Henry Ford Health’s plan for becoming destination hospital

DUSTIN WALSH

Mayo Clinic. Johns Hopkins Hospital. Cleveland Clinic. Cedars-Sinai Medical Center. All agship destination research hospitals that attract complex patients from around the U.S. is is the class Henry Ford Health aspires to join.

e newly announced $2.2 billion investment into its Detroit campus is a massive step in that direction.

e investment includes the construction of a $1.8 billion, one million-square-foot-plus, state-of-theart patient tower, including a two-story emergency department, and a previously announced roughly 300,000-square-foot research facility in partnership with Michigan State University. And a key could be nearby residential and commercial development.

It’s by far the largest investment in the system’s 108-year history.

And it comes at a critical time for health systems in America who are ghting to stay pro table in a shifting health care landscape. Rapid consolidation is occurring throughout — Beaumont Health merged with Spectrum Health and University of Michigan is acquiring Sparrow Health in Lansing — and systems are being forced to nd market share anywhere they can.

For University of Michigan Health, which is investing $800 million over eight years into Sparrow, market share continues to grow as increasingly complex patient cases end up in their system. e problem was space, hence the addition of Sparrow’s six hospitals. e Ann Arbor health system is also constructing a $920 million new patient tower next to its existing hospital with all-private rooms and state-ofthe-art equipment for complex patients, with 240 beds able to transform into an intensive-care unit, if need be.

Henry Ford Health is following suit and has also been the recipient of more and more complex patients, but its own aging infrastructure and aging neighborhood make it less palatable to some patients, particularly those traveling and unfamiliar with Detroit.

in that capacity,” Bob Riney, president and CEO of HFH told Crain’s. “But when people research (for a hospital to receive care), they want an environment that’s not only great for them, but great for their families, who in many cases are going to be staying for multiple days while they’re here.” e groups are also seeking a hotelier to open a hotel on the properties to further support families staying at the hospital. e project will connect the new hospital, along with legacy hospital, to the new MSU research center via skywalks and bridges and greenspace, creating a campus-like feel for the area that is largely de ned by aging industrial buildings, o ce space and parking lots. search facility going in its parking lot. e legacy hospital’s emergency department was also not equipped to handle current demand — Riney said it treats about twice the number of patients it was designed to care for. It’s among the busiest of the 10 Level 1 trauma centers operating in the state. e emergency department at the Detroit hospital saw 78,924 patient visits in 2022 and has topped 100,000 in years prior. e new hospital will host a two-story emergency department capable of serving the needs of Detroiters.

Coupled with the residential and retail portion spearheaded by billionaire investor Tom Gores, the area is expected to make a complete transformation. Gores’ team will redevelop HFH’s headquarters at One Ford Place into residential, something Riney said was important for the system.

Riney and Detroit Pistons Vice Chairman Arn Tellem said the development is spun from the success of the health system and the Pistons partnering on the Performance Center, which includes a Plum Market and Planet Fitness, they built in 2019.

“It was never designed in a way for the future of ED, or the current state of ED services, so the team has done an amazing job handling the capacity at the present time,” said Adnan Munkarah, chief clinical ofcer for HFH. “But we know both our teams and the community deserve better.” e plan was largely developed under former CEO Wright Lassiter, who left for the top position at Chicago’s CommonSpirit Health last year, but Riney, a lifelong Michigander who has been employed at HFH since 1978, said he intends to stay until the project is completed in 2029.

HFH has been amassing property for 10 years across the street from its hospital in hopes of someday constructing a new tower.

“I am more energized to lead this organization than I ever thought possible, and it’s because of these major transformational projects,” Riney said. “I really look at this as an ultimate legacy that any leader would just love to have.”

But it’s not only his legacy that he’s concerned with. e addition of a major destination health care hub has the potential to propel Detroit to new heights as well.

“Every major Rust Belt city that’s had to go through some signi cant turnaround, whether that’s Pittsburgh or whether that’s Philadelphia or go down the list, having a worldclass medical facility has been the absolute key to the economic multiplier,” Riney said. “A world-class medical facility is key to a world-class city. I’m really excited for the city.” ry Ford Health footprint and generally north of where fellow billionaire Dan Gilbert has concentrated much of his real estate holdings. e Ilitch/Ross venture is seeking a package of $797 million in public funding, including $616 million in socalled “transformational brown eld” program support that would reimburse the development team on things like sales taxes, income taxes and others.

But grand, neighborhood-size development proposals — speci cally the District Detroit — have at least to date fallen short of the expectations laid out when they were unveiled. Much of the residential space promised originally in that plan has yet to be built, and some buildings sit half-constructed.

Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB

Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh

“We’ve always been a destination for complex care, but we’re growing

Vacating One Ford Place would harm the Performance Center across the street and the MSU re-

Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh

But now, he is putting his foot more rmly in an arena where Detroit’s other billionaires have had theirs for years, partnering with Henry Ford Health on a proposed mega-development that recalls those in the works driven by mortgage mogul Dan Gilbert and the Ilitch family’s pizza and sports empire.

