Competition for patients will increase in the Jackson market with a stronger Henry Ford Allegiance Health hospital and the University of Michigan Health System creeping closer to Jackson.
In March, UM announced it plans to purchase a 49 percent interest in St. Joseph Mercy Chelsea Hospital, which is between Ann Arbor and Jackson.
Officials for St. Joseph Mercy Health System, which owns the Chelsea hospital, said the two are expected to invest at least $20 million in improvements. The community hospital would increase operating rooms to eight from six, boost operating beds from about 100 now to the licensed capacity of 133 beds and add minimally invasive robotic surgery.
Fojtasek said the move to Chelsea makes sense for the University of Michigan. “We are competitors, and that probably will increase competition and makes sense for them,” she said.
But David Spahlinger, M.D., president of the University of Michigan Health System, said UM’s decision on Chelsea had nothing to do with blunting Henry Ford’s move into Jackson. He said UMHS simply needs additional beds to serve its patients and is striking deals with health care organizations like St. Joseph’s across the state.
Spahlinger confirmed that HAP plans to roll out a tiered provider network insurance product in the Jackson market sometime this year. He said he was informed by Henry Ford that UM will become a “tier 2” provider that will charge patients using UM higher out of pocket costs under the new product plan.
In a statement, Mary Ann Tournoux, HAP’s senior vice president and chief marketing officer, said that HAP is considering a tiered provider network in Jackson market that could place some providers in higher cost-sharing tiers.
“As with all health plans in Michigan, HAP is evaluating the use of tiered networks in all of our markets that would give an incentive to those members who choose to get their health care from high-quality providers that deliver the best value,” Tournoux said.
Under the tiered network approach, health insurers charge patients higher copays for tier 2 or tier 3 to discourage the use of certain providers or to encourage use of lower-cost and higher-quality providers. Tier 1 is considered the preferred network providers and have the lowest copayments.
In the Jackson and Ann Arbor markets, sources tell Crain’s, the end result is expected to reduce the number of HAP members using UM and direct more to Allegiance or possibly coming to Henry Ford Hospital in Detroit for higher-cost specialty services.
“HAP has (placed UM in tier 2 for the proposed narrow network insurance product), but these actions occurred after our announcement (with St. Joe’s Chelsea hospital),” said Spahlinger.