Crain's Detroit Business, April 1, 2019 issue by Crain's Detroit Business

Forum: No-fault lawsuits jump in Oakland Page 19

DTE ramps up plans for renewables Page 3

APRIL 1 - 7, 2019 | crainsdetroit.com

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FEAST OR FAMINE IN DETROIT CONDO MARKET

Detroit City FC to add suites from shipping containers

Pair of projects shelved as another is nearly sold out

By Bill Shea bshea@crain.com

Semi-pro soccer team Detroit City FC, seeking revenue to fund its move to professional status later this year, will add suites made from refurbished industrial shipping containers as VIP seating at its home stadium in Hamtramck. Four of the steel containers will be placed on newly poured concrete pads behind the goal at the north end of Keyworth Stadium, the school district-owned historic venue used by the wildly popular semi-pro soccer club since 2016. Each of the containers will be divided into three suites

By Kirk Pinho kpinho@crain.com

Slimmer-than-anticipated profit margins caused by increased construction costs have shelved two anticipated Detroit condominium projects — at least for the time being — and other for-sale multifamily projects have also been delayed in getting out of the ground. The changes illustrate the changing landscape of commercial real estate development in today’s Detroit market, which has not only caused for-sale multifamily projects to be re-evaluated, scratched altogether or postponed, but also apartment projects and other mixed-use efforts that would bring more density to the city. The latest project being “re-evaluated” is Cass and York, a development by Detroit-based The Platform LLC, which planned 56 luxury condominiums plus apartments and a parking deck at that TechTown neighborhood intersection as part of a broader plan that also includes a renovation of the former Wayne State University criminal justice building at 6001 Cass Ave. Peter Cummings, executive chairman for the development company, said the vacant site at 5935 Cass Ave. known as Lot 11 is being “re-evaluated” and that the overall project other

“You’ll have a full, wide-open view. It’ll be intimate.”

THE VISION: A rendering of the Cass and York project by The Platform.

— Sean Mann, Detroit City FC CEO

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THE REALITY: The vacant site at 5935 Cass Ave. is being “re-evaluated.” LARRY PEPLIN FOR CRAIN’S

than the office space is being put on hold. Tata Technologies, the Novibased division of Tata Group, is anticipated to take 20,000 square feet in the office building, and Cummings said that lease plus at least one other are close to bringing its 130,000 square feet to 93 percent occupancy. SEE CONDOS, PAGE 29

ANALYSIS

What’s next for Wayne State?

Options are few for medical school after Henry Ford suspends affiliation talks By Jay Greene

Now that negotiations for an affiliation deal between Wayne State University and Henry Ford Health System have stalled, what options remain? The plain truth is that Wayne State University needs at least $10 million to $20 million in additional

revenue per year to support its medical school, educational responsibilities, clinical and basic science research program and bankrupt faculty medical practice plan. While the now-stalled negotiations hadn’t yet specified how much in annual funding the Detroit-based nonprofit health system

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would have provided, Crain’s has reviewed documents that showed Wayne State’s contracts with current partner Detroit Medical Center have dwindled to about $30 million per year in 2017 from $88 million in 2006, a $58 million drop that amounts to more than $300 million over the past decade. SEE ANALYSIS, PAGE 28

Need to know  At stake for Wayne State was millions of dollars needed to help pay for medical education and research costs  Question: Will Wayne State board issue statement of unity that convinces Henry Ford to return to negotiating table?

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that can accommodate 16 people, said Detroit City FC CEO Sean Mann, and seven of the 12 suites have been leased. The suites can be leased for $10,000 for the season, or per match starting at $800, Mann said. The club, which launched at Detroit’s Cass Tech High School field in 2012, also is in talks to sell naming rights to some of the suites, he said, but Mann didn’t disclose names because the deals aren’t finished. DCFC is pitching the suites for B-to-B use, Mann said. “It’s something that we’ve been talking to a couple entities about, but we haven’t locked any deals in yet,” he said. The other two containers will be placed behind the suites and used as walk-up bars that face the game-day beer garden area. The field-facing containers, which have roll-up industrial garage doors to allow a field view, will have outdoor patio seating between the containers and the field. Seating will be just 10 feet from the turf, Mann said. “You’ll have a full, wide-open view,” he said. “It’ll be intimate.” SEE SUITES, PAGE 26 19 S I N E S S // A P R I L 1 , 2 0 CRAIN’S DETROIT BU

FOCUS

FAMILY-OWNED BUSINESSES

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NEY CAN BUY MORE THAN MO ‘socioemotional wealth’ Beyond profits, family businesses can

create

By Dustin Walsh | dwalsh@crain.com

roughly 63 percent of businesses in the U.S., employing here are roughly 5.5 million family-owned product. ¶ These businesspercent to the nation’s gross domestic the workforce and contributing 57 such as customer satisas all other private and public companies, es face the same big-ticket challenges bond creates major differand quality control. But the familial faction, human resources management have discovered recently. The and those that are not, researchers traded ences between family-run companies a lack of data — unlike large, publicly to due been has historically, rms, lack of research on these fi can analyze, family comreports and other records that researchers companies, which produce earnings ¶ In the past decade, acto the law, their customers and themselves. ts ranging from panies are generally only beholden l wealth” — a set of nonfinancial benefi ademics have defined the idea of “socioemotiona and the continuation of the family name. In short, personal identity ts. ¶ profi of power and influence to a sense of expense the at that increase those characteristics family companies often make decisions of the Stevens Center for with Rejeana Heinrich, associate director Crain’s reporter Dustin Walsh chatted how it impacts decision making. State University, about the topic and Family Business at Saginaw Valley

of Rejeana Heinrich, associate director to the Stevens Center for Family Business if Preserving pride and the loyalty at Saginaw Valley State University. nastic succession. Doesn’t matter a the enterprise. you’re a small family business or Can this behavior or emotions be huge family business like Walmart. that It’s basically the emotional aspects, of pride Is that a good thing? Couldn’t taught? af- Ownership and the sense work against the interest of the what researchers would call an In fact, yes. Some of the basic founand the passing down of this preatowners fault? business a to family business fect, that dations of well-run family business cious thing, that seems to be the disCertainly it could, but the one thing tach to themselves and their family have long been identified. The printinguishing characteristic of family the literature is clear on, the higher business. It’s those feelings of pride, them are businesses that other businesses or- ciples and best practices of the socioemotional wealth of the personal reward and satisfaction foundadon’t have. This seems to be proven family well established. One major that accrue from being a part of the in- ganization, the more likely that tion is quality communications and out over and over. The family is business is going to stay in the family is family enterprise. It can constitute effective conflict management. Th trinsically intertwined. The blood an important part of the family dy- and perpetuate from one generation sounds easy, but it’s key to have in is and money is a very complicated to another. If the socioemotional members’ identity. Familial bond together. working place good family-enterprise goveris namic wealth is lower, whether that’s proba very important. Increasingly this nance systems, whether that’s lems in the family or whatever, the being looked at as the construct that characteristics impact uncil or other kinds of or-

What exactly is socioemotional wealth?

be positive feelings. Maybe it can’t taught in a classroom, but awareness can be raised. And over time, with good governance, solid policies, procedures and established a best practices, family members in business can be channeled in a positive direction.

Globalization, regulatory hurdles, of etc. have made it difficult for a lot smaller family-run companies to keep up. Do you worry we’re losing socioemotional wealth in this country?

I haven’t seen any evidence of that. in I’m reminded of a meeting I was recently with two CEOs who were the fifth-generation leaders of their businesses. They were talking heart to heart about where their enterprises were going. I heard one of them say, ‘Whatever it takes we’ll see this through. This business is not going down on my watch.’ They are sustaining their family legacy and passing it on to their next generation. to The pride and sense of obligation their forebearers and the future generations is strong; it’s so important to the family. These businesses are also tremendously important to the communities. They are the backIt’s bone of our economy’s wealth. where a substantial amount of the

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MICHIGAN BRIEFS

INSIDE

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

Michigan’s minimum wage, sick leave laws face legal uncertainty Michigan’s minimum wage rose 20 cents to $9.45 per hour Friday after months of political haggling that’s expected to continue in court. The $9.25 minimum wage had been set to rise by an inflationary amount in April. But a ballot drive gathered signatures for an initiative to set it at $10 this year and ultimately $12 in 2022. But Republican lawmakers sidestepped the ballot box by adopting the citizens’ initiative, then scaled it back with outgoing Gov. Rick Snyder after the November election. Legislators delayed increasing the minimum wage to $12 an hour by 2022 until 2030 to address business’ concerns. Minimum wage for tipped employees remains 38 percent of the minimum wage, which results in an increase to $3.59 an hour from $3.52 an hour. Employers can also pay minors 16 years old to 17 years old 85 percent of the minimum wage, increasing to $8.03 an hour from $7.86 an hour. Training wages — wages paid to teenagers from 16 years old to 19 years old, remains $4.25 an hour during the first 90 days of employment.

Legislators also altered another citizen-led bill that exempted small businesses — those with fewer than 50 workers — from requiring paid sick leave. The changes made to stymie the November vote on the initiative were contentious at the time and could result in legal scrutiny. Democratic Attorney General Dana Nessel and the Michigan Supreme Court are reportedly examining whether, under the Michigan Constitution, state lawmakers can adopt citizen-led initiatives and change them during the same legislative term. There’s been no instance since the state’s 1963 constitutional convention was ratified in which the Legislature changed a voter-initiated law in the same session in which the Legislature adopted it. Legislators from both parties have asked for an opinion on the matter.

McLaren starts telemedicine program

McLaren Health Care Corp., a 14-hospital health system based in Grand Blanc, has jumped on the emerging telehealth bandwagon by offering a new service called McLarenNow to employees, patients and anyone who has a non-emergency primary care condition. For a $49 fee, people can register at McLarenNow with their smartphone or computer and use a web camera to talk with one of five board-certified

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McLaren Health began a telehealth service on March 1.

family physicians on McLaren’s hospital staffs. Common conditions include back strain, cough and cold, ear pain, headaches, pink eye, rash, sore throat, sinus problems and flu symptoms. Cheryl Ellegood, McLaren’s vice president of service lines, said people shouldn’t use McLarenNow for emergency conditions or those they know require a specialty consultation. She said family practice doctors can discuss primary care problems, prescribe medications and suggest specialty referrals for people and children starting at age 2. McLaren, which launched a monthlong pilot for employees that ended

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Feb. 28, began the telehealth service on March 1. So far, about 200 telehealth consultations have been delivered, with 82 percent women, mostly mothers asking about their children’s medical conditions, she said. Ellegood said McLaren initiated McLarenNow after a survey showed that 85 percent of people said would use telehealth as they believe it would be beneficial for their care. “Rather than traveling to medical offices, waiting for a doctor, traveling back (home), it is a great alternative for people,” Ellegood said. “We determined people want board-certified doctors rather than having midlevels on the phone.”

Gov. Gretchen Whitmer directed Michigan’s environmental agency to develop drinking water standards for certain toxic industrial chemicals rather than waiting for updated federal guidelines, the Associated Press reported. The rules will cover long-lasting “forever” chemicals known as perfluoroalkyl and polyfluoroalkyl substances, or PFAS, which were long used in firefighting, waterproofing, carpeting and other products. The Environmental Protection Agency, which has established a nonbinding health advisory threshold of 70 parts per trillion, last month announced plans to consider setting nationwide limits on the toxic chemicals. Whitmer, a Democrat, said she will not wait for the Trump administration to act — a move that drew praise from environmental groups, lawmakers and others.

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INVESTMENT

UM health spinoff Fifth Eye nabs $11M VC round

ENERGY

RAMPING UP RENEWABLES

By Tom Henderson thenderson@crain.com

DTE is investing $2 billion in renewable energy, mostly in wind farms, by 2024. The bulk of planned solar investments will come after 2024. GETTY IMAGES/ISTOCKPHOTO

DTE aiming for 50 percent cut in carbon emissions By Jay Greene | jgreene@crain.com

enewable energy, a natural gas-fired power plant and energy-efficiency programs will be ramped up over the next five years to replace three coal-fired plants and move DTE Energy Co. toward its new goal of 50 percent reduction in carbon emissions by 2030, according to a five-year energy plan DTE submitted to Michigan regulators Friday.

CEO and Chairman Gerry Anderson briefed reporters Thursday on DTE’s “integrated resource plan” for electricity production that it will file with the Michigan Public Service Commission that was mandated as part of the state’s 2016 energy law. The MPSC must approve the plan later this year for it to go forward.

Some of the highlights of DTE’s proposed energy plan include:  Shuttering three coal-fired plants, St. Clair Power Plant, Trenton Channel Power Plant and River Rouge Power Plant, in 2022, one year before previously announced.  Hitting a 50 percent carbon emissions reduction by 2030, increasing

the pace DTE announced last year. The company still plans to reduce carbon emissions by 80 percent by 2040.  Investing $2 billion in renewable energy, mostly in wind farms, by 2024. The bulk of planned solar investments will come after 2024.  Offering home and businesses opportunities to voluntarily buy more

clean energy through DTE’s MiGreenPower program and through voluntary partnerships with Ford Motor Co. and General Motors Co.  Phasing in energy-efficiency programs from their current level of 1.5 percent annually to 1.75 percent over the next two years. Depending on market conditions, DTE could increase the electricity waste reduction program, which saves customers money, by up to 2 percent annually by 2024.  Investing $800 million in a hydroelectric storage program at Michigan’s Ludington pump station, which is co-owned by DTE and Jackson-based Consumers Energy. By 2020, Ludington will generate enough power to serve 175,000 DTE households. SEE DTE, PAGE 28

SPORTS BUSINESS

Hydrofest loses Gold Cup boats, seeks new sponsor By Bill Shea bshea@crain.com

Organizers of the annual Detroit River Hydrofest powerboat races, which lost the APBA Gold Cup class of the fastest boats earlier this year over stalled contract talks, say they will unveil the August event’s title sponsor this month. “We are planning on announcing that in the next two weeks,” said Mark Weber, president of the race organizer Detroit Riverfront Events Inc. The Metro Detroit Chevy Dealers Local Marketing Association was the title sponsor on one-year deals for 2017-18, Weber said. Before that, the hydroplane races has been sponsored by the Detroit-based UAW-GM

Center for Human Resources and Chrysler Jeep Superstores. Some years have had no top-tier sponsor. A title sponsor is needed to cover a chunk of the Aug. 23-25 race’s $500,000 cost to stage, Weber said. He declined to discuss sponsorship rates, but in the past the event’s presenting sponsorship has sold for $150,000. Ticket sales and donations cover the rest. The event has cycled through lead sponsors and organizers over the years while struggling with financing. It has cut its operating cost in half after running a deficit for many years, and as motorsports marketing dollars dry up. SEE HYDROFEST, PAGE 25

Detroit River Hydrofest powerboat races, which lost the APBA Gold Cup class of the fastest boats earlier this year over stalled contract talks.

Fifth Eye Inc., a health care spinoff from the University of Michigan, will announce Monday that it has closed on a Series A venture-capital round of $11.5 million. The funding was led by two new investors, Ann Arbor-based Arboretum Ventures LLC and St. Louis-based Cultivation Capital LLC. It was joined by Michigan Investment in New Technology Startups (MINTS), a direct investment program of UM’s endowment, and by some of those who invested in the company’s seed round of $2.5 million last year, including Detroit-based Invest Michigan and 15 angel investors, including some from the Lansing-based Capital Community Angels. Fifth Eye has developed software that monitors hospital patients for warning signs of post-operative Jen Baird: Fifth distress before Eye will begin they can become human trials. life-threatening, promising to improve patient outcomes, limit hospital stays and lower health care costs. Jen Baird, the company’s CEO, said the company will begin human trials on at least 100 patients at three Michigan hospitals later this month. One will be Michigan Medicine, formerly called the University of Michigan Health System. She said she doesn’t have permission to name the other two but that they are major health care systems in the state. She said she hopes to have trials concluded by the end of fall and, if they are successful, to get approval from the U.S. Food and Drug Administration early next year to go to market. Fifth Eye, which was founded in 2017 and based on research at UM, uses noninvasive electrocardiograms to continuously monitor post-operative patients for what is called hemodynamic instability, which can be caused by internal bleeding, infection leading to sepsis, pneumonia and other lung conditions. Hemodynamic instability can lead to sudden low blood pressure, cardiac arrest and heart failure. Currently, by the time such instability is detected, the patient is often on the path to severe decline and expensive follow-up care. Last November, Circulation, a journal of the American Heart Association, published an abstract by Fifth Eye researchers and founders that detailed the results of analysis of 4,483 hours of ECG date of 22 patients who had required rapid-response team intervention by care givers for a variety of issues, 13 due to hemodynamic instability. SEE FIFTH EYE, PAGE 27

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The Detroit Regional Chamber is launching Tuesday an online economic development data portal at detroitdatacenter.org.

