Rance CrainTreasurer Mary Kay CrainExecutive Vice President/OperationsWilliam A. MorrowExecutive Vice President/Director of StrategicOperations Chris CrainExecutive Vice President/Director of CorporateOperations KC CrainVice President/Production & ManufacturingDave KamisChief Financial Officer Thomas StevensChief Information Officer Anthony DiPonio G.D. Crain Jr. Founder (1885-1973)Mrs. G.D. Crain Jr. Chairman (1911-1996)Editorial & Business Offices1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000Cable address: TWX 248-221-5122 AUTNEW DETCRAIN’S DETROITBUSINESS ISSN # 0882-1992 is pub-lished weekly,except fora special issue the third weekofNovember,and no issue the third weekofDecemberbyCrain Communications Inc.at 1155 Gratiot Ave.,DetroitMI 48207-2732.Periodicals postage paid at Detroit,MIand additional mailing offices.POSTMASTER: Send ad-dress changes to CRAIN’S DETROITBUSINESS,Circula-tion Department,P.O.Box07925,Detroit,MI 48207-9732.GST# 136760444.Printed in U.S.A.Entire contents copyright 2015 byCrain Communica-tions Inc.All rights reserved.Reproduction oruse ofedi-torial content in anymannerwithout permission isstrictly prohibited.
CRAIN’SDETROIT BUSINESS
Achatz Handmade Pie ...................................... 4Adamo Group ................................................... 24Amherst Partners .............................................. 9Arbor Hospice & Palliative Care .................... 22Blue Cross Blue Shield of Michigan .................. 1Cascade Partners .............................................. 9City Hall Artspace Lofts.................................. 26Dalsey & Associates........................................ 26Detroit Symphony Orchestra ......................... 14Detroit Zoological Society ............................... 11Dick Scott Chrysler Dodge Jeep.................... 20Downtown Detroit Partnership..................... 25eCycle Opportunities ....................................... 13Fiat Chrysler Automobiles .......................... 1, 20Fox Hills Chrysler Jeep .................................... 20Fred A. and Barbara M. Erb Family Foundation . 12Fund for Medical Research and Education .... 3George P. Johnson Co. ........................................ 1Gibbs Planning Group ..................................... 26Grandmont Rosedale Development.............. 15Grow Detroit’s Young Talent .......................... 25
Hospice of Michigan ........................................ 22Just Baked Cupcakes ........................................ 4JVS ...................................................................... 13Kresge Foundation .......................................... 25Livonia Chrysler Jeep ...................................... 20Mercer ............................................................... 26Michigan Manufacturers Association........... 19Michigan Unemployment Insurance Agency ... 17North American International Auto Show... 1, 28Olympus Fare .................................................... 21Pitt, McGehee, Palmer & Rivers..................... 18Plunkett Cooney ............................................... 19Quarton Partners............................................... 9Skillman Foundation ....................................... 25Small Business Association of Michigan ...... 18University of Michigan ...................................... 6Wayne Metropolitan CommunityAction Agency 14Western Michigan Univ. Cooley Law School..... 17Wolfson Bolton ................................................. 19Wayne State University .................................... 3Wayne State University Physician Group....... 3
INDEX TO COMPANIESThese companies have significant mention in this week’s Crain’s Detroit Business:
who came from Augusta, Ga.-basedGeorgia Regents Health System andhas known Wilson for many years,was given the job of reviewing themedical school’s financial condi-tion, Sobel said.
Within 45days, Hefner dis-covered com-municationproblems be-tween the med-ical school,FMRE, the Uni-versity PhysicianGroup and prac-tice plans thatwere hurtingtheir ability to
generate revenue, Sobel said. Thoseincluded a lack of joint strategicplanning and coordination of hiringand compensation plans.
“The university had to pay thecosts of the professors because themoney was not covered by UPG,”said Sobel, noting that UPG thisyear lost $9 million, despite the $27million sale of a 175,000-square-foot corporate office and ambulato-ry surgery center in Troy.
Losses for the medical school infiscal 2015 totaled $7 million andlosses for FMRE were $13 million,Sobel said. Combined revenue forthe medical school and UPG in2015 was about $640 million.
“I am not here to point fingers,”Sobel said. “There are too manyfingers to point, and the fingershave grown long” over the past 20years.
Sobel said a turnaround team ledby Hefner is exploring various op-tions this month to cut costs and in-crease revenue.
“We cannot have a burn rate of$1.5 million in January, not even a$1 million” per-month loss rate,Sobel said. “We have already fleecedthe university more than what isreasonable.”
Starting next year, Sobel said,there will be a period of austerity forsome departments at the medicalschool.
“There will be a (hiring) freeze inmany departments. There will be(expense) cuts,” he said. “I amagainst the concept of across-the-board cuts. We cannot cut success-ful individuals.”
Total employees at the medicalschool and UPG are 3,285, with985 at UPG and 2,300 at the med-ical school. Total clinical, scienceand research faculty is 827 profes-sors.
“We don’t know about (employ-ee) reductions. Things are thin now.We are looking possibly at attrition,”Hefner told Crain’s on Tuesday.“On the faculty side, there will be re-deployments and cuts in overheadareas.”
To turn around operations, Hefn-er said, the medical school and UPGalso must increase revenue in a va-riety of areas.
Immediately, he said, UPG hastaken action on improving billingand collections and in renegotiatingsupply and management servicevendor contracts.
“We are opening up (physician)schedules and removing barriers tosee more patients and beginning tointeract and share information withfaculty,” Hefner said. “We need totake systemic actions, but some ofthat does require more planningand design work.”
Sobel said plans call for renegoti-ating contracts with such partnerorganizations and increasing re-search funding and philanthropy.Efforts are also underway to de-crease overhead costs and tie physi-cian pay to productivity.
“We need to fundamentallychange how we operate,” Sobelsaid. “The chairs have not been heldaccountable, and that will stop. Weneed to increase faculty productivi-ty and reduce administrative over-head. We need to create a high-per-forming team across theorganization.”
Sobel said one disturbing find-ing was the low percentage of clini-cal faculty and basic science facul-ty that are contributing fundedresearch grants to the medicalschool.
In a Thursday interview withCrain’s, Sobel said the lack of re-search and grant dollars is a “domi-nant factor” in accounting for the$29 million in losses.
For example, the national aver-age for tenured faculty with grants isabout 40 percent, but Wayne State’saverage recently has been about 14percent.
“Most (science and clinical) fac-ulty don’t have grants. This has gotto stop,” Sobel said in the town hall
WSUFROM PAGE 3
video. “They can go to another hos-pital, not here. … We have too many(faculty) who are unable to supportthemselves with clinical services orresearch.”
Sobel estimated “we have 200FTEs (full-time equivalent) in ex-cess of what we are doing.” He saidthe Wayne State turnaround team isclosely looking at the clinical andscience departments to identify fac-ulty who either have no researchgrants or grants with small amountsof funding.
