Crain's Detroit Business, Oct. 21, 2019 issue by Crain's Detroit Business

Crain’s Forum: What can be done to halt surprise medical billing Page 10

OCTOBER 21 - 27, 2019 | crainsdetroit.com

REAL ESTATE

HIGH-PROFILE DEAL

Rust never sleeps, but Ziebart diversifies Page 3

Sterling Group seeking to redevelop Joe Louis Arena site By Kirk Pinho kpinho@crain.com

Joe Louis Arena is being demolished as a deal is nearing to redevelop the downtown Detroit site. LARRY PEPLIN FOR CRAIN’S

A Detroit-based real estate company is nearing a deal to redevelop the site of the Joe Louis Arena currently being demolished along the Detroit River, Crain’s has learned. Sterling Group, which was founded by TCF Bank Executive Chairman Gary Torgow in 1988 and is now run by his adult children, is the previously unknown developer working to get the site to which New York City-based Financial Guaranty Insurance Corp. has development rights, according to two sources familiar with the matter. If it finalizes — the Detroit City Council is expected to begin consideration of it this week — it would be another high-profile deal for the Torgow family, and the latest chapter in the effort to reuse the site of the former Detroit Red Wings home. Plans for property are not known, although a previous vision set forward in a 2014 bankruptcy court settlement called for a mixed-use redevelopment with residential, office and hotel space. Mayor Mike Duggan’s office declined comment. Messages were sent to a Sterling Group executive late last week. Derek Donnelly, senior managing director for FGIC, declined comment when reached Friday morning. With a deal for the site looming, the Torgows are making more inroads in the area surrounding the 2.4 million-squarefoot TCF Center, which was renamed in late August following a $33 million, 22-year naming rights deal that wiped Detroit’s racist former mayor’s name from the convention center. SEE ARENA, PAGE 18

AUTO INSURANCE

State of Michigan cracks down on collision-only auto insurance policies By Chad Livengood clivengood@crain.com

Dustina Dixon made a $542 down payment for auto insurance on Aug. 30 at an L.A. Insurance office in Pontiac before she purchased a 2016 Jeep Compass off a Detroit used-car lot later that day. The L.A. Insurance agent sold the 49-year-old Waterford Township woman a policy with coverage split between two different carriers — Integon National Insurance Co.

for mandatory medical coverage and USA Underwriters for collision-only coverage. The sale occurred two weeks before state insurance regulators moved to ban split-coverage auto no-fault policies because the Legislature outlawed them in June. In a jumble of paperwork Dixon received, the agent hand-wrote “pay by 10/2/19” for the next monthly payment of $161.99, leaving Dixon convinced she had paid for a

crainsdetroit.com Vol. 35 No. 42 $5 a copy. $169 a year.

month’s worth of auto insurance coverage. On Sept. 25, a week before the hand-written deadline, a driver in a 1999 Buick Century crossed the center line on Elizabeth Lake Road in Waterford Township and sideswiped Dixon’s SUV in a six-car accident, sending Dixon to McLaren Oakland hospital for injuries sustained to her brain and liver, police and hospital records show. SEE INSURANCE, PAGE 21

CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS

Dustina Dixon learned the hard way that she hadn’t bought the auto insurance she thought she did when she paid more than $500 to L.A. Insurance.

C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 2 1 , 2 0 1 9

MICHIGAN BRIEFS

INSIDE

From staff and wire reports. Find the full stories at crainsdetroit.com

Low crop yields expected in Michigan

Some Michigan farmers will see the lowest crop yields in more than a decade this year if recent federal projections play out. The U.S. Department of Agriculture predicts the state’s corn crop will be the lowest since 2004, down 9 percent from 2018 for a total of 270 million bushels, according to a news release from the Lansing-based Michigan Farm Bureau that cites USDA projection data. Soybeans are expected to decrease 31 percent on the year — the lowest production since 2008. The USDA does see average corn production per acre growing by 2 bushels this year, but rain delays meant 250,000 fewer acres were planted in the first place. It expects soybean growers to average 44 bushels per acre, down 3.5 bushels from last year. Wet fields, a wide range in crop maturity and “extremely variable crop conditions” are contributing to the tough year for agriculture, and farmers expected a poor showing, the release said. It was Michigan’s wettest season on record, Theresa Sisung, field crops specialist for the Michigan Farm Bureau, previously told Crain’s.

CALENDAR

Michigan pension fund moves $600 million out of Fisher Investments after offensive remarks

The State of Michigan Retirement Fund’s pension account, worth more than $70 billion, ended its relationship with the investment firm of Ken Fisher in the latest backlash to offensive remarks the billionaire made last week at an investment conference. Fisher has apologized for sexist and off-color remarks he made at the Tiburon CEO summit in San Francisco, but it hasn’t stopped the outrage. The $112 billion Fisher Investments was responsible for managing $600 million in retirement funds for Michigan, and has been associated with the state body for about 15 years. Jon Braeutigam, Michigan’s chief investment officer, notified the State of Michigan Investment Board of the termination in a letter dated Oct. 10. Braeutigam said in the letter that Fisher’s comments were unacceptable. Although employees at the pension fund hadn’t witnessed or been aware of similar comments, “this history does not outweigh the inappropriateness of the comments,” he wrote. “There is no excuse not to treat everyone with dignity and respect,” Braeutigam said in the letter. “We have high expectations of our managers (and staff ) not just with regards to returns but also in how they exhib-

CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS

A flooded farm field in Shiawassee County illustrates the conditions that delayed planting for thousands of Michigan farmers this year.

it integrity and respect to all individuals.” Over the years, the performance of Fisher Investments had been good and beat the S&P 1500, Braeutigam wrote. The decision to terminate the relationship was unanimous. “In our opinion, this history does not out-weigh the inappropriateness of the comments made by the founder,” Braeutigam wrote.

State launches green energy info campaign

A new initiative in Michigan to encourage and guide individuals and businesses in the transition to clean energy has been launched by Gov. Gretchen Whitmer and the Michigan Public Service Commission. Called MI Power Grid, the initiative will serve as a centralized source

for information and is designed to engage utility customers and other stakeholders to help integrate new clean energy technologies. It also will produce feedback to help utilities optimize grid investments for reliable, affordable electricity service. The MI Power Grid website also will provide information on events, MPSC actions on renewable energy and participation opportunities. Over the past decade, Michigan has increased renewable energy production well past 10 percent of utility electricity sales, with the top two energy companies, DTE Energy Co. and Consumers Energy Co., investing billions of dollars in wind, solar and other clean energy sources. Utilities are expected to surpass the 15 percent mark for renewable energy by 2021.

CLASSIFIEDS

DEALS & DETAILS

OPINION

OTHER VOICES

PEOPLE

RUMBLINGS

WEEK ON THE WEB

Consumers Energy CEO Patti Poppe joins Whirlpool’s board

The CEO of one of the state’s largest utilities has been appointed to Benton Harbor-based Whirlpool Corp.’s board of directors. Patti Poppe, president and CEO of Jackson-based utility CMS Energy Corp. and its electric subsidiary, Consumers Energy, will assume the board position Dec. 16, according to a Tuesday news release. Poppe has been CEO of CMS Energy since July 2016 and served in a variety of executive roles with the utility before that. “Given her extensive leadership experience in consumer-facing industries and environmental stewardship, she will bring a valuable perspective to our board as it continues a tradition of strong governance and oversight within our company. We expect her breadth of experience will be extremely useful to our board of directors and Whirlpool Corporation,” Whirlpool Chairman and CEO Marc Bitzer said in a release.

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C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 2 1 , 2 0 1 9

AUTO SUPPLIERS

Financier tries high-wire move to shed obligations By Dustin Walsh dwalsh@crain.com

Lynn Tilton, the CEO and financier of Dura Automotive Systems LLC, is likely to face a serious challenge in bankruptcy court. The Auburn Hills-based company and its domestic subsidiaries filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Middle District of Tennessee on Thursday in hopes of clearing Dura from Tilton’s investment company’s obligations to repay a bond insurer in an unrelated legal dispute. Tilton reached a legal settlement in May with bond insurer MBIA Inc. The agreement involved three bankrupt investment funds Tilton and MBIA had created to originate loans for distressed companies owned by her turnaround firm.

MANUFACTURING

Electric chassis maker to open facility in Detroit area

“Ongoing constituent disputes have made it impossible for DURA to access ordinary course, yet essential financing.” Lynn Tilton BLOOMBERG

“Ongoing constituent disputes have made it impossible for DURA to access ordinary course, yet essential financing,” Tilton said in the release. “The actions announced today will allow the company to move forward and access the necessary capital that will fuel its growth.” Tilton’s Patriarch Partners, 73 percent majority owner of Dura, has sought to sell the maker of driver control systems, lightweight metal vehicle frames and battery trays for at least a year, with Bloomberg reporting a potential $1 billion price tag. But that obligation appears to be preventing a sale, as prospective buyers are fearful of the risk, said Marcus Hudson, executive director of Birmingham-based turnaround firm Calderone Advisory Group.

“Someone has probably put a claim on the assets of Dura, and it’s holding up a sale of some shape or form,” Hudson said. “If everyone agreed upon a value, we wouldn’t be in bankruptcy court. This seems to be a creative way of trying to negotiate a deal that probably should be done out of court.” A source familiar with Dura’s situation that spoke to Crain’s on the condition of anonymity called the filing “financial engineering.” Generally, bankruptcy protection is reserved for unprofitable companies or those headed for insolvency, Hudson said. Dura is profitable. Dura generated revenue of $1.4 billion in 2018, according to estimates by Automotive News. SEE DURA, PAGE 17

SERVICES

By Chad Livengood clivengood@crain.com

Motiv Power Systems, a California-based all-electric medium-duty chassis maker for buses and trucks, has completed a $60 million equity funding round and is turning its attention to opening a new engineering and manufacturing facility in metro Detroit. The 10-year-old Silicon Valley startup headquartered in the San Francisco Bay area is looking to scale up operations after deploying more than 100 step-in delivery vans, box trucks, school buses and shuttles. Its customers include Aramark, Bimbo Bakeries USA and the U.S. Postal Service. Matt O’Leary, CEO of Motiv and a veteran of Ford Motor Co., said the company needs engiO’Leary neering and manufacturing space near Ford, which is a partner in outfitting E-450 and F59 truck chassis with Motiv’s proprietary operating software and power electronics. The company has not yet settled on an industrial building in or around Detroit but hopes to move into a facility by the first quarter of 2020, O’Leary said. Motiv also has partnerships with Elkhart, Ind.-based bus builders and Detroit Chassis LLC, which assembles F59 and F53 motor home chassis at its Lynch Road plant in Detroit. “We’ve been doing the work remotely from Foster City (Calif.), but as we ramp up, we really need some engineering resources in the Detroit area,” O’Leary said in an interview with Crain’s. “So having the ability to interface with these different entities in real time is just going to work better for us in making sure we have designs that are manufacturable in our partners’ facilities.” SEE CHASSIS, PAGE 18

GRANT PICHLA

Tom Wolfe has been president and CEO of Ziebart since 1994.

PROTECTING THEIR MARKET Ziebart builds off rustproofing roots with new business model By Kurt Nagl knagl@crain.com

For much of Ziebart Corp.’s 60-year existence, there’s been a lingering concern that its core rustproofing business would erode. In response to automaker warranties, advances in material science and the proliferation of plastic-body vehicles over the decades, Ziebart diversified its business to include more than just rust protection. It introduced an assortment of services such as windshield replacement, sunroof installation and electronics. Only some of it stuck. What never went away was the rust, which is far from slain. “There will always be a need for rustproofing as long as there is sheet metal,” said Tom Wolfe, who has been president and CEO of the company since 1994. Rustproofing made up 30 percent of Ziebart’s systemwide revenue of $170 million in

2018. Revenue has increased 7 percent-10 percent for the past four years and is on pace for $175 million this year. While Ziebart has seen an uptick in rustproofing demand in recent years, Wolfe recognizes that its legacy service is past its heyday. Cars still rust, but not like they used to. Expanding its services is a smart play, but drifting from its core is a mistake, he said. One of Ziebart’s greatest threats today is not an absence of rust, it is the uncertainty of retail. Ziebart is primarily a franchisor of brick-andmortar shops. It has around 100 standalone stores in the U.S., including a dozen or so in Michigan, and about 150 corporate employees. Worldwide, it has 400 locations. All but 11 in the U.S. are franchise locations. Around 30 percent of sales come from more than 1,000 dealerships around the world that Ziebart partners with to expand its reach. As car buyers increasingly gravitate toward buy-

ing direct and online, that model could be in jeopardy. “We’re very well-known with baby boomers and beyond,” Larisa Walega, the company’s director of marketing, said. “We started working on strengthening the brand so when (buyers) do get the car away from the dealership, they know to bring it back to us.” While most of Ziebart’s business is from new car buyers, the company wants to do better at keeping the buyers’ business throughout the lifetime of their cars. “We want to bring that new car feeling back into your life,” Walega said. That’s the theme of a new $5 million to $7 million-per-year digital marketing campaign the company plans to launch nationwide by the end of next year. It will target millennials, the coveted buyer segment that has widely upended consumer habits. SEE ZIEBART, PAGE 20

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REAL ESTATE INSIDER

KIRK PINHO/CRAIN’S DETROIT BUSINESS

Scaffolding recently appeared on the sidewalk surrounding the building at 1101 Washington Blvd. downtown.