Detroit chamber launches new online data dashboard By Dustin Walsh dwalsh@crain.com

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The Detroit Regional Chamber is launching Tuesday an online economic development data portal. The Detroit Regional Data Center, created by Austin, Texas-based Headlight Data, provides economic, workforce, education and demographic data for the 11-county region — Wayne, Macomb, Oakland, Lapeer, Livingston, St. Clair, Genesee, Monroe, Washtenaw, Lenawee and Shiawassee. The website is designed to be used by economic development officials, businesses and the general public to access continuously updated economic indicators. “We wanted to bring our business community a tool they can use on a daily basis to make more informed decisions on their business and community efforts,” said Angela Ladetto, director of business research

Need to know

JJWebsite offers extensive workforce and

industry data on 11 Southeast Michigan counties

JJAvailable to anyone but designed for economic development JJTool provides continuously updated data and reports

for the chamber. “While there’s no forecasting in it, it provides a good snapshot on segments of our economy and demographics that can help make their work easier.” Ladetto also stressed that the updated industry and employment data is useful to students and job seekers looking to identify which industries and occupations are growing as well as for site selectors and grant writers. The tool tracks anything from employment by county to average salary

by industry to housing permits. The data is automatically updated as government institutions and research firms release findings, such as the U.S. Census Bureau, U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis, Brookings Institution, etc. The Detroit Regional Partnership, the regional economic development collaborative that spun out of the Detroit Regional Chamber earlier this year, is funding 20 percent of the tool, chamber CEO Sandy Baruah said. Detroit will be the largest region in the country to have a portal like this available. “Anyone with an economic development role is using data quite a bit,” Baruah said. “This is partly public service, partly as we view ourselves of the keepers of regional data.” To view the data, visit detroitdatacenter.org.

Detroit Metro Airport to begin $256M reconstruction on old runway By Anisa Jibrell ajibrell@crain.com

A nearly 70-year old runway at the Detroit Metropolitan Airport is scheduled to get a major facelift. The $256 million reconstruction project on the 8,500-foot primary departure runway will start April 1, according to a Thursday news release. “Runway 3L/21R was the first runway constructed at Detroit Metropolitan Airport in the 1950s,” Wayne County Airport Authority CEO Chad Newton said in a written statement. “The runway and taxiways have reached the end of their useful life. This reconstruction effort will ensure our pavement meets current FAA standards, and improve the efficiency of our airfield by reducing departure times. Passengers will see the construction, but flights will not be impacted.” The runway and its associated taxi-

Need to know

JJReconstruction project on the

8,500-foot primary departure runway will start April 1 JJThe runway will only be shut down for the construction season this year JJProject is slated to be complete by November 2020

ways will be completely reconstructed over the next two years, starting with Runway 3L/21R and its parallel Taxiway M this year, followed by Taxiway P, which will be reconstructed along with a new connector taxiway in 2020, the release said. The runway will only be shut down for the construction season this year, and the whole project is slated to be completed by November 2020. The Federal Aviation Administration green-lighted the environmen-

tal review of the project, as the analysis suggests there are “no significant environmental effects or extraordinary circumstances” linked to the project, the release said. “We will incorporate environmentally sustainable practices into this project, as we have in the past,” project manager and deputy director of airfield facilities Theresa Samosiuk said in written statement.“We will be excavating 750,000 cubic yards of soil, as well as recycling the existing concrete. All excess soil and recycled concrete will remain onsite, diverting it from landfills and reducing truck emissions.” The project is backed by FAA Airport Improvement Program funds and airport revenue bonds, the release says. Anisa Jibrell: (313) 446-0495 Twitter: @anisajibrell

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expert in convening the community, and that’s what we need, because this is too big a problem for any one organization to deal with.” We looked at a collective impact approach and spent about six months with a variety of experts. We came up with a three-pronged strategy. First, change the narrative and reduce the stigma. Second, we talked about a very robust training module so people interacting with teens are able to recognize signs of problems. The third part is the back-end resources. Having Children’s Hospital of Michigan Foundation (CHMF) as a partner helped us launch this. Burns: Tell us about that partnership. Kaufman: One of the key components to reducing the stigma was a series of high-level videos, with actual kids, teachers and doctors from the community talking about mental health issues. CHMF funded the series. The first video we put online as a soft test had 50,000 hits in three days. It went viral. High school freshmen were going up to the seniors who were in the videos, and instead of a stigma they were almost heroic. We quickly saw this is a way to change the narrative and reduce the stigma.

Larry Burns: Tell us about your personal journey. Mike Veny: At age 6, I started to struggle with behavior and have a lot of outbursts. I came from a wonderful home and my parents tried to get me help through therapy. However, things got worse and I ended up being expelled from three schools for behavior problems and hospitalized in a mental hospital three times. I attempted to die by suicide at age 10 and I self-harmed. The thing that turned my life around was drumming; it grounded me and let me express myself in an emotionally healthy way. Nowadays I still struggle with mental-health challenges including depression, anxiety and OCD. But I'm doing much better and I know how to cope. I'm able to live in the world and have a life and have friends. And everything is okay. Burns: Tell us about your book, "Transforming Stigma: How to Become a Mental Wellness Superhero." Veny: The subject of mental health, a lot of times, is a boring conversation. I wanted to write something that would keep people’s attention. This book gives a different perspective on what a child might be struggling with. The second half of the book is dedicated to actual solutions to truly transforming the stigma surrounding mental health. Because truth be told, it shouldn’t be a special conversation. Burns: Could you highlight a few key elements of mental wellness? Veny: First, do one new activity to take care of yourself. There’s a difference between self-care activities and escape activities. Escape activities can be watching

Netflix or playing video games. Self-care activities are intentional activities that you do to grow and nurture yourself. If you’re going to say that you don’t have time, that’s a problem; you need to stop saying that. Everyone can make time, especially parents. The reason I encourage parents to self-care is it helps children model self-care. Second, start having the conversation about mental health, even if it feels uncomfortable. You can just say, “I’m going through a rough time.” Third, look for opportunities to check in with people in your life. Ask, “How are you?” and really listen to what they’re saying. One of the questions I get often is, what do you say to someone who’s struggling? When someone’s struggling the worst thing you can do is give them advice or tell them to cheer up. There are two things you can say to someone who’s struggling. One is, “How can I support you?” The other is, “Help me understand.” It’s important to be quiet and let them answer.

Larry Burns: Tell us about your early childhood and how it shaped your future. Shenandoah Chefalo: I was born in California. We were homeless often and moved over 50 times. Plagued by family members who suffered from severe addictions and mental health issues, I selfreported myself to foster care before I turned 13. I was lucky enough to have a teacher who took interest in me in high school, because I aged out of foster care halfway through my senior year. With the help of the teacher I ended up getting into Michigan State. That became a difficult transition for me. My first year at MSU I was dealing with quite a bit of things and I attempted suicide for the first time. I was depressed, and playing into that was financial need. I was hired as a part-time receptionist in a law office and eventually worked my way up to a law office administrator. I hired a law clerk who eventually became my husband and we moved to Traverse City in 1999 to start a law office, with this idea of doing criminal law differently. In that work, I started to realize that our clients’ issues weren’t merely the crime that brought them to us. A lot of our clients had tumultuous childhoods and spent time in foster care. I started researching foster care statistics, trying to understand what was going on with our clients, and was floored by the statistic that approximately 70 percent of incarcerated inmates spent time in the child welfare system. At that time I hadn’t disclosed my time in the foster care system, but I made it my mission to let out this secret. I wrote "Garbage Bag Suitcase" with the hope that we could reinvent child welfare and

heal trauma in order to help people make better decisions. Burns: You’re faculty at the Center for Trauma Resilient Communities. Tell us about the center and the “resiliency factor.” Chefalo: The center started because people involved in trauma-informed implementation theory were interested in how that reaches beyond the walls of foster care and into communities. Why is it that some people, like myself, go against all odds and seem to have great resiliency, and other people don't? There are some pretty core things we can do to help people retrain their brain so that they can bounce back better. A lot of those things are based in connections and connections in communities. The center is focused on training and helping communities develop models that work in their specific group. Upcoming children’s health summit Evidence-based research on mental wellness will be the focus of a daylong 2019 Child and Adolescent Behavioral Health Summit hosted by the Children’s Hospital of Michigan Foundation. Hear from local and national leaders in children’s health about suicide prevention, trauma, anxiety and depression, and the stigma of substance abuse during the May 14 event. See the agenda and register now at www.chmfoundation.org/2019bhs

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

Meridian Health to get new owner for 2nd time in a year By Jay Greene jgreene@crain.com

For the second time in less than a year, Michigan’s largest Medicaid health plan is set to get a new owner. Health insurer Centene Corp. agreed to buy WellCare Health Plans Inc., a Tampa-based provider of Medicaid and Medicare services, for more than $15 billion to expand in the market for government-sponsored health care. Last year, WellCare (NYSE: WCG) bought the multistate operations of Detroit-based Meridian Health for $2.5 billion. Because St. Louis-based Centene already has a small operation in Michigan there is a little overlap in business, WellCare spokesman Kimbrel Arculeo told Crain’s on Wednesday. “WellCare will continue to offer its statewide prescription drug plan and provide Medicaid, Medicare and health insurance exchange (Obamacare) plans through its wholly-owned subsidiary, Meridian, in their current state through this acquisition,” Arculeo, vice president of corporate communications, said in an email. “Meridian, a WellCare company, remains committed to providing quality health care to all of our members.” Centene offered $305.39 per share in cash and stock for WellCare, the companies said in a joint statement Wednesday. Both boards backed the transaction, which has an enterprise value of $17.3 billion. The deal will add to adjusted

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Meridian has become a visible fixture in downtown Detroit since purchasing One Campus Martius with Bedrock LLC in 2015.

earnings per share in its second year, the companies said. The purchase will give Centene, which focuses on Medicaid and Affordable Care Act markets, a Medicare business even as the Trump administration launches a fresh assault on Obamacare. The enlarged company would be threatened if higher courts uphold a request to

wipe out the entire law, though legal experts have called that outcome unlikely. Founded by David Cotton, M.D., and his wife, Shery, in 1997, Meridian is Michigan’s largest Medicaid health plan, with more than 500,000 members, and was one of the largest family-owned for-profit managed-care companies in the nation. Overall,

Meridian served about 1.1 million Medicaid, Medicare Advantage, integrated dual-eligible and health insurance marketplace members. Sources familiar with Meridian and WellCare told Crain’s that the Centene offer took the Detroit-based company and executives by total surprise. Meridian executives declined comment, referring all communica-

tion to WellCare officials in Tampa. Susan Moore, R.N., a health care quality consultant with Ortonville-based Health Care Resources, said the merger of health plans that sell government-sponsored insurance products makes sense to build economies of scale and reduce costs. “WellCare purchased Medicare plans in the last few years that they’re still integrating into their organization, along with the purchase of Meridian,” Moore said. “With the states’ budgets taking huge hits for the increasing cost of Medicaid as a portion of their budgets, they’re trying to economize as much as possible on payments to plans.” Moore said it is much easier to “buy” members by purchasing the plans instead of setting up new plans in markets where they don’t have a presence or where they can eliminate a competitor. “Even though WellCare is smaller, they’ve been very successful at winning competitive bids in new states,” she said. Meridian is also a major employer in downtown Detroit and ranked fourth on Crain’s Private 200 list of largest privately held companies in metro Detroit with $3.8 billion in 2017. The company has become a visible fixture in downtown Detroit since purchasing One Campus Martius with Dan Gilbert’s Bedrock LLC in 2015 for an estimated $140 million to $150 million. — Bloomberg News contributed to this report.

UM health system, Sparrow Health sign affiliation agreement By Jay Greene jgreene@crain.com

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Michigan Medicine, the University of Michigan’s health care arm, and Lansing-based Sparrow Health System have signed an affiliation agreement that will first bring together pediatric programs and include a minority investment into Sparrow’s profitable health plan, the two health care organizations announced Thursday. Ann Arbor-based Michigan Medicine and Lansing-based Sparrow said the agreement will pave the way for other unspecified collaborations. The pediatric joint venture will integrate UM’s pediatric services at C.S. Mott Children’s Hospital with Sparrow Children’s Center in Lansing. The joint venture will be launched in May. Over the past six months, sources have told Crain’s that the University of Michigan and Sparrow were talking about a merger or affiliation, but officials for the two health systems declined to comment. “It’s a privilege to partner with Sparrow to provide care for children and families in the communities of mid-Michigan,” Chris Dickinson, M.D., interim executive director of Mott Children’s, said in a statement. “Our commitment is always to keep care close to home for families, and this relationship will help us do that.” Mott Children’s already provides pediatric cardiology, pediatric gastroenterology and pediatric surgery services through clinics at the Sparrow Medical Professional Building. The venture will expand clinical partnerships and pedi-

Need to know

JJUniversity of Michigan and Sparrow

Health System sign affiliation that involves pediatrics and a managed-care program investment JJThe two health organizations say that

future collaboration is expected in other areas

JJPediatric care coordination in Lansing market is expected to be improved

atric specialty services in the Lansing market. The pediatric joint venture will not interfere with Sparrow’s existing relationship with MSU’s College of Human Medicine and College of Osteopathic Medicine, officials said. “Our organizations are coming together to mutually serve our pediatric patients,” Karen Kent VanGorder, M.D., Sparrow’s senior vice president and chief medical and quality officer, said in a statement. “Sparrow physicians, and the children we care for, will have expanded access to the latest pediatric expertise and clinical care resources.”

Minority investment Michigan Medicine also will be making a minority investment in Sparrow’s health plan, Physicians Health Plan. No further information was available on the scope of the investment, expected to be completed in six months or less. In 2006, the University of Michigan sold M-CARE, an HMO, to Blue Cross Blue Shield of Michigan.

On the other hand, Physicians Health Plan, which was founded in 1980, earned $5.9 million in 2018 and $9.3 million in 2017.

Future collaboration? The two health organizations have appointed representatives to an oversight committee that will approve all other future collaborative agreements. “Collaboration in this form brings together the best talents of both entities in a meaningful way that can greatly benefit our most vulnerable patients. This partnership with Michigan Medicine is representative of Sparrow’s culture where the patient is always the top priority in decision making and where all Sparrow team members can be the very best they can be for every patient, every time,” Joseph Ruth, acting president and CEO, said in a statement. Sparrow’s former CEO, E.W. Tubbs Jr., was replaced last month in a scandal over allegations of sexual misconduct with a female co-worker at his previous job in Virginia. Tubbs had only been at Sparrow for about four months. “Sparrow is an important part of the fabric of the mid-Michigan community, and their commitment to delivering high quality care is clear,” David Spahlinger, M.D., president of the University of Michigan Health System, the clinical care enterprise of Michigan Medicine, said in a statement. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

LEGAL NOTICE

To merchants who have accepted Visa and Mastercard at any time from January 1, 2004 to January 25, 2019: Notice of a class action settlement of approximately $5.54-6.24 Billion. Si desea leer este aviso en español, llámenos o visite nuestro sitio web, www.PaymentCardSettlement.com. Notice of a class action settlement authorized by the U.S. District Court, Eastern District of New York. This notice is authorized by the Court to inform you about an agreement to settle a class action lawsuit that may affect you. The lawsuit claims that Visa and Mastercard, separately, and together with certain banks, violated antitrust laws and caused merchants to pay excessive fees for accepting Visa and Mastercard credit and debit cards, including by: • Agreeing to set, apply, and enforce rules about merchant fees (called default interchange fees); • Limiting what merchants could do to encourage their customers to use other forms of payment; and • Continuing that conduct after Visa and Mastercard changed their corporate structures. The defendants say they have done nothing wrong. They say that their business practices are legal and the result of competition, and have benefitted merchants and consumers. The Court has not decided who is right because the parties agreed to a settlement. The Court has given preliminary approval to this settlement.