“We have to redeploy, resize andright-size,” Sobel said at the townhall meeting.
Hefner said Thursday the med-ical school will have a plan some-time in January to address what todo about the differential in facultysalary and research grants.
It is standard practice at mostmedical schools that when re-searchers receive grants, part oftheir salaries is paid from thosegrants.
However, in fiscal year 2015,medical school faculty brought in$117 million in research grantsand sponsored awards, but only$12 million of salary was recov-ered from these grants, Hefnersaid. If Wayne State moved to anational median, $5 million to$15 million more could be recov-ered, he said.
However, in the last three quar-ters, Sobel said, the amount of re-search grants alone has picked upby at least $10 million. For example,research grants increased to $70million in the first nine months ofthis year from $60.3 million duringthe same period in 2014.
“We have a lot of wonderful re-searchers here,” Sobel said, addingthat the medical school is workingon a way to increase incentives andshare resources to encourage de-partments and faculty to increasetheir research capabilities withoutaffecting their educational and clin-ical responsibilities.
While in the making for 20 to 30years, financial problems started tobecome serious in 2009, whenWayne State settled a contract dis-pute with the Detroit Medical Centerthat led to a reduction in funds fromDMC to the medical school anduniversity.
Hefner said the DMC contractand lower payments was a signifi-cant contributor to the financialdownturn at Wayne State. He saidthe school is still researching howmuch less the medical school hasreceived from DMC since 2009.
The DMC contract with the med-ical school expires in March and willbe renegotiated “to make it fairer,”he said.
“It is very difficult to manage theschool of medicine and take care ofour commitments with thatamount” of money from DMC,Sobel said.
But Hefner said the financialproblems facing Wayne State arealso due to reductions in fundingfrom the state, the National Institutesof Health and more recently, a de-cline in clinical services revenue,primarily because of declining re-imbursement for care.
“We did not address these de-creases with commensurate cost re-
ductions,” Sobel said.Hefner said Wayne State now is
focusing on mostly non-labor ex-pense improvement. However,Nicole Mascia, UPG’s chief of cor-porate affairs and COO, resigned inearly November.
Sobel and Hefner said therecould be more resignations at themedical school before January,when the full turnaround plan is ex-pected to be in place.
Hefner said historically themedical school — as most med-ical schools nationally — has lostmoney as part of the university,but the affiliated entities havegenerated enough revenue tokeep the school in the black. In2014, for example, the WayneState medical school and its relat-ed entities lost about $8 million,Hefner said.
But UPG, the medical school’sfaculty practice plan, which wasfounded in 2006 as a 501(c)(3) non-profit organization by former DeanRobert Mentzer, M.D., traditionallyhas been profitable and helpedcontribute revenue to the medicalschool.
While UPG is affiliated with themedical school, the board is inde-pendent with seven communitymembers and six medical schoolmembers, including Sobel.
Each year, UPG contributes anannual “dean’s tax” that has rangedfrom 8.7 percent to 17 percent ofprofessional fees annually to FMREto support research and medicaleducation. That dean’s tax hasamounted to between $10 millionand $14 million per year.
From 2009 to 2012, UPG wasprofitable, averaging about $2 mil-lion to $3 million a year. But begin-ning in 2013, UPG has lost an in-creasing amount of money,culminating in a $9 million loss in2015.The discovery of financial loss-es led to a delay in construction thissummer on a $60 million, 125,000-square-foot ambulatory care andadministrative building for WayneState’s UPG at 3750 Woodward Ave.The new office would enable UPGto consolidate its various officesaround DMC into a central loca-tion.
The newly appointed chairmanof UPG, Michael Busuito, M.D., aTroy plastic surgeon, told Crain’s onThursday that the UPG board is tak-ing aggressive action to reduce costsand modernize business practicesand its information technology sys-tem.
“UPG is still in its infancy, stillevolving,” Busuito said. “There arechanges (in health care) that arehappening at the speed of light. Insurgery, we say, there can be com-plications.”
Over the next 30 days, Hefnersaid more data will be collectedfrom University Physician Groupand the medical school to makedecisions early next year on how toimprove operations and breakeven.
“We have 30 to 40 people todayworking together to developthe data that we didn’t have before,” Hefner said. “This is longoverdue.” �
Jay Greene: (313) 446-0325Twitter: @jaybgreene
David Hefner:Found problems incommunication.
20151207-NEWS--0029-NAT-CCI-CD_-- 12/4/2015 5:02 PM Page 1
YOUR AD
HERE
1/4 Page >3 column x 6”(6” x 6”)
29C R A I N ’ S D E T R O I T B U S I N E S S // D E C E M B E R 7, 2 0 1 5
www.crainsdetroit.com
Editor-in-Chief Keith E. CrainGroup Publisher Mary Kramer,(313) 446-0399 or [email protected] Publisher Marla Wise, (313) 446-6032or [email protected] Jennette Smith, (313) 446-1622 [email protected] Editor Cindy Goodaker, (313) 446-0460or [email protected], Digital Strategy, Audience DevelopmentNancy Hanus,(313) 446-1621 or [email protected] Managing Editor Michael Lee, (313) 446-1630 [email protected] Editor/Custom and Special ProjectsDaniel Duggan, (313) 446-0414 [email protected] Managing Editor Kristin Bull,(313) 446-1608 or [email protected] Editor Beth Reeber Valone, (313) 446-5875 or [email protected] Editor Gary Piatek, (313) 446-0357 or [email protected] and Data Editor Sonya Hill,(313) 446-0402or [email protected] Support (313) 446-0419; YahNica Craw-ford, (313) 446-0329Newsroom (313) 446-0329, FAX (313) 446-1687 ,TIP LINE (313) 446-6766
REPORTERSJay Greene, senior reporter Covers health care, in-surance, energy, utilities and the environment.(313) 446-0325 or [email protected] Halcom Covers litigation, the defense indus-try and education. (313) 446-6796 [email protected] Henderson Covers banking, finance, tech-nology and biotechnology. (313) 446-0337 [email protected] Pinho Covers real estate, Oakland and Ma-comb counties. (313) 446-0412 [email protected] Shea, enterprise editor Covers media,advertising and marketing, the business ofsports, and transportation.(313) 446-1626 or [email protected] Snell, reporter Covers city of Detroit and regional politics. (313) 446-1654 [email protected] VanHulle, Lansing reporter. (517) 657-2204 or [email protected] Walsh, senior reporter Covers the busi-ness of law, auto suppliers, manufacturing andsteel. (313) 446-6042 or [email protected] Welch, senior reporter Covers nonprofits,services, retail and hospitality. (313) 446-1694 or [email protected]
ADVERTISING
Sales Inquiries (313) 446-6032; FAX (313) 393-0997Sales Manager Tammy Rokowski Senior Account Executive Matthew J. LanganAdvertising Sales Christine Galasso, CatherineGrace, Joe Miller, Sarah StachowiczClassified Sales Manager Angela Schutte, (313)446-6051Classified Sales Lynn Calcaterra, (313) 446-6086Events Manager Kacey AndersonCreative Services Director Pierrette TempletonSenior Art Director Sylvia KolaskiMarketing Coordinator Ariel BlackSpecial Projects Coordinator Keenan CovingtonSales Support Suzanne Janik, YahNica CrawfordEditorial Assistant Nancy PowersProduction Manager Wendy KobylarzProduction Supervisor Andrew Spanos
