Rich was key in hospital merger and the creation of Spectrum Health

The DeVos family’s support for health care is well established.

Spectrum Health’s Helen DeVos Children’s Hospital is perhaps the most prominent example, followed by the Richard DeVos Heart & Lung Transplant Program. Rich and Helen also provided support for Spectrum’s Meijer Heart Center and the Lemmen-Holton Cancer Pavilion.

Driven by a desire to bring quality, cutting-edge health care to his hometown so people wouldn’t have to travel, Rich spent more than 30 years publicly and privately advocating for local health care through board service, fundraising and philanthropy.

In fact, in 1994 he was the leading architect behind the creation of Spectrum Health, guiding its transformation from two community hospitals struggling to compete in an ever changing healthcare landscape into what is now one of the state’s largest health systems, with 14 hospitals and more than 31,000 employees.

Making quality health care affordable

Rich’s deft guidance came at a time when the Grand Rapids area’s two biggest and oldest hospitals — Butterworth Hospital downtown and Blodgett Memorial Medical Center 3 miles away in East Grand Rapids — were beginning talks about how they could better serve West Michigan.

At that time, the hospitals that had started in the 1800s had nearly 860 beds, 7,400 employees and annual revenues of $420 million between them. They largely competed against each other for patients, especially those needing the most sophisticated care.

Bringing the two entities together was expected to save $100 million in capital expenses and another $70 million in operating expenses in the first five years. More importantly, Rich knew that merging these institutions would make quality health care more affordable for the community.

“It may take 10 years, but a process has been set into place that should eventually end in consolidation,” Rich told The Grand Rapids Press in the early stages of the arrangement. “We are into this to carry it through to the end. I think, together, the hospitals can make beautiful music for all of the people of this community and beyond.”

That was the beginning of a journey that required rallying support and creating opportunities for consensus among hospital executives and employees as well as community members, business leaders and politicians. Rich even testified for more than an hour in federal court in support of the merger, which he saw as necessary for the health and wellbeing of both hospitals and the community.

Encouraging collaboration over competition

It wasn’t the first time Blodgett and Butterworth leaders had explored a closer relationship. Discussions 12 years earlier had ended without an agreement. But this time, Rich was spearheading the effort.

When the plan initially struggled to get broad local backing, Rich used his skills for bringing people together. He encouraged the community to see what they could accomplish by working together rather than competing and used his decades of business experience to guide the process through negotiations and, ultimately, legal proceedings with the Federal Trade Commission.

Rich’s vision for the hospitals reflected a growing concern about the future of health care in his community. In 1993, the Hillman Commission, a 23-member citizens advisory committee, spent more than a year studying local health care institutions, concluding that if local hospitals cooperated and streamlined their operations, health care costs could be contained.

Another group, Health Care 2000, representing 80 local businesses and their 45,000 employees, favored consolidating, seeing it as a way to cut down on duplication of medical services. The coalition included the region’s biggest employers: Amway, Autocam Corp., Bil-Mar Foods, Donnelly Corp., Herman Miller Inc., Meijer Inc., Spartan Foods and Steelcase Inc.

“We’re very positive about this because it would bring high-quality care at a lower price,” said John C. Kennedy, the group’s chairman and president of Autocam, a Grand Rapids manufacturer, of the proposed merger.

The spiraling cost of health care was a growing problem for employers. In May 1994, during a daylong conference titled Strategies for Health Care Management, Rich’s son and Amway President Dick DeVos Jr. challenged local businesses to take action and not wait for the federal government to revamp the nation’s health care system.

“The people in Washington are debating theory while you are debating reality,” said Dick. “The most meaningful change in health care is going to happen at the point of delivery, which is right here.”

Facing opposition

But in January 1996, just over two years after merger plans were announced, the Federal Trade Commission went to court to stop it. The FTC contended a merger would create a mega-hospital that would stifle competition and raise health care expenses for consumers. The plan was also opposed by local insurance providers, health maintenance organizations, some doctors and other medical personnel who worried about how changes would impact patient care.

Rich had the opportunity to present his case in court. In his signature colorful way of public speaking, Rich described a health system that would lure people to Grand Rapids for care, competing with Detroit or Chicago.

“We could get the word out that we do open hearts for half the price in Grand Rapids, and we’ll put families up in the Amway Grand Plaza,” Rich testified. “With a merger, we could exert more influence and ask people to travel here because it’s a better buy.”

The Press reported that Rich was “grilled” by government attorneys for more than an hour about why he wanted the merger.

“I realized that there were already too many beds in our community and that some hospitals would perish if something wasn’t done,” Rich explained at the FTC hearing. While he said he was a “gung-ho capitalist,” he added that had learned from his time on the Butterworth board that competition in the healthcare arena follows a different model from nearly any other industry.

“We need to do what we can today to ensure that we are cost-effective and offer high-quality services for our people down the line,” Rich said.

‘A new day in health care’

The FTC continued its opposition for nearly two years before voting unanimously in September 1997 to end its challenge to the move. The decision came as Michigan politicians were working to fight the FTC on the issue and as more hospital mergers across the country were winning similar battles in court.

In the big picture, the Butterworth and Blodgett merger illustrated the type of changes required for hospitals to thrive in the next century.

“We think the commission was right,” Butterworth Attorney Richard Bouma told The Press at the time. “Their actions signal a new day in health care in West Michigan.”

Source: The Grand Rapids Press

• DeVos urges businesses to act on health care (GRP, 5/4/94)
• Hospital talks could mean merger (GRP, 9/9/94)
• Few fear merger of GR hospitals (GRP, 9/10/94)
• FTC sends hospital merger to ER (GRP, 1/20/96)
• Lack of community support may have influenced FTC’s decision, many say (GRP, 1/20/96)
• Merger hopes lie in court (GRP, 1/23/96)
• DeVos set market health care (GRP, 4/25/96)
• FTC won’t fight merger of hospital (GRP, 9/26/97)