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I’ve received multiple inquiries about some scaffolding that popped up at a building downtown recently, so here’s what I know. KIRK Richard Karp, PINHO the owner of the building at 1101 Washington Blvd. across from the Westin Book Cadillac Hotel, said the ultimate plan for the vacant building is still demolition and a subsequent new development (more on that later). That’s not new. But he says the city has been “concerned with the condition” of his property, which he bought in August 2013 for just $700,000, according to CoStar Group Inc., a Washington, D.C.-based real estate information service. It’s about 62,000 square feet and was built in 1950, CoStar says. John Roach, director of media relations for Mayor Mike Duggan, said the city’s Buildings, Safety, Engineering and Environmental Department instructed Karp to put up the scaffolding over the sidewalk “as a precaution due to the deteriorating condition of some portions of the building’s exterior until he addresses the issue.” Karp says there has not been any debris falling from the building. “As it has been widely known that our ultimate plans for 1101 is demolition and erection of a larger scale development, the city was concerned with the condition of 1101 and was pushing to force us to demolish immediately,” Karp said in an email. “We agreed to provide the scaffolding tunnel on the sidewalk (and completed that within the last few weeks) to protect the pedestrian public from the non-existent falling debris to buy us some time while we move through

KIRK PINHO/CRAIN’S DETROIT BUSINESS

This mural on the Supino Pizzeria building in Eastern Market depicts Italian astronaut Samantha Cristoforetti.

the process of preparing for demolition, which includes asbestos surveys, solicitation of bids, demolition fencing plans, engineering studies, etc.” Karp said any timeframe for a new development on the site is premature because “the current relationship between market rents and construction costs render the project unfeasible, however, we do see those trending toward feasibility, potentially in the nearer term.”

RFP issued for city land Bids are due by 5 p.m. Jan. 31 for a request for proposals the city issued yesterday seeking a developer for 0.86 acres of land at Charlotte Street and Third Avenue north of downtown. Developers are asked to propose a commercial development like a restaurant or event or retail space. Mixed-use projects with residential

space are also acceptable. The asking price for the land is about $1.31 million.

New mural on Supino Pizzeria building A mural has been painted on the Supino Pizzeria building in Eastern Market. Sanford Nelson, who owns the building through his Firm Real Estate company, said the mural is of Italian astronaut Samantha Cristoforetti. “The Italian Consulate in Detroit sponsored some artists from Milan to come do a mural in town,” Nelson said. “They wanted to do it in (Eastern Market), and we got connected.” A press release from the consulate says the mural was done by Orticanoodles, a team of Walter Contipelli and Alessandro Breveglieri. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // O C T O B E R 2 1 , 2 0 1 9

Flavored-nicotine vape products back on the shelves at Corktown Smoke Shop following an injunction stopped the stateâ&#x20AC;&#x2122;s ban on the products.

Norman A. Yatooma ATTORNEY AT LAW

CORKTOWN SMOKE SHOP

Flavored-nicotine vape products are back on shelves in Michigan â&#x20AC;&#x201D; for now By Dustin Walsh

â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘

dwalsh@crain.com

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Flavored-nicotine vape products are back on shelves across retail stores in Michigan â&#x20AC;&#x201D; for now. A Michigan Court of Appeals judge issued a preliminary injunction last Tuesday, barring the state from enforcing its ban on the products. Itâ&#x20AC;&#x2122;s a blow to Gov. Gretchen Whitmer, who announced the first-of-itskind ban last month. Whitmer ordered the 180-day initial ban, effective on Oct. 2, in the wake of a nationwide outbreak of lung illnesses that has caused more than 500 hospitalizations and seven confirmed deaths as of Thursday. Use of the devices and the candy and fruit flavors they feature has also become an epidemic among teenagers. Nathan Esquivel, owner of the

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Need to know

Court of Appeals judge temporarily halts stateâ&#x20AC;&#x2122;s flavored-vape ban ď §

ď § Stores reported layoffs, closures, lost sales in wake of ban ď § Gov. Gretchen Whitmer vows to appeal case to Michigan Supreme Court

Corktown Smoke Shop in Detroit, said the company brought the products back out of storage after the ruling. â&#x20AC;&#x153;We just boxed them up and put them in back until we could figure out what to do with them,â&#x20AC;? Esquivel said. â&#x20AC;&#x153;Now they are back out. It only took two weeks.â&#x20AC;? Nicotine vape sales account for only about 15 percent of Esquivelâ&#x20AC;&#x2122;s sales. He said many of his customers switched from the flavored-nicotine vape juice to the tobacco-flavored begrudgingly. Jason Canvasser, partner at law firm Clark Hill PLLC, has advised his clients, mostly grocery and convenience store chains, to reorder the products again. To comply with the ban, his clients had either returned the vape products to the distributor or shipped them to stores in other states. But Canvasser warns that while the injunction allows the sales again, itâ&#x20AC;&#x2122;s not a permanent solution. Whitmer has vowed to appeal the case to the Michigan Supreme Court. â&#x20AC;&#x153;Even though there are sales, it could be very short-lived,â&#x20AC;? Canvasser said. â&#x20AC;&#x153;I think itâ&#x20AC;&#x2122;s a pretty important issue, so I wouldnâ&#x20AC;&#x2122;t be surprised if the Supreme Court takes it up on an expedited basis and we hear something from them as soon as a few weeks.â&#x20AC;? Until then, though, retail outlets will likely push hard on sales. â&#x20AC;&#x153;I imagine the smaller retailers will go full bore and try to sell as many as they can for as long as they can,â&#x20AC;? Canvasser said. Esquivel understands the opportunity may be temporary. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s all unknown,â&#x20AC;? he said. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re still doing a buy-one-get-one free on the juices and 25 percent off the devices because thereâ&#x20AC;&#x2122;s no certainty yet.â&#x20AC;? The stateâ&#x20AC;&#x2122;s ban was met with instant opposition from vape retailers and organizations that stand against Whitmerâ&#x20AC;&#x2122;s use of executive power to skirt the administrative rule-making process. Retailers that have opened hundreds of dedicated vape stores across

the state say the ban amounts to putting them out of business. The injunction from Judge Cynthia Diane Stephens comes after a lower court ruled the lawsuit failed to establish that the ban would create irreparable harm to the businesses and that an emergency order was not necessary. Stephens, however, concurred with the assessment from plaintiffs Marc Silas and his Houghton-based vape store 906 Vapor LLC and Ann Arbor-based e-cigarette maker A Clean Cigarette Corp. that they will go out of business under the ban. A Clean Cigarette has already shuttered one retail location with plans to close four more due to the ban, the company said in testimony. The company also has $2 million in inventory it cannot legally sell in the state of Michigan, according to court records. â&#x20AC;&#x153;In essence, this rule will destroy plaintiff A Clean Cigaretteâ&#x20AC;&#x2122;s business as it currently exists as well as any branding or goodwill associated therewith,â&#x20AC;? according to summarized testimony in the court order. The judge also agreed with the plaintiffs that Whitmer and the Michigan Department of Health and Human Services issued an emergency ruling leading to the vape ban when no emergency was present. â&#x20AC;&#x153;The plaintiffs have convinced the court that defendantsâ&#x20AC;&#x2122; proffered reasons for the emergency declaration have fallen short,â&#x20AC;? the court order said. That legal challenge is supported by a coalition of small businesses and business associations called Defend MI Rights Coalition, which includes the Small Business Association of Michigan. The groupâ&#x20AC;&#x2122;s platform is the ban violates proper legislative process. â&#x20AC;&#x153;We are pleased today that the court saw the ban of flavored vaping products for what it truly is: an overreach of government into the lives of adults,â&#x20AC;? the group said in a statement Tuesday. â&#x20AC;&#x153;We agree with Judge Stephens, the rules are invalid, and we are thankful that she saw the truth. We are ready to work through the normal legislative process to arrive at a balanced solution that protects the rights of adults to use vaping products as an alternative to combustible cigarettes and at the same time get these products out of the childrenâ&#x20AC;&#x2122;s hands.â&#x20AC;? Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

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Wayne State issues termination letters to 100 doctors By Jay Greene jgreene@crain.com

More than 100 pediatricians affiliated with University Pediatricians have received letters of termination of employment from Wayne State University, effective Nov. 18, based on the failure of UP to reimburse Wayne State for millions of dollars under a salary reimbursement agreement, Crain’s has learned. Two top Wayne State medical school officials notified the pediatricians Oct. 14 that they could continue their faculty appointments and fringe benefits by joining Wayne Pediatrics, the newly formed medical school pediatrics department clinical group. The letters are the latest move in a long-running dispute that resulted in a breakup between the university’s medical school and the pediatrics practice, which provides clinical services at the Detroit Medical Center. “We are sorry to inform you that as of November 18, 2019, your employment (full-time equivalent) by Wayne State University will be reduced by the percent subsidized by University Pediatricians. We very much regret the necessity of taking this measure, but we are afraid we have no option, due to the failure of University Pediatricians PC to fulfill its financial obligation on your behalf.” The letter to UP members was signed by Herman Gray, M.D., WSU’s chair of pediatrics, and Jack Sobel, M.D., dean of the Wayne State University School of Medicine.

Angelilli

Gray

Need to know

JJWayne State sends letters to 100 pediatrician members of University Pediatricians JJUniversity gives them 30 days to decide

if they want to join its new practice plan

JJUP pediatricians have joined faculty of Central Michigan University medical school

In response on Oct. 14, Mary Lu Angelilli, M.D., president of University Pediatricians, accused Wayne State of mistreating UP doctors. “Each of you have given tirelessly over decades serving as their department of pediatrics, and you certainly did not deserve the lack of care and disrespect that these letters cast upon you,” Angelilli said in an e-mail to members. “UP, however, is ever mindful that its oath of allegiance is to its patients and its members,” she said. “And, while the news is disappointing, UP’s board of directors, officers and administrative team want to assure you that

UP will not allow its membership to suffer as a result of WSU’s reckless actions.” Angelilli promised to “make each of our physician members whole on their salaries and each will also be provided with uninterrupted UP benefits.” Wayne State also said in its letter that UP has failed to abide by its salary reimbursement agreement. It last received a payment on Feb. 14. The salary reimbursement agreement with UP allowed Wayne State to cut a single check to faculty members that paid pediatrician compensation upfront, including faculty salaries and benefits. Over the past several years, UP has failed to fully reimburse Wayne State for its share of the paychecks, amounting to about an $18 million backlog in debt, WSU said. In August, Wayne State sued UP over $15.3 million in unreimbursed salary costs in Wayne County Circuit Court. That amount owed has risen to about $18 million the past three months, a WSU official said. “All attempts to persuade University Pediatricians to resume reimbursement have been unavailing. University Pediatricians recently denied responsibility for this reimbursement and has argued that the university has ‘failed to mitigate its damages.’ In other words, that the School of Medicine should have already terminated your employment,” WSU said. In one faculty termination letter that Crain’s obtained, WSU said the following: “The failure of University

The letters are the latest move in a long-running dispute that resulted in a breakup between the university’s medical school and the pediatrics practice. Pediatricians to reimburse the university for your salary and fringe benefit expenses has, as of September 22, 2019, resulted in a shortfall ... tied directly to your compensation. While your service and contributions to the University’s educational and research programs are held in the highest regard, the University and the School of Medicine cannot sustain this deficit and expense.” Angelilli did not respond to Crain’s for comment about the salary reimbursement dispute and other matters. However, in the past UP has said it is withholding the money because it believes Wayne State owes it more than $60 million in enhanced Medicaid funds over the past several years, a charge that Wayne State has denied. Earlier this year, Crain’s reported that UP appears to be counting millions of dollars of university seed money paid to the state Medicaid program each year to receive the enhanced

Medicaid funding, also known as the Medicaid Public Entity Physician Payment Adjustment Program, or PEPPAP. In response to UP’s allegations, WSU President M. Roy Wilson asked the Michigan Department of Health and Human Services to investigate the university use of PEPPAP funds. Recently, MDHHS has begun a complete review of PEPPAP that covers all seven “public entities” in the program, including the University of Michigan and Michigan State University. Each year, on average for the past six years, Wayne State receives $112.8 million in PEPPAP money from the state that it uses to reimburse 23 affiliated clinical groups, including UP, for serving Medicaid patients. After paying the clinical groups about $56.5 million annually, then deducting $32.2 million in seed money, WSU retains an average of about $24 million in administrative costs, or about 21 percent, which it calls institutional adjustments. In response to Wayne State’s lawsuit to collect the now $18 million in compensation, UP filed a counter-claim seeking to collect on the alleged $60 million-plus in unpaid PEPPAP funds it claims Wayne State owes it, university spokesman Matt Lockwood said. Wayne State has asked the county court to dismiss the claim for lack of merit. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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OPINION COMMENTARY

Strike deal is a win for UAW, but labor’s reckoning is just a matter of time

urrent union workers at General Motors got a win. As the more than five-week UAW strike of the Detroit automaker comes to a close, assembly workers walk away with a $11,000 bonus, modest wage increases and a promise that GM’s Detroit-Hamtramck plant will reopen. The tentative contract with GM, if ratified, would result in all current workers earning at least $32.32 an hour by September 2023. Labor supporters across the country touted the tentative agreement as a broader metric of the growing labor movement in the U.S. Striking workers hit a 32-year watermark in 2018 and approval of labor unions is near an all-time high with strong support from Democratic presidential candidates, most notably Bernie Sanders and Elizabeth Warren. AFL-CIO President Richard Trumka called the UAW/GM tentative agreement “the latest victory in a wave of collective action happening across America.” “Working people won’t allow greed to dictate our lives, and we won’t tolerate a system that’s been rigged against us. Bosses everywhere should take note — we’re not going to take it anymore.” But labor’s resurgence is merely a stopgap in the long hollowing-out of the manufacturing sector, particularly the automotive industry. Barring a near impossible fundamental reshuffling of industrial policy and global economics, the reckoning is inevitable. Please don’t take this as disparaging of organized labor. A vast number of economists have espoused sound logic about why the U.S. should further embrace collective bargaining for the benefit of its citizens and the economy. But the trend line doesn’t change. Fewer and fewer workers will manufacture products in the U.S. moving forward. This country’s manufacturing might is almost exclusively viewed through the lens of its workers. Politicians, workers and loose-lipped observers battle over unfair trade agreements, automation and anti-labor policy, mostly because it means votes and paychecks. But the truth is America’s manufacturing strength never went anywhere, even as jobs eroded and continue to erode. “GM has a tough row to hoe, but the UAW has a much tougher row going forward to reclaim its position in society,” said Marick Masters, program director of Wayne State University’s labor studies department and professor of business. “The sticking point is a differing view on what kind of society we want going forward. People often ask whether the sides don’t understand the dynamics of the industry. ... They do. They live it. But we’re moving in a direction that’s going to continue to be vocalized as long as we have increasing economic

BLOOMBERG

As the more than five-week UAW strike of the Detroit automaker comes to a close, assembly workers walk away with a $11,000 bonus, modest wage increases and a promise that GM’s Detroit-Hamtramck plant will reopen.