CUSTOMER SERVICE
Main Number: Call (877) 824-9374 or [email protected] $59 one year, $98 two years. Out ofstate, $79 one year, $138 for two years. OutsideU.S.A., add $48 per year to out-of-state rate for sur-face mail. Call (313) 446-0450 or (877) 824-9374.Single Copies (877) 824-9374Reprints (212) 210-0750; or Krista Bora [email protected] find a date a story was published (313) 446-0406 or e-mail [email protected]
Crain’s Detroit Business is published by Crain Communications Inc.Chairman Keith E. CrainPresident Rance CrainTreasurer Mary Kay CrainExecutive Vice President/OperationsWilliam A. MorrowExecutive Vice President/Director of StrategicOperations Chris CrainExecutive Vice President/Director of CorporateOperations KC CrainVice President/Production & ManufacturingDave KamisChief Financial Officer Thomas StevensChief Information Officer Anthony DiPonio G.D. Crain Jr. Founder (1885-1973)Mrs. G.D. Crain Jr. Chairman (1911-1996)Editorial & Business Offices1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000Cable address: TWX 248-221-5122 AUTNEW DETCRAIN’S DETROITBUSINESS ISSN # 0882-1992 is pub-lished weekly,except fora special issue the third weekofNovember,and no issue the third weekofDecemberbyCrain Communications Inc.at 1155 Gratiot Ave.,DetroitMI 48207-2732.Periodicals postage paid at Detroit,MIand additional mailing offices.POSTMASTER: Send ad-dress changes to CRAIN’S DETROITBUSINESS,Circula-tion Department,P.O.Box07925,Detroit,MI 48207-9732.GST# 136760444.Printed in U.S.A.Entire contents copyright 2015 byCrain Communica-tions Inc.All rights reserved.Reproduction oruse ofedi-torial content in anymannerwithout permission isstrictly prohibited.
CRAIN’SDETROIT BUSINESS
Achatz Handmade Pie ...................................... 4Adamo Group ................................................... 24Amherst Partners .............................................. 9Arbor Hospice & Palliative Care .................... 22Blue Cross Blue Shield of Michigan .................. 1Cascade Partners .............................................. 9City Hall Artspace Lofts.................................. 26Dalsey & Associates........................................ 26Detroit Symphony Orchestra ......................... 14Detroit Zoological Society ............................... 11Dick Scott Chrysler Dodge Jeep.................... 20Downtown Detroit Partnership..................... 25eCycle Opportunities ....................................... 13Fiat Chrysler Automobiles .......................... 1, 20Fox Hills Chrysler Jeep .................................... 20Fred A. and Barbara M. Erb Family Foundation . 12Fund for Medical Research and Education .... 3George P. Johnson Co. ........................................ 1Gibbs Planning Group ..................................... 26Grandmont Rosedale Development.............. 15Grow Detroit’s Young Talent .......................... 25
Hospice of Michigan ........................................ 22Just Baked Cupcakes ........................................ 4JVS ...................................................................... 13Kresge Foundation .......................................... 25Livonia Chrysler Jeep ...................................... 20Mercer ............................................................... 26Michigan Manufacturers Association........... 19Michigan Unemployment Insurance Agency ... 17North American International Auto Show... 1, 28Olympus Fare .................................................... 21Pitt, McGehee, Palmer & Rivers..................... 18Plunkett Cooney ............................................... 19Quarton Partners............................................... 9Skillman Foundation ....................................... 25Small Business Association of Michigan ...... 18University of Michigan ...................................... 6Wayne Metropolitan CommunityAction Agency 14Western Michigan Univ. Cooley Law School..... 17Wolfson Bolton ................................................. 19Wayne State University .................................... 3Wayne State University Physician Group....... 3
INDEX TO COMPANIESThese companies have significant mention in this week’s Crain’s Detroit Business:
who came from Augusta, Ga.-basedGeorgia Regents Health System andhas known Wilson for many years,was given the job of reviewing themedical school’s financial condi-tion, Sobel said.
Within 45days, Hefner dis-covered com-municationproblems be-tween the med-ical school,FMRE, the Uni-versity PhysicianGroup and prac-tice plans thatwere hurtingtheir ability to
generate revenue, Sobel said. Thoseincluded a lack of joint strategicplanning and coordination of hiringand compensation plans.
“The university had to pay thecosts of the professors because themoney was not covered by UPG,”said Sobel, noting that UPG thisyear lost $9 million, despite the $27million sale of a 175,000-square-foot corporate office and ambulato-ry surgery center in Troy.
Losses for the medical school infiscal 2015 totaled $7 million andlosses for FMRE were $13 million,Sobel said. Combined revenue forthe medical school and UPG in2015 was about $640 million.
“I am not here to point fingers,”Sobel said. “There are too manyfingers to point, and the fingershave grown long” over the past 20years.
Sobel said a turnaround team ledby Hefner is exploring various op-tions this month to cut costs and in-crease revenue.
“We cannot have a burn rate of$1.5 million in January, not even a$1 million” per-month loss rate,Sobel said. “We have already fleecedthe university more than what isreasonable.”
Starting next year, Sobel said,there will be a period of austerity forsome departments at the medicalschool.
“There will be a (hiring) freeze inmany departments. There will be(expense) cuts,” he said. “I amagainst the concept of across-the-board cuts. We cannot cut success-ful individuals.”
Total employees at the medicalschool and UPG are 3,285, with985 at UPG and 2,300 at the med-ical school. Total clinical, scienceand research faculty is 827 profes-sors.
“We don’t know about (employ-ee) reductions. Things are thin now.We are looking possibly at attrition,”Hefner told Crain’s on Tuesday.“On the faculty side, there will be re-deployments and cuts in overheadareas.”
To turn around operations, Hefn-er said, the medical school and UPGalso must increase revenue in a va-riety of areas.
Immediately, he said, UPG hastaken action on improving billingand collections and in renegotiatingsupply and management servicevendor contracts.
“We are opening up (physician)schedules and removing barriers tosee more patients and beginning tointeract and share information withfaculty,” Hefner said. “We need totake systemic actions, but some ofthat does require more planningand design work.”
Sobel said plans call for renegoti-ating contracts with such partnerorganizations and increasing re-search funding and philanthropy.Efforts are also underway to de-crease overhead costs and tie physi-cian pay to productivity.
“We need to fundamentallychange how we operate,” Sobelsaid. “The chairs have not been heldaccountable, and that will stop. Weneed to increase faculty productivi-ty and reduce administrative over-head. We need to create a high-per-forming team across theorganization.”
