Retiring CEO champions Mercy Hospital Cadillac's sale to Munson

Aug 22, 2014

UPDATED 8/25/2014 This story has been corrected to properly reflect the role of Mayor Carla Filkins at Mercy Cadillac. She oversees the purchasing of supplies. We regret our earlier error.

Two northern Michigan hospitals now owned by a national health system could soon be the property of Munson Healthcare in Traverse City. A deal for Mercy Grayling and Mercy Cadillac is expected in September.

Mercy Cadillac CEO John MacLeod agreed to lead the transition to Munson before retiring this year. He is pictured with Shannon Smith, who is his marketing manager.
Credit Linda Stephan

Going local is just the opposite of what we’ve seen in Petoskey, Cheboygan and Ludington. All joined major hospital systems in recent years, in part for the stability and access to capital those big players can provide.

In Cadillac no one seems very worried about bucking the trend. That’s at least in part due to the efforts of one man. The outgoing CEO of Mercy Cadillac is leading the transition into Munson as his final legacy before retirement.

Giving birth

Mercy Hospital Cadillac CEO John MacLeod looks on at a crying baby through a glass window at the nursery on the fourth floor, where babies are born.

The birth center at Mercy Cadillac has six private rooms, each have a tub a mother can chose to labor in. This fundraising project and redesign was one of MacLeod early projects at Mercy Cadillac. He's been CEO 15 years.
Credit Linda Stephan

  “Happens to be my favorite place in the hospital. It’s  usually a very happy place,” he says.

Birthing wards like this tend to lose money for hospitals and in some small communities up north local hospitals don’t even offer the service.

Contrast with Mercy Cadillac, where there are private rooms and extras, like bathtubs for mothers to labor in before giving birth. This re-design was one of MacLeod’s first major projects as CEO. Under his watch, the hospital has also redesigned its surgery, ICU and cancer services and MacLeod says there’s money in the bank.

“We are actually one of the strongest balance sheets in Trinity Health, he says. And so we’re pretty proud of that. And so we think we’re moving into Munson in a good position.”

MacLeod says Cadillac has 300 days worth of cash on hand to run the hospital, and it’s been in the black 14 years running.

Going local

In an era of hospital consolidations, the trend is for small regional hospitals to join larger systems as they find it harder to turn a profit, or to get capital for big projects and renovations, or even to get decent prices for medical supplies.

But that is not what is happening in Cadillac and Grayling. With this sale the two hospitals, along with Mercy Homecare and Hospice of Northern Michigan, would leave long-time owner CHE Trinity Health, a Catholic system with 86 hospitals nationwide.

They would join Munson Healthcare, which only a few years back itself considered merging with a larger system. That move was fraught with controversy in Traverse City and ultimately went nowhere.

Going smaller, going regional, bucks a national trend. But John MacLeod is convinced joining Munson is the right thing for Cadillac.

“In my opinion there is still a place for a strong, regional provider and it all depends on competition,” he says “And that’s one of the beauties of northern Lower Michigan – is there’s basically 13 hospitals serving 26 counties, I believe. And we don’t really have a lot of direct competition with each other.

“We’re not overbuilt I guess.”

MacLeod says the change makes a lot of sense. Cadillac and Grayling share doctors and specialists with Munson more so than with any hospital in their own corporate network. In fact, under a complicated agreement between Munson and Trinity, Munson’s actually been managing the two northern Michigan hospitals for years.

Easing the stress of change

Mercy Hospital Cadillac is currently owned my a national Catholic hospital system, but a deal with Munson is expected in September.
Credit Linda Stephan

John MacLeod is the kind of CEO who addresses every nurse, volunteer and janitor by name as he walks the hallway. Nurse Courtney Wilson says his opinion carries a lot of weight. She oversees the Emergency Room.

“The unknown, more than anything, is always hard,” says Wilson on a quiet day in the E.R. “But knowing that John is kind of at the helm of this whole transition is very comforting for – not only me but for the entire hospital.

“We know John is going to take care of us. So I really foresee great things happening with the merger.”

Cadillac’s mayor, Carla Filkins, agrees. She also sees some potential for job growth in Cadillac with the sale. It just so happens that her day job is to oversee the purchase of supplies for both Mercy Cadillac and Mercy Grayling.

“It’s going to be about doing what’s best for the people in our community,” says the Mayor. “And I truly believe that Munson wants that as well. And so putting the right care at the right place where it’s needed by the patients, I think is going to be a focus.

“We have to do that in a fiscally sound and responsible manner, but I think the opportunities will be great.”

Filkins speaks as mayor, and not on behalf of either Trinity or Munson.

No promises are being made and few details of the sale are yet public. Cost cutting is possible. John MacLeod says he’s not privy to the asking price nor Munson’s analysis of how well it can afford to buy two hospitals.

But he shares Mayor Filkins’ hopes for growth. There are some jobs now headquartered downstate that would move back to northern Michigan. MacLeod says he also trusts the leadership at Munson to make sound decisions for Cadillac.

“You know this is my hospital. I plan to stay and live in Cadillac. They’ll be taking care of me as I get older. So I certainly want it to do well. So if I can help in some way I’m happy to do that,” he says.

Hospital leaders say talks are progressing well. They hope to transition the hospitals to the Munson system early in 2015.