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Posted on Thu, Oct 7, 2010 : 6:03 a.m.

Health care reform law played role in merger between IHA, St. Joseph Mercy Health System

By Nathan Bomey

Bill Fileti, CEO of Ann Arbor-based Integrated Healthcare Associates, wants to make sure Michigan doesn’t become Massachusetts.

“If you watched the Massachusetts experience, when they went to universal health care, volumes skyrocketed and waiting time grew exponentially,” he said. “That’s not an outcome that we want here in our community.”


St. Joseph Mercy Health System has seven hospitals, including one in Superior Township.

Photo courtesy of St. Joseph Mercy Health System

With that in mind, IHA said Tuesday that it had agreed to a merger with Saint Joseph Mercy Health System, which will operate IHA as a subsidiary, maintaining IHA’s 150 physicians, 700 other employees and 32 offices in four counties.

Both health care organizations said the merger was partly a response to the national health care reform legislation passed earlier this year by U.S. Congress and signed by President Barack Obama.

The health care reform law, together with another federal bill, will ultimately result in some 32 million uninsured Americans being eligible for coverage, putting more strain on health care providers.

Marianne Udow-Phillips, director of the Center for Healthcare Research & Transformation, a partnership between the University of Michigan and Blue Cross Blue Shield of Michigan, said the merger was a sign of things to come for the Ann Arbor region.

“The IHA-St. Joe’s merger is a great example of the kinds of things we’re going to start see rolling out as we gear up for health care reform,” she said.

Today, Michigan has about 1.055 million residents living without health care insurance.

By 2014 the law will be in full effect, requiring uninsured people to buy insurance or pay fees to the government. CHRT projects that about 910,000 currently uninsured Michigan residents will have coverage after the health care reform law takes full effect in 2014.

The legislation calls for the creation of so-called insurance exchanges, giving people the option to buy their own insurance, in some cases using government subsidies. Others will become eligible for government insurance through Medicaid or Medicare.

Collectively, it means that people who previously would never dream of visiting the hospital or a doctor will suddenly have cost-effective options of doing so.

For Michigan hospitals and doctors, a sudden influx of patients is looming - and that means they need to become more efficient in working together to treat patients more efficiently and effectively.

“The connection between physicians and hospitals in the post-health reform world will be much more important than it ever has been historically,” Udow-Phillips said. “That’s because there are a lot of components of health care reform that rely on physicians and hospitals working together to improve the quality and cost-effectiveness of care.

“Creating these integrated systems was very much part of what the vision was for health care reform.”

An integrated system is the goal of SJMHS and IHA. Both organizations had already been collaborating - some IHA doctors serve in various medical roles at St. Joe’s seven hospitals, for example.

But they need to collaborate more effectively to shift treatments from hospitals to doctor’s offices, freeing up hospital space and reducing health care costs.

“The real economic value of this is not so much realized by us but it’s by those who are going to pay for care down the road,” said Rob Casalou, CEO of St. Joseph Mercy Hospitals in Ann Arbor, Saline and Howell. “IHA - their model is to keep people out of the hospital. If we work together well in this partnership, we’ll be lowering costs and that’s ultimately where the value is.”

There’s an incentive for collaborating, too. The federal health care legislation favors so-called “bundled payments,” which provide a single rate of reimbursement for health care services provided by a health care group. A network of doctors and hospitals can get higher payments for ensuring “they’re not just bouncing patients back and forth,” Udow-Phillips said.

Meanwhile, the legislation also stipulates that Medicare reimbursement payments will be made to so-called “accountable care organizations” - that is, a coalition of health care providers - based on goals such as improved clinical care and shared savings.

“The only way that hospitals are going to achieve the goals that have been set out for them by Medicare are by working with doctors closely,” Udow-Phillips said.

Robert Milewski, senior vice president of operations and health care value at Blue Cross Blue Shield of Michigan, said that the health care reform law is playing a role in prompting more collaboration between doctors and hospitals. But he said the country’s aging population is also a factor.

“In order to achieve the types of the efficiencies that are going to be necessary going forward, just because of the pressures on the health care system, there’s going to have to be better alignment between hospitals, physicians and insurers,” Milewski said.