Sobel said one disturbing find-ing was the low percentage of clini-cal faculty and basic science facul-ty that are contributing fundedresearch grants to the medicalschool.
In a Thursday interview withCrain’s, Sobel said the lack of re-search and grant dollars is a “domi-nant factor” in accounting for the$29 million in losses.
For example, the national aver-age for tenured faculty with grants isabout 40 percent, but Wayne State’saverage recently has been about 14percent.
“Most (science and clinical) fac-ulty don’t have grants. This has gotto stop,” Sobel said in the town hall
WSUFROM PAGE 3
video. “They can go to another hos-pital, not here. … We have too many(faculty) who are unable to supportthemselves with clinical services orresearch.”
Sobel estimated “we have 200FTEs (full-time equivalent) in ex-cess of what we are doing.” He saidthe Wayne State turnaround team isclosely looking at the clinical andscience departments to identify fac-ulty who either have no researchgrants or grants with small amountsof funding.
“We have to redeploy, resize andright-size,” Sobel said at the townhall meeting.
Hefner said Thursday the med-ical school will have a plan some-time in January to address what todo about the differential in facultysalary and research grants.
It is standard practice at mostmedical schools that when re-searchers receive grants, part oftheir salaries is paid from thosegrants.
However, in fiscal year 2015,medical school faculty brought in$117 million in research grantsand sponsored awards, but only$12 million of salary was recov-ered from these grants, Hefnersaid. If Wayne State moved to anational median, $5 million to$15 million more could be recov-ered, he said.
However, in the last three quar-ters, Sobel said, the amount of re-search grants alone has picked upby at least $10 million. For example,research grants increased to $70million in the first nine months ofthis year from $60.3 million duringthe same period in 2014.
“We have a lot of wonderful re-searchers here,” Sobel said, addingthat the medical school is workingon a way to increase incentives andshare resources to encourage de-partments and faculty to increasetheir research capabilities withoutaffecting their educational and clin-ical responsibilities.
While in the making for 20 to 30years, financial problems started tobecome serious in 2009, whenWayne State settled a contract dis-pute with the Detroit Medical Centerthat led to a reduction in funds fromDMC to the medical school anduniversity.
Hefner said the DMC contractand lower payments was a signifi-cant contributor to the financialdownturn at Wayne State. He saidthe school is still researching howmuch less the medical school hasreceived from DMC since 2009.
The DMC contract with the med-ical school expires in March and willbe renegotiated “to make it fairer,”he said.
“It is very difficult to manage theschool of medicine and take care ofour commitments with thatamount” of money from DMC,Sobel said.
But Hefner said the financialproblems facing Wayne State arealso due to reductions in fundingfrom the state, the National Institutesof Health and more recently, a de-cline in clinical services revenue,primarily because of declining re-imbursement for care.
“We did not address these de-creases with commensurate cost re-
ductions,” Sobel said.Hefner said Wayne State now is
focusing on mostly non-labor ex-pense improvement. However,Nicole Mascia, UPG’s chief of cor-porate affairs and COO, resigned inearly November.
Sobel and Hefner said therecould be more resignations at themedical school before January,when the full turnaround plan is ex-pected to be in place.
Hefner said historically themedical school — as most med-ical schools nationally — has lostmoney as part of the university,but the affiliated entities havegenerated enough revenue tokeep the school in the black. In2014, for example, the WayneState medical school and its relat-ed entities lost about $8 million,Hefner said.
But UPG, the medical school’sfaculty practice plan, which wasfounded in 2006 as a 501(c)(3) non-profit organization by former DeanRobert Mentzer, M.D., traditionallyhas been profitable and helpedcontribute revenue to the medicalschool.
While UPG is affiliated with themedical school, the board is inde-pendent with seven communitymembers and six medical schoolmembers, including Sobel.
Each year, UPG contributes anannual “dean’s tax” that has rangedfrom 8.7 percent to 17 percent ofprofessional fees annually to FMREto support research and medicaleducation. That dean’s tax hasamounted to between $10 millionand $14 million per year.
From 2009 to 2012, UPG wasprofitable, averaging about $2 mil-lion to $3 million a year. But begin-ning in 2013, UPG has lost an in-creasing amount of money,culminating in a $9 million loss in2015.The discovery of financial loss-es led to a delay in construction thissummer on a $60 million, 125,000-square-foot ambulatory care andadministrative building for WayneState’s UPG at 3750 Woodward Ave.The new office would enable UPGto consolidate its various officesaround DMC into a central loca-tion.
The newly appointed chairmanof UPG, Michael Busuito, M.D., aTroy plastic surgeon, told Crain’s onThursday that the UPG board is tak-ing aggressive action to reduce costsand modernize business practicesand its information technology sys-tem.
“UPG is still in its infancy, stillevolving,” Busuito said. “There arechanges (in health care) that arehappening at the speed of light. Insurgery, we say, there can be com-plications.”
Over the next 30 days, Hefnersaid more data will be collectedfrom University Physician Groupand the medical school to makedecisions early next year on how toimprove operations and breakeven.
“We have 30 to 40 people todayworking together to developthe data that we didn’t have before,” Hefner said. “This is longoverdue.” �
Jay Greene: (313) 446-0325Twitter: @jaybgreene
David Hefner:Found problems incommunication.