DUSTIN WALSH dwalsh@crain.com

inequality.” Manufacturing jobs peaked in 1979 at 19.4 million workers, according to U.S. Bureau of Labor Statistics. Only a few years after several strikes at Chrysler between 1970 and 1974 led nearly 1.2 union workers to walk off the job. There were authorized labor strikes of Chrysler in all but four years between 1957 and 1980. Workers held a great deal of power. But that power dynamic has swayed — partly because of trade, partly because of automation, but mostly because of productivity. Factory lines got streamlined. Workers got better at making products. By 1987, manufacturing employment fell to 17.6 million. Today, it’s less than 13 million, bottoming out at 11.5 million coming out of the Great Recession in 2010. Automotive manufacturing employment has fared far worse. Fewer than 1 million people work for automakers and suppliers in 2019. A good 400,000 workers never returned to auto manufacturing after the recession in 2001 and the Great Recession. Yet U.S. manufacturers make more goods than ever. The manufacturing sector as a whole produced nearly $6.3 trillion worth of goods in 2018

(in constant 2009 dollars), up from $5.5 trillion in 2010. Automakers and suppliers made $715 billion worth of goods last year, compared to $450 billion in 2010. U.S. consumers bought a record 17.8 million cars and trucks in 2016. Dealers sold 17.7 million vehicles last year. Yet, the auto industry has bled roughly 16,500 workers in 2019, before the strike even happened. Improving the productivity of labor is the only recourse to save U.S. jobs, said Tom Mayor, U.S. automotive strategy leader for advisory firm KPMG in Cleveland. “The great news is because we’re so productive and innovative, (the U.S.) has held its global share of manufactured goods even though jobs have decreased,” Mayor said. “Europe has lost share and so has Japan. If we’re going to keep jobs in the U.S. that has to continue. We have to continue to think harder about how we manufacture and find that next level of productivity we can drive.” That’s not going to happen through tariffs and protectionist policy. Making U.S. companies less competitive does not mean more jobs. The stark reality is fewer workers will be needed to manufacture cars. Assembly jobs are no salvation. In 1991, as many as 234 million people in developing countries worked in manufacturing, according to the United Nations Industrial Development Organization. By 2014, that figure grew to 304 million. In developed countries, like the U.S., only 63 million people worked in manufacturing. Yet the U.S. is still rich, and Mexico and others are still, by our standards, poor.

Assembly jobs are not making those countries rich, just as they didn’t make the U.S. rich. Innovation did. It’s even evident in the UAW/GM tentative agreement. While the automaker plans to invest $9 billion in U.S. plants, including $3 billion to save the Detroit-Hamtramck assembly plant, it’s still closing two transmission plants near Baltimore and in Warren. GM plans to produce an electric truck at the Detroit-Hamtramck plant. The world, whether consumers want it or not, is moving toward electric vehicles. That requires training. Yet, as part of the new labor deal, the UAW-GM joint training center in Warren will be only closed. The center is caught in the middle of the ongoing federal UAW corruption investigation. The two parties will maintain training, but it’s still not enough. “As industrial unions, they have to ask how they can create value going forward,” Mayor said. “Our industrial unions grew up in the Dickensian era of the late 1800s and early 1900s. They worked to make manufacturing safe and get everyone 40-hour work weeks. But today, the challenges to me are around ensuring the global competitiveness of their workforce and the employers they work with.” Skilled trades are also projected to grow 50 percent faster than the statewide average by 2024 and offer a median wage 45 percent higher than the median for all occupations in the state. Look to U.S. trade unions for a road map. The International Brotherhood of Electrical Workers has doubled down on training. IBEW Local 58 in Detroit trains upward of 725 per year and is now offering pre-apprenticeships to get undereducated recruits up to speed. “Our industrial unions, similar to what our trade unions have done, need to focus themselves on apprenticeships programs,” Mayor said. “We don’t have the Dickensian shops anymore. They are safe, high tech. We need that strong form, innovative workforce coming in the door. It’s imperative to the future of our economy.” So while the labor movement may have gotten a win this time, the livelihoods of its members are at stake and it’s going to take more than a labor agreement to change the future. Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

MORE ON WJR Listen to Crain’s Group Publisher Mary Kramer and Managing Editor Michael Lee talk about the week’s stories every Monday morning at 6:15 a.m. Mondays on WJR 760 AM’s Paul W. Smith Show.

OTHER VOICES Don Welsh

A pure loss for Michigan F

or over a decade, Pure Michigan has shown visitors and locals how to find inspiration through the state’s breathtaking landscapes, rich culture and simple pleasures. More than just a marketing slogan, Pure Michigan has become a way of life and a statewide community-shared value for those who live and work there. It is a source of state pride and brings immense brand recognition and economic impact. Pure Michigan is worth saving. It has proven to be effective in bringing people in from across the country and around the world to the state in record numbers. In 2018, 124.8 million visitors injected $25.7 billion into the state economy and generated enough tax revenue to reduce the tax burden by $711 per household. The tourism sector supports the livelihoods of thousands of Michigan residents in the form of 227,497 jobs. Without Pure Michigan, these jobs and the people that fill them, are at risk. Those people are worth saving. They live and work in communities that have adopted and rallied behind Pure Michigan. However, there is more to this. In today’s globalized world, every community is in competition with one another for their share of consumers, talent and investment. In order for a community to compete, people need to be aware of it and have a positive impression. This is achieved through clearly developing, articulating and managing the destination’s brand. Efforts must be made to promote, market and engage potential visitors. Destination promotion is an essential investment to the quality of life of all residents of a community. Those destinations that do not compete will fall behind. Gov. Gretchen Whitmer’s lineitem budget veto of Pure Michigan will negatively impact the state’s tourism economy and hurt businesses that depend on tourism. Michigan cannot afford to defund Pure Michigan as it will cost Michigan jobs, tax revenue, investment, talent and state pride. Destinations International, along with destination professionals in Michigan and around the world, respectfully urge Whitmer to put politics aside and consider the social, environmental and economic benefit of destination promotion. Don Welsh is the president and CEO of Destinations International, the global trade association for convention and visitors bureaus and tourism boards.

C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 2 1 , 2 0 1 9

Detroit Homecoming inspires action right here at home

n addition to engaging the city’s expat community, Detroit Homecoming has served as a catalyst for some local residents to make a difference in their city. After hosting a house party as part of Detroit Homecoming V in 2018, June and Charles “Chuck” Rivers, who happen to be my aunt and uncle, became encouraged to immerse themselves in the challenges of the once vibrant Harmony Village which is just west of West McNichols, where they hold membership at the Antioch Church of God in Christ, and of Schulze, an adjacent neighborhood located on the north side of McNichols that has been home to their family for roughly 40 years. June, a literacy specialist and Ph.D., served the Detroit Public Schools for over 40 years, and Chuck, a former automotive industry human resources director who currently serves Michigan State University as director for Community Relations–Southeast Michigan, are no strangers to civic engagement. However, serving as Homecoming house party hosts to expats allowed June and Charles to put their neighborhood in a new perspective to consider a grassroots approach for addressing the housing instability and transiency, social divestment and parental disempowerment within their community. After their Homecoming house party, they transformed their block club into a neighborhood association in partnership with the Hubbard branch of the Detroit Public Library. It now meets on the last Monday of every month after being defunct for years. In the winter of 2019, June and Chuck began coordinating with Wayne State, Michigan State and Michigan Tech to engage nine students from their neighborhood with summer education programs that covered the fields of mathematics, agriculture and natural resources. In 2020, the University of Detroit Mercy will also coordinate with the Riverses in order to engage additional neighborhood youth with summer enrichment programs. By the spring of 2019, June Rivers facilitated three literacy workshops for parents and guardians as part of a pilot program with the Detroit Public Library. Through this pilot, 12 adults and 23 youth received dinner, hands-on literacy training, a visual take-home reading manual and a copy of the popular children’s book “Salt in His Shoes.” In addition to launching a second version of this initial literacy pilot in 2020, their team of neighborhood volunteers is also exploring the areas of housing and neighborhood beautification. This fall they will be hosting two workshops to help local residents take advantage of Wayne County’s property tax exemption program and will be working with business owners on Six Mile between Schaefer and the Lodge Freeway to provide much needed visibility and beautification. For the Riverses and others who

portant inflection point in the well-being of their neighborhood and community.

OTHER VOICES Medvis Jackson

still call Detroit home, Detroit Homecoming is serving as an im-

Medvis Jackson is a community manager and former Challenge Detroit fellow for Detroit Homecoming, produced by Crain’s Detroit Business, facilitating expat engagement with the city of Detroit post-Homecoming. He’s also a returned Detroit expat and a member of the Lodge Six Community Initiative.

June and Charles “Chuck” Rivers

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FORUM OCTOBER 2019

HEALTH CARE

SEEKING A CURE

Surprise medical billing is under scrutiny, but solution divides industries

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ter Th in t in t Th int ces

By Jay Greene |

jgreene@crain.com

Surprise bills for medical care from hospitals, physician groups, laboratories and diagnostic centers arrive in the mail to patients for all sorts of reasons. Maybe the surprise is the large size of the bill itself or that it comes from a physician group or health care company you never heard of before. Most surprise medical bills are charges from doctors or medical facilities that practice or have contracts with a medical group, hospital or surgery center you thought was in your health insurance network. When health insurers don’t pay the organization’s full charges, patients are often left footing what’s called a “balance bill,” which is the difference between their charges and what the insurance plan paid. Sometimes in-network doctors will have an arrangement with an out-of-network lab and a test you had performed by that lab will be denied by the insurer. The in-network doctor or payer will send you a bill for the full price of the lab fee, creating a surprise bill that you need to deal with later by multiple phone calls or with a checkbook. Worse, the surprise bill is unpaid and goes to a collection agency. FERGS ILLUSTRATION FOR CRAIN’S DETROIT BUSINESS

Exactly how often patients receive surprise bills is subject to debate, but a recent report estimates 9 percent of patients in Michigan with large-employer health coverage incurred at least one out-of-network surprise bill. Another 13 percent who had an inpatient hospital stay received a surprise bill, according to the Peterson-Keyser Health System Tracker. As health insurers trim down their networks to gain better prices, an increasing number of patients are receiving surprise bills from out-of-network providers, experts say. Balance and surprise medical billing have been always been a problem. But it has gotten worse because some providers have increased prices to the point that payers are balking at contracting with them. SEE SURPRISE, PAGE 12

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C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 2 1 , 2 0 1 9

John Fox:

Hospitals have role in fixing billing surprises. Page 14

SURPRISE MEDICAL BILLING | PROVIDER VIEW

NA HE

Physicians: End surprise billing, don’t limit access to care with price controls

Lift he th th red

he first and most fundamental question every Michigan physician asks when faced with any health care crisis is “what’s in the best interest of my patient?” That’s true in the exam room. It’s true during testing and diagnosis. It’s true in the operating suite and during post-operative evaluation. And it’s also true in the glamorous halls and hearing rooms at the state Capitol in Lansing. That’s why Michigan physicians strongly oppose a pair of bills recently introduced in the House of Representatives that would limit patients’ access to the health care they need.

To hear their sponsors standard. In fact, Michitell the story, House Bills gan’s standard — as pro4459 and 4460 were written posed — goes even further to address a very real probthan California’s. It’s an approach that puts the weight lem that hits patients in very of law behind big insurance expensive ways — a phecompanies and against the nomenon known as “surhealth care providers meetprise billing.” Surprise billing is a genuing patients’ needs. ine crisis that’s crying out MOHAMMED ROY Out West, it’s a policy SOTO for a meaningful solution — ARSIWALA that’s resulted in reduced a solution that puts patients and canceled contracts with House Bills 4459 and first. First time. Every time. physicians. In other words, Unfortunately, these new 4460 would create the the policy gives insurers a House bills would actually most aggressive form of lot of power, and they’re usmake problems for patients price-setting anywhere in ing that power to further worse by limiting their the country when it comes limit the physicians and health care options. We to billing laws. We know providers they allow paknow, because that’s exactly it’s a bad policy because tients to see. Furthermore, what’s happened in another other states have tried it research is showing that it is state that recently tried the — and watched their exacerbating provider conpatients suffer in the same approach. solidation, which only Let’s start at the begin- process. serves to increase the cost of health care. ning. Far too often in health Michigan already has the sixth least competicare, patients seek care for a disease, a condition, or an emergency situation and come home tive insurance market in the nation, according from the hospital or the treatment facility to find to a 2019 study by the American Medical Associhuge unexpected medical bills because their ation, and these bills would give insurers even health insurance company has severely restrict- more power to limit patients’ access networks. Physicians think there’s a better way, and it ed the number of providers that are considered spins out of our first principle — to put our pa“in network.” It’s a nightmare for patients, and it’s got to tients first. Instead of following California’s end. No patient should be penalized because his failed, anti-patient model, lawmakers should or her insurer fails to provide an acceptable net- look at a more balanced approach like those used in places such as Texas and New York. work of physicians. In those states, instead of price-setting, poliThat’s why Michigan physicians are working in both Lansing and Washington, D.C., on solu- cymakers got patients out of the middle of billtions that ensure Michiganders can access the ing issues by allowing insurers and providers to benefits they were promised by their health negotiate in good faith. When there’s a dispute plans without unanticipated medical bills. they can’t settle, instead of hurting patients, Where there’s a debate between a health care they’ve created an independent dispute resoluprovider and a giant insurance company, we tion process. think they should work it out amongst themEarly objective evidence shows that this is a selves. Insurers shouldn’t force patients into the better approach — it’s one that’s working and saving customers hundreds of millions in unanmiddle of the discussion. House Bills 4459 and 4460 instead would cre- ticipated medical bills. Results like that merit a serious look. Results ate the most aggressive form of price-setting anywhere in the country when it comes to bill- like that put patients first. ing laws. We know it’s a bad policy because other states have tried it — and watched their pa- Mohammed Arsiwala, M.D., is president of the Michigan State Medical Society. Roy Soto, M.D., tients suffer in the process. The bills are modeled on a policy from Cali- is president of the Michigan Society of fornia with an almost identical price-setting Anesthesiologists.