THE SETTLEMENT Under the settlement, Visa, Mastercard, and the bank defendants have agreed to provide approximately $6.24 billion in class settlement funds. Those funds are subject to a deduction to account for certain merchants that exclude themselves from the Rule 23(b)(3) Settlement Class, but in no event will the deduction be greater than $700 million. The net class settlement fund will be used to pay valid claims of merchants that accepted Visa or Mastercard credit or debit cards at any time between January 1, 2004 and January 25, 2019. This settlement creates the following Rule 23(b)(3) Settlement Class: All persons, businesses, and other entities that have accepted any Visa-Branded Cards and/or Mastercard-Branded Cards in the United States at any time from January 1, 2004 to January 25, 2019, except that the Rule 23(b)(3) Settlement Class shall not include (a) the Dismissed Plaintiffs, (b) the United States government, (c) the named Defendants in this Action or their directors, officers, or members of their families, or (d) financial institutions that have issued Visa-Branded Cards or Mastercard-Branded Cards or acquired Visa-Branded Card transactions or Mastercard-Branded Card transactions at any time from January 1, 2004 to January 25, 2019. The Dismissed Plaintiffs are plaintiffs that previously settled and dismissed their own lawsuit against a Defendant, and entities related to those plaintiffs. If you are uncertain about whether you may be a Dismissed Plaintiff, you should call 1-800-625-6440 or visit www.PaymentCardSettlement.com for more information.

WHAT MERCHANTS WILL GET FROM THE SETTLEMENT Every merchant in the Rule 23(b)(3) Settlement Class that does not exclude itself from the class by the deadline described below and files a valid claim will get money from the class settlement fund. The value of each claim will be based on the actual or estimated interchange fees attributable to the merchant’s Mastercard and Visa payment card transactions from January 1, 2004 to January 25, 2019. Pro rata payments to merchants who file valid claims for a portion of the class settlement fund will be based on: • The amount in the class settlement fund after the deductions described below, • The deduction to account for certain merchants who exclude themselves from the class, • Deductions for the cost of settlement administration and notice, applicable taxes on the settlement fund and any other related tax expenses, money awarded to the Rule 23(b)(3) Class Plaintiffs for their service on behalf of the Class, and attorneys’ fees and expenses, all as approved by the Court, and • The total dollar value of all valid claims filed. Attorneys’ fees and expenses and service awards for the Rule 23(b)(3) Class Plaintiffs: For work done through final approval of the settlement by the district court, Rule 23(b) (3) Class Counsel will ask the Court for attorneys’ fees in an amount that is a reasonable proportion of the class settlement fund, not to exceed 10% of the class settlement fund, to compensate all of the lawyers and their law firms that have worked on the class case. For additional work to administer the settlement, distribute the funds, and litigate any appeals, Rule 23(b)(3) Class Counsel may seek reimbursement at their normal hourly rates. Rule 23(b)(3) Class Counsel will also request (i) an award of their litigation expenses (not including the administrative costs of settlement or notice), not to exceed

$40 million and (ii) up to $250,000 per each of the eight Rule 23(b)(3) Class Plaintiffs in service awards for their efforts on behalf of the Rule 23(b)(3) Settlement Class.

HOW

ASK

FOR

PAYMENT

To receive payment, merchants must fill out a claim form. If the Court finally approves the settlement, and you do not exclude yourself from the Rule 23(b)(3) Settlement Class, you will receive a claim form in the mail or by email. Or you may ask for one at: www.PaymentCardSettlement.com, or call: 1-800-625-6440.

LEGAL RIGHTS

AND

OPTIONS

Merchants who are included in this lawsuit have the legal rights and options explained below. You may: • File a claim to ask for payment. Once you receive a claim form, you can submit it via mail or email, or may file it online at www.PaymentCardSettlement.com. • Exclude yourself from the Rule 23(b)(3) Settlement Class. If you exclude yourself, you can individually sue the Defendants on your own at your own expense, if you want to. If you exclude yourself, you will not get any money from this settlement. If you are a merchant and wish to exclude yourself, you must make a written request, place it in an envelope, and mail it with postage prepaid and postmarked no later than July 23, 2019, or send it by overnight delivery shown as sent by July 23, 2019, to Class Administrator, Payment Card Interchange Fee Settlement, P.O. Box 2530, Portland, OR 97208-2530. Your written request must be signed by a person authorized to do so and provide all of the following information: (1) the words “In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation,” (2) your full name, address, telephone number, and taxpayer identification number, (3) the merchant that wishes to be excluded from the Rule 23(b) (3) Settlement Class, and what position or authority you have to exclude the merchant, and (4) the business names, brand names, “doing business as” names, taxpayer identification number(s), and addresses of any stores or sales locations whose sales the merchant desires to be excluded. You also are requested to provide for each such business or brand name, if reasonably available: the legal name of any parent (if applicable), dates Visa or Mastercard card acceptance began (if after January 1, 2004) and ended (if prior to January 25, 2019), names of all banks that acquired the Visa or Mastercard card transactions, and acquiring merchant ID(s). • Object to the settlement. The deadline to object is July 23, 2019. To learn how to object, visit www.PaymentCardSettlement.com or call 1-800-625-6440. Note: If you exclude yourself from the Rule 23(b)(3) Settlement Class you cannot object to the settlement. For more information about these rights and options, visit: www.PaymentCardSettlement.com.

COURT APPROVES FINAL SETTLEMENT

THE

Members of the Rule 23(b)(3) Settlement Class who do not exclude themselves by the deadline will be bound by the terms of this settlement, including the release of claims against the released parties provided in the settlement agreement, whether or not the members file a claim for payment. The settlement will resolve and release claims by class members for monetary compensation or injunctive relief against Visa, Mastercard, or other defendants. The release bars the following claims: • Claims based on conduct and rules that were alleged or raised in the litigation, or that could have been alleged or raised in the litigation relating to its subject matter. This includes any claims based on interchange fees, network fees, merchant discount fees, no-surcharge rules, nodiscounting rules, honor-all-cards rules, and certain other conduct and rules. These claims are released if they already have accrued or accrue in the future up to five years following the court’s approval of the settlement and the resolution of all appeals. • Claims based on rules in the future that are substantially similar to – i.e., do not change substantively the nature of – the above-mentioned rules as they existed as of preliminary approval of the settlement. These claims based on future substantially similar rules are released if they accrue up to five years following the court’s approval of the settlement and the resolution of all appeals. The settlement’s resolution and release of these claims is intended to be consistent with and no broader than federal law

on the identical factual predicate doctrine. The release does not extinguish the following claims: • Claims based on conduct or rules that could not have been alleged or raised in the litigation. • Claims based on future rules that are not substantially similar to rules that were or could have been alleged or raised in the litigation. • Any claims that accrue more than five years after the court’s approval of the settlement and the resolution of any appeals. The release also will have the effect of extinguishing all similar or overlapping claims in any other actions, including but not limited to the claims asserted in a California state court class action brought on behalf of California citizen merchants and captioned Nuts for Candy v. Visa, Inc., et al., No. 1701482 (San Mateo County Superior Court). Pursuant to an agreement between the parties in Nuts for Candy, subject to and upon final approval of the settlement of the Rule 23(b) (3) Settlement Class, the plaintiff in Nuts for Candy will request that the California state court dismiss the Nuts for Candy action. Plaintiff’s counsel in Nuts for Candy may seek an award in Nuts for Candy of attorneys’ fees not to exceed $6,226,640.00 and expenses not to exceed $493,697.56. Any fees or expenses awarded in Nuts for Candy will be separately funded and will not reduce the settlement funds available to members of the Rule 23(b)(3) Settlement Class. The release does not bar the injunctive relief claims or the declaratory relief claims that are a predicate for the injunctive relief claims asserted in the pending proposed Rule 23(b)(2) class action captioned Barry’s Cut Rate Stores, Inc., et. al. v. Visa, Inc., et al., MDL No. 1720, Docket No. 05-md-01720MKB-JO (“Barry’s”). Injunctive relief claims are claims to prohibit or require certain conduct. They do not include claims for payment of money, such as damages, restitution, or disgorgement. As to all such claims for declaratory or injunctive relief in Barry’s, merchants will retain all rights pursuant to Rule 23 of the Federal Rules of Civil Procedure which they have as a named representative plaintiff or absent class member in Barry’s, except that merchants remaining in the Rule 23(b)(3) Settlement Class will release their right to initiate a new and separate action for the period up to five (5) years following the court’s approval of the settlement and the exhaustion of appeals. The release also does not bar certain claims asserted in the class action captioned B&R Supermarket, Inc., et al. v. Visa, Inc., et al., No. 17-CV-02738 (E.D.N.Y.), or claims based on certain standard commercial disputes arising in the ordinary course of business. For more information on the release, see the full mailed Notice to Rule 23(b)(3) Settlement Class Members and the settlement agreement at: www.PaymentCardSettlement.com.

THE COURT HEARING ABOUT THIS SETTLEMENT On November 7, 2019, there will be a Court hearing to decide whether to approve the proposed settlement. The hearing also will address the Rule 23(b)(3) Class Counsel’s requests for attorneys’ fees and expenses, and awards for the Rule 23(b) (3) Class Plaintiffs for their representation of merchants in MDL 1720, which culminated in the settlement agreement. The hearing will take place at: United States District Court for the Eastern District of New York 225 Cadman Plaza Brooklyn, NY 11201 You do not have to go to the Court hearing or hire an attorney. But you can if you want to, at your own cost. The Court has appointed the law firms of Robins Kaplan LLP, Berger Montague PC, and Robbins Geller Rudman & Dowd LLP as Rule 23(b)(3) Class Counsel to represent the Rule 23(b)(3) Settlement Class.

QUESTIONS? For more information about this case (In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, MDL 1720), you may: Call toll-free: 1-800-625-6440 Visit: www.PaymentCardSettlement.com Write to the Class Administrator: Payment Card Interchange Fee Settlement P.O. Box 2530 Portland, OR 97208-2530 Email: info@PaymentCardSettlement.com Please check www.PaymentCardSettlement.com for any updates relating to the settlement or the settlement approval process.

www.PaymentCardSettlement.com • 1-800-625-6440 • info@PaymentCardSettlement.com

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OPINION EDITORIAL

COMMENTARY

Time to turn off the lawsuit mills

Fixing potholes is just half the story

t’s an eye-popping number. As Chad Livengood reports in Crain’s Forum on Page 19, the number of lawsuits against auto insurance companies filed in Oakland County more than quadrupled in two years, from 644 to 2,545. You don’t have to know any more than that to conclude that something is broken in the system. It turns out that the reason for the increase isn’t just the heavily advertised plaintiff law firms and their industrialized lawsuit mills that seek to exploit Michigan’s unlimited lifetime medical benefits for injuries caused by auto accidents. It’s also a result of insurance companies pushing back on those lawsuits. And a heaping dollop of court-shopping, as Oakland County’s judges are seen as friendlier toward medical claims. It used to be Wayne County, but now that county’s courts are known as strict interpreters of a Supreme Court ruling limiting the ability of medical providers to sue. Oakland County’s courts — along with Wayne and Macomb’s — draw lawsuit filings from all over the state, jamming the courts with cases that could be judged wherever the accident happened. That results in cases like the accident victim in Cadillac being cared for in Grand Rapids whose lawsuit was filed in Oakland County Circuit Court. Total lawsuits filed under the law have nearly doubled in the past 10 years, and 70 percent of the cases in the state now wind up in Oakland, Wayne and Macomb counties. One of the purposes of no-fault insurance is to keep from clogging the courts. That’s clearly not working anymore. Michigan’s unlimited benefits, which have few controls on how much providers can charge, have caused the lawsuit industry to become industrialized. It’s simply too lucrative for too many middle men. Attorneys take their share of claims that can run over $300,000 per year just to pay attendant care costs, often to victims’ family members. A patchwork fix could be to require such lawsuits to be filed in the jurisdiction where the accident victim lives, or where the accident took place. At least that would even out the burden of hearing all these lawsuits. But that won’t solve the bigger problem. Michigan’s current system is just too lucrative for the attorneys and health care providers. That has driven the insurance companies to push back harder on paying medical claims. That fight winds up in court. Meanwhile, the accident victims — the people who bought the insurance in the first place and wound up needing it — wait. Our Forum op-ed writers on Pages 22-23 blame many culprits for the nofault mess: fraud and waste in the system, sky-high medical costs, insurance companies whose rates aren’t adequately regulated. Our takeaway: They’re all right. And fixing this very expensive mess is going to require a lot of constituencies to take a pay cut.

LETTERS

PFAS — move beyond testing

To the Editor: Recently, Mary Kramer addressed the urgent need for swift action related to testing PFAS in Michigan’s water systems. PFAS are toxic, persistent chemicals used in everyday products associated with many serious health problems. PFAS has been found in our drinking water and in our fish and wildlife. Mary called for out-of-the-box solutions, and I couldn’t agree more. The governor is taking critical steps to address PFAS with the re-establishment of the Science Advisory committee of the Michigan PFAS Action Response Team (MPART) and a directive to set a drinking water standard for PFAS, but we cannot rely solely on state government. As executive director of the Huron River Watershed Council, I wanted to share that Michigan needs go beyond testing. The state has done a lot of testing and while there is more to be done, what we need most is to prevent

these chemicals that harm human health from being used and introduced in to the environment. Before these chemicals can be used, we need to know the impacts on human and environmental health. And then find alternatives that aren’t harmful. We cannot allow corporations and government agencies to continue to contaminate our water and land. We need the state to move quickly on Gov. Gretchen Whitmer’s recent directive to establish a drinking water standard for PFAS under the Michigan Safe Drinking Water Act. Additionally, the state needs to provide options at no cost to individual residents in impacted communities and fund new treatment technologies for public water systems. And most importantly, the state needs to hold companies accountable to pay for the cleanups. Laura Rubin Executive director Huron River Watershed Council Ann Arbor

here’s something missing from the debate about Michigan’s proposed 45-cent gas tax hike. Gov. Gretchen Whitmer and the Michigan Department of Transportation are asking drivers to pay an additional $270 per year on average. In return, they say, Michigan drivers will get fewer potholes. But that’s only part of the story. Potholes are a big issue in Michigan to be sure — especially in some of the older cities like Detroit. But MDOT isn’t just asking for money for road maintenance. It’s also for money to expand roads, to widen highways and state roads. And whether the state really needs wider roads — new road capacity — is a question that deserves a serious discussion. Because widening highways is not only really expensive, it can cause problems as well, especially in areas like Detroit that don’t have much population growth. MDOT is currently moving ahead with two highway projects that include widening in the Detroit metro region: I-75 and I-94. The bill for those two projects is about $4 billion — or almost twice what Whitmer ex-

OTHER VOICES Angie Schmitt

pects her gas tax to bring in annually. It’s hard to know exactly how much is for maintenance and how much is for widening. But University of Michigan Ph.D. student Joel Batterman estimates that between those projects and a list of other expansions being planned for Oakland and Macomb counties, about $1 billion of highway widenings are being planned for Southeast Michigan alone. Keep in mind: Southeast Michigan — and Michigan itself — isn’t growing. According to the Southeast Michigan Council of Governments, the region’s population is about the same as it was in 1970. And is expected to remain fairly steady out to 2045.

Adding highway lanes in a region that isn’t growing is not sustainable — and that’s partly why Michigan has such a big pothole problem. It’s hard to maintain an ever-increasing supply of highway lanes with the same population. Highway widening projects also undermine urban areas and encourage sprawl by transferring land value from areas that are already developed to areas that are not. In other words, they help “new” places like northern Oakland county — who are the primary beneficiaries of wider highways — while hurting already developed places, like Detroit. Whitmer and MDOT are probably right that there is a real need for more money for road maintenance in Michigan. But unless there is stricter focus on actually fixing roads, rather than building new ones, it could just worsen some of the region’s most serious problems — further widening inequality and spurring more disinvestment in urban areas. Angie Schmitt is the Cleveland-based editor of Streetsblog USA.