20151207-NEWS--0029-NAT-CCI-CD_-- 12/4/2015 5:02 PM Page 1
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29C R A I N ’ S D E T R O I T B U S I N E S S // D E C E M B E R 7, 2 0 1 5
www.crainsdetroit.com
Editor-in-Chief Keith E. CrainGroup Publisher Mary Kramer,(313) 446-0399 or [email protected] Publisher Marla Wise, (313) 446-6032or [email protected] Jennette Smith, (313) 446-1622 [email protected] Editor Cindy Goodaker, (313) 446-0460or [email protected], Digital Strategy, Audience DevelopmentNancy Hanus,(313) 446-1621 or [email protected] Managing Editor Michael Lee, (313) 446-1630 [email protected] Editor/Custom and Special ProjectsDaniel Duggan, (313) 446-0414 [email protected] Managing Editor Kristin Bull,(313) 446-1608 or [email protected] Editor Beth Reeber Valone, (313) 446-5875 or [email protected] Editor Gary Piatek, (313) 446-0357 or [email protected] and Data Editor Sonya Hill,(313) 446-0402or [email protected] Support (313) 446-0419; YahNica Craw-ford, (313) 446-0329Newsroom (313) 446-0329, FAX (313) 446-1687 ,TIP LINE (313) 446-6766
REPORTERSJay Greene, senior reporter Covers health care, in-surance, energy, utilities and the environment.(313) 446-0325 or [email protected] Halcom Covers litigation, the defense indus-try and education. (313) 446-6796 [email protected] Henderson Covers banking, finance, tech-nology and biotechnology. (313) 446-0337 [email protected] Pinho Covers real estate, Oakland and Ma-comb counties. (313) 446-0412 [email protected] Shea, enterprise editor Covers media,advertising and marketing, the business ofsports, and transportation.(313) 446-1626 or [email protected] Snell, reporter Covers city of Detroit and regional politics. (313) 446-1654 [email protected] VanHulle, Lansing reporter. (517) 657-2204 or [email protected] Walsh, senior reporter Covers the busi-ness of law, auto suppliers, manufacturing andsteel. (313) 446-6042 or [email protected] Welch, senior reporter Covers nonprofits,services, retail and hospitality. (313) 446-1694 or [email protected]
ADVERTISING
Sales Inquiries (313) 446-6032; FAX (313) 393-0997Sales Manager Tammy Rokowski Senior Account Executive Matthew J. LanganAdvertising Sales Christine Galasso, CatherineGrace, Joe Miller, Sarah StachowiczClassified Sales Manager Angela Schutte, (313)446-6051Classified Sales Lynn Calcaterra, (313) 446-6086Events Manager Kacey AndersonCreative Services Director Pierrette TempletonSenior Art Director Sylvia KolaskiMarketing Coordinator Ariel BlackSpecial Projects Coordinator Keenan CovingtonSales Support Suzanne Janik, YahNica CrawfordEditorial Assistant Nancy PowersProduction Manager Wendy KobylarzProduction Supervisor Andrew Spanos
CUSTOMER SERVICE
Main Number: Call (877) 824-9374 or [email protected] $59 one year, $98 two years. Out ofstate, $79 one year, $138 for two years. OutsideU.S.A., add $48 per year to out-of-state rate for sur-face mail. Call (313) 446-0450 or (877) 824-9374.Single Copies (877) 824-9374Reprints (212) 210-0750; or Krista Bora [email protected] find a date a story was published (313) 446-0406 or e-mail [email protected]
Crain’s Detroit Business is published by Crain Communications Inc.Chairman Keith E. CrainPresident Rance CrainTreasurer Mary Kay CrainExecutive Vice President/OperationsWilliam A. MorrowExecutive Vice President/Director of StrategicOperations Chris CrainExecutive Vice President/Director of CorporateOperations KC CrainVice President/Production & ManufacturingDave KamisChief Financial Officer Thomas StevensChief Information Officer Anthony DiPonio G.D. Crain Jr. Founder (1885-1973)Mrs. G.D. Crain Jr. Chairman (1911-1996)Editorial & Business Offices1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000Cable address: TWX 248-221-5122 AUTNEW DETCRAIN’S DETROITBUSINESS ISSN # 0882-1992 is pub-lished weekly,except fora special issue the third weekofNovember,and no issue the third weekofDecemberbyCrain Communications Inc.at 1155 Gratiot Ave.,DetroitMI 48207-2732.Periodicals postage paid at Detroit,MIand additional mailing offices.POSTMASTER: Send ad-dress changes to CRAIN’S DETROITBUSINESS,Circula-tion Department,P.O.Box07925,Detroit,MI 48207-9732.GST# 136760444.Printed in U.S.A.Entire contents copyright 2015 byCrain Communica-tions Inc.All rights reserved.Reproduction oruse ofedi-torial content in anymannerwithout permission isstrictly prohibited.
CRAIN’SDETROIT BUSINESS
Achatz Handmade Pie ...................................... 4Adamo Group ................................................... 24Amherst Partners .............................................. 9Arbor Hospice & Palliative Care .................... 22Blue Cross Blue Shield of Michigan .................. 1Cascade Partners .............................................. 9City Hall Artspace Lofts.................................. 26Dalsey & Associates........................................ 26Detroit Symphony Orchestra ......................... 14Detroit Zoological Society ............................... 11Dick Scott Chrysler Dodge Jeep.................... 20Downtown Detroit Partnership..................... 25eCycle Opportunities ....................................... 13Fiat Chrysler Automobiles .......................... 1, 20Fox Hills Chrysler Jeep .................................... 20Fred A. and Barbara M. Erb Family Foundation . 12Fund for Medical Research and Education .... 3George P. Johnson Co. ........................................ 1Gibbs Planning Group ..................................... 26Grandmont Rosedale Development.............. 15Grow Detroit’s Young Talent .......................... 25
Hospice of Michigan ........................................ 22Just Baked Cupcakes ........................................ 4JVS ...................................................................... 13Kresge Foundation .......................................... 25Livonia Chrysler Jeep ...................................... 20Mercer ............................................................... 26Michigan Manufacturers Association........... 19Michigan Unemployment Insurance Agency ... 17North American International Auto Show... 1, 28Olympus Fare .................................................... 21Pitt, McGehee, Palmer & Rivers..................... 18Plunkett Cooney ............................................... 19Quarton Partners............................................... 9Skillman Foundation ....................................... 25Small Business Association of Michigan ...... 18University of Michigan ...................................... 6Wayne Metropolitan CommunityAction Agency 14Western Michigan Univ. Cooley Law School..... 17Wolfson Bolton ................................................. 19Wayne State University .................................... 3Wayne State University Physician Group....... 3
INDEX TO COMPANIESThese companies have significant mention in this week’s Crain’s Detroit Business:
who came from Augusta, Ga.-basedGeorgia Regents Health System andhas known Wilson for many years,was given the job of reviewing themedical school’s financial condi-tion, Sobel said.
Within 45days, Hefner dis-covered com-municationproblems be-tween the med-ical school,FMRE, the Uni-versity PhysicianGroup and prac-tice plans thatwere hurtingtheir ability to
generate revenue, Sobel said. Thoseincluded a lack of joint strategicplanning and coordination of hiringand compensation plans.
“The university had to pay thecosts of the professors because themoney was not covered by UPG,”said Sobel, noting that UPG thisyear lost $9 million, despite the $27million sale of a 175,000-square-foot corporate office and ambulato-ry surgery center in Troy.
Losses for the medical school infiscal 2015 totaled $7 million andlosses for FMRE were $13 million,Sobel said. Combined revenue forthe medical school and UPG in2015 was about $640 million.
“I am not here to point fingers,”Sobel said. “There are too manyfingers to point, and the fingershave grown long” over the past 20years.
Sobel said a turnaround team ledby Hefner is exploring various op-tions this month to cut costs and in-crease revenue.
“We cannot have a burn rate of$1.5 million in January, not even a$1 million” per-month loss rate,Sobel said. “We have already fleecedthe university more than what isreasonable.”
Starting next year, Sobel said,there will be a period of austerity forsome departments at the medicalschool.
“There will be a (hiring) freeze inmany departments. There will be(expense) cuts,” he said. “I amagainst the concept of across-the-board cuts. We cannot cut success-ful individuals.”
Total employees at the medicalschool and UPG are 3,285, with985 at UPG and 2,300 at the med-ical school. Total clinical, scienceand research faculty is 827 profes-sors.
“We don’t know about (employ-ee) reductions. Things are thin now.We are looking possibly at attrition,”Hefner told Crain’s on Tuesday.“On the faculty side, there will be re-deployments and cuts in overheadareas.”