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SURPRISE FROM PAGE 10

In addition, a growing number of private equity investors are acquiring specialty providers such as emergency or anesthesia providers or air ambulance companies and have increased charges. Some of those have opted for out-of-network pay arrangements because payers refuse to renegotiate contracts. To protect patients, various states such as New York, New Hampshire and Oregon have enacted surprise-billing legislation that either bans balance billing or creates arbitration methods to resolve pay disagreements. At least 25 states have some balance-billing protections, but these state-level policies vary widely in scope and effectiveness.

Legislative proposals In Michigan, two bills were introduced in April and have been awaiting a hearing in the state House Health Policy Committee. One bill (HB 4459) would set insurance reimbursement at 125 percent of the regionâ&#x20AC;&#x2122;s Medicare rate in an emergency situation to prohibit an out-of-network provider from charging an exorbitant rate. The other bill (House Bill 4460) would require providers to obtain written consent before proceeding with nonemergency services that would result in a patient bill for fees not paid for by the health plan. The Michigan Health and Hospital Association supports the legislative intent, but wants the bills tweaked to simply ban balance billing to patients. Essentially that means patients would be responsible to pay only what would have been the in-network payment, either a copay or co-insurance, to those groups or doctors who balance bill the patient, said Laura Appel, the MHAâ&#x20AC;&#x2122;s senior vice president and chief innovation officer. â&#x20AC;&#x153;We support protecting patients from out-of-pocket expenses beyond anything that they would pay if the provider were in-network,â&#x20AC;? Appel said. â&#x20AC;&#x153;If the in-network coverage requires a deductible, a copay or coinsurance, the patient would pay that amount. Anything more (because of the out of network facility or provider) would be worked out between the facility/clinician and the third-party payer.â&#x20AC;? Appel said if a provider group or health care company has a beef, it would need to work with the heath insurer on collecting the difference. â&#x20AC;&#x153;We donâ&#x20AC;&#x2122;t want the patient involved,â&#x20AC;? she said. The Michigan State Medical Society, while also not directly supporting the bills, believes disputes between providers and health insurers on charges should not involve the patient. Dominick Pallone, executive director with the Michigan Association of Health Plans, supports the two-bill package because â&#x20AC;&#x153;patients shouldnâ&#x20AC;&#x2122;t receive billsâ&#x20AC;? from providers they didnâ&#x20AC;&#x2122;t select. He said a default payment such as 125 percent of Medicare rates should be used when providers and payers canâ&#x20AC;&#x2122;t agree. â&#x20AC;&#x153;The provider community views it as a coverage gap,â&#x20AC;? Pallone said. â&#x20AC;&#x153;We donâ&#x20AC;&#x2122;t think patients should be caught in the middle in these disputes.â&#x20AC;? But Appel said the MHA opposes setting a specific rate in state law because that could place hardship on the patient. â&#x20AC;&#x153;(We) believe it is appropriate at

Ambulance bills can often surprise patients after their insurer denies a claim for a condition that turned out to be non-life-threatening.

Mazurkiewicz

Pallone

state level to do legislation, (but we support that) no one may balance bill a patient for out of network services beyond what they would pay out of pocket if services were delivered in network,â&#x20AC;? Appel said. Numerous federal bills also have been proposed, none of which appears to be on track to approval because of political gridlock and intense industry lobbying. However, experts say federal legislation is needed so that self-insured employers, which represent about 60 percent of employer-sponsored health insurance, would be covered under the Employee Retirement Income Security Act of 1974. There are several solutions on the table in the congressional legislation. They include arbitration or a dispute resolution process, which would send the insurers and health care providers through an independent review to determine a fair price, and a benchmarking reimbursement setting process. Under benchmarking, insurance companies would pay providers a fee for the claim based on the average of what other providers in the area had been paid for that service. Another would be to set a payment standard, such as 125 percent of Medicare rates. Many emergency medicine and specialty groups support claims being reviewed by an impartial referee. But doctor groups also are concerned that they could be forced to accept insurer-controlled rates and lose their ability to negotiate what they consider fair prices.

Hospital approaches Some hospitals in Michigan have taken a company-driven business approach tied to contracting and medical staff privileges.

Large health systems such as Trinity Health Michigan, a 13-hospital health system, and Sparrow Health System in Lansing require their contracted physician groups to also Appel contract with all payers they do business with. This helps to avoid out-of-network charges for at least the hospital-based physician groups, which include emergency physicians, anesthesiologists, radiologists, pathologists and hospitalist doctors. Last year, McLaren Healthcare Corp., a 14-hospital health system based in Grand Blanc, became one of the more recent systems in Michigan to mandate its hospitals require hospital-based doctor groups to contract with same payers as the hospital does. â&#x20AC;&#x153;We had some patient complaints all of a sudden and they made no sense. They were coming out of some of our ERs,â&#x20AC;? said McLaren CFO David Mazurkiewicz. â&#x20AC;&#x153;An independent group decided not to accept insurance from anybody. They like cash and to bill.â&#x20AC;? Mazurkiewicz said the policy applies to all hospital-based physician groups, including emergency, anesthesiology, radiology and pathology. He declined to name the ER groups, but said one had been acquired recently by a private equity firm. â&#x20AC;&#x153;They decided to increase their revenue streamâ&#x20AC;? by increasing charges, he said. Pallone and Appel said they are also concerned about rapid acquisitions of specialty provider practices by private equity firms. â&#x20AC;&#x153;These new investors appear to be simply trying to exploit a broken market,â&#x20AC;? Pallone said. â&#x20AC;&#x153;While we donâ&#x20AC;&#x2122;t often like to see government intervention in private payment negotiations, this is an area where we need the state to help ensure that the member is not stuck in the middle and that we have a reasonable reimbursement backstop designed to encourage the payer and provider to reach an amicable agreement that doesnâ&#x20AC;&#x2122;t price-gouge the consumer.â&#x20AC;?

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At McLaren, its hospitals in Flint,

Crain’s Health Care Leadership Summit is Oct. 28

At the Oct. 28 Crain’s 11th annual Health Care Leadership Summit, surprise billing will be one of the explored a CEO panel moderated by Crain’s Managing Editor Michael Lee. The summit’s theme will explore various gaps in health care that include health care coverage, communication among providers and social determinants of health. Two keynote speakers will offer their perspectives. JJThe first is Rana Awdish, M.D., a critical care physician at Henry Ford Hospital who wrote a book, “In Shock,” which recounts the story of her own experience as a patient with a life-threatening condition who then returned to medicine. JJThe second keynoter is Detroit’s own Mark Bertolini, the former chairman and CEO of Aetna Inc. who put together the multibillion-dollar deal to combine with CVS Health Corp. He will talk about his experiences in the health care system and discuss his book, “Mission-Driven Leadership: My Journey as a Radical Capitalist.” JJTickets are available at crainsdetroit.com/hcsummit

Bay and Macomb changed ER groups because the old providers refused to comply with the changes, Mazurkiewicz said. “Any clinician we contract with has to accept the same insurance we do and as the patient does as well,” Mazurkiewicz said. “If they don’t we don’t have an agreement with them. It is not in the best interest of our patients.” Earlier this year, a contract dispute broke out between Trinity Health’s St. Joseph Mercy Health System in Ann Arbor and Anesthesiology Associates of Ann Arbor, or A4, its contracted anesthesiology provider. While the dispute has been settled with a new five-year contract, it began with A4 terminating its managed care contracts with Priority Health, Health Alliance Plan and Blue Cross

Blue Shield of Michigan over what A4 said was little or no rate increases for six years. St. Joe’s sued A4 because the Catholic health system alleged that A4 breached its contract that required A4 to contract with the same payers it does business with to avoid patients receiving balance bills, or out-of-network charges. Greg Bock, CEO of A4, told Crain’s in August the anesthesiology provider was out of network with several heath insurers for several months from April to July in an effort to negotiate higher rates. Last year, A4 was acquired by Siromed Physician Services Inc., a group of out-of-state private equity investors. “With Siromed coming, it forced us to look at how the business was being run and identified key opportunities to get what we believed was fair compensation,” said Bock, adding that A4 needed to address turnover, attrition and recruitment and increasing rates was paramount. But Bock said A4 promised Trinity that it would not balance bill patients. After the health insurers refused to renegotiate rates, Bock said A4’s strategy was to bill insurers its full charges for the services and then later sue for failing to pay bills. “These payers reimburse us about $35 on charges of $100 per unit,” Bock said in a previous interview. “We expect to be paid 100 percent of charges. We have $65 (of every $100) due in accounts receivable. Ultimately we would say you owe us this much money for failure to pay charges, but we would never balance bill patients.”

Interest group views Emergency medicine management companies have been targeted by hospitals, managed care payers and legislators as one of the physician groups most likely to send patients out-of-network surprise medical bills. But Michael Baker, who is a medical director with Ann Arbor-based Emergency Physicians Medical Group, which is part of Envision Physician Services, a Nashville-based investor-owned physician management company, told Crain’s ER doctors don’t have any choice but to treat emergency patients. “We treat all regardless of an ability to pay,” said Baker, who practices at several hospitals in Southeast Michigan. “There is a hole in the system (surprise bills) that has existed for a while and has been swallowing up more and more people over time.” Baker acknowledged that Envision sometimes balance bills patients. He said, “it is not fair to patients and it’s not fair to anybody,” but some payers offer rates that don’t cover overhead and uncompensated care. “We have patients who come without an ability to pay. Insurance pays what they want to pay. We’d like to see some process, an independent dispute resolution, where patients come to the ER and they will be covered, no matter what,” Baker said. “Then ER groups can work with insurance companies on the amount to be paid.” Baker said ER doctors don’t want to put the patient in the middle. “Arbitrators can look at the service, the ER (bill) and the insurance (payment), look at different benchmarks, then come up with a number. The loser pays for the arbitration,” he said. In New York, for example, an independent dispute resolution process

led to a 68 percent decrease in out-ofnetwork complaints since 2015 to 6 percent in 2017, said the American College of Emergency Physicians. “California set low benchmark pay and (Envision) pay contracts were not compatible with the benchmark,” Baker said. “Setting too low benchmarks is a race to the bottom (in rates). The contracts get lower and lower and discourages groups from being in-network providers.” Kolby Miller, CEO of Medstar Ambulance in Clinton Township, said most problems with patient bills occur when health insurers deny a claim, stating the transport was unnecessary or not covered. He said Medstar is in-network for all health insurers in its market. “It is more an issue of surprise lack of coverage for policies certain people buy,” said Miller, who said some inexpensive policies don’t have ground or air ambulance coverage. But most situations involve 911 calls when an emergency call comes in for a heart attack or another serious problem. After a transport to the hospital, the ER doctor diagnoses the problem as a non-emergency issue such as abdominal pain. “We submit the bill, and the insurance company denies it. They might find the pain was related to substance abuse, which is a mental health issue that requires prior authorization,” Miller said. In those instances, patients will get a bill for the transportation. “It is $600, not in the thousands. We will usually work something out,” he said. Another example when a patient may get an ambulance bill is when the health insurance company covers the transportation but the patient hasn’t yet met the policy’s deductible, he said. One sticky problem is air ambulance companies, which have low volume and high-cost operations. Some companies, many of which are owned by private equity firms, often send patients surprise medical bills and are accused of using unnecessary transportation, according to congressional reports. Until recently, air ambulance companies were primarily owned by hospitals, which took financial losses on helicopter programs. Now private companies bill patients directly for rides, tripling prices over the past decade. Medstar recently partnered with Lifeflight of Michigan to operated a Medstar-branded Eurocopter EC135 helicopter. Lifeflight is a subsidiary of Petroleum Helicopters Inc. “(Lifeflight) is working to add in-network agreements in Michigan. It is a very expensive service to provide,” Miller said. “When a doctor decides it is necessary to move a patient from one hospital to the other, nobody is in a position (to question) covered benefits.” Miller said denied charges for air ambulance companies happen just like ground transportation ambulances. “When the insurer denies the charge, our partner reaches out to the patient about the unpaid charge,” he said. “They have a compassionate policy and work with the patient to greatly reduce the charges.” Miller said occasionally there are instances when patient bills are referred to collection agencies. “You find out that the patient never made an effort to contact the provider, never made arrangements to pay.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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CRAIN’S FORUM | OCTOBER 2019 SURPRISE MEDICAL BILLING | HOSPITAL VIEW

Ban surprise medical billing without imposing price controls T he mission of Beaumont Health is to provide compassionate, extraordinary care every day. With a vision of being the leading high-value health care network focused on extraordinary outcomes through education, innovation and compassion, we take issues like surprise billing to heart.