With autism, success for my family, state A

bout 20 years ago, my wife, Peggy, and I were introduced into the world of autism. We continue to learn every day about the challenges, successes and the reasons to be thankful and optimistic. While I would like to be more specific about my child’s story, she requested her privacy. I get it. Unfortunately, we live in a world where in many cases the lack of understanding and biases about the spectrum lead to low-expectation and exclusion, generating terrible outcomes like the 90 percent unemployment levels among adults on the spectrum. Our experience was eye-opening. We searched across Michigan for a diagnosis. We found countless sympathetic faces and few answers. Years clipped by without any help. Twenty years ago, an autism diagnosis in Michigan didn’t mean much in the way of therapy, physician support, school resources and insurance coverage. That is why 10 years ago I joined friends and colleagues to form the Autism Alliance of Michigan. With every step I take, I learn something new about the struggles people with autism face in our state. As an organization, AAoM has learned from my journey, and the paths of countless others, to develop an agenda for change that prepares individuals with autism for the best possible life. Michigan has witnessed 10 years of breathtaking, life-affirming change. Through our work, Michigan has gone from one of the worst states for someone with autism to live in, to one of the best. When we formed AAoM, there were 30 behavioral therapists in Michigan who treated autism. Today, that number is in the thousands. That is be-

OTHER VOICES Dave Meador

cause we started at the source, working to ensure insurance covered behavioral therapy for autism. This seemingly small change attracted therapists and physicians to our state, slashing wait times and helping those with a diagnosis to receive desperately needed treatment. Today, the average age of diagnosis and start of treatment in Michigan has dropped from age seven to age four. We know from research, the earlier a person can receive therapy and support, the more likely they are to thrive long-term. This is a start, but it’s not enough. So far, we’ve focused on early-life intervention. But now, it’s time to expand our wins. As a business community, we must find opportunities for those living with autism to thrive and contribute. People with autism are loyal employees with specific skills and a strong work ethic. However, they are often ruled out during the interview process because of problems like not answering questions directly or failing to make strong eye contact. AAoM works with employers to see the potential in these individuals. I’ll never forget one highly educated man who came to AAoM for help finding a job. After the initial conversation, we learned he wanted to work as a CPA.

He had incredible math skills and multiple degrees to back it up. Finally, we asked how long he had been looking for a job. He replied simply: 14 years. We must do better. I encourage businesses to expand the definition of diversity and inclusion to recognize autism as a disability that deserves accommodation. This act will reveal an untapped pool of highly-qualified candidates. A number of Michigan businesses, including Ford Motor Co. and DTE Energy Co., have taken steps to provide accommodations during the interview process for people on the autism spectrum. I applaud this step and encourage more companies to follow suit. My life experience as a parent is my guide. I have seen the great successes and extreme challenges Michiganders with autism face. It is time our business community looks for ways to expand inclusion, to provide work opportunities to people who may think or act differently, but are loyal and qualified. Join me in celebrating AAoM’s achievements, and working together to do more to provide able-bodied adults with autism rewarding careers. Dave Meador is the co-founder and chairman of the Autism Alliance of Michigan. He serves as the vice chairman and chief administrative officer for DTE Energy.

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.

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Automotive worker ‘retool’ requirements driving success

icture the scene: It’s the 1950s in the Motor City and almost every household has some tie to the automotive industry. From assembly workers to quality control to design engineers, Detroit was a hotbed of cars and innovation. In this post-World War II era, the industry faced a new breed of rapid technological change, mass production and innovative designs. Fast forward to the automakers of today and we are once again faced with those same technological changes, only this time, the shift is not only felt in the way the cars are manufactured and produced but in the skills required of the workers themselves, given the impact of electrification and future of autonomous technologies. The road ahead centers on estimates that by the year 2030, there will be approximately 380 million semi-highly or fully autonomous vehicles on the roads, which will dramatically change the requirements for the skills required by the workers in the automotive industry. This is making the process of hiring the right talent challenging. Physical, cyber and human worlds are merging into a series of new and uncharted technical and economic landscapes that are affecting the automotive industry on a grand scale. Not only are we faced with the new skills required to keep up with the rapidly changing technologies, we also must address the socioeconomic trends such as urbanization, changing family composition and a shifting middle class in assessing the talent pool as well as where, when and how we work. Where prior technological transformation waves in the auto industry brought about such digital improvements as installing personal computers or improving front-line operations, this new area of transformation is forcing automakers to not only add digital technologies, but to also train and hire a workforce adept at performing these new digital tasks in a constantly changing environment. The speed at which the industry is racing forward makes the task of hiring highly skilled workers even harder. Automakers are not only concerned with hiring software programmers and individuals skilled in the digital world of today, but also workers for the production lines who are flexible, can rapidly adjust to change and can quickly get up to speed on the technology required to keep them a step ahead of the competition. Gone are the days where the primary qualification for working on an assembly line was manual dexterity. Today, automakers seek workers who can work in teams, take initiative, quickly solve problems and handle multiple jobs at a fast pace, in a digital world. The changing landscape of automotive includes autonomous driving, EV technology and mobility services; however, that is only the tip of the iceberg of the changes in the auto industry. Innovations that will power the industry going forward include big data, advanced analytics, artificial intelligence, automated back-office processes and service robots. To succeed in this new era of change, automakers need to acquire a scarce supply of high-tech workers and replace and/or retrain current staff who can work with these innovations. In essence, autoworkers need to “retool” their skills to not only keep

OTHER VOICES Larry Keyler

their jobs, but to succeed in what will be a very different competitive technical environment going forward. No longer is it acceptable to just “work the line.” Today’s workers must have a strong grasp of technology, under-

stand the role automation and data-driven operations play in improving profitability, and possess the skills needed to implement and leverage the data being generated by the automated systems. The shortage of skilled workers for manufacturers in general is on the rise. However, in the auto industry, amid the strong consumer demand for constant upgrades to technology, those individuals who can retool themselves to embrace this rapid change in the industry and develop this new set of 21st century skills will rise to the top in the labor pool and have the biggest impact on the success of the automotive industry into

Today, automakers seek workers who can work in teams, take initiative, quickly solve problems and handle multiple jobs at a fast pace, in a digital world. the future. Anticipating the workforce of the future, some original equipment manufacturers and suppliers may bring previously outsourced opera-

tions back in-house, allowing the company to retain a portion of its workforce and ensuring some consistency and knowledge retention. OEMs are building up their capabilities around new technologies, increasingly fighting with the IT and consumer electronics industries for software and engineering talent. In the end, a new culture might be necessary to successfully integrate these new competencies to ultimately stay a step ahead of the rest in a very competitive environment. Larry Keyler is RSM’s Detroit managing partner and head of the firm’s automotive sector.

Celebrating 150 Years through

Giving

Since our founding in 1869, we’ve recognized the importance of ƌĞŝŶǀĞƐƟŶŐ ŝŶ ŽƵƌ ĐŽŵŵƵŶŝƟĞƐ͘ To honor our milestone anniversary, our 12 Months of Giving ŝŶŝƟĂƟǀĞ ŝƐ ƵŶĚĞƌǁĂǇ͘ Howard & Howard looks forward to building upon our legacy of giving back to the ŶĞŝŐŚďŽƌŚŽŽĚƐ ŝŶ ǁŚŝĐŚ ǁĞ ůŝǀĞ ĂŶĚ ǁŽƌŬ͘

#hh150anniversary

www.howardandhoward.com | 248.645.1483 ®

Ann Arbor, MI | Detroit, MI | Chicago, IL | Peoria, IL Las Vegas, NV | Los Angeles, CA

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

FOCUS

FAMILY-OWNED BUSINESSES

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MORE THAN MONEY CAN BUY Beyond profits, family businesses can create ‘socioemotional wealth’ By Dustin Walsh | dwalsh@crain.com

positive feelings. Maybe it can’t be taught in a classroom, but awareness can be raised. And over time, with good governance, solid policies, procedures and established best practices, family members in a business can be channeled in a positive direction.

here are roughly 5.5 million family-owned businesses in the U.S., employing roughly 63 percent of the workforce and contributing 57 percent to the nation’s gross domestic product. ¶ These businesses face the same big-ticket challenges as all other private and public companies, such as customer satisfaction, human resources management and quality control. But the familial bond creates major differences between family-run companies and those that are not, researchers have discovered recently. The lack of research on these firms, historically, has been due to a lack of data — unlike large, publicly traded companies, which produce earnings reports and other records that researchers can analyze, family companies are generally only beholden to the law, their customers and themselves. ¶ In the past decade, academics have defined the idea of “socioemotional wealth” — a set of nonfinancial benefits ranging from power and influence to a sense of personal identity and the continuation of the family name. In short, family companies often make decisions that increase those characteristics at the expense of profits. ¶ Crain’s reporter Dustin Walsh chatted with Rejeana Heinrich, associate director of the Stevens Center for Family Business at Saginaw Valley State University, about the topic and how it impacts decision making.

What exactly is socioemotional wealth?

It’s basically the emotional aspects, what researchers would call an affect, that family business owners attach to themselves and their family business. It’s those feelings of pride, personal reward and satisfaction that accrue from being a part of the family enterprise. It can constitute an important part of the family members’ identity. Familial bond is very important. Increasingly this is being looked at as the construct that defines the unique distinctiveness of family businesses from non-family businesses. How is it measured?

There is an established set of dimensions that constitute socioemotional wealth. It’s an acronym. FIBER: Family control and influence; identification of family members with the firm; binding social ties; emotional attachment of family members; and the renewal of family bonds to the firm through the dynastic succession.

Doesn’t matter if you’re a small family business or a huge family business like Walmart. Ownership and the sense of pride and the passing down of this precious thing, that seems to be the distinguishing characteristic of family businesses that other businesses don’t have. This seems to be proven out over and over. The family is intrinsically intertwined. The blood and money is a very complicated dynamic working together. How do these characteristics impact decision making?

That’s part of some of the intriguing aspects. The emotional attachment of the family members to the business can make a distinct difference on their strategic and financial decision making. It’s been demonstrated, family business will on occasion make decisions that are contrary to their financial interest but are in the socioemotional best interest of the business — whether that’s preserving the family relationships or the bond the family has to the company.

Preserving pride and the loyalty to the enterprise. Is that a good thing? Couldn’t that work against the interest of the business to a fault?

Certainly it could, but the one thing the literature is clear on, the higher the socioemotional wealth of the organization, the more likely that family business is going to stay in the family and perpetuate from one generation to another. If the socioemotional wealth is lower, whether that’s problems in the family or whatever, the more likely it will be closed or sold to another entity or not remain in the family. Previous research has shown that customer loyalty is higher for family business than non-family business. The customer goes back to the family values that are in place. The customers get treated like family too. Even if it’s business-to-business, the commitment the family members have, they put more into it and therefore go the extra mile for their customers, and that gets noticed.

Globalization, regulatory hurdles, etc. have made it difficult for a lot of smaller family-run companies to keep up. Do you worry we’re losing socioemotional wealth in this country?

Rejeana Heinrich, associate director of the Stevens Center for Family Business at Saginaw Valley State University. Can this behavior or emotions be taught?

In fact, yes. Some of the basic foundations of well-run family business have long been identified. The principles and best practices of them are well established. One major foundation is quality communications and effective conflict management. This sounds easy, but it’s key to have in place good family-enterprise governance systems, whether that’s a family council or other kinds of organized bodies. Creating policies on decision making within the company and pertaining to family employment, all these things contribute to good communications and the healthy management of conflict. With those strategic actions and governance actions for a company, that can nurture quality communications. If people are communicating well and in a healthy way, the bond … gets stronger, creates more

I haven’t seen any evidence of that. I’m reminded of a meeting I was in recently with two CEOs who were the fifth-generation leaders of their businesses. They were talking heart to heart about where their enterprises were going. I heard one of them say, ‘Whatever it takes we’ll see this through. This business is not going down on my watch.’ They are sustaining their family legacy and passing it on to their next generation. The pride and sense of obligation to their forebearers and the future generations is strong; it’s so important to the family. These businesses are also tremendously important to the communities. They are the backbone of our economy’s wealth. It’s where a substantial amount of the philanthropy comes from, where the leaders of the community are nurtured. That’s where these family businesses are anchored. Children and grandchildren are going to reside in these communities, so they want the best environment for them and are willing to put the effort toward that goal. Their mission and their goal is to perpetuate through the generations and I don’t see them giving that up easily.

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SPECIAL REPORT: FAMILY-OWNED BUSINESSES

Selling the storied Anchor Bar: The time, price were right

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By Annalise Frank

afrank@crain.com

Vaughn Derderian’s Plan A was to move up north near Gladwin into semi-retirement while his son, also Vaughn, continued to run the downtown Detroit bar that’d been in their family for nearly 60 years. For the elder Derderian, 71, Plan B was to sell the iconic Anchor Bar. His father, Leo, bought the bar in 1959 and grew it into a boozy hangout popular with reporters and sports fans throughout the years. It was long known by patrons for its wall of photos of deceased friends, its affordable beer and that one time in the 1970s it was the site of an FBI raid. Plan B moved up a slot recently, though, when developer and restaurant owner Zaid Elia came along with the right deal. Elia of the Birmingham-based Elia Group and the Derderians confirmed in July that the wellknown family business would change hands. Vaughn Sr. and Elia declined to disclose the amount paid for the saloon and its home, the Mercier Building at 450 W. Fort St. But according to public Detroit records, the deal for the building alone closed in December for approximately $1.58 million. “My son, he was with me for almost 20 years,” Vaughn Sr. said. “He had veto power over the deal. If he didn’t like the deal, he could squash the deal.” They hadn’t marketed the Anchor Bar for sale, he said. They got two previous buyout offers, though, and turned both down. Elia’s was for more money, and didn’t involve Vaughn continuing to operate the bar as an employee, like the other two proposals did. He also expects the new owner to make improvements, such as to the roof, which he estimated he had to patch a hundred or so times. “It is truly an honor to be a part of the legacy that the Derderians created; the Anchor Bar is synonymous with Detroit ...” Elia said in an emailed statement. “We’re not just embracing the rich history of the Anchor, we’re also going to celebrate the impact that the Derderian family had on generations of Detroiters.” Elia previously said he plans to find ways to display the bar’s history, but will also update its menu and facilities. His other holdings include the Ford Building downtown, and the restaurants Fountain Detroit and Parc in Campus Martius Park with developer partner Matthew Shiffman and 220 Merrill in Birmingham. He also made an agreement to buy a building adjacent to the Guardian Building downtown for $4.65 million. “I started doing a little research and asking around and said, ‘Holy smokes, this guy is a serious businessman,’” Vaughn Sr. said. “And all these stories of the bar, Zaid (Elia) was transfixed by them. That was part of what sealed the deal.” Vaughn Sr. said one big factor he considered was his employees. He and Vaughn gave out $45,000 in bonuses from the proceeds of the sale. He also didn’t realize how complex the purchase would be — he had two lawyers working on the case, as well as his accountant.

Vaughn, Vaughn and Leo The Anchor Bar is a vessel for Derde-

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Clockwise from bottom right: Vaughn H. Derderian, Sybil Derderian, Katelyn Derderian, Vaughn R. Derderian, Jennifer Derderian, Jeff Putt and Kira Putt with the Stanley Cup at Anchor Bar in 2008.

rian memories. The first of them to run it, elder Vaughn’s father, Leo, was known for his longform storytelling. The younger two have the knack, as well. Many a whiskey or beer was shared over the decades with customers, some of whom became close friends. Leo bought the downtown bar in 1959 after running a grocery store next door that was “really a sports betting operation,” Vaughn Sr. said. He moved the bar from Howard Street to Fourth and Fort. It later left and settled in on Lafayette Boulevard in between The Detroit News and Detroit Free Press buildings, leasing, in 1975. Vaughn Sr. started working at Anchor Bar with his father around age 22, in 1969. He decided it would become his livelihood at the urging of his mother, who “wanted to know what the hell was going on down at the bar, because (Leo) wouldn’t let her in there.” In the 1990s, the Derderians shifted to building ownership. Vaughn Sr. bought the 12,300-square-foot Mercier Building in 1993 and renovated the space with help from his son. Leo died in January 1994. “It was difficult for me, early on, to give the customers what they wanted,” Vaughn said. “What they wanted was me imitating my father. Because they’d come in there to see him, hear his stories, get his take on what happened recently, whatever it was. This thing, that thing. There was a reason why so many journalists gravitated to my father. He had kind of a knack about him.”