To turn around operations, Hefn-er said, the medical school and UPGalso must increase revenue in a va-riety of areas.
Immediately, he said, UPG hastaken action on improving billingand collections and in renegotiatingsupply and management servicevendor contracts.
“We are opening up (physician)schedules and removing barriers tosee more patients and beginning tointeract and share information withfaculty,” Hefner said. “We need totake systemic actions, but some ofthat does require more planningand design work.”
Sobel said plans call for renegoti-ating contracts with such partnerorganizations and increasing re-search funding and philanthropy.Efforts are also underway to de-crease overhead costs and tie physi-cian pay to productivity.
“We need to fundamentallychange how we operate,” Sobelsaid. “The chairs have not been heldaccountable, and that will stop. Weneed to increase faculty productivi-ty and reduce administrative over-head. We need to create a high-per-forming team across theorganization.”
Sobel said one disturbing find-ing was the low percentage of clini-cal faculty and basic science facul-ty that are contributing fundedresearch grants to the medicalschool.
In a Thursday interview withCrain’s, Sobel said the lack of re-search and grant dollars is a “domi-nant factor” in accounting for the$29 million in losses.
For example, the national aver-age for tenured faculty with grants isabout 40 percent, but Wayne State’saverage recently has been about 14percent.
“Most (science and clinical) fac-ulty don’t have grants. This has gotto stop,” Sobel said in the town hall
WSUFROM PAGE 3
video. “They can go to another hos-pital, not here. … We have too many(faculty) who are unable to supportthemselves with clinical services orresearch.”
Sobel estimated “we have 200FTEs (full-time equivalent) in ex-cess of what we are doing.” He saidthe Wayne State turnaround team isclosely looking at the clinical andscience departments to identify fac-ulty who either have no researchgrants or grants with small amountsof funding.
“We have to redeploy, resize andright-size,” Sobel said at the townhall meeting.
Hefner said Thursday the med-ical school will have a plan some-time in January to address what todo about the differential in facultysalary and research grants.
It is standard practice at mostmedical schools that when re-searchers receive grants, part oftheir salaries is paid from thosegrants.
However, in fiscal year 2015,medical school faculty brought in$117 million in research grantsand sponsored awards, but only$12 million of salary was recov-ered from these grants, Hefnersaid. If Wayne State moved to anational median, $5 million to$15 million more could be recov-ered, he said.
However, in the last three quar-ters, Sobel said, the amount of re-search grants alone has picked upby at least $10 million. For example,research grants increased to $70million in the first nine months ofthis year from $60.3 million duringthe same period in 2014.
“We have a lot of wonderful re-searchers here,” Sobel said, addingthat the medical school is workingon a way to increase incentives andshare resources to encourage de-partments and faculty to increasetheir research capabilities withoutaffecting their educational and clin-ical responsibilities.
While in the making for 20 to 30years, financial problems started tobecome serious in 2009, whenWayne State settled a contract dis-pute with the Detroit Medical Centerthat led to a reduction in funds fromDMC to the medical school anduniversity.
Hefner said the DMC contractand lower payments was a signifi-cant contributor to the financialdownturn at Wayne State. He saidthe school is still researching howmuch less the medical school hasreceived from DMC since 2009.
The DMC contract with the med-ical school expires in March and willbe renegotiated “to make it fairer,”he said.
“It is very difficult to manage theschool of medicine and take care ofour commitments with thatamount” of money from DMC,Sobel said.
But Hefner said the financialproblems facing Wayne State arealso due to reductions in fundingfrom the state, the National Institutesof Health and more recently, a de-cline in clinical services revenue,primarily because of declining re-imbursement for care.
“We did not address these de-creases with commensurate cost re-
ductions,” Sobel said.Hefner said Wayne State now is
focusing on mostly non-labor ex-pense improvement. However,Nicole Mascia, UPG’s chief of cor-porate affairs and COO, resigned inearly November.
Sobel and Hefner said therecould be more resignations at themedical school before January,when the full turnaround plan is ex-pected to be in place.
Hefner said historically themedical school — as most med-ical schools nationally — has lostmoney as part of the university,but the affiliated entities havegenerated enough revenue tokeep the school in the black. In2014, for example, the WayneState medical school and its relat-ed entities lost about $8 million,Hefner said.
But UPG, the medical school’sfaculty practice plan, which wasfounded in 2006 as a 501(c)(3) non-profit organization by former DeanRobert Mentzer, M.D., traditionallyhas been profitable and helpedcontribute revenue to the medicalschool.
While UPG is affiliated with themedical school, the board is inde-pendent with seven communitymembers and six medical schoolmembers, including Sobel.
Each year, UPG contributes anannual “dean’s tax” that has rangedfrom 8.7 percent to 17 percent ofprofessional fees annually to FMREto support research and medicaleducation. That dean’s tax hasamounted to between $10 millionand $14 million per year.
From 2009 to 2012, UPG wasprofitable, averaging about $2 mil-lion to $3 million a year. But begin-ning in 2013, UPG has lost an in-creasing amount of money,culminating in a $9 million loss in2015.The discovery of financial loss-es led to a delay in construction thissummer on a $60 million, 125,000-square-foot ambulatory care andadministrative building for WayneState’s UPG at 3750 Woodward Ave.The new office would enable UPGto consolidate its various officesaround DMC into a central loca-tion.
The newly appointed chairmanof UPG, Michael Busuito, M.D., aTroy plastic surgeon, told Crain’s onThursday that the UPG board is tak-ing aggressive action to reduce costsand modernize business practicesand its information technology sys-tem.
“UPG is still in its infancy, stillevolving,” Busuito said. “There arechanges (in health care) that arehappening at the speed of light. Insurgery, we say, there can be com-plications.”
Over the next 30 days, Hefnersaid more data will be collectedfrom University Physician Groupand the medical school to makedecisions early next year on how toimprove operations and breakeven.
“We have 30 to 40 people todayworking together to developthe data that we didn’t have before,” Hefner said. “This is longoverdue.” �
Jay Greene: (313) 446-0325Twitter: @jaybgreene
David Hefner:Found problems incommunication.