We see stories of patients across the country receiving out-of-network “surprise” medical bills every week, and we at Beaumont Health — along with our hospital colleagues from across Michigan — believe patients should be much better protected from these situations. Surprise bills happen for several reasons, most of which are directly JOHN related to the historical complexity FOX and disjointed nature of the American health care system. The surprise bills most often publicized seem to occur because hospitals contract to be “in-network” with insurance companies to provide care to members — yet the law does not allow hospitals to force all physicians practicing within their walls to contract with that same insurance company. Hospitals employ different specialty physician groups to keep our hospitals staffed at nec-

essary levels. Those doctors provide essential, and in many cases, emergency, care but do not always fall “in-network.” This leads to a patient’s insurance company denying coverage for the service — no matter how medically necessary a procedure might be — and passing the bill along to the patient to pay out of pocket. At Beaumont, this is expressly forbidden in our physician contracts. For some time now, hospitals in Michigan have voluntarily been pushing to eliminate surprise billing. Many have been pushing their specialty physician groups to be contracted with the same insurer networks that the hospital maintains to ensure continuity of coverage for every patient. Beaumont Health also has a robust patient financial assistance department, and we urge

patients to call us before any non-emergency ment intervention or price controls into decidprocedure to identify their physicians and in- ing what private entities, like providers and insurance to make sure they know they’re cov- surers, pay each other. ered. We now provide more than 20,000 estiProviders and payers know the value and mates a month to our patients. need of these services, and can, through their There are currently legislative efforts here in own negotiations, decide what should be reimMichigan as well as in Washington, D.C., to reg- bursed for an out-of-network service. The hospiulate surprise bills. The legtal community continues to islation varies, but in addi- Surprise bills happen participate in negotiations tion to banning surprise for several reasons, most on the various legislative bills, there are discussions proposals with our primary of which are directly about the state or federal focus always being on progovernment implementing related to the historical tecting patients. a fee schedule for out-of- complexity and Beaumont Health and network surprise bills or disjointed nature hospitals and health sysforcing providers into arbi- of the American health tems across Michigan are tration to settle these bills. laser-focused on providing care system. The hospital community high-quality care to every has made it clear to state and federal legislators patient we serve. That mission extends to makthat we support one clear and simple goal: ing care affordable, understandable and transLeave patients out of the fight. Patients need to parent. We remain committed and look forbe protected from this, not dragged through it. ward to continuing the work to keep surprise We support banning surprise bills and making bills out of the hands of our patients. sure patients pay only their in-network amount, whether or not the hospital or physician has a John Fox is president and CEO of Beaumont contract with that patient’s insurer. Health and chairman of the Michigan Health & What we don’t believe in is more govern- Hospital Association Board of Trustees.

SURPRISE MEDICAL BILLING | LEGISLATIVE VIEW

SURPRISE MEDICAL BILLING | ONE PATIENT’S STORY

When surprise medical bills hapwouldn’t happen, and it shouldn’t pen, patients can be on the hook for happen to patients. thousands of dollars — dollars they The number one cause of banksimply don’t have and never agreed ruptcy is medical expenses. Pato pay. Unexpected expenses like tients cannot avoid these unfair this can break a person, causing out-of-pocket costs without more stress and worry in an incredibly transparency. They deserve to know hopeless situation. what they’re getting into. We must Recently, a resident from my take action to protect patients from mid-Michigan community reached REP. ROGER these unexpected costs. out to me. He went in to the hospi- HAUCK I’ve partnered with one of my tal for knee surgery, taking all the Democratic colleagues to develop a appropriate steps ahead of time to About one fair, practical and bipartisan soludetermine that the facility was in of every tion to this mess — because this his insurer’s network. The facility seven isn’t a partisan issue. Everyone can was in-network, but unfortunately, patients agree that the current system is unone of the doctors who assisted receives a fair. with his surgery that day was not. surprise Our plan requires medical proThe man went home with a massive bill, despite viders to give 24 hours’ notice if bill he hadn’t planned for and could obtaining their service will result in out-ofnot afford to pay. pocket costs to their patient, along care at an His situation isn’t unique. About in-network with a written estimate of those one of every seven patients receives hospital. costs. In emergency situations, a surprise bill, despite obtaining where consent cannot be given, the care at an in-network hospital. patient will still be protected from surprise This practice isn’t fair for Michigan patients fees. and families. In a medical emergency, the last Changes have to be made to make health thing vulnerable patients should have to wor- care more affordable for the people of our ry about is whether each and every member state, and this is just one step in that process. We must continue to do all we can to enof that medical facility is in-network. Everyone has the right to know exactly how sure every Michigan resident gets the care much they will be charged before going in for they need at a price they can afford. medical treatment. It’s plain and simple. Can you imagine if any other industry forced its State Rep. Roger Hauck represents the 99th customers to pay more than they agreed to for House District in Isabella County and 10 products or services after receiving them? It townships in Midland County.

Since his previous ambulance trips were completely covered by his insurance, we never questioned the coverage of the trips to the hospital for radiation. Three weeks later, after my dad had passed away, my mom was saddled with a bill for almost $10,000 from the ambulance company. As a registered nurse, I advocated for my mom by calling the ambulance company, the insurance company and even the hospice physician. No one answered our plea for help. Everyone denied responsibility. Ultimately, my mom had to pay the massive bill. When a person receives medical treatment, they have the right to know ahead of time what it will cost them. State Reps. Roger Hauck and Frank Liberati have introduced bills to address this very serious issue. House Bills 4459 and 4460 will take someone like my mom and dad out of the equation and force the insurance company to negotiate directly with providers of care. I don’t want this situation, or similar situations, to happen to any other family, which is why I support this measure. Surprise medical bills have devastated too many families, and it’s time to put an end to this unfair practice.

Require hospitals to notify patients of out-of-pocket costs

cross Michigan, families face unexpected medical charges from health care providers they did not know were outside of their plan’s network at the time they received care. Surprise medical bills might occur in an emergency situation when a patient has no ability to select the care providers or facilities who will treat them. They might also occur if a patient plans to receive care from an in-network provider but other treating providers — such as anesthesiologists, radiologists, pathologists or surgical assistants — are brought in to participate in the patient’s care who are not in the same network.

Patients ‘have the right to know’ costs before treatment

urprise medical bills can have a devastating impact on a family who isn’t prepared for the astronomical costs they can pose. My dad had cancer that spread to his spine, leaving him completely paralyzed. Even though he was under the care of a hospice physician, it was recommended that he receive radiation treatments, which were covered under his health insurance plan. It was impossible for my mom to drive him to the hospital for the daily treatments, so the physician ordered advanced medical transportation via ambulance.

State Rep. Mary Whiteford, R-South Haven, represents the 80th House District in Allegan County.

After my dad had passed away, my mom was saddled with a bill for almost $10,000 from the ambulance company. No one answered REP. MARY our plea for help. WHITEFORD Everyone denied responsibility. Ultimately, my mom had to pay the massive bill.

Read more online Go to www.crainsdetroit.com to see more viewpoints on surprise medical billing: Rep. Frank Liberati: Bar medical providers from sending patients ‘surprise’ medical bills. Dominick Pallone: The executive director of the Michigan Association of Health Plans says it’s time to end the surprise billing horror show.

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Piston Group buys Ohio braking plant By Lindsay Chappell Automotive News

Piston Group, the Detroit supplier of chassis and electronics assemblies, has added Honda to its customer list by acquiring Marion Industries from Ernie Green Industries. From its plant in central Ohio, Marion is a key supplier of assembled brake corners to Honda’s U.S. operations. Piston Group, controlled by Detroit businessman and former NBA star Vinnie Johnson, hopes to broaden the Ohio plant’s Honda business beyond brake assemblies. Terms of the deal were not disclosed.

“They have been a strong business, with an excellent record of quality and delivery.” Bob Holloway

“We already do chassis and brake corner assemblies for FCA, Toyota and Ford,” said Bob Holloway, Piston Automotive president. “This provides an opportunity for us to continue to diversify with a new customer.” Piston Group also supplies module assemblies for other vehicle compo-

nents for its other customers, including high-voltage battery modules. “We hope to bring some of our other module assembly expertise to grow with Honda, whether its interior, exterior, powertrain cooling or electrification,” he said. Marion has been a successful and growing business for Ernie Green Industries, a certified minority-owned business enterprise headquartered in Columbus, Ohio. But Holloway said Ernie Green offered to sell Piston Group the brake operation in order to shift its focus to its primary business in injection-molded plastics. Piston Group reported 2018 reve-

nues of $2.88 billion, and employs about 10,000 people. The Marion operation is the company’s ninth automotive plant, all of which are in the United States. Holloway said no changes are planned for the Marion operation, beyond putting up a new sign at the plant that will read “Piston Automotive Marion.” “They have been a strong business, with an excellent record of quality and delivery,” Holloway said. “We don’t intend to change anything. They have some key product launches coming up and we will work with their existing launch plans.”

Vinnie Johnson of Piston Group

Rockbridge buys majority stake in White Glove By Tom Henderson thenderson@crain.com

Detroit-based Rockbridge Growth Equity LLC will announce Tuesday morning that it has added a sixth company to its portfolio by investing in a majority stake in Birmingham-based White Glove, which does seminar marketing and planning and helps companies manage their social-media campaigns and contents. White Glove, which was founded in 2015 by cousins Dean and Mike Thurman as White Glove Workshops, targets companies and professionals in the finance, insurance, legal and real estate industries. White Glove’s management of seminar planning includes finding and booking venues, digital marketing, registration, e-mail campaigns and reminders, media training and on-site communication support for speakers. The company has managed more than 10,000 seminars. “White Glove’s unique approach to marketing, combined with a rapidly scaling seminar-planning service makes it a great addition to the Rockbridge portfolio,” said Kevin Prokop, a managing partner at Rockbridge, in a press release. “We look forward to helping accelerate White Glove’s growth throughout North America.” “The partnership between White Glove and Rockbridge is a strong strategic alliance that empowers us to continue growing our company as the unmatched leader in the educational seminar marketing and planning industry,” said Dean Thurman. “When selecting a private equity partner, we prioritized a cultural fit and ability to help us accelerate our growth. After getting to know the Rockbridge team and seeing the capabilities they bring, we knew we found the right group.” White Glove was founded with four employees and has grown to more than 120. Terms of the deal and revenue for White Glove were not disclosed. Thurman told Crain’s last year that the company’s revenue rose from $3.2 million in 2016 to $11.1 million in 2017 and that the company expected $20 million last year. Rockbridge said there are no plans to move White Glove employees to Detroit. Rockbridge is part of Dan Gilbert’s Rock Family of Companies.

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SPOTLIGHT

DEALS & DETAILS CONTRACTS  ESOC Commercial Truck Inc., Wixom, manufacturer of diesel fuel, engine oil and coolant exchanger and refilling systems, has an agreement with Fireball Equipment Ltd., Edmonton, Alberta, Canada, industrial equipment supplier, as the exclusive sales agent for ESOC products in the Canadian provinces of Manitoba, Saskatchewan, Alberta

and British Columbia, and the Yukon and Northwest Territories. Websites: esocinc.com, fireball.ca  LLamasoft Inc., Ann Arbor, a software development company, has a partnership with Eversight, Ann Arbor, a nonprofit organization dedicated to restoring sight and preventing blindness through eye donation, corneal transplantation and vision research. Websites: llamasoft.com, eversightvision.org

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 Secure Investors Group Inc., Troy, a financial services and insurance

Spalding DeDecker

Ballmer Group

Spalding DeDecker, a leading civil engineering and surveying firm, is pleased to announce that Ariana Jeske, PE, PTOE has joined our team as a Transportation Project Manager in our Grand Rapids Office. As a Professional Traffic Operations Engineer, Ariana brings traffic and safety expertise to both our public and private clients. Her extensive experience designing roads and non-motorized pathways increases capacity in Spalding DeDecker’s growing transportation group.

Ballmer Group has hired Dalia O’Brien and Kayla Roney Smith as portfolio managers to develop and execute investment strategies focused on strengthening communities throughout Southeast Michigan in the areas of early childhood, K-12 education, and college and career readiness.

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O’Brien

TUESDAY, OCT. 22 Lunch & Learn: Stay on the Path to Success with Staff Succession Planning. 11:30 a.m.-1 p.m. Michigan Manufacturing Technology Center. Event will discuss the need for effective succession planning throughout an organization to sustain stability and growth. Topics will include: Documenting job descriptions, executing effective performance reviews, implementing a capability database, conducting a training needs analysis and following a nine-block leadership competency model. Michigan Manufacturing Technology Center, Plymouth. $20. Contact: Theresa Payne, email: tpayne@the-center.org; phone: (888) 414-6682.

WEDNESDAY, OCT. 23 Roney Smith

NEW HIRE? PROMOTION? BOARD APPOINTMENT?

Secure Investors Group, Inc. Bryan E. Spencer, Co-Founder of Secure Investors Group, Inc. acquires Murray, Tymkew & Associates and the Springport Insurance Agency. Bryan has a long-established financial career and has attained many Michigan practices over the years. These acquisitions have provided value for business owners and their consumers providing new opportunities that can benefit existing and new clients’ financial needs through exceptional personalized service, more products, and competitive pricing to clients.

firm, is acquiring insurance agencies Murray, Tymkew and Associates, Albion, and Springport Insurance Agency, Springport. Website: secureinvestorsgroup.com

NEW SERVICES  Wayne State University Law School, Detroit, in partnership with the Mike Ilitch School of Business, the School of Social Work and the College of Liberal Arts and Sciences, is launching a minor in law program for undergraduate WSU students beginning in winter semester 2020. Website: go.wayne.edu/lawminor

Submit Deals & Details items to cdbdepartments@crain.com

CALENDAR

To place your listing, visit www.crainsdetroit.com/people-onthe-move or for more information, please call Debora Stein at (917) 226-5470 or email dstein@crain.com. NONPROFIT

 Shred415, Chicago, a chain of interval training fitness facilities, opened its first Michigan location at 443 E. Big Beaver Road, Troy. Phone: (248) 817-2257. Website: shred415. com/locations/troy  Herta LLC, a public relations firm, is opening an office at 117 North Wing St., Northville. The new office will feature a second floor multimedia collaboration studio. Phone: (248) 697-6836. Website: hertacomm. com

MERGERS & ACQUISITIONS

PEOPLE ON THE MOVE ENGINEERING / DESIGN

EXPANSIONS

UHY LLP Annual Manufacturing Outlook: Lean into Change and Innovation. 7:30-11:30 a.m. UHY LLP. National manufacturing practice leader Tom Alongi and industry thought leaders will discuss the changing landscape of the manufacturing space and how manufacturers will handle disruption. Detroit Athletic Club. Free. Pre-registration is required. Contact: Jessica Labut, email: jlabut@uhy-us.com; phone: (586) 843-2507.