‘Didn’t affect me’ Despite Vaughn’s obvious adoration for the bar, all his children and his wife working there, and his penchant for tales of his father, he said the fact that it was a family business didn’t factor into the decision to sell. “It didn’t affect me at all,” he said. “The time had come, my son was on

board and the price was right. And the thought that I could actually retire while I’m still fairly healthy and enjoy my life ... it was a pretty natural thing to happen. Like I said, Plan A was a good plan, but Plan B didn’t turn out so bad, either.” It wasn’t as though Anchor Bar was on the edge of closure, either. “Business had never been better,” Vaughn Sr. said, despite an approximately 90 percent plummet in hockey fan business with the closing of nearby Joe Louis Arena in April 2017. That venue drew crowds of 250-300 customers around big Friday or Saturday games, he said. “But even just with Quicken (Loans Inc.) and other young, well-paid jobs moving downtown,” the bar was doing well, he said. The family wanted to sell while downtown Detroit was on an upswing, and Elia was the right choice because he didn’t want to change its personality, the younger Vaughn previously told Crain’s. “The business is in a state of transition and I think it’s a kind of natural inflection point to take a step back,” he said when the impending sale was first reported in July. The younger Vaughn is now serving as chairman of the Oakland County Democratic Party. His father plans to spend more time up near Gladwin where he bought property around 25 years ago and built a house. “There’s kind of an in-joke around the bar for many years now that says ... Every chance I got I’d go up there (to the property) to do some work, relax, go fishing ... The joke was, ‘Well, is he retired? How could you tell the difference?’ “We had a routine going where I could sort of come and go as I please. Now I’m up there more often.” Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

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Hospitals confront Southeast Michigan measles outbreak By Jay Greene

Impact on businesses

With 22 cases of measles reported in Oakland and Wayne counties the past month, metro Detroit hospitals have implemented safety measures for patients and visitors while experts recommend businesses monitor their workforces. As of Wednesday, there were 21 people with measles in Oakland County and one in Wayne County, all originating from one infected person from Israel. The patients range in age from 11 to 63 years fold. It is the most cases in Michigan since 1994, when there were 26 reported cases of the contagious disease. Last year there were 19 cases. Nationally, more than 314 cases have been reported in 15 states, the most in nearly 30 years, officials with the Centers for Disease Control and Prevention said. The current outbreak began in New York as several people from Israel and Ukraine with active cases entered the country. Measles, which was thought to be nearly eradicated in the U.S. in 2000 along with mumps, is spread through direct contact as well as coughing and sneezing. Symptoms usually begin 7-14 days after exposure and can include a high fever, cough, runny nose and red, watery eyes. The initial symptoms are followed by tiny white spots in the mouth and then a blotchy red rash. Most of the recent outbreaks in the U.S. have to do with unvaccinated people coming to country from other countries.

Several business associations and chambers of commerce told Crain's that employers haven't yet asked for advice on what to do to minimize potential outbreaks in their workforces or employees and families. Band said he is surprised businesses haven't been more proactive, especially after the various bioterrorism scares employers have faced in the nearly two decades after the 9/11 attacks. He said any employer that has a worker exposed to measles should notify the local health department and all employees of the exposure so preventive action can be taken to contain the disease. "We tackled this issue in the mid1980s at Beaumont and felt that we had a duty to protect our patients and other health care workers by making immunity to several communicable diseases a condition of employment," said Band, noting that some workers and unions are opposed to mandatory vaccinations. "All new hires since that time were screened for measles immunity and other important communicable diseases, and if not immune, as a condition of employment unless a medical exemption existed, had to be immunized," Band said. Teena Chopra, M.D., director of infectious disease control at Detroit Medical Center, said employers should be proactive with measles because it is in the community. She said employers should recommend parents vaccinate

jgreene@crain.com

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Metro Detroit health officials are urging the public to ensure they are immunized for measles amid an outbreak of the contagious disease.

Complications from measles can include pneumonia, swelling of the brain, ear infections that result in permanent hearing loss, pre-term births and low birthweight babies.

Public health threat Jeffery Band, M.D., former corporate epidemiologist at Beaumont Health and a national infectious disease expert, said measles is re-emerging as a public health threat because a growing number of parents are not immunizing their children with the MMR vaccine (measles, mumps and rubella) as the CDC recommends. "The major public health issue that must be addressed now that several

vaccine-preventable diseases are re-emerging as public health threats is whether or not persons can refuse immunization for personal and philosophical beliefs," Band said. "As far as religious beliefs, almost all major religious organizations do not oppose immunizations." But Band said medical exemptions are available as some people are not able to receive some vaccines. For example, live vaccines such as measles are contraindicated in people whose immune systems are compromised by disease or certain medications or pregnant. "Persons who have had a life-threatening reaction to any vaccine in the past, cannot receive additional doses," he said.

their children and not take unvaccinated children to public areas. “Measles is very contagious disease. It spreads like wildfire,” Chopra said. “It has to be prevented, and it is going to be up to the entire community to contain this infection.”

Impact on health systems Officials at Henry Ford Health System in Detroit and Southfield-based Beaumont Health have notified staff about the measles outbreak since it began in early March. “We’ve advised providers to ensure their patients are up to date on their measles, mumps and rubella vaccination,” said David Olejarz, a Henry Ford spokesman. “We’ve also advised staff with details about symptoms, diagnosis, management and infection control of a suspected case of measles.” Beaumont's Rama Thyagarajan, M.D., corporate medical director of infection prevention, also recommended employers contact the health department if an employee has been exposed to measles. “If (an employee) suspects they have measles, we encourage them to stay home to avoid spreading the disease," Thyagarajan said in an email. "If an employee feels like he or she needs to be seen by a physician, call ahead to the doctor’s office or emergency center and notify the health care provider of their concern about measles.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

Dexter printing company files for bankruptcy, to lay off at least 80 By Kurt Nagl knagl@crain.com

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A publishing and commercial printing company in Dexter filed for bankruptcy Monday and plans to lay off at least 80 people as a Minnesota-based consolidator makes a bid to buy it. Thomson-Shore Inc. said it will continue operations at 7300 W. Joy Road but likely with less than half of its current staff, according to a notice filed with the state. All 177 of the company’s employees will be terminated May 6, when CJK Group's takeover is expected to be finalized, but an undisclosed number will be retained after the acquisition. “We anticipate that at least 80 current employees of the company, and likely more, will not be offered employment with CJK and will, therefore, suffer a loss of employment,” the notice said. Employees do not have bumping rights, the notice said. Before Thomson Shore is sold, the company must go through a voluntary Chapter 11 bankruptcy auction, scheduled to start April 29. A sale must occur on or before May 3, according to documents filed with U.S. Bankruptcy Court, Eastern District of Michigan. The company has been approached by a “potential purchaser” offering $8.25 million for its assets, the documents show. Thomson-Shore has $14.5 million in assets and $11.6 million in liabilities, according to its petition

Need to know

All 177 employees to be terminated, but some will be retained J

J Company filed for Chapter 11 bankruptcy Monday J Minnesota-based consolidator bids to buy Dexter company

“We anticipate that at least 80 current employees of the company, and likely more, will not be offered employment with CJK and will, therefore, suffer a loss of employment.” a notice filed with the state for bankruptcy. It has more than 200 creditors. Bankruptcy documents point to a “seven figure loss” resulting from a cyber ransom-ware attack in 2017 as among its financial woes. Per the documents, its largest creditors include Lindenmyr Munroe, a New York-based paper and packaging distributor with a warehouse in Ann Arbor, which holds an unsecured claim of $2.9 million, and Atlanta-based logistics firm Veritiv, which holds an unsecured claim of $566,579.

The printing business has yet to stabilize since digitization began eating away at the industry overall. In July, the 125-year-old Edwards Brothers Malloy, which was one of the largest independent book printers in the country, closed in Scio Township and laid off 282 people. Peter Shima was hired from Edwards Brothers in January to be president and CEO of Thomson-Shore, according to a news release. Thomson-Shore had been financially sound up until 2008, according to bankruptcy documents. Around that time, it made a $10 million investment to retool the company. In tandem with taking on more debt than usual, the industry declined sharply and the company’s profitability began sliding. Despite efforts to diversify with new services such as digital printing, color text printing and specialty hand-binding, the company was unable to weather the “economic forces affecting the industry.” A message seeking more information was left with Shima on Wednesday morning. CJK Group has gobbled up several printing companies in recent years. The conglomerate had been in talks to purchase Edwards Brothers, but the deal eventually fell through, according to a report from Printing Impressions. Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl

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But United Shore goes above and beyond sending personalized emails and gifts. It has adopted team members’ favorite charities into its Pay It Forward charitable giving program and annual companysponsored events, including a fair and trick-ortreating, are open to team members’ families. United Shore has built a slew of amenities into its new, 600,000-square-foot headquarters in Pontiac, including a doctor’s office, fitness center and convenience store, to help employees keep up with their day-to-day personal needs. The company prioritizes a work-life balance philosophy because it wants its team members to maximize their personal time and spend it at home with their families. United Shore does all of these things because it understands that its people are the reason for its success, and it takes great care to treat them accordingly. Moving forward, United Shore will continue to focus on the little things that make a big difference, maintaining its status as the #1 wholesale lender for years to come.

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CRAIN'S LIST: LARGEST MICHIGAN FAMILY-OWNED BUSINESSES Ranked by 2018 revenue Company Address Rank Phone; website

Year founded Firstgeneration owner

Revenue 2018/2017

Percent change

$19,250.0 B $18,940.0 B

1.6%

Amway 7575 Fulton St. E., Ada 49355-0001 (616) 787-1000; www.amwayglobal.com

8,800.0 8,600.0

2.3

Ilitch companies 2211 Woodward Ave., Detroit 48201 (313) 471-6600; www.ilitchcompanies.com

3,800.0 3,600.0

5.6

Plastipak Holdings Inc. 41605 Ann Arbor Road, Plymouth 48170 (734) 455-3600; www.plastipak.com

3,143.1 2,782.4

13.0

Moroun family holdings 12225 Stephans Road, Warren 48089 (586) 939-7000; NA

2,792.6 C 2,404.2 C

16.2

1937 T.J. Moroun

The Suburban Collection 1795 Maplelawn Drive, Troy 48084 (877) 471-7100; www.SuburbanCollection.com

2,619.7 2,294.2

14.2

1948 Richard Fischer

2,250.0 2,100.0

7.1

H.W. Kaufman Group Inc./Burns & Wilcox Ltd. 30833 Northwestern Highway, Farmington Hills 48334 (248) 932-9000; www.hwkaufman.com

1969 Herbert W. Kaufman

Haworth Inc. 1 Haworth Center, Holland 49423 (616) 393-3000; www.haworth.com

2,140.0 D 2,040.0

4.9

Soave Enterprises LLC 3400 E. Lafayette, Detroit 48207 (313) 567-7000; www.soave.com

2,051.9 1,610.4

27.4

Barton Malow Co. 26500 American Drive, Southfield 48034 (248) 436-5000; www.bartonmalow.com

1,900.0 2,591.0

-26.7

1924 Ben Maibach Jr. E

1,786.0 F 1,780.0

0.3

1973 Albert M. Serra

1 2 3

Meijer Inc. 2929 Walker Ave. NW, Grand Rapids 49544 (616) 453-6711; www.meijer.com

Other family members in management with relation to the first-generation owner

1934 Hank Meijer, executive chairman, grandson; Hendrik Meijer Doug Meijer, director, grandson 1959 Jay Van Andel and Rich DeVos 1959 Mike and Marian Ilitch

Steve Van Andel, co-chair of the board, son of co-founder Jay Van Andel; Doug DeVos, co-chair of the board, son of co-founder Rich DeVos Christopher Ilitch, president and CEO, Ilitch Holdings Inc., son

1967 William C. Young, president and CEO, son William P. and Mary E. Young

Percent of business familyowned

Type of business

Supercenters and grocery stores

100

Direct selling business. Brands includes: Nutrilite vitamin, mineral and dietary supplements, Artistry skincare and color cosmetics, eSpring water treatment systems and XS energy drinks Food, sports and entertainment organization. Businesses include: Little Caesars Pizza, Blue Line Distribution, the Detroit Red Wings, Olympia Entertainment, the Detroit Tigers, Olympia Development of Michigan, Little Caesars Pizza Kit Fundraising Program and Champion Foods. The organization also has a joint venture interest in 313 Presents. Additionally, Marian Ilitch owns MotorCity Casino Hotel Manufacturer of rigid plastic packaging containers and preforms for consumer product companies

100

Manuel Moroun, son, and Matthew Moroun, grandson, both hold several executive positions

Ambassador Bridge and various trucking and logistics companies

David T. Fischer, chairman and CEO, son; David Fischer Jr., president and COO, grandson; Zachary Fischer, director, grandson Alan Jay Kaufman, chairman, president and CEO, son; Daniel J. Kaufman, corporate vice president, grandson; Jodie Kaufman Davis, senior vice president, granddaughter

100

Automobile sales and service

100

Provides insurance services including distribution, brokerage, underwriting, reinsurance, real estate, premium financing, inspections, audits, risk management and third-party claims administration

1948 Dick Haworth, chairman emeritus, son; G.W. Haworth Matthew Haworth, chairman, grandson

Furniture manufacturer

1961 Angelique Soave, vice president, daughter; Anthony Soave Andrea Soave Provenzano, vice president, daughter

100

Diversified management holding company, specializing in scrap metal recycling, real estate, hydroponic greenhouse, auto retailing, others

Ryan Maibach, president, CEO and chairman, grandson; Doug Maibach, executive vice chairman, son; Ben Maibach III, chief community officer, son Joseph Serra, president, son

General contracting, construction management, design/build, engineer-procure-construct, integrated project delivery, selfperform services: civil, concrete, rigging and interiors

Auto dealerships

Construction company offering services in North America and South America

Mat Ishbia, president and CEO, son

100

Wholesale mortgage lender. United Shore is the parent company of United Wholesale Mortgage

1937 Alfred Bonahoom

Jim Bonahoom, president, son; Roger Bonahoom, vice president, son; Jay Bonahoom, vice president, grandson

100

Wholesale meat packer and processor; wholesale meat, poultry and seafood distributor

6.3

1973 Gerald Diez

100

1,214.5 1,084.0

12.0

1975 Harold Zeigler

April Diez, vice chairman, daughter; Gerald Diez Jr., president, son; Sherry Diez, vice president, daughter; Mark Diez, vice president, son Aaron Zeigler, president, son

100

Aluminum and steel sales, processing, service, warehousing and logistics centers: blanking exposed and unexposed, CTL, laser welding, precision slitting, milling, wash and oil and warehousing and logistics Auto dealerships

Garber Management Group Inc. 999 S. Washington Ave., Saginaw 48601 (989) 790-9090; www.garberauto.com

1,173.0 1,013.1

15.8

1907 Guy S. Garber

Richard J. Garber, president, grandson

Auto dealerships

Kenwal Steel Corp. 8223 W. Warren Ave., Dearborn 48126 (313) 739-1000; www.kenwal.com

1,057.0 882.0

19.8

1947 Sol Eisenberg

Kenneth Eisenberg, chairman and CEO, son; Stephen Eisenberg, president, Burns Harbor, Ind. plant, grandson

100

Steel service center

1,010.2 925.2

9.2

1980 Michael T. LaFontaine

Ryan LaFontaine, COO/dealer, son; Kelley LaFontaine, CEO/dealer, daughter

100

Auto dealerships

LaFontaine Automotive Group 4000 W. Highland Road, Highland Township 48357 (248) 887-4747; www.thefamilydeal.com

955.6 827.6

15.5

1964 Abe Baidas

Robert Baidas, CEO and chairman, son; Loren Baidas, president and chairman, grandson; Wade Stuff, vice president of operations, grandson-in-law

100

Recreational vehicle dealership

Serra Automotive Inc. 3118 E. Hill Road, Grand Blanc 48439 (810) 694-1720; www.serrausa.com

Walbridge 777 Woodward Ave., Suite 300, Detroit 48226 (313) 963-8000; www.walbridge.com

1,340.0 1,500.0

-10.7

United Shore Financial Services LLC 585 South Blvd. E, Pontiac 48341 (248) 833-5000; www.unitedshore.com

1,340.0 1,086.0

23.4

1986 Jeffrey Ishbia

Wolverine Packing Co. 2535 Rivard, Detroit 48207 (313) 259-7500; www.wolverinepacking.com

1,265.0 1,303.0

-2.9

The Diez Group 8111 Tireman Ave., Dearborn 48126 (313) 491-1200; www.thediezgroup.com

1,265.0 1,190.0

Zeigler Auto Group 4201 Stadium Drive, Kalamazoo 49008 (269) 375-4500; www.zeigler.com

General RV Center Inc. 25000 Assembly Drive, Wixom 48393 (248) 349-0900; www.generalrv.com

1916 John Rakolta Jr., chairman and CEO, son; John Rakolta G John Rakolta III, EVP and CAO, grandson

This list of family-owned or controlled businesses is an approximate compilation of the largest such businesses in Michigan. It is not a complete listing but the most comprehensive available. Crain's estimates are based on industry analyses and benchmarks, news reports and a wide range of other sources. Unless otherwise noted, information was provided by the companies. For some companies, the founders were later bought out by another family. Actual revenue figures may vary. The following no longer qualify for the list: Kelly Services Inc. which was No. 4 on last year's list no longer qualifies after the death of chairman Terrence Adderley in October 2018. Meridian Health Plan, which was No. 5 on last year's, list was sold to Tampa-based Wellcare Health Plans Inc. The deal closed in September 2018 and the Cotton family has left the business. No. 11 on last year's list, Sherwood Food Distributors, merged with San Diego-based Harvest Food Distributors in April. They are now both owned and operated by Sand Dollar Holdings Inc. NA = not available.

