Thursday, August 29, 2013

Privatization Prompts More Detroit Medical Center Layoffs

More DMC layoffs could be coming

7:34 PM, August 28, 2013
By JC Reindl
Detroit Free Press Business Writer

Detroit Medical Center CEO Joe Mullany said the merger is in the 'final countdown.'

Another round of layoffs could be coming to the Detroit Medical Center.

An e-mail sent to DMC employees Tuesday said jobs will be lost as a result of the coming merger between DMC’s for-profit parent — Nashville-based Vanguard Health Systems — and the larger Dallas-based Tenet Healthcare.

In the e-mail, DMC CEO Joe Mullany said the merger is in the “final countdown.” An e-mail attachment provided frequently asked questions about the merger and its effects on the DMC system. Toward the end, it said: “The acquisition will result in some position eliminations, and not all employees will be retained.”

A Vanguard spokeswoman initially said Wednesday that the “position eliminations” may not necessarily pertain to DMC and referred all official comment to Tenet. Suzanne Towry, Vanguard’s director of marketing and public relations, later sent a message to the Free Press that read, in full:

“It would be inaccurate and potentially misleading to take a Q and A and interpret that question as ‘layoffs are coming down the pike.’ Since the merger has not been completed and the integration work is on-going I think it would be a mistake to suggest layoffs may happen. Per the agreement, all of our employees will become Tenet employees on the date the merger occurs.”

After the reference to “position eliminations,” the e-mail employees received went on to describe questions and answers regarding issues such as unemployment and COBRA benefits. It said that DMC employees who leave are free to reapply for a job at Tenet in the future.

DMC laid off about 300 employees earlier this year, citing Medicare spending cuts related to the federal sequester as well as an effort to streamline operations amid the changing health care business environment. DMC remains a top employer in Detroit with about 12,600 full-time-equivalent employees across all of its facilities.

Vanguard bought the formerly nonprofit DMC in January 2011, converting the eight-hospital system to a for-profit enterprise. As part of the deal, Vanguard promised to invest $850 million in capital spending to upgrade and expand DMC’s aging facilities.

In June, Tenet Healthcare announced its tentative agreement to buy Vanguard and turn it into a wholly-owned subsidiary. Vanguard said in corporate filings that it expects the deal to close early in its second quarter, which begins Oct. 1.

The deal is valued at $4.3 billion — $1.8 billion in cash and the assumption of $2.5 billion in debt.

Tenet also would assume responsibility for fulfilling Vanguard’s promise of $850 million in capital spending over five years at DMC. Vanguard reported spending $321 million toward that goal as of June 30.

Contact JC Reindl: 313-222-6631 or Follow him on Twitter @JCReindl.

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