Hospital, Vanguard agree on sale terms

March 20, 2010 at 12:00a.m.

Associated Press

DETROIT

Detroit Medical Center officials said Friday that plans for the nonprofit hospital system to be purchased by the privately held Vanguard Health Systems Inc. will allow it to maintain its commitment to charitable care and boost investment in its future.

The eight-hospital system and Nashville, Tenn.-based Vanguard signed a letter of intent that opens the door for the sale. Terms include Vanguard’s making $850 million in capital improvements during the next five years, as well as paying $417 million to retire outstanding DMC bonds and other long-term debts.

Mike Duggan, the DMC’s president and chief executive, said the deal will allow the state’s largest provider of charitable care to continue in that role and invest in facilities. Despite six years of profitability, the DMC was unable to get investment from the Wall Street bond market as a nonprofit, he said.

“The nonprofit hospital model is killing health care in the city of Detroit,” Duggan said at a news conference at Children’s Hospital of Michigan.

Vanguard has agreed to $500 million in specific projects, including a new Children’s Hospital tower and expansion and improvements to several other facilities. The other $350 million will be for ongoing repairs and capital and equipment needs.

“DMC at its core is a place that takes care of people who have no place else to go,” Duggan said. “That’s who we are; that’s who we’re always going to be.”

Vanguard has committed to keep all DMC hospitals open for 10 years and maintain the system’s charity-care policy during that time. The hospitals will be owned by a Vanguard subsidiary known as VHS Michigan and will continue to operate under the Detroit Medical Center name. The final purchase price has not been disclosed.

Trip Pilgrim, Vanguard’s chief development officer and senior vice president, said the company was impressed by the DMC’s profitability, given the difficult economic climate in the Detroit area.