20151207-NEWS--0029-NAT-CCI-CD_-- 12/4/2015 5:02 PM Page 1
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HERE
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www.crainsdetroit.com
Editor-in-Chief Keith E. CrainGroup Publisher Mary Kramer,(313) 446-0399 or [email protected] Publisher Marla Wise, (313) 446-6032or [email protected] Jennette Smith, (313) 446-1622 [email protected] Editor Cindy Goodaker, (313) 446-0460or [email protected], Digital Strategy, Audience DevelopmentNancy Hanus,(313) 446-1621 or [email protected] Managing Editor Michael Lee, (313) 446-1630 [email protected] Editor/Custom and Special ProjectsDaniel Duggan, (313) 446-0414 [email protected] Managing Editor Kristin Bull,(313) 446-1608 or [email protected] Editor Beth Reeber Valone, (313) 446-5875 or [email protected] Editor Gary Piatek, (313) 446-0357 or [email protected] and Data Editor Sonya Hill,(313) 446-0402or [email protected] Support (313) 446-0419; YahNica Craw-ford, (313) 446-0329Newsroom (313) 446-0329, FAX (313) 446-1687 ,TIP LINE (313) 446-6766
REPORTERSJay Greene, senior reporter Covers health care, in-surance, energy, utilities and the environment.(313) 446-0325 or [email protected] Halcom Covers litigation, the defense indus-try and education. (313) 446-6796 [email protected] Henderson Covers banking, finance, tech-nology and biotechnology. (313) 446-0337 [email protected] Pinho Covers real estate, Oakland and Ma-comb counties. (313) 446-0412 [email protected] Shea, enterprise editor Covers media,advertising and marketing, the business ofsports, and transportation.(313) 446-1626 or [email protected] Snell, reporter Covers city of Detroit and regional politics. (313) 446-1654 [email protected] VanHulle, Lansing reporter. (517) 657-2204 or [email protected] Walsh, senior reporter Covers the busi-ness of law, auto suppliers, manufacturing andsteel. (313) 446-6042 or [email protected] Welch, senior reporter Covers nonprofits,services, retail and hospitality. (313) 446-1694 or [email protected]
ADVERTISING
Sales Inquiries (313) 446-6032; FAX (313) 393-0997Sales Manager Tammy Rokowski Senior Account Executive Matthew J. LanganAdvertising Sales Christine Galasso, CatherineGrace, Joe Miller, Sarah StachowiczClassified Sales Manager Angela Schutte, (313)446-6051Classified Sales Lynn Calcaterra, (313) 446-6086Events Manager Kacey AndersonCreative Services Director Pierrette TempletonSenior Art Director Sylvia KolaskiMarketing Coordinator Ariel BlackSpecial Projects Coordinator Keenan CovingtonSales Support Suzanne Janik, YahNica CrawfordEditorial Assistant Nancy PowersProduction Manager Wendy KobylarzProduction Supervisor Andrew Spanos
CUSTOMER SERVICE
Main Number: Call (877) 824-9374 or [email protected] $59 one year, $98 two years. Out ofstate, $79 one year, $138 for two years. OutsideU.S.A., add $48 per year to out-of-state rate for sur-face mail. Call (313) 446-0450 or (877) 824-9374.Single Copies (877) 824-9374Reprints (212) 210-0750; or Krista Bora [email protected] find a date a story was published (313) 446-0406 or e-mail [email protected]
Crain’s Detroit Business is published by Crain Communications Inc.Chairman Keith E. CrainPresident Rance CrainTreasurer Mary Kay CrainExecutive Vice President/OperationsWilliam A. MorrowExecutive Vice President/Director of StrategicOperations Chris CrainExecutive Vice President/Director of CorporateOperations KC CrainVice President/Production & ManufacturingDave KamisChief Financial Officer Thomas StevensChief Information Officer Anthony DiPonio G.D. Crain Jr. Founder (1885-1973)Mrs. G.D. Crain Jr. Chairman (1911-1996)Editorial & Business Offices1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000Cable address: TWX 248-221-5122 AUTNEW DETCRAIN’S DETROITBUSINESS ISSN # 0882-1992 is pub-lished weekly,except fora special issue the third weekofNovember,and no issue the third weekofDecemberbyCrain Communications Inc.at 1155 Gratiot Ave.,DetroitMI 48207-2732.Periodicals postage paid at Detroit,MIand additional mailing offices.POSTMASTER: Send ad-dress changes to CRAIN’S DETROITBUSINESS,Circula-tion Department,P.O.Box07925,Detroit,MI 48207-9732.GST# 136760444.Printed in U.S.A.Entire contents copyright 2015 byCrain Communica-tions Inc.All rights reserved.Reproduction oruse ofedi-torial content in anymannerwithout permission isstrictly prohibited.
CRAIN’SDETROIT BUSINESS
Achatz Handmade Pie ...................................... 4Adamo Group ................................................... 24Amherst Partners .............................................. 9Arbor Hospice & Palliative Care .................... 22Blue Cross Blue Shield of Michigan .................. 1Cascade Partners .............................................. 9City Hall Artspace Lofts.................................. 26Dalsey & Associates........................................ 26Detroit Symphony Orchestra ......................... 14Detroit Zoological Society ............................... 11Dick Scott Chrysler Dodge Jeep.................... 20Downtown Detroit Partnership..................... 25eCycle Opportunities ....................................... 13Fiat Chrysler Automobiles .......................... 1, 20Fox Hills Chrysler Jeep .................................... 20Fred A. and Barbara M. Erb Family Foundation . 12Fund for Medical Research and Education .... 3George P. Johnson Co. ........................................ 1Gibbs Planning Group ..................................... 26Grandmont Rosedale Development.............. 15Grow Detroit’s Young Talent .......................... 25
Hospice of Michigan ........................................ 22Just Baked Cupcakes ........................................ 4JVS ...................................................................... 13Kresge Foundation .......................................... 25Livonia Chrysler Jeep ...................................... 20Mercer ............................................................... 26Michigan Manufacturers Association........... 19Michigan Unemployment Insurance Agency ... 17North American International Auto Show... 1, 28Olympus Fare .................................................... 21Pitt, McGehee, Palmer & Rivers..................... 18Plunkett Cooney ............................................... 19Quarton Partners............................................... 9Skillman Foundation ....................................... 25Small Business Association of Michigan ...... 18University of Michigan ...................................... 6Wayne Metropolitan CommunityAction Agency 14Western Michigan Univ. Cooley Law School..... 17Wolfson Bolton ................................................. 19Wayne State University .................................... 3Wayne State University Physician Group....... 3
INDEX TO COMPANIESThese companies have significant mention in this week’s Crain’s Detroit Business:
who came from Augusta, Ga.-basedGeorgia Regents Health System andhas known Wilson for many years,was given the job of reviewing themedical school’s financial condi-tion, Sobel said.
Within 45days, Hefner dis-covered com-municationproblems be-tween the med-ical school,FMRE, the Uni-versity PhysicianGroup and prac-tice plans thatwere hurtingtheir ability to
generate revenue, Sobel said. Thoseincluded a lack of joint strategicplanning and coordination of hiringand compensation plans.
“The university had to pay thecosts of the professors because themoney was not covered by UPG,”said Sobel, noting that UPG thisyear lost $9 million, despite the $27million sale of a 175,000-square-foot corporate office and ambulato-ry surgery center in Troy.
Losses for the medical school infiscal 2015 totaled $7 million andlosses for FMRE were $13 million,Sobel said. Combined revenue forthe medical school and UPG in2015 was about $640 million.
“I am not here to point fingers,”Sobel said. “There are too manyfingers to point, and the fingershave grown long” over the past 20years.