Contact's Nathan Bomey at (734) 623-2587 or You can also follow him on Twitter or subscribe to's newsletters.


Ned Simpson

Fri, Oct 15, 2010 : 8:22 a.m.

For two years from 2007 thru 2009, I worked at the Massachusetts Healthcare Reform Connector Authority. First I applaud IHA and St. Joseph for their forward thinking action. It will serve our community well to have this merged organization developing solutions for the challenges the country faces in our health care crisis. However, I was very disappointed to see the inaccurate portrayal of the Massachusetts reform effort. There was neither skyrocketing volumes nor exponential growth in waiting times. Far from skyrocketing or exponential waits, Health Affairs (6/3/2008, found In roughly the first year under reform, uninsurance among working-age adults was reduced by almost half.... At the same time, access to care improved, and the share of adults with high out-of-pocket costs and problems paying medical bills dropped. There are a number of good third party studies of the Massachusetts reform initiative: The Kellogg Family Foundation ( and The New England Journal of Medicine ( This is not to say that there were not problems, not the least of which is cost, and unintended consequences in Massachusetts. The Affordable Care Act (ACA) reflects many lessons learned for Massachusetts. (Back to subject of volume, many MA hospitals are now struggling with declining utilization. It's complex) Im impressed at the vision and leadership it took from IHA and St. Joseph to effect the merger. However, particularly with the swirl of inaccuracies, misperceptions and general fear uncertainty and doubt surrounding health care reform, I would like to think the holds its self to a high standard of integrity and would present a full accurate and balanced report of the Massachusetts experience and ACA.

Bill Fileti

Thu, Oct 7, 2010 : 5:19 p.m.

Blogger bugjuice captures the challenges the health care system will face in 2014 unless we start preparing to increase our physician and nurse practitioner capacity, add more offices, and work to improve access through expanded hours, improved phone capabilities, 24/7 call center availability and web portal functionality. IHA is moving on many fronts to fully implement these potential solutions. We dont want the crisis that has engulfed Massachusetts to happen in our community. We agree that the health care system has many inadequacies. Thats why we will be working closely with our colleagues at both St. Joes and UM to create a more integrated, collaborative and coordinated system in the future.

Atticus F.

Thu, Oct 7, 2010 : 1:09 p.m.

I agree with the majority of the posters here. I have insurance, but I wouldn't mind waiting longer at the doctors office if it meant that others in need would be getting treatment. I also agree that this artical is trying to portray an image of masses of people who are unwilling to work, mooching of the healthcare system... While 'good people' suffer the consequinces of having to wait hours for treatment.


Thu, Oct 7, 2010 : 9:34 a.m.

"The health care reform law, together with another federal bill, will ultimately result in some 32 million uninsured Americans being eligible for coverage, putting more strain on health care providers." Yes, isn't it a nuisance that more people will be getting health care. Sounds like some "health care providers" are not happy about that. More the corporate types being quoted rather than the doctors in the trenches.

Basic Bob

Thu, Oct 7, 2010 : 9:31 a.m.

What universal health care potentially does is gives more access to clinics and doctors' offices. Right now if one shows up at the office without insurance or cash, they are not treated. So they go to the "free" emergency room instead. Expanding clinics is a more efficient way to provide high quality health care. Most people that need to see a doctor don't need all the stuff in the hospital.


Thu, Oct 7, 2010 : 8:18 a.m.

Shame on all those people in Massachusetts who finally had the chance to go see a doctor. They made the lines too long and exposed our inadequate health care system. Mr Filet's politics are showing right through his management style.

Bob Bethune

Thu, Oct 7, 2010 : 7:38 a.m.

The author of this story wrote, "Collectively, it means that people who previously would never dream of visiting the hospital or a doctor will suddenly have cost-effective options of doing so." That's silly. The author should know that when uninsured people need care, they show up at the emergency room. They do so only after their condition has already gotten worse than it needed to get, when they are in a state that requires more expensive treatment than they otherwise would have needed. The emergency room visit is also the most expensive and least effective way to provide treatment--least effective because it doesn't lead to followup treatment, patient education, or preventative treatment. This merger may be a good thing, but it won't deal with a supposed avalanche of new patients. It doesn't add one staff person or hospital bed or outpatient seat to what exists at present.