DMC:
Private Gain, Public Loss

May 10, 2010

The Detroit Medical Center recently announced it was selling itself to Vanguard Health Systems. The deal represents the largest takeover in the country of a non-profit hospital system by a for-profit company.

Vanguard receives a complex of nine hospitals in and around the Detroit area, six of them located on the DMC’s main campus in the heart of Detroit.

In an area of just a dozen or so city blocks, DMC owns a children’s hospital, a women’s hospital, a general hospital, the city’s most important trauma care center, an eye institute, and a rehabilitation institute. The overall medical complex also includes the Wayne State University medical school, a veterans’ hospital, and a prominent cancer center. DMC also benefits from other institutions put together with public money.

Vanguard gets a diversified hospital system put together with a huge amount of government money.

DMC was established in 1985 as a non-profit organization, with 25 years of tax exemption from all federal, state, and local taxes. Those tax breaks have been worth about 20 million dollars per year, for a total savings of 500 million for DMC.

In exchange for getting all these hospitals and years of tax breaks, Vanguard is paying ... nothing. It says only that it will invest 850 million dollars in future improvements, and assume 500 million of DMC’s current debt and pension obligations. It’s only a promise–which can be broken. But even if Vanguard does pay, it will not be with its own money. It will be money taken from the income DMC continues to generate.

Vanguard says it is “buying” DMC. The fact is it is paying nothing. It’s being given a huge gift, funded in the past and future by city, county, state and federal tax dollars.