THURSDAY, OCT. 24

Crain’s People on the Move showcases industry achievers and their companies to the Detroit business community. Contact: Debora Stein at dstein@crain.com

Women Who Fund Forum. 11 a.m.-4 p.m. ACG Detroit Women’s Forum and University of Michigan Center for Venture Capital & Private Equity Finance, Ross School of Business. Mary Tolan, founder and managing partner of Chicago Pacific Founders, provider of health care management services, opens the forum with a perspective on investing in health care and industry opportunities. The program includes lunch and features panels on “The Rise of Investors Supporting Health Innovators” and “The Spectrum of Deal Sourcing and PostDeal Governance.” UM Golf Course Clubhouse, Ann Arbor. $95. Contact: Mary Nickson, email: MNickson@ umich.edu; phone: (734) 615-4424.

UPCOMING EVENTS Forbes Under 30 Summit. Oct. 2730. Forbes. The summit includes: a

private music festival, speakers, investor speed-pitching, industry-focused field trips, a pub crawl, a food festival and community service. Masonic Temple. $595. Contact: Lexi Driscoll, email: 30under30@forbes. com From Good Idea to Great Concept. 1-4 p.m. Oct. 29. Oakland County One Stop Shop. Program will discuss how to take an idea and build a great business concept to implement. Topics include: How to move from idea to concept and how successful entrepreneurs adjust their concept to give them the best chance at creating a successful business. L. Brooks Patterson Building Conference Center, Waterford. Free. Contact: One Stop Shop, email: smallbusiness@oakgov. com; phone: (248) 858-0783. The Business of Cannabis: Impact and Opportunities. 8-11 a.m. Oct. 30. Detroit Regional Chamber. Program will discuss how cannabis legalization can affect a business, the new business opportunities in the industry and how to be at the forefront of changes that may impact the bottom line. Detroit Golf Club. $75. Contact: Maggie Greaney, email: mgreaney@detroitchamber.com; phone: (313) 596-0482. Integr8 — The Industry 4.0 conference. 7:30 a.m.-6 p.m. Nov. 6. Automation Alley. Integr8 is a conference focused on the eight core smart technologies of the Fourth Industrial Revolution: Internet of Things, Big Data, Robotics, Artificial Intelligence, The Cloud, Cybersecurity, Additive Manufacturing and Advanced Materials and Modeling, Simulation, Visualization and Immersion. Event will include Industry 4.0 roundtables in addition to breakout sessions; national and international keynote speakers and panelists offering insights on how to capitalize on the rapid transformation of global manufacturing while ensuring the workforce is prepared for the changing job landscape. The Smart Technology Expo will highlight the technology options available to facilitate the digital transformation. TCF Center, Detroit. $449 members; $599 nonmembers. Contact: Cathy Steiner, email: info@automationalley.com; phone: (248) 457-3200.

DMC’s downtown hospitals get new president

Audrey Gregory, R.N., has been appointed president of Detroit Medical Center’s downtown adult hospitals, DMC CEO Tony Tedeschi, M.D. announced last week. Gregory has been with Tenet Healthcare Corp., DMC’s Dallas-based parent Gregory company, for the past 15 years. She had headed up Tenet’s Saint Francis Healthcare System in Memphis. At DMC, Gregory will oversee DMC’s Harper University, Hutzel, Detroit Receiving and Heart hospitals and will have market-level operational oversight for the Rehabilitation Hospital of Michigan and Children’s Hospital of Michigan.

Dietrich Knoer out at The Platform

Dietrich Knoer is leaving development firm The Platform effective immediately. The reason behind the leadership change wasn’t detailed in an Oct. 14 announcement saying that Peter Cummings will retain his chairmanship position and also become CEO Knoer of the Detroit-based company headquartered out of the Fisher Building in the New Center area. A spokesman did not respond to questions about the circumstances surrounding the departure. Knoer, who was president and CEO and teamed up with Cummings following a few years with Southfield-based developer and landlord Redico LLC, said in a statement: “A lot of work remains to be done (in Detroit) and I intend to take on my share of it.”

Ford Motor Co. Fund president to retire

Ford Motor Co. Fund’s longtime president Jim Vella will retire at year’s end, capping a career of more than 31 years with the automaker. Mary Culler, chief of staff for Ford’s office of the executive chairman and development director for the company’s reVella vitalization of Michigan Central Station in Detroit, will succeed Vella as head of the Ford fund. A 19-year veteran of Ford, she brings a deep background in government and community affairs, the company said. “Whether it was a plant crisis or internal issue, Jim has been a trusted partner and adviser through an extraordinary era at Ford,” said Bill Ford Jr., the company’s executive chairman, in a release. “His devotion to helping others and commitment to expanding Ford’s role in the community have made us a leader in corporate philanthropy around the world.”

C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 2 1 , 2 0 1 9

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CLASSIFIEDS To place your listing, contact Suzanne Janik at 313-446-0455 or email sjanik@crain.com www.crainsdetroit.com/classifieds

AUTOMOTIVE NEWS

According to the filing, Lynn Tilton is looking to sell Dura to herself through the bankruptcy court.

DURA FROM PAGE 3

It generates around $90 million in earnings before interest, tax, depreciation and amortization, according to a Bloomberg report. “I was confused by the filing and further confused when I see the company’s performance,” Hudson said. “I get the sense that this bankruptcy will be challenged in court and that’s probably why they filed with Middle District of Tennessee instead of Eastern District in Michigan where it belongs, in hopes of getting a judge less experienced in these kinds of cases.” According to the filing, Tilton is looking to sell the profitable company to herself through the court. Tilton committed $77 million of debtor-in-possession financing to purchase Dura’s assets and take on all employee, customer and trade obligations through an investment arm called Ark II CLO 2001-1 Ltd. The company said in a press release it expects the sale of Dura to Tilton’s other entity to be completed within 120 days. Day-to-day operations for the supplier are not expected to be impacted. Tilton has been embroiled in litigation for years. In 2017, the self-described turnaround queen beat a fraud charge brought by the U.S. Securities and Exchange. Filed in March 2015, the SEC alleged Tilton and her various investment companies misled investors about the values of risky tranches of corporate loans while collecting nearly $200 million in fees. The SEC focused on Tilton’s investment companies collectively known as the Zohar Funds, which held portfolios of loans issued to distressed firms. The SEC had charged that Tilton and her companies falsely led investors to believe that she and her companies made impartial and ethical valuations of the loan assets. According to the SEC, the valuations didn’t fall even though many of the distressed firms made partial or no interest payments to the funds for several years. Tilton countered with her own lawsuit against the SEC and tried to take the case to the U.S. Supreme Court in an unsuccessful bid to have the SEC’s case declared unconstitutional. Tilton ultimately prevailed when the administrative law judge ruled in her favor. She also beat a racketeering case brought forth by the funds in December 2017. But the Zohar funds remain a problem, as a dispute arose between Tilton and the bond insurer MBIA. Zohar III Corp., which raised about $2.5 billion from investors, filed for bankruptcy in March 2018. Tilton

used a similar description to Dura as why she sought bankruptcy protection for Zohar. She said in the legal filing that litigation over Zohar had blocked her from selling one company and financing several others, but the funds retain “tremendous value” and are worth “billions of dollars,” reported Reuters. Tilton ultimately settled the Zohar case with MBIA by agreeing to step aside as head of the funds for at least 15 months, only allowing her to resume her position if she can repay MBIA and other creditors with proceeds from selling or refinancing some of her portfolio companies. But MBIA, as a Zohar investor, is countering Tilton’s move and filed a motion in the Zohar bankruptcy case hours after Dura’s filing in Tennessee to move the case to Delaware. The fund claims in a court filing in U.S. Bankruptcy Court in Delaware that Tilton is violating the terms of the settlement by placing Dura into bankruptcy. The agreement states Tilton is to repay Zohar “whether through sale or refinancing” of portfolio companies, including Dura. The fund alleges Tilton “ignored alternative third-party financing that would have avoided a chapter 11 filing.” “The only reason the Zohar funds can fathom that the Dura debtors filed the Dura Chapter 11 Cases in Tennessee — which is neither their operating headquarters nor the jurisdiction of their formation — is that they did so at the behest of Ms. Tilton to avoid and circumvent the bargain she struck in the Delaware Bankruptcy Court ...,” the funds said in the Delaware motion. “Ms. Tilton and the Dura debtors should not be permitted to do such violence to the linchpin of the Zohar funds’ bankruptcy cases and the groundwork that has already been laid in Delaware to continue the monetization process for all of the portfolio companies, including (Dura).” It’s unclear when or if the Delaware bankruptcy judge will rule on Zohar’s motion. But if Tilton succeeds in Tennessee in prying away that obligation, she may be able to secure a higher acquisition price for Dura and, ultimately, herself, Hudson said. “I don’t know Lynn personally, but there’s a history here,” Hudson said. “There’s a history here of … being very creative in using the bankruptcy court. Some have gone in her favor, so she’s back at it and this seems to be another attempt at trying to negotiate a deal that probably should be done out of court.” Crain’s reporter Kurt Nagl contributed to this report. Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

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ARENA FROM PAGE 1

It also bought the Marquette Building from Adient plc across from what would become TCF Center and is working on finishing the abandoned headquarters project. Sterling Group also owns the Fort Washington Plaza tower at 333 W. Fort St., the 455 Building at 455 W. Fort St. and other properties nearby. A Sterling Group affiliate is the developer working on a new 20-story headquarters building downtown at Woodward Avenue and Elizabeth Street for Detroit-based TCF. In August, Torgow’s former bank, Chemical Bank, completed a merger with TCF Bank in a $3.6 billion all-stock deal that creates the state’s largest bank with $47 billion in assets and $35 billion in deposits. That was about a month after discussions between FGIC and an at that time unidentified local developer were revealed in the middle of July. The road to the property’s redevelopment has been long. FGIC subsidiary Gotham Motown Recovery LLC received until June 15, 2021, to submit a development plan for the property, which was abandoned when the Red Wings moved to Little Caesars Arena two years ago. The deadline had been 5 p.m. Jan. 15, 2020, under terms of a mediated settlement reached between the Gotham Motown Recovery and the city in July 2018 after the former sued in federal court in February 2018 for more time. The original deadline was Nov. 21, 2017, under terms of a settlement of Detroit debts reached in federal bankruptcy court in October 2014

LARRY PEPLIN FOR CRAIN’S

An agreement calls for demolition and remediation to be complete by June 15, 2020.

when the city was under emergency management. The new agreement calls for demolition and remediation to be complete by June 15, 2020. The demolition is estimated at $13.2 million and has received brownfield financing. Exterior work began in June. Bankruptcy court documents in 2014 said that the property was to be redeveloped with a hotel with at least 300 rooms and standing no more than

30 stories and a mix of office, retail, recreation and residential space. Gotham was working with Detroit-based architecture firm SmithGroupJJR, which in September 2016 prepared a 29-page outline for what could be done with the Joe Louis Arena property. It called for re-establishing the street grid and creating a landmark development that connects with the Detroit riverfront. It also suggests ending the two north-south freeways

through downtown, M-10 and I-375, farther north, either at Howard and Larned streets or about at I-75. Several development mixtures are contemplated in the outline, including a 24-story residential tower, an expansion of Cobo Center and parking with about 2,000-4,000 spaces. Today, it’s not known what precisely is being contemplated for the property, nor what Sterling Group would pursue.

The property’s complex nature and an evolving commercial real estate market has made it difficult to submit a redevelopment proposal, Gotham Motown has argued in the past. One city official has called what surrounds the arena “an absolutely wicked entanglement of infrastructure” that makes redevelopment difficult. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

CHASSIS FROM PAGE 3

Motiv’s Series B equity funding round was led by GMAG Holdings Corp. and recreational vehicle maker Winnebago. “These funds are really to get us ready for the next big spurt of growth,” O’Leary said. “A year ago, we changed our strategy to focus on large fleets. Prior to that, we were working on just trying to get an order in different applications to try the technology and prove it all.” Matt Gallaher, CFO of GMAG Holdings, said Motiv has proven its technology and business model. “The commercial transportation industry is on the cusp of significant growth in electrification,” Gallaher said in a statement. “We strongly believe in Motiv’s technology as well as the management team driving its growth.” For its new Detroit area facility, Motiv plans to hire 20 to 25 new engineers. The recruitment and hiring process is already underway, O’Leary said, even amid a tight labor market, particularly for software engineers. In Silicon Valley, Motiv has been able to attract engineers “attracted by the mission” of electrifying fleets of diesel-powered school buses and delivery vehicles that emit harmful pollution, O’Leary said. “Electrifying the fleet is a mission for a lot of people, so they’re happy to be a part of it,” he said. Motiv Power Systems was founded in 2009 by Jim Castelaz, who stepped aside as CEO in February and remains the company’s chief technology officer and maintains a seat on Motiv’s board. O’Leary spent 38 years at Ford in truck product development, purchasing and finance. He joined Motiv as a

MOTIV POWER SYSTEMS

Detroit Chassis LLC assembles F59 and F53 motorhome chassis at its Lynch Road plant in Detroit with Motiv Power Systems’ all-electric chassis.

board member in 2016 and was appointed chairman in July 2018, according to his LinkedIn profile. Motiv plans to maintain its headquarters and research and development in Foster City, Calif., while scaling its engineering and manufacturing capabilities in metro

Detroit, O’Leary said. “We’re set up well with this next round of growth,” he said. “And I’m happy to put it to work in my home state of Michigan.” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

