Alive!

A bit of local business that went down over the past month is that Sparrow Hospital is being absorbed by the University of Michigan medical system.

All the evidence I see is that it was a distressed sale. U-of-M is paying about $110,000 per job for the business. With 7700 employees, Sparrow Hospital is one of the area's largest employers.

---Aside---

Some commenters see the Healthcare Industry as a powerful economic engine. I see Healthcare as a cost like the money spent re-working scrap-parts to make them usable. Or another metaphor would be the wages paid to smoke-jumpers fighting forest fires. It is hard to see how setting more forest fires benefits the economy just as increasingly expensive and intrusive medical procedures benefiting the economy.

---End Aside--- 

The plight of Sparrow Hospital is not an isolated case. There is huge cost pressure on all hospitals. U-of-M and Sparrow merging might be analogous to two, falling-down drunks leaning on one another for support.

It is tempting to point to Obamacare as initiating this secular shift in the healthcare business.

It was such a great idea that people had to be punished for not joining an insurance plan that might cost $15k/year/person. Once the penalties were eliminated, people dropped their plans knowing that hospitals legally had to provide services via Emergency Rooms. Federal reimbursements came nowhere close to making up the shortfall.

Obamacare included mandates that added additional layers of administration and complexity. That overhead was larded into every procedure.

Covid resulted in the number of billable procedures performed in hospitals crashing. Overhead is a fixed cost. It does not go away when the volume of work is reduced. The overhead did not go away but became a tsunami of red-ink.

Very locally, the biggest* "gym" in Charlotte, Michigan is affiliated with Sparrow:Charlotte. The gym is named "Alive" and is a converted grocery store. The facility hosts physical and cardiac rehab, a walking track, a weight-room, treadmills, elliptical machines and the like. The facility has classes on various physical disciplines and on heart-friendly cooking.

It saddens me that Alive might be on the cutting block as the bean-counters examine every enterprise with respect to cost-and-revenues. While Alive does not cost much to keep running, mostly payroll, it does not bring in much revenue. My fear is that various types of overhead may have been apportioned on the basis of time-card-hours and a too-simple of an analysis will show Alive to be unprofitable.

And that would be a tragedy. For Alive to be killed due to overhead generated by other enterprises.

It would be a tragedy because Alive isn't setting forest fires. It is using the best science available to prevent them.

*65,000 square-feet