Gores, who made his $6.1 billion fortune in private equity investing, told Crain’s he views his e orts more holistically than just putting up new buildings or rehabbing old ones.

“Community development really focuses on the conditions in an environment for people to be successful,” Gores said an in interview. “I see so many folks that, if they were in di erent conditions or a di erent environment, or had access to certain things, from kids to adults and so on, I think conditions matter.”

Gores said he wants to “develop in the correct way, from the real estate side.”

“But really having it driven by community development,” Gores said. “ is ( e Detroit Pistons) is a community asset. We’ve always said that. I think you can have a real estate project and also a community development project where everybody’s getting better and they have chances to succeed and conditions that are set up for them to give them the best.” e Ilitch family (matriarch Marian Ilitch is estimated to be worth $4.4 billion) and Gilbert ($20.3 billion) each have assembled massive real estate empires in and around the downtown core. In some circles, the areas where they have concentrated their holdings have become known colloquially as Gilbertville and Ilitchville.

Gores — while crediting Gilbert, the Ilitches and fellow billionaire Stephen Ross for doing “amazing things in their own way to build a better Detroit” — says he is taking a di erent approach.

“My goal is to complement their efforts, partnering on some projects and going in di erent directions on others,” he said.

Pistons Vice Chairman Arn Tellem, Gores’ top deputy in Detroit, told Crain’s that while his boss is ramping up his e orts in the area where the Pistons practice and have their corporate headquarters — the one property Gores owns in Detroit and ground leases — it would be a stretch to tack a “ville” at the end of the Gores name to describe that part of town.

“I think it goes against the way we want to think about how we should lead in the city,” Gores said. “I think we’re based on a lot of collaboration and, once you start claiming (one) area, I think you just shut o collaboration.” ose are a handful of his e orts that have resulted in what another one of his top deputies, Mark Barnhill, said is $585 million “invested or committed” to date so far in Detroit. at includes $454 million from Gores and the Pistons and $132 million in “sideby-side co-investment from partners,” Barnhill said.

Gores, who was raised in Flint, has made a series of investments and philanthropic commitments around Detroit in a variety of ways, ranging from building dozens of new basketball courts when he moved the Pistons from the Palace of Auburn Hills to Little Caesars Arena to $1 million donated to the Jalen Rose Leadership Academy and $20 million spent on a community center on Detroit’s west side, to name a few.

“Sports teams have a unique ability to unite people of widely di erent backgrounds and interests,” Gores said. “We recognized from the beginning that owning a sports franchise carried with it certain responsibilities to protect people’s memories and nurture their pride for their team and their city. We saw an opportunity to turn that pride not just into a rooting interest for the team, but as a rallying point for community development. We’re uniquely suited to be a catalyst for building a stronger and better community.”

His new partnership with Henry Ford is among his biggest commitments so far.

On Wednesday, Henry Ford Health, Michigan State University and Gores’ Platinum Equity private rm announced a $2.5 billion plan to build a new hospital on the south side of West Grand Boulevard in Detroit’s Elijah McCoy neighborhood straddling the New Center area. Gores’ team will lead the charge on constructing at least 550 new residential units and perhaps new hotel space, plus 2 acres of green space, basketball courts and other public amenities.

Henry Ford’s commitment to the plan is about $2.2 billion, with Gores’ initial investment on the commercial side of the equation not yet nalized — but Tellem said whatever it ends up at, at least initially, will be “a nice number.” e rst components include a new residential building sandwiched between Henry Ford Health’s current headquarters, One Ford Place, and the Henry Ford Detroit Pistons Performance Center, the team’s practice facility and corporate o ces; as well as redevelopment of the One Ford Place building into residential space.

Henry Ford Health “had greater visions, and we wanted to be actively supporting them and working with them to do greater things, to build out this area of the city,” Tellem said. “And that’s what’s happening.”

But Tellem, who joined Gores in 2015, was clear that his boss’s investments in Detroit won’t be “de ned by one area or one opportunity.”

“What Tom wants is to try to make the best impact that’s going to help the people of Detroit, this community, and doing it with partners,” Tellem said. “It starts really there.”

Other billionaires have concentrated their real estate holdings in other parts of the greater downtown area.

Gilbert, the founder and chairman of the board for mortgage company Rocket Companies Inc. (NYSE: RKT), started assembling central business district buildings more than a decade ago during what he has described as a “skyscraper sale,” renovated them and leased them to a host of o ce tenants, restaurants and retail users.