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STATEMENT OF OWNERSHIP, MANAGEMENT AND CIRCULATION (Required by 39 U.S.C. 3685) 1. Publication Title: Crain’s Detroit Business. 2. Publication No.: 743-370. 3. Filing Date: September 30, 2019. 4. Issue Frequency: Published Weekly Except for the Last Week in December. 5. No. of Issues Published Annually: 51. 6. Annual Subscription Price: $169.00. 7. Complete Mailing Address of Known Office of Publication: Crain Communications, Inc. 1155 Gratiot Avenue, Detroit, MI 48207-2997. 8. Complete Mailing Address of Headquarters or General Business Office of Publisher: Crain Communications, Inc. 1155 Gratiot Avenue, Detroit, MI 48207-2997. 9. Full Names and Complete Mailing Addresses of Publisher, Editor, and Managing Editor: Publisher, KC Crain, Crain Communications, Inc. 1155 Gratiot Avenue, Detroit, MI 48207-2997.; Managing Editor, Mike Lee, Crain Communications, Inc. 1155 Gratiot Avenue, Detroit, MI 48207-2997. 10. Owner: Crain Communications Inc. 1155 Gratiot Ave., Detroit, MI 48207-2997; K. E. Crain, 1155 Gratiot Ave., Detroit, MI 48207-2997. 11. Known bondholders, mortgagees and other security holders owning or holding 1 percent or more of total amount of bonds, mortgages or other securities: None. 12. Tax Status (For completion by nonprofit organizations authorized to mail at special rates) The purpose, function, and nonprofit status of this organization and the exempt status for Federal income tax purposes (Check one). • Has Not Changed During Preceding 12 Months • Has Changed During Preceding 12 months. (If changed, publisher must submit explanation of change with this statement) 13. Publication Name: Crain’s Detroit Business. 14. Issue Date for Circulation Data Below: 9/30/2019. 15. No. Copies of Average No. Single Copies Issue Each Issue Published Extent and During Nearest to Nature of Preceding Filing Circulation 12 Months Date a. Total Number of Copies (Net press run) . . . . . . . . . . . 22,870 22,898 b. Paid Circulation (By Mail and Outside the Mail) (1) Mailed Outside-County Paid Subscriptions Stated on PS Form 3541 (Include paid distribution above nominal rate, advertiser’s proof copies, and exchange copies) . . . . . . . . . . . . . . . .20,387 21,452 (2) Mailed In-County Paid Subscriptions Stated on PS Form 3541 (Include paid distribution above nominal rate, advertiser’s proof copies, and exchange copies) . . . . . . . . . . . . . . . . . . . . 0 0 (3) Paid Distribution Outside the Mails including Sales Through Dealers and Carriers, Street Vendors, Counter Sales, and Other Paid or Requested Distribution Outside USPS® . . . . . . . . . . . 15 23 (4) Paid Distribution by Other Classes of Mail Through the USPS (e.g. First-Class Mail®) . . . . . . . . . . . 4 6 c. Total Paid Distribution (Sum of 15b. (1), (2), (3), and (4)) . . . . . . . . . . . . . . 20,406 21,481 d. Free or Nominal Rate Distribution (By Mail and Outside the Mail) (1) Free or Nominal Rate Outside-County Copies included on PS Form 3541 . . . . . . . . . . . . . .1,501 300 (2) Free or Nominal Rate In-County Copies included on PS Form 3541 . . . . . . . . . . . . . . . . . 0 0 (3) Free or Nominal Rate Copies Mailed at Other Classes Through the USPS (e.g. First-Class Mail) . . . . . . . . . . . . . . . . . . . . . . 4 12 (4) Free or Nominal Rate Distribution Outside the Mail (Carriers or other means) . . . . . . . . . . . . . 173 74 e. Total Free or Nominal Rate Distribution (Sum of 15d (1), (2), (3) and (4)). . . . . . . . . .1,678 386 f. Total Distribution (Sum of 15c and e). . . . . . . . .22,084 21,867 g. Copies not Distributed (See Instructions to Publishers #4, (page #3)) . . . . . . 786 1,031 h. Total (Sum of 15f and g) . . . 22,870 22,898 i. Percent Paid (15c divided by 15f times 100) . . . . . . . . . 92.40% 98.23% No. Copies of Average No. Single Copies Issue Each Issue Published Electronic During Nearest to Copy Preceding Filing Circulation 12 Months Date a. Paid Electronic Copies 0 0 b. Total Paid Print Copies (Line 15c) + Paid Electronic Copies (Line 16a) 20,406 21,481 c. Total Print Distribution (Line 15f) + Paid Electronic Copies (Line 16a) 22,084 21,867 d. Percent Paid (Both Print & Electronic Copies) (16b divided by 16c X 100) 92.40% 98.23% I certify that 50% of all my distributed copies (electronic and print) are paid above a nominal price. 17. Publication of Statement of Ownership. If the publication is a general publication, publication of this statement is required. Will be printed in the October 21, 2019 issue of this publication. 18. Signature and Title of Editor, Publisher, Business Manager, or Owner. I certify that all information furnished on this form is true and complete. I understand that anyone that funishes false or misleading information on this form or who omits material or information requested on the form may be subject to criminal sanctions (including fines and imprisonment) and/or civil sanctions (including civil penalties). KC Crain, Publisher, 9-30-19 16.

GRANT PICHLA

Ziebart’s new business model involves four main services: rustproofing and structural protection; protection of paint on the exterior and upholstery in the interior; detailing; and protective films.

ZIEBART FROM PAGE 3

Coinciding with the marketing push is the company’s brand repositioning. It has pulled the plug on sunroofs, windshields, accessories and electronics, although remote starters remain. Franchise locations are free to still offer the other services, but corporate no longer provides technical support or marketing for them. “What we did was we simplified the entire business format,” Wolfe said. “We went back to our core business, which is protection.”

Rustproof roots German immigrant Kurt Ziebart started the company in 1959, and for the first 20 years all it did was rust protection. On that foundation, it grew into an auto aftermarket powerhouse with around 450 locations worldwide in more than 30 countries. It remains an employee-owned company with an employee stock ownership plan that gives its workers ownership interest. Nobody owns more than 5 percent of the company, Wolfe said. A decade ago during the Great Recession, the company was forced to shed stores and made big changes to its business model. It closed around 40 dealers, including 20 in the U.S. “We had dealers grossing $880,000 and $900,000 and losing money,” he said. “They were heavily concentrated in accessories and there is no money in that.” Wolfe axed the accessories business in 2007. The next to go was windshields. A few years ago, the company ended a co-branding deal it made in 1998 with Speedy Auto & Window Glass. The Canadian company never made good on its promise to build a network in the U.S., Wolfe said, and windshields are a losing business for the most part. “It’s very cutthroat,” he said. “The insurance companies basically con-

Ziebart’s world headquarters is in Troy.

“What we did was we simplified the entire business format. We went back to our core business, which is protection.” Tom Wolfe

trol the whole business, so if you’re not in with an insurance company, you’re in trouble.” One deal that endured was the one made with San Diego-based Rhino Linings Inc. in 1999. Under the deal, Ziebart pays Rhino to use its brand name and polyurethane spray-on bedliner product. It proved to be a pivotal move that has bolstered the rustproofing business. Most of Ziebart’s rustproofing customers are pickup truck owners who buy the service bundled with a new bedliner.

Fresh approach Ziebart’s new business model in-

GRANT PICHLA

volves four main services: rustproofing and structural protection; protection of paint on the exterior and upholstery in the interior; detailing; and protective films. Wolfe said paint protection is a key area of growth. It involves using coating or film on the exterior, whereas rustproofing uses abrasion-resistant sealant on the bottom of cars and inside exterior body panels. On average, rust protection starts at $550 per vehicle, and the Z-Gloss treatment starts at $1,300. The company’s new Ceramic Z-Gloss paint coating and Z-Shield paint protection film are booming in popularity, Wolfe said. Ceramic Z-Gloss is a coating that is resistant to scratches, sunlight, rain and chemicals. It was first launched overseas before being rolled out in the U.S. last year. Demand from its markets in the Persian Gulf is fueling the growth. “We are in every country in the Persian Gulf,” Wolfe said. “With all the sand, it’s huge over there.” After opening six new stores in the U.S. last year and planning to open a

pair of stores in Costa Rica and five in Egypt, Ziebart is nearing the number of systemwide locations it had before the recession. Wolfe said he’s looking to expand in Europe, Africa, India and possibly China, in addition to the U.S. “The opportunities here in the states are still wide open,” he said. Franchising is about 70 percent of the corporation’s business. Ziebart franchises individual licenses per store; not region, like many other franchisers. Generally, Ziebart signs 10-year deals and charges $30,000 up front and requires the franchisee to purchase inventory and equipment from the company, amounting to a total initial investment of about $300,000. The $30,000 up-front fee is waived for U.S. military veterans. After initial fees, franchisees are required to purchase proprietary products from Ziebart and pay yearly royalty fees. Those fees are 8 percent on every sale, or 5 percent for hard goods. International franchise agreements are typically for five years and usually involve 2 percent royalty fees. Franchises that benefit from a marketing campaign, such as the one upcoming, are also required to help pay for it. Wolfe declined to break down corporate and franchise revenue. Over the decades, Ziebart has learned that rust never sleeps, but the promise shown by its paint protection vertical has awakened the company to new possibilities. The service is expected to surpass rustproofing by the end of next year. Wolfe said the company is testing products designed to make the paint on used cars glow again without a whole new paint job. Those products could come to market as soon as early next year. “That opens up a tremendous avenue that no one’s gone after before,” he said. “We want to make it look like new again.” Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl

C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 2 1 , 2 0 1 9

INSURANCE FROM PAGE 1

In most cases, Dixon’s auto insurance would have fully covered the replacement of her totaled vehicle and medical treatment for her injuries, which have left her walking with a cane and unable to return to work cutting hair for a living. But on Sept. 13, the insurance policy L.A. Insurance sold Dixon automatically expired, records show, leaving her without collision coverage for the vehicle and without personal injury protection to pay her medical bills and give her the right to sue the at-fault driver for pain and suffering. What didn’t expire were two roadside assistance motor club memberships from Nation Safe Driver and Drive America Auto Club that L.A. Insurance tacked onto Dixon’s bill, totaling $250 of her $542 down payment, records show. The pair of six-month memberships added to Dixon’s out-the-door cost raises questions about whether she would have had insurance coverage at the time of the accident if 46 percent of her payment hadn’t been applied to driving club memberships that last five-and-a-half months longer than the car insurance. “I chose (L.A. Insurance) because it was the down payment I could afford,” Dixon told Crain’s. “I should have known it was too good to be true.” Dixon’s case is not unique. Over the past six years, the Michigan Department of Insurance and Financial Services (DIFS) has closed 43 separate enforcement cases against dozens of L.A. Insurance agents, employees and individual agencies for a host of violations of the state insurance code. The most common infraction involves L.A. Insurance agents loading up a new auto insurance policy with optional roadside assistance plans from Nation Safe Driver that inflate the upfront payment without the knowledge of the customer. The business practice, which state regulators have deemed deceptive, is known in the insurance industry as “sliding,” in which hidden costs are slid into the policies, unbeknownst to the customer. “Most of what they do is a scam. And they double-charge people for stuff they don’t need,” said Daniel Groves, a personal injury attorney at Bashore Green Law Group in Pontiac. “L.A. does this all the time. It’s shady.” Royal Oak-based L.A. Insurance is an insurance retail broker with dozens of storefronts across Michigan. Crain’s has learned L.A. Insurance’s business is intertwined with USA Underwriters, the insurer that wrote Dixon’s collision coverage for $163 for 14 days — the largest portion of her $542 down payment. Groves reviewed Dixon’s case, but declined to represent her because she was not technically insured on the day of the accident. “Legally, I think they have their butt covered,” Groves said of L.A. Insurance. “But ethically, they’re taking advantage of low-income people.” Dixon then turned to prominent personal injury attorney Lee Steinberg (of “Call Lee Free” commercial fame), who reached the same conclusion as Groves and also turned her down. “Since she doesn’t have any PIP coverage, she can’t even bring a claim against the other driver who’s at fault (in the accident),” Steinberg told Crain’s. “L.A. Insurance is horrible.”

crainsdetroit.com

CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS

Royal Oak-based L.A. Insurance is an insurance retail broker with dozens of storefronts across Michigan.

Groves

Steinberg

Dale Royal, the chief operating officer of L.A. Insurance, said the company’s leaders are “deeply saddened to learn” of Dixon’s accident and “pray for her and a full and timely recovery.” “We cannot comment on specifics of claims and accidents, as a matter of respect for our clients’ privacy and by policy,” Royal said in a statement to Crain’s. “We will simply state that a fully informed decision was made by the customer and when all facts are viewed in whole that can be easily verified.”

State moves on split Public records show state insurance regulators have allowed L.A. Insurance’s practice of splitting up the PIP and collision coverage into two separate policies since at least 2013, but have recently moved to prohibit it. On Sept. 11, two days before Dixon’s 14-day insurance expired, the state insurance department ordered Royal Oak-based USA Underwriters to cease selling collision-only insurance plans by Dec. 9 because they violate a section of the no-fault auto insurance reform law that went into effect June 11. “As a result of the amendments to (the auto insurance law), USA Underwriters’ Economy Program automobile insurance policy forms are no longer permitted to be offered and sold in Michigan in their current form,” Karen Dennis, director of the DIFS Office of Insurance Rates and Forms, wrote in a Sept. 11 letter to USA Underwriters. USA Underwriters is a corporation registered by Anthony Yousif, the CEO of L.A. Insurance. As a regulated insurance carrier, USA Underwriters operates separately from L.A. Insurance, Royal said. But the two companies share a corporate headquarters on South Main Street in Royal Oak. Andrea Miller, a spokeswoman for DIFS, said the sale of two or more insurance products for one policy “being sold simultaneously can raise concerns.” “Often, these types of transactions can be confusing to consumers, who may not fully understand the details of the products being purchased,” Miller said in a statement to Crain’s. “Insurance producers are required to

fully explain the products being purchased in any insurance transaction in Michigan. A producer’s failure to fully disclose and explain the details of products purchased in an insurance transaction can be considered a violation of the insurance code.” Public Act 21, one of two no-fault reform laws signed by Gov. Gretchen Whitmer in May, requires all auto insurance policies to contain personal protection, property protection and residual liability insurance coverages, Miller said. DIFS officials requested lawmakers add the prohibition on split policies, according to L.A. Insurance’s COO. L.A. Insurance uses multiple carriers for the same plan to save motorists money, Royal said. “This ability to mix coverages is not at odds with Michigan statute, but rather was done in full concert, review and with approval of DIFS,” Royal said. Royal said the prohibition of split policies will lead to the elimination of dozens of jobs in December. L.A. Insurance has asked the state insurance department to delay the prohibition to July 1, 2020, when the rest of the new auto insurance law kicks in, Royal said. “L.A. Insurance follows the mandates and directives of DIFS, but this single action will cause the immediate elimination of 50-70 quality jobs in Michigan,” Royal said.

