Detroit Medical Center: Investing in Detroit’s Health
$1.2 billion committed to implement critical upgrades and improve the quality of care for a population in need.
The Detroit Medical Center (DMC) is one of Detroit’s leading healthcare providers and a nationally and regionally recognized medical system. Founded in 1886, DMC is a collection of eight hospitals and one rehabilitation institute caring for an underserved, urban population. Given the highly distressed local economy due to the decline of the region’s predominant employers and 25% population loss over the past decade, the scale and impact of this investment on the Detroit community is considerable.
- Hospitals: 8
- Employees: 12,000
- Physicians: 3,000
- Annual patient visits: 1,400,000
Five DMC hospitals received national and regional recognition for excellence in twenty specialties according to U.S. News & World Report’s 2010-2011 ‘Best Hospital Rankings’ and made the publication’s list of ‘most connected’ hospitals for their leadership in moving to electronic medical records. DMC Children’s Hospital of Michigan garnered U.S. News rankings in nine pediatric specialities.
Blackstone and DMC
Given the choppy financing markets of 2008/09, DMC was capital constrained and forced to delay major new capital projects. DMC was seeking a buyer who would not only uphold DMC’s long-standing tradition of clinical excellence, but also provide the capital necessary to expand and upgrade its facilities. DMC identified a small group of potential buyers and selected Vanguard as its buyer of choice. In late 2009, DMC senior management approached Blackstone portfolio company, Vanguard, about acquiring DMC. Vanguard marries the principles of non-profit health care with the business acumen of a privately owned organization, making it a good cultural fit for DMC. Importantly, Vanguard was willing to maintain DMC’s charity care policy.
Vanguard acquired the not-for-profit system in December 2010 for $368 million. The acquisition represents the largest ever conversion (in terms of revenue) of a not-for-profit hospital system in the U.S.
The DMC acquisition supports Vanguard’s strategic objective to acquire not-for-profit hospital systems with dominant market share and drive clinical, operational, and financial improvements.
Largest Private Investment in Detroit History
As part of the acquisition, Vanguard committed to invest $850 million over five years in capital improvements, the single largest private investment in Detroit history.
The capital injection will facilitate the following upgrades and expansions:
- New Children’s Hospital Ambulatory Center
- New Tower in the Children’s Hospital to expand and improve pediatric care
- New Emergency room, ICU and Ambulatory space at Sinai-Grace Hospital
- New Cardiovascular Center and Specialty Ambulatory Building at Harper University Hospital
- Renovations at Detroit Receiving Hospital
- Major upgrades to the Perioperative suites at Harper University Hospital
Other capital investments are in planning and will be rolled out over the coming years.
Growth Potential
With help from Vanguard and Blackstone’s Portfolio Operations Group, DMC is implementing a series of strategic growth initiatives. In addition to making targeted capital investments, the company is now expanding service offerings and outpatient/ambulatory services, which will assist in the consolidation of the Detroit market.
Blackstone’s deep operational expertise and Vanguard’s sector knowledge are helping the company implement a series of operational efficiencies. By leveraging Blackstone and Vanguard’s purchasing power, DMC is expected to achieve significant cost savings that better position it for future growth.