B Supermarket News Top 75 estimate. C Crain's estimate. D From MiBiz E Founded in 1924 as C.O. Barton Co. by Carl Osborn Barton. The Maibach family acquired majority control in 1961. F Automotive News. G George B. Walbridge and Albert H. Aldinger founded the company in 1916. John Rakolta Sr. bought the company in 1963 with business partner Robert Robillard. LIST RESEARCHED BY SONYA D. HILL

An expanded version of this list is available with a Crainâ&#x20AC;&#x2122;s Enhanced Membership at crainsdetroit.com/lists

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

Ex-Lion Bartell plans new development, $4.6M investment in ‘Avenue of Fashion’ By Kurt Nagl knagl@crain.com

Former Detroit Lions cornerback Ron Bartell is charging forward with $4.6 million of investment in new development and renovations along the historic “Avenue of Fashion.” The investment is spread across a handful of Bartell’s properties on Livernois Avenue between Seven Mile and Eight Mile roads. It includes a new mixed-use building expected to cost $3 million to construct, as well as $1.6 million in renovations to a couple of buildings set to welcome new tenants this spring and fall. The new development, planned for 19338 Livernois Ave., will be tied into a neighb o r i n g 3,000-squarefoot building, which is vacant and part of the old Hunter’s Ron Bartell: Supper Club Wants it to fit property, Bartell with area. said. Once complete, the 10,000-square-foot, three-story development would include three ground-floor retail spaces totaling 7,000 square feet and five apartment units. Bartell is working with community development financial institution Capital Impact Partners to secure financing for the project. He said he expects the project to break ground in late fall and be complete nine months later. “I just want something that fits the area, to help with the changing landscape of the Avenue of Fashion,” Bartell said. Bartell, who played for the Lions from December 2012 to August 2013 and was a 2018 Crain’s 40 Under 40, is looking to capitalize on new energy and interest in the northwest Detroit neighborhood. The city plans to spruce up the business corridor there as it attracts new developments and small businesses. Besides the $8.3 million redevelopment of the former B. Siegel site that seeks to jump-start the Livernois-Seven Mile corridor, Motor City Brewing Works intends to open its second location at part of the former Hunter’s Supper Club property — the piece owned by John Linardos, who plans to open the brewery by the end of the year. Bartell said he is also wrapping up a $1 million renovation of 19331 Livernois Ave., next door to Kuzzo’s, a popular chicken and waffles restaurant he opened in 2015. The 6,000-squarefoot, four-unit building has one tenant, Narrow Way Café, which opened in 2017. Bartell said the building will be ready for new occupants by June. D&D Cuisine and Loose Massage Therapy Plus plan to open in the building, according to Motor City Match’s website. The businesses were awarded $35,000 each. A few blocks north, Bartell said he is investing about $600,000 to renovate the 3,000-square-foot vacant building at 20050 Livernois Ave. Petty Cash Kitchen + Cocktail Bar, which was awarded $50,000 from Motor City Match, is expected to open there in the fall. Bartell said he is in discussions with several potential restaurant and retail

Need to know

JJNew 10,000-square-foot mixed-use

development planned

JJ$3 million project expected to break ground late fall JJ$1.6 million in renovations for buildings set to welcome new tenants

tenants for the new development. Rental units have not been set for the apartment units. There will likely be one studio unit at 500-600 square feet, three 800-square-foot one-bedroom units and one 1,200-square-

foot two-bedroom unit. Bartell said he plans for one of the units to be priced as affordable housing. Grosse Pointe Park-based Urban Alterscape is the architect for the new development. A general contractor has not yet been selected. Bartell said he has a few other properties in the area but no other immediate redevelopment plans. “This has kind of been keeping me busy for the last year and a half,” he said. Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl

URBAN ALTER SCAPE

A new 10,000-square-foot development planned by former Detroit Lion Ron Bartell consists of a new building tied into a renovated 3,000-square-foot building at 19344 Livernois Ave.

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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 // A P R I L 1 , 2 0 1 9

CALENDAR WEDNESDAY, APRIL 3 Manufacturing Summit: The State of the 2019 U.S. Manufacturing Industry. 5:30-7:30 p.m. Michigan Manufacturing Technology Center. Summit will examine how U.S. trade policy shifts are expected to impact manufacturing and open opportunities. Speakers: Attorney James Reid IV from Maddin Hauser; attorney Chad Silver from Silver Tax Group; attorney Michael Marsalese; Shelly Stobierski from the Michigan Manufacturing Technology Center; Chuck Werner from the Michigan Manufacturing Technology Center; and Marc Lasceski from Oswald Companies. The Detroit Club. Free. Contact: Theresa Payne, email: tpayne@the-center.org; phone: (888) 414-6682; website: .the-center.org/ Events/Manufacturing-Summit

FRIDAY, APRIL 5 Makers Mingle: A Celebration of Manufacturing Technology. 9 a.m.-noon. Michigan Manufacturing Technology Center. Interactive educational session will focus on the latest Industry 4.0 technological advancements in manufacturing. Industry experts will discuss how to identify relevant and affordable technologies to support business goals using advanced manufacturing innovations. Speakers: The Michigan Manufacturing Technology Center’s

Industry 4.0 team: Chuck Werner, lean program manager; George Singos, business leader adviser; Russ Mason, lean program manager; Michael McGray, IT manager. Michigan Manufacturing Technology Center, Plymouth. Free. Contact: Charlie Westra, email: cwestra@the-center. org; phone: (888) 414-6682

UPCOMING EVENTS The Rapid Innovation of Marketing. 6-8 p.m. April 11. American Marketing Association Detroit. Event features Casey Hurbis, CMO of Quicken Loans. The Madison Hurbis Building, Detroit. $50 members; $60 nonmembers. Contact: Whitney Swistock, email: connect@amadetroit.org; phone: (248) 797-1976. Professional Development Seminar: Manage Conflict & Deal with Difficult Issues. 7:30-10:15 a.m. April 16. Detroit Economic Club. Topics include: How to create a climate where healthy, productive conflict exists; how to deal with disruptive conflict in a timely and effective manner; recognizing strengths and areas for improvement around tack-

ling difficult issues; building a climate for productive conflict and strategies, tactics and actions to encourage healthy conflict to obtain better team results. Lawrence Technological University. $45 members, $55 guests of members. Website: econclub.org Oakland County Annual Economic Outlook Luncheon 2019. 11 a.m.1:30 p.m. April 26. Oakland County. Oakland County Executive L. Brooks Patterson’s Economic Outlook Luncheon will feature University of Michigan economists Gabriel Ehrlich and Donald Grimes present their three-year forecast on the county’s economic future. Troy Marriott. $50. Contact: Sandra O’Connell, email: oconnells@oakgov.com; phone: (248) 858-7647.

dresses whether a business is ready for a competitive market, in light of potential economic changes. The workshop will feature speakers, panelists, community and corporate partners with information and resources focused on assisting businesses while navigating a potential changing economic landscape later this year. TechTown Detroit. $75; early bird price $65 until April 19. Contact: Lisa Washington, email: meetings@meeting-coordinators.com; phone: (248) 643-6590.

A Conversation with PGA Tour Commissioner Jay Monahan. 3:306:30 p.m. May 2. Jay Monahan, commissioner of the PGA Tour, will discuss the Rocket Mortgage Classic, the tour’s first-ever event to be held in Detroit, and the emphasis placed on charitable impact in the communities in which the tour plays. Detroit Golf Club. $45 members, $55 guests of members. Website: econclub.org

Fully Human: 3 Steps to Grow Your Emotional Fitness in Work, Leadership, and Life. 11:30 a.m.1:30 p.m. May 15. Detroit Economic Club. Susan P a c k a r d , c o - f o u n d e r, Packard Scripps Interactive Networks and HGTV, tells how organizations can revitalize and shift their leadership practices to build effective, supportive and winning teams. The Masonic. $45 members, $55 guests of members. Website: econclub.org

5th Annual Small Business Workshop. 8 a.m.-1 p.m. May 7. The Lee Group. The Fifth Annual Small Business Workshop’s theme — “Navigating The Headwinds of Change” — ad-

To submit calendar items visit crainsdetroit.com and click “Events” near the top of the home page. More Calendar items can be found at crainsdetroit.com/events.

Crain’s Real Estate: Next Crain’s Real Estate: Next — The Retail Landscape. 9-11:30 a.m. April 24. Crain's Detroit Business. Event looks at perspectives on the future of the real estate market, what factors are impacting development and how changes in the market can directly affect local businesses. Event agenda includes: A real estate-focused Southeast Michigan economic outlook; panel discussion: “Why retail still matters;” interactive idea session; panel discussion: “Opportunities for retail in Detroit's neighborhoods.” Panelists include: Joey Agree, CEO, Agree Realty Co.; Scottie Lee, vice president, Strategy and Analytics, The Taubman Co.; Jennifer Skiba, vice president, Bedrock; Kristi Trevarrow, executive director, Rochester DDA; Alessandro DiNello, president and CEO, Flagstar Bank; Katy Trudeau, executive director, Services & Infrastructure, Mayor's Office City of Detroit; Jevona Watson, owner, Detroit Sip. The Fillmore, Detroit. Individual ticket $80; reserved table of 10 $850; young professional (30 percent off ) $56. Contact: Kacey Anderson, email: cdbevents@crain. com; phone: (313) 446-0300.

DEALS & DETAILS

CONTRACTS J DeMaria, Detroit, a commercial construction firm, was awarded the construction management contract by Ascension Michigan, Southfield, for a brick masonry replacement and tuckpointing project. DeMaria was also awarded the Wyandotte boiler house project by Wyandotte Municipal Services. DeMaria will provide the construction in preparation for a new boiler house in the power plant located in Wyandotte.

Victor Torres has over 29 years of commercial litigation experience successfully representing international, national, and local businesses ranging in size from Fortune 500 companies to small businesses.

Website: demariabuild.com Qualitech, Bingham Farms, a technology integrator and software re-seller, has installed its hosted VOIP phone system at Gershenson Realty and Investment, Farmington Hills, a property management, leasing, brokerage and development company. Website: qualitech.net J

NEW SERVICES J Howard & Howard PLLC, Royal Oak, a law firm, has formed an Alter-

native Dispute Resolution Practice Group. The practice group’s attorneys assist clients in resolving disputes out of court. Website: howardandhoward.com J Controlled Power Company, Troy, an industrial power equipment supplier, has launched a re-designed website, controlledpwr. com Submit Deals & Details items to cdbdepartments@crain.com

Fifth Third Bank to lay off 87 in Ann Arbor following merger with MB Financial By Kurt Nagl knagl@crain.com

Victor J. Torres, Partner

COMMERCIAL LITIGATION

Livonia, MI | www.mikecoxlaw.com (734) 591-4002 | vtorres@mikecoxlaw.com

Fifth Third Bancorp is laying off 87 employees in Ann Arbor as it moves to close an MB Financial Inc. office following Fifth Third’s $4.7 billion acquisition of the bank. Cincinnati-based Fifth Third said the permanent job cuts will result from the closure of Chicago-based MB Financial’s Ann Arbor office at 2350 Green Road, according to a notice filed with the state. The layoffs are expected to start May 13 and continue through Sept. 29. Most affected employees were part of back-office functions, said Larry Magnesen, senior vice president and chief reputation officer for Fifth Third. They included loan officers, underwrit-

Need to know

JJLayoffs are result of $4.7 billion merger

JJMB Financial announced 495 layoffs last year

ers and senior management positions, according to the state filing. They do not have bumping rights but will be offered severance pay commensurate with length of service, Magnesen said. “As is typical with mergers of this type, there are some reductions in positions where there are duplicative functions,” he said. The merger between MB Financial and Fifth Third, finalized March 22, was announced last May, less than a month after MB Financial said it would scrap its mortgage origination business and

cut 495 jobs in metro Detroit. After those cuts were finished in December, the company had only about 87 employees left in Ann Arbor. Magnesen said a “handful” of those employees would be offered jobs elsewhere with Fifth Third. The bank already has a big presence in metro Detroit and does not have openings for all impacted MB Financial employees, Magnesen said. Fifth Third employs 2,677 people in the Lower Peninsula. Around 970 work in Grand Rapids — the bank’s second largest operations center. Magnesen said there are no other mass layoffs planned in Michigan. 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 // A P R I L 1 , 2 0 1 9

FORUM

John Prosser III:

Consumers benefit when regulators act. Page 22

APRIL 2019

AUTO INSURANCE

COURTROOM COLLISIONS SHIFT GEARS No-fault lawsuits flood Oakland County courts By Chad Livengood | clivengood@crain.com

n a Saturday evening in May 2017, Avoryanna Harper was a helmetless 21-yearold passenger on a motorcycle that hit a stopped SUV in a head-on crash in Cadillac. She landed 48 feet away. Bleeding in multiple parts of her brain left lasting cognitive and emotional damage that affected her ability to perform basic functions, according to court records. Under Michigan’s no-fault auto insurance law, the insurance company for the Ford Explorer that the motorcycle collided with is responsible for paying for Harper’s lifelong medical care. But the SUV driver’s carrier, USAA Casualty Insurance Co., stopped paying for around-the-clock attendant care for Harper in September 2017, according to a lawsuit filed in Oakland County Circuit Court on behalf of Harper's mother, the woman’s conservator. The lawsuit seeking up to $40 per hour in attendant care coverage for Harper’s lifelong care is one of 2,545 no-fault auto insurance lawsuits that flooded the Oakland County Circuit Court docket last year — more than quadruple the number of first-party claims brought against insurers in 2016, when 644 suits were filed, records show. SEE NO-FAULT, PAGE 20

FERGS ILLUSTRATION FOR CRAIN’S

Peter Lucido: Time to crack down on fraud, waste in injury fund. Page 22

Terry Sabo: Hold auto insurers accountable for high rates. Page 23

Tricia Kinley: Broken insurance system desperately needs reform. Page 23

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CRAIN’S FORUM | APRIL 2019

NO-FAULT

Oakland County lawsuits

FROM PAGE 19

State Farm Mutual Auto Insurance Co., which has more than 1 million auto no-fault policies, was sued 440 times in Oakland County Circuit Court in 2018 in first-party lawsuits seeking payment of personal injury protection benefits under Michigan’s no-fault auto insurance lawsuit. The number of first-party auto insurance lawsuits in Oakland County more than quadrupled between 2016 and 2018 following a Michigan Supreme Court ruling that made it harder for medical providers to get standing to sue insurers. 2018 Oakland County no-fault lawsuits

State Farm Mutual Auto Insurance Co. Progressive Casualty Insurance Co. Allstate Fire & Casualty Insurance Farm Bureau General Insurance Co. Auto Club Group Insurance Co. (AAA) Liberty Mutual Insurance Co. Citizens Insurance Company of America USAA Casualty Insurance Co.

Total lawsuits against insurer

440 312

238 179

172 131

128 97

Meemic Insurance Co.

Farmers Insurance Exchange

Geico Insurance

Nationwide Property & Casualty

Esurance Insurance Services Inc.

Auto-Owners Insurance

National General Insurance

Westfield Insurance Co.

Frankenmuth Mutual Insurance Co.

Amerisure Mutual Insurnace Co.

Safeco Insurance Company of Illinois

Titan Insurance Co.

Hanover Mutual Insurance

Integon Insurance Co.

Amerisure Mutual Insurnace Co.

Steadfast Insurance Co.

Grange Insurance Co.

Sources: Oakland County Circuit Court records; Crain’s analysis

The Harper lawsuit and hundreds of other claims brought in Oakland County last year underscore how increasingly disorderly Michigan’s auto no-fault system has become as medical providers and injured drivers jump to different courts in search of favorable rulings and insurers seek new ways to mitigate their losses. Michigan’s no-fault law allows injured drivers and their medical providers to sue in any county where an insurance carrier sells policies, often making Oakland, Macomb and Wayne counties the courts of choice for complicated no-fault cases like Harper’s — a Lake City woman injured in west Michigan’s Wexford County and currently residing at the Origami Brain Injury Rehabilitation Center in Grand Rapids. “I’m seeing more and more instances where the insurance company is saying, ‘We’re not going to pay this benefit or we’re going to pay less than what’s being billed’ without any reason,” said attorney Nick Andrews, a partner at Liss, Seder & Andrews P.C. in Bloomfield Hills who is representing Harper’s mother in the lawsuit, which goes to trial on Monday. “Maybe they’re hopeful that people will just go away.” “(Insurers will) try anything that they think will stick,” said attorney Jarrod Anthony, a partner at Anthony Paulovich & Worrall PLLC in Dearborn who represents medical providers. “There’s a new argument probably every few months.” Michigan’s unique no-fault law, which was originally designed to limit litigation and ensure a driver’s medical bills get paid in a timely fashion, has become awash in legal battles. Between 2008 and 2018, the number of first-party no-fault lawsuits nearly doubled from 6,035 to 11,764. Seven out of 10 of the 2018 lawsuits were filed in Macomb, Oakland and Wayne counties. As no-fault lawsuits have piled up in Oakland County Circuit Court the past two years — a 295 percent increase between 2016 and 2018 — state lawmakers have remained at loggerheads over how to overhaul a multibillion-dollar industry that is a financial safety net for critically injured motorists like Harper but also the most expensive insurance system in America for 7 million Michigan drivers. “All of it goes to show that this is a system in absolute chaos, which is why the costs are continuing to go up across the state and reform is needed,” said Dave Massaron, interim chief financial officer for the City of Detroit and Mayor Mike Duggan’s point man on auto insurance reform.