He has also started building groundup developments not just downtown, but also in neighborhoods like Brush

A look back at Tom Gores’ involvement in his home state

The team-up of Detroit Pistons owner Tom Gores with Henry Ford Health marks a signi cant ramp-up of Gores’ involvement in Detroit. A look back at some of the investments the Flint native has made in Detroit and his hometown of Flint: e Ilitch family’s real estate empire generally sits north of Grand Circus Park and west of Woodward Avenue, where they have spent decades buying buildings and land. Olympia Development of Michigan, the family’s Detroit-based real estate company, has faced criticism for years for things like lack of progress on its District Detroit area vision, as well as tearing down old buildings and leaving surface parking lots in their wake, among other things. e Ilitch/Ross team have also proposed a $1.5 billion new construction and redevelopment spree consisting of 10 properties that would bring new high-rises with o ce and residential space downtown, along with hotel, retail and other uses. at plan is seeking nearly $800 million in public subsidies. is isn’t the rst time Gores has dipped his toes into large-scale real estate development in Detroit. In 2016, Gores teamed up with Gilbert in an effort to lure a Major League Soccer team to Detroit, initially with a plan to build a stadium on the former Wayne County Consolidated Jail site at Gratiot Avenue and I-375. at plan would have anked the 25,000-seat stadium with hotel, residential and o ce space.

April 8: Gores announces a deal to buy the Detroit Pistons and Palace Sports & Entertainment from the estate of industrialist William Davidson.

Park, with visions for other parts of the city, as well. Gilbert’s philanthropic efforts also extend far beyond the central business district; two years ago, Gilbert and his wife, Jennifer, made a $500 million commitment over 10 years to bene t Detroit neighborhoods.

In the past year and a half, they have teamed up with yet another billionaire — Detroit native and mega developer Stephen Ross ($11.6 billion) — to breathe new life into the sweeping plans for the District Detroit, now with a plan for a second anchor, the Detroit Center for Innovation, a University of Michigan graduate school campus expected to start construction this year.

Outside of real estate, the Ilitch family also has several charitable e orts, including Ilitch Charities as well as philanthropic arms of the two professional sports teams they own, the Detroit Tigers and Detroit Red Wings.

Gores said he and his team are “very good at connecting the vision and execution together,” which he says should help with concerns about large grandscale proposals not coming to fruition as pitched.

Major League Soccer passed over the partnership when it was awarding new franchises, and the plan never materialized.

Since then, he has generally looked outside of downtown to make nancial commitments.

“I’m focused on Detroit, not on a particular neighborhood,” Gores said. “All of us need to develop a coherent view that ties together all of the city’s neighborhoods.”

Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB

June 5: Gores recruits sports agent Arn Tellem as vice chairman of the Pistons. Gores says Tellem “shares my belief that sports can be a catalyst for change in the community” and points out that “given his experience and all of his success, Arn could have gone just about anywhere, and he chose Detroit.”

Nov. 22: Gores announces he’s moving the Pistons back to the city of Detroit. Gores said: “I’ve always believed that a sports franchise is a community asset with the power to unite and inspire people. There’s a big responsibility that goes with that, but there’s also a big payo .”

Feb. 24: Gores, Pistons, Henry Ford Health announce plans for the $90 million Pistons Performance Center in New Center.

‘11 ‘12 ‘13 ‘14 ‘15 ‘16

May 1: Wayne State University OKs a plan to partner with Gores and the Pistons organization to build a new $25 million, 70,000square-foot basketball arena for its teams that would also serve as the future home for the NBA G League a liate of the Pistons.

July 29: Pistons announce acquisition of Phoenix Suns G League franchise, which will rebrand and begin playing in Detroit for the 2021-2022 season.

June 2: Gores announces $100 million commitment to launch national charitable endeavor, with Rouge Park its rst signature initiative.

March 23: Gores and leaders from Blue Cross Blue Shield of Michigan, Ford, FirstMerit, GM, Kresge Foundation and Penske Corp. each donate $1 million for the purchase of new police and EMS vehicles for the city of Detroit.

June 4: Gores and the Pistons commit $1 million to the Detroit Institute of Arts as part of the “Grand Bargain,” which helps the city of Detroit exit bankruptcy.

Jan. 29: Gores announces a $10 million pledge for Flint water crisis relief e orts and commits to rallying private sector support from corporate, civic, sports and entertainment leaders. FlintNOW partnerships include a $25 million economic development program launched with Huntington Bank and other campaigns.

‘17

Oct. 9: Palace Sports and the Ilitch family-owned Olympia Entertainment launch 313 Presents to manage concerts and other events at six venues in metro Detroit.

Oct. 19: Pistons complete rst round of neighborhood basketball court refurbishments as part of a $2.5 million plan to build or renovate 60 outdoor courts across the city in connection with the move downtown. To date, 52 of the 60 courts are done or nearly complete.

June 24: Gores and Livoniabased developer Schostak Brothers form joint venture to redevelop Palace site.

Oct. 7: Henry Ford-Pistons Performance Center opens.

March 10: Gores donates $1 million to the Jalen Rose Leadership Academy.

July 11: Gores launches a threeyear $40 million renovation to upgrade The Palace. Final stages completed in 2014. ‘18 ‘19 ‘20 ‘21 ‘22

June 1: Gores announces plans to build $20 million, 25,000square-foot community center in Rouge Park on the city’s west side. The center is expected to be nished in 2024.