Regulatory faceoffs L.A. Insurance and its state regulators have been at odds for several years. In 2017, the state insurance department cracked down on L.A. Insurance’s sale of seven-day auto insurance policies written by Integon that were seen as a way for motorists to get their vehicles registered legally — and then drive without insurance for the remaining 51 weeks in a year. State regulators first took action to stop Integon’s sale of seven-day plans in March 2017. Eighteen months later, the prohibition went into place in September 2018 and North Carolina-based Integon National Insurance Co. agreed to begin writing a six-month auto insurance product sold at L.A. Insurance agencies. Yousif, the L.A. Insurance CEO who was not made available for comment for this article, has previously accused DIFS of trying to ruin his business. In a March 2017 interview with Crain’s, Yousif predicted “all the stores in Detroit are probably going to end up closing.” It’s unclear how many L.A. Insurance stores, if any, have closed since the elimination of seven-day insur-

ance. But the company is still operating multiple storefronts across Detroit, as well as within first- and second-ring suburbs. In early 2018, the state slapped multiple L.A. Insurance agents with $142,500 in fines for “sliding” roadside assistance plans into insurance policies, ordering some agencies to refund customers who were improperly charged for the Nation Safe Driver memberships. Since Labor Day, DIFS has levied fines totaling $33,725 against 14 L.A. Insurance agents and their agencies in Redford Township, Royal Oak, Southfield, Warren and Trenton, for misleading customers that they had to purchase the roadside assistance plan in order to buy an auto insurance policy. Each of the cases have been settled without L.A. Insurance admitting any wrongdoing. In March 2018, Yousif told Crain’s that settling the state’s enforcement cases “was cheaper ... than (to) keep fighting.” “The attorney fees are astronomical,” Yousif said. “It was easier to settle.” One of the recently closed cases involved a state investigator going undercover and posing as a customer at an L.A. Insurance store in Redford in August 2013. The six-year adjudication of $6,200 in fines reflects the backlog of enforcement cases the state insurance department has to juggle. “This one particular L.A. case did not involve a consumer that was victimized, nor was there any monetary harm to any consumer; therefore, it was given a lower priority than others,” the DIFS spokeswoman said.

‘You have no insurance’ For Dustina Dixon, she’s trying to figure out how to get her life back together after the Sept. 25 accident. Winston-Salem, N.C.-based Integon National Insurance Co. — a subsidiary of National General Insurance — has denied her medical claim. USA Underwriters denied her collision claim. “They told me, ‘You have no insurance, stop making claims, stop calling us,’” Dixon said. Dixon wants to know why L.A. Insurance was allowed to bake not one, but two, motor club memberships into her down payment for coverage, effectively siphoning away money that could have been applied to her auto insurance premium. “This is along the lines of what they were fined for and told not to do,” Dixon said. “How are they still able to do it?” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

Editor-in-Chief Keith E. Crain Publisher KC Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Associate Publisher Lisa Rudy, (313) 446-6032 or lrudy@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@crain.com Product Director Kim Waatti, (313) 446-6764 or kwaatti@crain.com Digital Portfolio Manager Tim Simpson, 313-446-6788 or tsimpson@crain.com Creative Director David Kordalski, (216) 771-5169 or dkordalski@crain.com Assistant Managing Editor Dawn Riffenburg, (313) 446-5800 or driffenburg@crain.com News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Senior editor, Chad Livengood, (313) 446-1654 or clivengood@crain.com Special Projects Editor Amy Elliott Bragg, (313) 446-1646 or abragg@crain.com Design and Copy Editor Beth Jachman, (313) 446-0356 or bjachman@crain.com Research and Data Editor Sonya Hill, (313) 446-0402 or shill@crain.com Newsroom (313) 446-0329, FAX (313) 446-1687, TIP LINE (313) 446-6766

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C R A I N ’ S D E T R O I T B U S I N E S S // O C T O B E R 2 1 , 2 0 1 9

THE WEEK ON THE WEB

RUMBLINGS

DTE makes $2.65B natural-gas deal

Detroit to host Net Impact Conference

OCTOBER 11-17 | For more, visit crainsdetroit.com

TE Energy Co. unit DTE Midstream agreed to buy a natural gas gathering system and gathering pipeline in the Haynesville Shale rock formation in Louisiana for $2.25 billion in cash, plus another $400 million at a 2020 milestone. Detroit-based DTE will take on all assets from Momentum Midstream and Indigo Natural Resources, the main natural gas producer supplying the system, including a 150-mile, under-construction pipeline and an existing gathering system. DTE (NYSE: DTE) made the announcement in a news release Friday morning. It gives DTE access to growing markets around the Gulf Coast, the release said. DTE Midstream is the utility company’s natural gas storage, pipeline and gathering provider in the Midwest, Appalachian area, the Northeast and in Ontario. It said in May it would acquire an additional 30 percent of Stonewall Gas Gathering in West Virginia for $275.3 million. DTE wants to spend $4 billion-$5 billion in its midstream business between this year and 2023. “DTE’s non-utility operations continue to grow, perform well and fit nicely into our planned utility and non-utility mix,” Jerry Norcia, president and CEO of DTE Energy, said in the release. “This acquisition significantly enhances the strength and diversity of DTE Midstream, adding premium assets in one of the fastest growing and best positioned U.S. shale formations. The successful operation of the Link asset, also purchased from Momentum, demonstrates the operating expertise and value creation DTE Midstream brings to this new system. In addition, the company gains a strong commercial partner in Indigo, one of the nation’s largest private natural gas producers supplying the rapidly growing demand in the Gulf Coast region.” The deal is expected to close in the fourth quarter, pending closing conditions and regulatory approvals, the release said. The additional $400 million would be paid when the under-construction pipeline is finished in the third or fourth quarter of 2020.

BUSINESS NEWS J The Fisher Building’s largest tenant is going to be Strategic Staffing Solutions. Founder and CEO Cindy Pasky’s company is moving its headquarters to take more than 57,400 square feet in the iconic New Center area tower owned by a joint venture that includes Detroit-based landlord and developer The Platform LLC. Strategic Staffing currently leases space in the Penobscot Building. J 27th Letter Books, an independent bookstore and audio recording space aiming to open in the Jefferson Chalmers neighborhood, has won a $100,000 grant in this year’s Comerica Hatch Detroit Contest. The winner was selected last week after a pitch event among five finalists. The competition for aspiring brick-and-mortar businesses doubled its award this year. J Pleasant Ridge-based 3D printing software provider and seller of printing machines and services Fisher

DTE MAINSTREAM

DTE Energy Co.’s DTE Mainstream is to buy a natural gas gathering system and gathering pipeline in Louisiana for a total of $2.65 billion.

Detroit digits A numbers-focused look at last week’s headlines:

$2.2M

How much the Detroit Free Press/ TCF Bank Marathon expected to raise for more than 45 charities over the weekend.

22,000

Number of square feet the latest co-working company coming to downtown Detroit, Venture X, plans to take up.

$10.5B

Amount of Wayne County’s gross domestic product immigrants accounted for in 2017, according to a new report.

Unitech Inc. has been acquired by competitor Computer Aided Technology LLC. Under the deal, the Buffalo Grove, Ill.-based CATI will consolidate its Michigan employees into the Fisher Unitech headquarters on East 10 Mile Road. CATI intends to maintain the “vast majority” of the 175 employees at Fisher Unitech. J Beaumont Health and employees affiliated with the Service Employees International Union Healthcare of Michigan are still far apart on wages and health care proposals. Beaumont has offered the more than 1,000 support employees a lower wage increase than other workers of similar jobs at the eight-hospital health system, according to union officials. Beaumont officials say they have been negotiating in good faith “for many months.” J Detroit Vs. Everybody LLC started selling “Detroit Vs. The Refs” hoodies in response to last week’s Detroit Lions loss to rival Green Bay Packers after a pair of controversial calls by referees. The retailer has proven adept at responding to current events that get the Detroit area buzzing. In July, it began selling “We on the Lodge wit it” T-shirts, using a phrase from a now-infamous cellphone video of cars doing doughnuts in the middle of the Lodge Freeway. J New York City-based Hearst Magazines has entered into a multiyear li-

cense agreement with Crain Communications Inc. to operate Autoweek, a brand in the Detroit-based publishing company’s portfolio. Hearst Autos will produce the digital publication on Autoweek. com, and the website will be hosted on Hearst’s proprietary content platform MediaOS. The print publication will cease. J Troy-based payment solutions provider Billhighway has been acquired by private equity firm Lovell Minnick Partners. Billhighway, which sells cloud-based accounting and transaction processing services on a subscription basis, was previously acquired by Illinois-based BluePay, which was then bought by First Data Corp. in 2017.

ore than 1,500 people are expected to convene next week in downtown Detroit for a conference aimed at inspiring and equipping future leaders with the skills to secure a sustainable world. The Net Impact Conference, scheduled for Thursday through Saturday at the TCF Center in Detroit, will cover topics ranging from impact investing to social entrepreneurship, featuring leaders from entities such as San Francisco-based Levi Strauss & Co., Dearborn-based Ford Motor Co. and Troy-based Kresge Foundation, according to a news release. The conference is broken up into three days of more than 50 sessions that will address topics such as community development, urban revitalization, corporate citizenship and environmental sustainability, according to the event’s website. Registration is open for the conference, whose “Widening the Lens” theme will underscore “social impact topics students and early career professionals care about,” the release said. Cost to attend is $499 for chapter

members and $549 for nonmembers. Student chapter members pay $399, and nonmember students pay $449. Among the list of keynote speakers at the conference will be founder of gift-economy incubator Service Space, Nipun Mehta; founder of The Runway Project, Jessica Norwood; and executive director of FoodLab Detroit, Devita Davison. Aside from keynote sessions, the event will feature meet and greets, panel discussions and interactive, skill-building workshops, the release said. “The foundation of Net Impact is the strength and breadth of its network,” Net Impact CEO Peter Lupoff said in the release. “We’re gathering top thinkers and leaders in corporate social responsibility, climate crisis, social justice, purpose-driven leadership and more, to take the conversation further than ever before.” Based in Oakland, Calif., Net Impact helps emerging leaders expand their thinking, grow their networks and scale their impact, its website says. It serves more than 39,000 chapter members worldwide.

EDUCATION NEWS J A group of community leaders operating as Wayne County Afterschool Partnership has launched a petition drive to collect signatures to get a ballot proposal supporting after-school and summer programs on the county’s March 10 ballot. Detroit Mayor Mike Duggan, Wayne County Executive Warren Evans, Wayne County Sheriff Benny Napoleon, DTE Energy Co. President and CEO Jerry Norcia and others are leading the petition drive. Called Wayne Kids Win!, it is seeking a tax of 1 mill over five years. J Orchard Lake St. Mary’s Preparatory all-boys high school will accept girls next year as it looks to guard against enrollment declines and respond where it sees opportunity for girls’ STEM education. The Catholic college preparatory academy with 474 students will admit boys and girls to separate, single-gender schools, starting with fall 2020’s incoming ninth grade class. It aims to accept around 40 girls next year. J A record 22 startups were born at the University of Michigan this year, adding to its portfolio of 230 startups that raised a total of $643 million in FY2019. UM’s Tech Transfer launched one more startup than last year and earned $16.3 million in licensing revenues compared to $11.8 million the year prior. Among those launched in 2019 are an AI firm that converts video into neatly packaged data and a software company aiming to bring “the world’s smallest computer” to market.

ADIENT

Plymouth-based Adient confirmed that 1,300 non-plant salaried employees will not be working or receive pay for the weeks of Thanksgiving and New Year’s.

GM strike leads to Adient holiday furlough

dient plc will furlough all of its corporate workforce in the U.S. during the holiday season. The Plymouth-based seating supplier confirmed to Crain’s Friday that 1,300 non-plant salaried employees will not be working or receive pay for the weeks of Thanksgiving, Nov. 2529, and New Year’s, Dec. 30-Jan. 3. Mary Kay Dodero, director of communications for Adient, said in an email that the five-week UAW strike of General Motors is to blame. “While globally Adient has a diversified customer mix, the unplanned loss of sales and profit caused by the GM strike is impacting Adient’s Americas region,” Dodero said in an email. “Adient decided to act proactively to offset this loss and ensure the company is well-positioned for the long term.” Adient was among suppliers that laid off at least some plant workers linked to the strike at GM, but would not confirm the number of workers affected.

The supplier has struggled financially since spinning off from Johnson Controls Inc. in 2016, resulting in several rounds of layoffs over the past 12 months. Most recently, Adient reported a net loss of $321 million on revenue of $4.2 billion during its fiscal third quarter, compared with net income of $54 million on revenue of $4.5 billion during the same quarter last year. Last year, Adient suspended its dividend as it reported a fiscal fourth quarter net loss of $1.35 billion. It has since focused on debt reduction and “financial flexibility.” Despite financial pressures and the strike’s impact, Adient has been favored by Wall Street during its attempted turnaround. Its shares (NYSE: ADNT) have risen more than 49 percent to $24.46 as of the close of business Thursday. However, they had lost more than 5 percent of their value on Friday after the news, trading at $23.16 at midmorning.

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