Lawsuits shift to suburbs To understand why Oakland County has seen a spike in lawsuits, you have to look north. Less than two weeks after Harper’s accident, the Michigan Supreme Court made a major ruling in a nofault lawsuit involving Covenant Medical Center in Saginaw and State Farm Mutual Insurance Co. The Supreme Court’s ruling hindered the right of medical providers to leapfrog over their patients and sue an insurer for non-payment or underpayment of services of an injured motorist.

Michigan’s no-fault auto insurance system, which was supposed to keep auto wreck cases out of court, doesn’t always do that. LARRY PEPLIN FOR CRAIN’S

Dubious distinction

The tri-county area leads the state in the number of no-fault suits.

Wayne, Oakland, Macomb: 8,267

Macomb

70%

Oakland 80 other counties: 3,497

30%

1,321

2,545

Wayne

4,401

Source: Michigan Supreme Court; Crain’s analysis

Personal injury attorneys say the ruling caused them to start filing more no-fault lawsuits in Oakland and Macomb counties instead of predominantly in Wayne County, which experienced a 30 percent decline in no-fault cases between 2016 and 2018. The total increase in cases in Oakland County (1,901) between 2016 and 2018 is nearly identical to

the decline in lawsuits filed in Wayne County (1,926). Most judges in Wayne County interpreted the Covenant decision strictly and began dismissing lawsuits from medical providers en masse, Anthony said. But several judges in Oakland and Macomb counties took a different view on the procedures providers

have to go through to get legal standing to sue, causing personal injury attorneys to take more cases north of Eight Mile Road. The number of no-fault lawsuits filed in Oakland County skyrocketed from 644 to 1,085 in 2017 and 2,545 in 2018, while Macomb County’s docket grew by 64 percent during that time, court records show. “There was a big shift at that point in time,” Anthony said after the Covenant decision. A Crain’s analysis of the 2,545 first-party auto insurance lawsuits filed in Oakland County last year shows 56 percent of them were brought by 25 medical providers that included neurosurgeons, orthopedic surgeons, spine and back specialists, pain management and rehabilitation clinics. In Oakland County, Dearborn-based Advanced Surgery Center was the most frequent litigant last year, filing at least 155 lawsuits against 32 different auto insurance companies (more lawsuits than were filed in 61 rural Michigan counties combined last year), a Crain’s analysis of court records shows. Representatives for Advanced Surgery Center did not return phone messages. Another frequent litigant in Oakland County’s courts last year was Flint neurosurgeon Jawad Shah, who filed 30 lawsuits against 14 different auto insurance companies, records show. One of Shah’s multiple lawsuits against State Farm challenged how the insurer baked clauses into its plans that disallowed injured motorists from assigning their no-fault

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CRAIN’S FORUM | APRIL 2019 Ian Vedder, co-owner of Soteria Home Health LLC, an attendant care agency based in Grand Blanc, said it’s not uncommon for insurance companies to send payment checks that are 50 percent to 70 percent of what he billed for nurse aides to provide in-home care for injured motorists who can’t walk, bathe or feed themselves. “To sit there and say the providers can bill whatever they want is a completely false narrative,” Vedder said. “I can bill whatever I want. But that doesn’t mean they’re going to pay whatever I want.” “What are my options? Either A, litigate it or B, accept it,” he added. In most cases, Vedder said, he eats his losses and prepares for the next insurance adjuster to come through his door. “It’s absolutely miserable to try to deal with an adjuster,” he said.

Unprompt payments

benefits to their doctors or medical providers, which gave them the right to sue for payment. The clauses were quietly added to no-fault policies while State Farm was battling Covenant all the way to the Supreme Court, according to multiple plaintiffs’ lawyers. “They tried to get rid of provider work altogether,” said Anthony, whose law firm works for orthopedic

“The reality may be that these personal injury lawyers are starting to tap out what they can go after in Wayne County. At some point, you start moving into different markets.” — Tricia Kinley, executive director of the Insurance Alliance of Michigan

surgeons, MRI clinics, physical therapists and anesthesiologists. A Michigan Court of Appeals panel ruled last year that State Farm’s “anti-assignment clause” was unenforceable, overturning a Genesee County judge. But even with the Court of Appeals decision, which has been appealed to the Supreme Court, some plaintiffs’ attorneys are choosing to stay out of Wayne County given the legal uncertainty that the spate of court rulings has created, Anthony said. Andrews, who litigates primarily

for attendant care benefits for quadriplegics and brain-injured motorists, said the Oakland County bench is a preferred court venue for the kinds of complicated cases he takes on. “What I’ve found, at least in Oakland County, is the judges seem to understand the issues — they give you a fair shake, a pretty fair read,” Andrews said. But insurance industry representatives contend there's been a change in business models for plaintiffs' attorneys. “The reality may be that these personal injury lawyers are starting to tap out what they can go after in Wayne County,” said Tricia Kinley, executive director of the Insurance Alliance of Michigan, the industry’s lobbying arm. “At some point, you start moving into different markets.” Kinley called the spike in no-fault lawsuits in Oakland and Macomb counties “shocking in a way, but also not surprising.” “It’s a really unfortunate indictment on the system that is just really, really weakening every single day,” she said.

‘Unjustified’ halting of benefits Defenders of the law contend the lawsuits from providers are triggered by the business tactics of auto insurers that operate with little state oversight and regulation. Mendelson Kornblum Orthopedic & Spine Specialists, a orthopedic surgical center with offices in Livonia and Warren, takes auto insurance

companies to court after the carriers’ doctors — known as independent medical examiners or IMEs — rule their patient can’t medically get better, according to the clinic’s attorney. “They file a lot of lawsuits because there are so many IMEs that are just unjustified,” said Bruce Pazner, a Grosse Pointe Park attorney who represents the Mendelson clinic, which filed at least 56 lawsuits in Oakland County last year. Pazner said the Legislature needs to create stronger regulatory oversight of doctors who perform independent medical exams “who make the same opinion over and over again” in favor of the insurance company paying them. Insurance industry executives have argued that medical providers, in conjunction with personal injury attorneys, order unnecessary tests and rehab services that inflate the cost of care because there are no lifetime limits for personal injury protection benefits under Michigan’s no-fault law. “The reality is, the more litigation we have, that just drives up premiums because that’s just an additional cost added into the system,” Kinley said. But not all unpaid medical bills end up in litigation. Outside metro Detroit, many smaller providers such as chiropractors will cut off care for patients when auto insurance companies start denying claims for continued treatment, Anthony said. “The insurance companies typically get a windfall on that because a lot of the providers won’t fight them,” Anthony said.

There are an untold number of cases of severely injured motorists or providers waiting years for a court ruling on whether the insurance company has to pay a claim. Harper’s case goes to trial on Monday in Oakland County Circuit Court as her Bloomfield Hills attorney intends to ask a jury for $179,921 in back pay for Harper’s mother’s attendant care — plus 12 percent interest and “actual attorney fees,” according to court records. The brain-injured woman’s doctor at Mary Free Bed Rehabilitation Hospital in Grand Rapids prescribed 24-hour-a-day attendant care for everything from assisting the woman with taking medication to “novel problem solving, managing daily schedule and concerns with safety, judgment and impulsivity,” according to court records. Andrews said he is pursuing attendant-care hourly rates between $25 and $40 an hour, based on a medical expert’s opinion of Harper’s needs. At the low end, the attendant care cost for Harper could cost $219,000 per year. At the high end, it could top $350,000. If the case is successful, Harper’s lifelong medical care will be paid out of the Michigan Catastrophic Claims Association’s $20 billion fund once they exceed a $580,000 cap that goes into effect July 1. The MCCA is an entity created to pay out the most expensive auto insurance claims after an insurer pays up to a cap set by regulators. Last week, the MCCA raised its annual per-vehicle assessment fee to $220, citing rising medical claims that are dominated by attendant care costs. Andrews filed the lawsuit on March 29, 2018. On Nov. 20, USAA made a payment of $77,109 for more than 6,400 hours of attendant care between September 2017 and November 2018 at a rate of $12 per hour, court records show. The payment, which is significantly less than the rate Harper’s attorney is seeking, came 18 months after she barely survived the motorcycle crash in Cadillac. A spokesman for USAA declined to comment, citing the ongoing litigation. “The system was designed for prompt payment — and we’ve seen anything but that,” Andrews said. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

Medical provider lawsuits About 56 percent of the 2,545 first-party no-fault auto insurance lawsuits filed in Oakland County Circuit Court last year were from 25 different medical providers seeking reimbursement for services rendered. Advanced Surgery Center in downtown Dearborn filed the most lawsuits with 155 suits against 32 different auto insurance companies — more lawsuits than were filed in 61 rural Michigan counties combined. Top 25 Plaintiffs in Oakland County no-fault lawsuits in 2018

Advanced Surgery Center Mercyland Health Services Greater Lakes Ambulatory Surgical Center Michigan Spine & Brain Surgeon Northland Radiology Physiatry & Rehab Associates Michigan Pain Management Meds Direct Pharmacy

Number of lawsuits

155 99

94 90 80 80 79 77

Michigan Head & Spine Institute

ZMC Pharmacy

Mendelson Orthopedics

Dearborn Pain Specialists

Detroit Medical Center

Associated Surgical Center

Southeast Michigan Surgical Hospital

Spine Specialists of Michigan

Integrative Neurology

Executive Ambulatory Surgical

Jawad A. Shah, MD

Michigan Institute of Pain and Headache

Michigan Ambulatory Surgical Center

Nextgen Pain Associates & Rehabilitation

Michigan Orthopedic Trauma Specialists

Special Tree Rehabilitation

Surgical Center of Southfield

Sources: Oakland County Circuit Court records; Crain’s analysis

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Voices CRAIN’S FORUM | APRIL 2019

NO-FAULT INSURANCE | CONSUMER ADVOCACY

Better consumer protection will lower auto insurance rates

here are 31 practices specifically prohibited by the Michigan Consumer Protection Act, one of which reads “Charging the consumer a price grossly in excess of the price at which similar property or services are sold.”

pricing practices by insurance compaHowever, Michigan insurance nies,” said Doug Heller, who authored companies are immune from this the study. “Pricing people based on act due to a series of court decisions their job type or education or home that essentially rendered all regulatownership not only has nothing to do ed businesses exempt. with their safety on the roads, it makes This is important to keep in mind it harder for financially-strapped drivwhen I tell you that I just paid $1,000 ers to maintain their coverage.” for a one-year full-coverage no-fault Heller, an insurance expert for the policy (with increased limits) for the Consumer Federation of America, second year in a row. Meanwhile JOHN published an additional report that drivers around the state are being PROSSER revealed Michigan would save nearly asked to pay two to five times that $4 billion per year in auto insurance amount for lesser coverage. Surely, Consumer premiums by adopting the same some of these policies have to be vio- protection oversight and consumer protection lating the MCPA’s “grossly in excess” is the solution laws as California. pricing language. These laws have helped California Factory workers are being charged to Michigan more than lawyers for their auto in- drivers’ high achieve the lowest price increases in the nation, with premiums increasing surance policies even if they drive the insurance a mere 12.5 percent over the last 30 same car, both have perfect driving rates. years. records, and they live in the same ZIP Notably, the CFA report said, “The states that code, according to a 2017 study commissioned ask insurance companies to demonstrate the by the Coalition Protecting Auto No-Fault. The study reveals that insurers are using appropriateness of rate hikes before imposing nondriving-related factors such as occupation, them, raise rates the least, without sacrificing level of education, and home ownership status industry profitability or market competitiveto set rates, and that these factors can increase ness.” (emphasis added) a driver’s premium by as much as 18 percent. Consumer protection is the solution to MichFor some drivers in our state, that can mean al- igan drivers’ high insurance rates. Currently, the insurance commissioner most an additional $1,000 per year for non-driv(now known as the director of the Department ing-related factors. “State law requires that Michigan drivers buy of Insurance and Financial Services) lacks the auto insurance, but it doesn’t protect blue collar ability to come in and say rates are too high. In workers and out-of-work residents from abusive order to find the rates excessive, the director

does not exist for the insurance,” according to the statute. Insurance companies often justify exorbitant premiums by publicly complaining about their inability to contain the costs of medical claims, while the reality is they challenge charges regularly either by sending a reimbursement at a reduced rate or by challenging the charges in court. Furthermore, insurance companies are only liable to pay for “reasonable charges” incurred as stated by the law. Without a functioning Consumer Protection Act or an empowered, consumer-oriented insurance commissioner, Michigan drivers are essentially left to pay whatever their insurance companies charge them. This has often been referred to as “file and use” because insurance companies are able to do just that. For many people, this unchecked “file and use” system is becoming increasingly unaffordable. Several other states have taken steps to address these issues, and it’s time for Michigan to do the same. As our friends in Lansing continue to debate what can be done to lower auto insurance premiums, keep in mind that allowing motorists to opt out of full personal injury protection — a proposal known as “PIP choice” — isn’t a viable solution. After all, it would do nothing to address any of the price setting done by insurers, which ironically is the cause of the discussion in the first place. MHJ/ISTOCK

would need to prove that “the rate is unreasonably high for the insurance coverage provided and a reasonable degree of competition

John Gwynne Prosser III is customer service executive at Health Partners Homecare and vice president of marketing for the Neuro Trauma Association. He also is co-author of the book “ACCIDENT: Michigan’s Insurance Model for America.”

NO-FAULT INSURANCE | LEGISLATIVE OPTIONS

Time to crack down on fraud, waste in catastrophic injuries fund

or as long as I can remember, people have complained about how expensive car insurance is in Michigan. I have heard politicians talk, year in and year out, about the need to reform our laws to reduce auto insurance rates.

Yet, for decades, despite the awareness of the problem and the desire to fix it, nothing substantive has been done. Instead, auto insurance rates have continued to climb. Today, Michigan drivers pay the highest auto insurance rates in the entire country thanks to our state’s unique auto no-fault insurance system, which provides unlimited lifetime monetary benefits for accident victims. Other states, including our neighbors, like Minnesota, offer capped systems, which are predictably less expensive but lack the coverage benefits. So how do we find savings within our current system? When you listen to the people who administer the Michigan Catastrophic Claims Association, they say waste, fraud and abuse are making things more expensive. The MCCA was established in 1978, and it oversees payment of unlimited lifetime benefits for people

PETER LUCIDO

The no-fault system is a prime target for fraud, and a cottage industry of egregious medical claims is thriving, with litigators in tow.

who sustain auto-related injuries that currently exceed $555,000. This amount, which is set to increase to $585,000 on July 1, is the point at which individual auto insurance companies stop paying. This is the so-called Personal Injury Protection. Under current law, PIP benefits include all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery or rehabilitation. This includes residential and attendant care, which is where most of the money is being spent. To help pay for PIP, the MCCA charges insured drivers in our state an annual assessment per vehicle, which takes effect each year on July 1. What started as a $3 charge per vehicle has increased virtually every year. It is currently $192 and is expected to increase again this year. There is about $20 billion in the

MCCA fund, and it pays out $100 million every month for PIP coverage — $1.2 billion was spent last year. Why do costs keep going up? One would think that $20 billion would be enough, right? Well, you might be shocked to learn that the MCCA operates in the red. For one, we don’t know how many people are receiving unlimited lifetime benefits, although the association has indicated its largest percentage of claimants are between the ages of 16 and 25. If the average person lives to be 78, that’s a long time to be getting unlimited insurance benefits, not to mention a lot of money. The no-fault system is also a prime target for fraud, and a cottage industry of bogus and egregious medical claims is thriving, with litigators in tow. At a recent hearing of the Senate Insurance and Banking Committee, MCCA representatives revealed outlandish cases of what I would call fraud, if not waste. For example, as was reported by Gongwer News Service, one 50-year-old claimant injured seven years ago receives attendant care from his wife, who is paid $13 per hour, 23 hours a day, every day of the year, and that is in addition to a charge of between $750,000 and $850,000 for home modifications. Another reported case involved a 23-year-old with a traumatic brain injury whose mother is being paid

$35 per hour, all day, for her attendant care — that’s $306,000 per year. Lastly, they cited a case in which a 37-year-old claimant injured in a hit-and-run accident is living in a residential care facility at a cost of $1,500 per day so he can receive bipolar medication and to avoid consuming alcohol — both of which have nothing to do with the insurance claim. The MCCA representatives said that cases like these are becoming more prevalent and are further driving up costs and legal fees. Auto insurance in Michigan is plagued by waste, fraud and abuse, and it comes at the expense of the hardworking families in our state who are struggling to justify, and afford, their insurance bills. Our highest-in-the-nation car insurance rates are forcing families to register their vehicles out of state just to afford driving at home and are making criminals out of people who feel they have no choice but to drive without insurance altogether. We can do better, and if it wasn’t clear before, it should be by now: The reasonable and necessary thing to help lower car insurance rates is to fix these problems. State Sen. Peter J. Lucido, R-Shelby Township, represents the 8th Senate District in Macomb County. He is a licensed insurance agent of 40 years and an attorney for more than 30 years.