Sobel said a turnaround team ledby Hefner is exploring various op-tions this month to cut costs and in-crease revenue.
“We cannot have a burn rate of$1.5 million in January, not even a$1 million” per-month loss rate,Sobel said. “We have already fleecedthe university more than what isreasonable.”
Starting next year, Sobel said,there will be a period of austerity forsome departments at the medicalschool.
“There will be a (hiring) freeze inmany departments. There will be(expense) cuts,” he said. “I amagainst the concept of across-the-board cuts. We cannot cut success-ful individuals.”
Total employees at the medicalschool and UPG are 3,285, with985 at UPG and 2,300 at the med-ical school. Total clinical, scienceand research faculty is 827 profes-sors.
“We don’t know about (employ-ee) reductions. Things are thin now.We are looking possibly at attrition,”Hefner told Crain’s on Tuesday.“On the faculty side, there will be re-deployments and cuts in overheadareas.”
To turn around operations, Hefn-er said, the medical school and UPGalso must increase revenue in a va-riety of areas.
Immediately, he said, UPG hastaken action on improving billingand collections and in renegotiatingsupply and management servicevendor contracts.
“We are opening up (physician)schedules and removing barriers tosee more patients and beginning tointeract and share information withfaculty,” Hefner said. “We need totake systemic actions, but some ofthat does require more planningand design work.”
Sobel said plans call for renegoti-ating contracts with such partnerorganizations and increasing re-search funding and philanthropy.Efforts are also underway to de-crease overhead costs and tie physi-cian pay to productivity.
“We need to fundamentallychange how we operate,” Sobelsaid. “The chairs have not been heldaccountable, and that will stop. Weneed to increase faculty productivi-ty and reduce administrative over-head. We need to create a high-per-forming team across theorganization.”
Sobel said one disturbing find-ing was the low percentage of clini-cal faculty and basic science facul-ty that are contributing fundedresearch grants to the medicalschool.
In a Thursday interview withCrain’s, Sobel said the lack of re-search and grant dollars is a “domi-nant factor” in accounting for the$29 million in losses.
For example, the national aver-age for tenured faculty with grants isabout 40 percent, but Wayne State’saverage recently has been about 14percent.
“Most (science and clinical) fac-ulty don’t have grants. This has gotto stop,” Sobel said in the town hall
WSUFROM PAGE 3
video. “They can go to another hos-pital, not here. … We have too many(faculty) who are unable to supportthemselves with clinical services orresearch.”
Sobel estimated “we have 200FTEs (full-time equivalent) in ex-cess of what we are doing.” He saidthe Wayne State turnaround team isclosely looking at the clinical andscience departments to identify fac-ulty who either have no researchgrants or grants with small amountsof funding.
“We have to redeploy, resize andright-size,” Sobel said at the townhall meeting.
Hefner said Thursday the med-ical school will have a plan some-time in January to address what todo about the differential in facultysalary and research grants.
It is standard practice at mostmedical schools that when re-searchers receive grants, part oftheir salaries is paid from thosegrants.
However, in fiscal year 2015,medical school faculty brought in$117 million in research grantsand sponsored awards, but only$12 million of salary was recov-ered from these grants, Hefnersaid. If Wayne State moved to anational median, $5 million to$15 million more could be recov-ered, he said.
However, in the last three quar-ters, Sobel said, the amount of re-search grants alone has picked upby at least $10 million. For example,research grants increased to $70million in the first nine months ofthis year from $60.3 million duringthe same period in 2014.
“We have a lot of wonderful re-searchers here,” Sobel said, addingthat the medical school is workingon a way to increase incentives andshare resources to encourage de-partments and faculty to increasetheir research capabilities withoutaffecting their educational and clin-ical responsibilities.
While in the making for 20 to 30years, financial problems started tobecome serious in 2009, whenWayne State settled a contract dis-pute with the Detroit Medical Centerthat led to a reduction in funds fromDMC to the medical school anduniversity.
Hefner said the DMC contractand lower payments was a signifi-cant contributor to the financialdownturn at Wayne State. He saidthe school is still researching howmuch less the medical school hasreceived from DMC since 2009.
The DMC contract with the med-ical school expires in March and willbe renegotiated “to make it fairer,”he said.
“It is very difficult to manage theschool of medicine and take care ofour commitments with thatamount” of money from DMC,Sobel said.
But Hefner said the financialproblems facing Wayne State arealso due to reductions in fundingfrom the state, the National Institutesof Health and more recently, a de-cline in clinical services revenue,primarily because of declining re-imbursement for care.
“We did not address these de-creases with commensurate cost re-
ductions,” Sobel said.Hefner said Wayne State now is
focusing on mostly non-labor ex-pense improvement. However,Nicole Mascia, UPG’s chief of cor-porate affairs and COO, resigned inearly November.
Sobel and Hefner said therecould be more resignations at themedical school before January,when the full turnaround plan is ex-pected to be in place.
Hefner said historically themedical school — as most med-ical schools nationally — has lostmoney as part of the university,but the affiliated entities havegenerated enough revenue tokeep the school in the black. In2014, for example, the WayneState medical school and its relat-ed entities lost about $8 million,Hefner said.
But UPG, the medical school’sfaculty practice plan, which wasfounded in 2006 as a 501(c)(3) non-profit organization by former DeanRobert Mentzer, M.D., traditionallyhas been profitable and helpedcontribute revenue to the medicalschool.
While UPG is affiliated with themedical school, the board is inde-pendent with seven communitymembers and six medical schoolmembers, including Sobel.
Each year, UPG contributes anannual “dean’s tax” that has rangedfrom 8.7 percent to 17 percent ofprofessional fees annually to FMREto support research and medicaleducation. That dean’s tax hasamounted to between $10 millionand $14 million per year.
From 2009 to 2012, UPG wasprofitable, averaging about $2 mil-lion to $3 million a year. But begin-ning in 2013, UPG has lost an in-creasing amount of money,culminating in a $9 million loss in2015.The discovery of financial loss-es led to a delay in construction thissummer on a $60 million, 125,000-square-foot ambulatory care andadministrative building for WayneState’s UPG at 3750 Woodward Ave.The new office would enable UPGto consolidate its various officesaround DMC into a central loca-tion.
The newly appointed chairmanof UPG, Michael Busuito, M.D., aTroy plastic surgeon, told Crain’s onThursday that the UPG board is tak-ing aggressive action to reduce costsand modernize business practicesand its information technology sys-tem.
“UPG is still in its infancy, stillevolving,” Busuito said. “There arechanges (in health care) that arehappening at the speed of light. Insurgery, we say, there can be com-plications.”
Over the next 30 days, Hefnersaid more data will be collectedfrom University Physician Groupand the medical school to makedecisions early next year on how toimprove operations and breakeven.
“We have 30 to 40 people todayworking together to developthe data that we didn’t have before,” Hefner said. “This is longoverdue.” �
Jay Greene: (313) 446-0325Twitter: @jaybgreene
David Hefner:Found problems incommunication.
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