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CRAIN’S FORUM | APRIL 2019 NO-FAULT INSURANCE | LEGISLATIVE OPTIONS

Hold auto insurers accountable for high rates

ne of the most controversial and often asked-about topics in our state is undoubtedly the absurd cost of auto insurance here in Michigan. I hear about it from people regardless of age, gender, race, political party affiliations (if any), and I experience it firsthand when my own premiums come due.

In the fall of 2017 two vastly different plans to address these costs were introduced in our state Legislature. One was a single bill that would have radically altered our system, reducing coverage for drivers and accident victims without guaranteeing a reduction in rates. Despite attempts by the party in power to squeeze votes out of their side, the bill ultimately failed to garner enough support from Democrats or Republicans. Meanwhile, a bipartisan group of House members introduced a full package of 17 bills to address the root causes of our high rates without reducing the quality or coverage Michigan families deserve called the Fair and Affordable NoFault Reform Plan. There too, though, politics got in the way, and the party

TERRY SABO

Preserving unlimited medical benefits while also reducing insurance rates is important.

in power never allowed the bills to come up for a vote. As I began my second term as a state representative, I was honored to be named to the House Select Committee on Reducing Car Insurance Rates. I knew immediately that this was a committee I wanted to be on for a number of reasons. I was excited by the challenge of taking on this issue, but also optimistic with the committee chair, Rep. Jason Wentworth, and his detailed plan of solution-based public hearings and his request for all committee members to have an open-minded approach regardless of past attempts to alter the system. Since the current legislative session began two months ago, we have only met a few times. Our committee

is expected to take many months of testimony from groups on all sides of the issue in order to educate committee members and the public before legislation is introduced. Those testifying are expected to provide ideas on how to lower rates. Unfortunately, some of my colleagues in both the House and Senate have made it clear that they have no intention of using a deliberative process to solve our too-high insurance rates, and I am disappointed in seeing that solutions once again seem to focus only on capping benefits for drivers and accident survivors. It is disturbing to hear this solution when the process hasn’t even been allowed to play out. Yet even more disturbing and disappointing is that this knee-jerk solution to fix our insurance rates is to slash the benefits that our system provides, once again without guaranteeing a rate reduction and without looking for a solution that holds rate-setters, not rate-payers, accountable for the high insurance costs. Michigan’s no-fault insurance system provides our state’s drivers and passengers with a robust medical safety net. We can take comfort in knowing that we have comprehensive and expansive medical coverage if tragedy strikes.

While very few people will ever need the full benefits our system provides, as a former police officer and firefighter I have seen up close the catastrophic damage that can result from car accidents. More importantly, I’ve seen how in the face of such tragedy, Michigan’s comprehensive no-fault coverage can make a world of difference in the health and quality of life for someone after they’ve been in a traumatic wreck. That is why preserving unlimited medical benefits while also reducing insurance rates is important to me and should be important to us as Michiganders. You can be sure I will fight to see all options are explored and properly vetted, and that we as a Legislature tackle this issue in a truly bipartisan way so that we can finally resolve the high insurance premiums that burden our citizens. Michiganders deserve world-class coverage and a rate reduction, and both things are possible if we work together, keep an open mind, and remember that the health and safety of Michigan’s working families should be our top priority. Rep. Terry Sabo, D-Muskegon, represents Michigan’s 92nd District in Muskegon County.

NO-FAULT INSURANCE | INDUSTRY VIEW

‘Broken’ no-fault system desperately needs reform

t’s no secret Michigan drivers pay the highest auto insurance premiums in the country, and have for more than five years. This undesirable distinction shows that when it comes to the cost of car insurance, Michigan is No. 1 for all the wrong reasons. The system is broken. It’s outdated. And it’s desperately in need of reform. and charging for more services that So how did we get here? may provide little, no or even negative First and foremost, a combination of health value to the patient.” out-of-control billing by medical proAnd Detroit Mayor Mike Duggan, viders and trial lawyers who have whose constituents pay more for car found new and creative ways to sue insurance than drivers in any other auto insurance companies, even city across the country, told the panel though no-fault was supposed to elimof lawmakers that Michigan’s auto inate costly, time-consuming lawsuits. no-fault system is “morally indefensiThe primary culprit for Michigan’s ble.” Duggan said medical providers skyrocketing auto insurance premi- TRICIA and lawyers are encouraged to “drive ums, however, is our one-of-a-kind, KINLEY up these bills as high they can, bemandated “unlimited” benefit system cause they both benefit” and profit that encourages uncontrolled and By cracking off the misfortune of others. Two lawoverutilized medical services. Drivers down on makers from different corners of injured in a serious accident deserve fraud and Michigan, who also serve on the the critical care they need, but Michi- stopping committee, Sen. Ed McBroom, R-Vulgan’s lack of cost controls has opened bad actors can, and Sen. Marshall Bullock, the door to unmitigated medical bill- — whether D-Detroit, testified about the harding and rampant abuse of the system. they’re ships their constituents face due to Furthermore, the original goal of no- individuals, the cost of auto insurance and delivfault — to minimize litigation — has attorneys or ered compelling testimony that now failed. Statewide, the civil docket medical shows this is a statewide problem. arising from no-fault litigation has providers The Insurance Alliance of Michijumped from 23 percent in 2010 to 42 — we can gan has supported many reforms percent in 2017. We now have the worst ensure car over the last two decades to bring of both worlds: High premium costs accident down the cost of auto insurance, indue to a lack of choice and medical cost victims get controls, and a rising number of cluding three commonsense reforms the care time-consuming and costly litigation. which include: they need. J Cracking down on fraud The only winners in this scenario are J Implementing a fee schedule simimedical providers and trial attorneys. Over the last several weeks, the Michigan lar to what is universally used for other medical Senate Insurance and Banking Committee has insurance to control costs held a series of hearings as a first step toward J Allowing consumers to have a choice in the reforming Michigan’s broken, outdated auto level of medical coverage they include with no-fault system. their auto insurance policy, one that fits their They’ve heard from the Citizens Research needs Council of Michigan, which penned a report on Fraud and abuse cost the average family hunthe medical costs associated with Michigan’s auto dreds of dollars every year in additional premino-fault system. The CRC report found Michi- ums. By cracking down on fraud and stopping gan’s auto no-fault system fails to hold medical bad actors — whether they’re individuals, attorproviders accountable, and that providers are neys or medical providers — we can ensure car “not prevented from, and may benefit in, ordering accident victims get the care they need.

MHJ/ISTOCK

Under Michigan’s current auto no-fault law, medical providers can dramatically overcharge for medical procedures — often to the tune of three to four times more when compared with other forms of insurance and sometimes even more. For instance, published reports show an MRI at a Metro Detroit medical provider costs someone injured in a car accident more than $5,000. That same MRI, at the same facility and on the same machine, costs someone $500 under Medicare. This overbilling doesn’t end when someone leaves the emergency room or is discharged from the hospital. In fact, much of this over-billing happens long after the person leaves the hospital, often continuing for decades. Because of this, Michigan’s auto no-fault system has become a golden goose for medical providers. Finally, drivers deserve a choice in the level of medical coverage they include with their

auto insurance. Michigan is the only state in the nation that requires drivers to pay for unlimited, lifetime medical benefits. Meanwhile, consumers can pick their cell phone plan, cable TV or streaming package. They can even choose different levels of collision coverage with the auto insurance policies — but not their medical coverage. That’s just not right. We’re encouraged by the steps the Legislature has taken to date to explore ways to reform Michigan’s broken, outdated auto no-fault system. We urge lawmakers to enact real, commonsense reforms to crack down on fraud and abuse, stop medical providers from overcharging for procedures, give consumers a choice and ensure Michigan drivers finally get the relief they deserve. Tricia Kinley is executive director of the Insurance Alliance of Michigan.

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FarmWise, Roush collaborate on autonomous weeding robots By Dustin Walsh dwalsh@crain.com

Silicon Valley farm equipment startup FarmWise has tapped Roush Industries to build autonomous weeder prototypes. The Livonia-based company known for retrofitting Ford Mustangs will develop a dozen of the robots this year, with additional units in 2020, the companies said in a news release. Terms of the deal were not disclosed. The autonomous robots are designed to weed farmland around the clock, providing farmers the ability to reduce the use of herbicides while saving costs on labor. “Technology is rapidly transforming every industry across the globe,” Roush CEO Evan Lyall said in the release. “The agricultural industry may be one of the most in need to make bold new advances to create efficiencies and produce safer products for consumers. We work with the best engineers to bridge the gap between theoretical knowledge and real-life products as we test these tractors in the field. We’re proud to support industry pioneers like FarmWise to solve the burning issues farmers face while building the new paradigm for the future of food production.” Roush and FarmWise were connected via the Michigan Economic Development Corp.’s PlanetM. The group works to market and develop relationships between Michigan businesses and startups and others around the world. FarmWise was founded in 2016 and employs research from 20 farming and artificial intelligence experts from the Massachusetts Institute of Technology, Stanford University and Co-

An early prototype of FarmWise’s autonomous weeder.

“The agricultural industry may be one of the most in need to make bold new advances to create efficiencies and produce safer products for consumers. We work with the best engineers to bridge the gap between theoretical knowledge and reallife products as we test these tractors in the field.”

FARMWISE

Need to know

 Roush will build autonomous farming robot prototypes  Scheduled to build 12 robots that weed farmland in 2019 

Terms of the deal not disclosed

Evan Lyall

vestments from Andy Rubin’s venture firm Playground Global. Rubin created the Android operating system. While Roush is most known for its high-performance Mustangs and its larger-than-life founder and successful race team owner Jack Roush, the company has spent decades developing prototypes. Roush developed and assembled Waymo Inc.’s Firefly autonomous driving pods. It also develops ride seat systems, show-action equipment and animatronics for the world’s top theme parks.

lumbia University. The startup has raised $5.7 million in seed-stage in-

Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

SPOTLIGHT Khaldun to start chief medical executive role April 15

The director of Detroit’s health department will become Michigan’s chief medical executive, the Associated Press reported. The appointment of Joneigh Khaldun, M.D., was announced by Gov. Gretchen Whitmer and state Health and HuKhaldun man Services Director Robert Gordon. Khaldun, a practicing emergency physician at Henry Ford Hospital in Detroit, will start the job April 15. She will be a member of Whitmer’s cabinet and — as chief deputy health director — oversee population health, medical services and other areas within the Department of Health and Human Services. Khaldun joins Elizabeth Hertel as chief deputy for administration and Erin Frisch as chief deputy for opportunity. These three chief deputy directors are responsible for integrating efforts across the state health department. Khaldun “will bring strong expertise, diverse experience and deep passion to state government,” Whitmer said in a news release. Khaldun has led several coordinated public health responses, including Detroit’s handling of the largest hepatitis A outbreak in Michigan history. She has worked in her current Detroit job since 2017, when she replaced Abdul El-Sayed, who resigned to run for governor. Before that, she had been medical director of the Detroit Health Department

since 2015 and was chief medical officer for the Baltimore City Health Department.

Leadership transitions at ACCESS

Maha Freij has been named the executive director of the Arab Community Center for Economic and Social Services in Dearborn. Hassan Jaber, CEO and executive director, has handed over part of his management responsibility to Freij but remains CEO. Freij Freij has been with ACCESS for 27 years, the last 12 as deputy executive director and CFO. In a related move, Wisam Fakhoury, who has served as finance director since 2009, has taken over the CFO duties from Freij. “These transitions obviously reflect future direction for our organization,” Jaber said in an emailed statement. Hassan has a nearly four-decadelong career with ACCESS. He’s led the nonprofit since 2007. And prior to that, he served as COO for 27 years. A member of the national advisory board to the U.S. Census Bureau, Hassan was named a Crain’s American Dreamer in 2014 for helping to grow ACCESS from a storefront in Dearborn to 11 locations in Southeast Michigan, which last year served 1.15 million people through 100 health, education, employment and social services programs. ACCESS ended fiscal 2018 with revenue and expenses balanced at $27.7 million, COO Lina Hourani Harajli said in an emailed statement.

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Gallagher Sharp LLP is pleased to announce that Elizabeth R. Reno has become a partner. A major focus of Ms. Reno’s practice involves defending nofault auto negligence claims, including catastrophic PIP involving the MCCA. She also defends businesses, insurance carriers and insureds against premises liability, construction indemnity, personal injury, property damage and wrongful death claims. For more information, see www. gallaghersharp.com.

Cushman & Wakefield, a leading global real estate services firm, announces that Steve Kozak has joined the metro Detroit office as director, specializing in servicing industrial clients. Kozak has more than 15 years of experience serving regional and national clients in the I-96 corridor. “I’m excited to bring the Cushman & Wakefield platform of tools and national and international resources to clients in the Detroit markets and beyond,” said Kozak. He joins a strong team of 18 in Southfield.

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The Gold Cup race, launched in 1904 and first run on the Detroit River in 1916, was lost because Detroit Riverfront Events wanted a guarantee of at least eight H1 boats.

HYDROFEST FROM PAGE 3

Not having the Gold Cup, which involves the fastest and most thrilling boats racing at up to 200 mph or more, doesn’t help. The Gold Cup race, launched in 1904 and first run on the Detroit River in 1916, was lost because Detroit Riverfront Events wanted a guarantee of at least eight H1 boats, Weber said, and in recent years H1 was bringing just five or six boats. They didn’t want to pay full price for less than eight boats. The situation was reported first by The Detroit News in March. “It was becoming clear to us they could not guarantee the quality show we feel our fans and Mark Weber: sponsors deCould not reach Weber terms on 8 boats. serve,” said. “By them not wanting to sign an agreement that they would show up with eight boats or be penalized significantly, we could not reach terms.” H1 officials could not be reached for comment. The organization issued a statement in February saying talks had failed and its concentration would be on hydroplane races elsewhere still on the 2019 schedule — but did leave open the possibility of a return to Detroit in 2020. “Unfortunately, progress in the negotiations has not been to the level that the H1 Board of Directors had anticipated, and the parties are at a contractual impasse,” H1 said in a statement. “H1 believes that the parties cannot come to an agreement that would assure a quality competition in Detroit for this coming season, and as such, H1 will not be sanctioning a race in Detroit in 2019.” This year, the H1 Unlimited Hydroplane Racing Series said it will run the Gold Cup on the Ohio River from July 5-7 in Madison, Indiana. Weber said Detroit’s event still will be exciting without the H1 Unlimited racers. “Those boats will not be on the river. There will still be 150 mph race

boats,” he said. “It’s clearly going to be different, but there is still going to be a lot of noise and 150 mph hydroplanes on the Detroit River.” There will be three other classes of racing, 40 race teams, and a number of vintage boats, he added. The major draw will be the Hydroplane Racing Series Grand Prix boats, powered by supercharged Chevy piston engines. Weber said paid attendance has increased the past three years, and last year saw about $160,000 in ticket sales. Not all spectators are paying because fans can watch from stretches of the riverfront. “We feel over three days, over 40,000 people came down to the river last year,” Weber said. This year’s three-hour race will have reduced ticket prices, he said, likely in the range of $20 to $25 for grandstand seats but final numbers haven’t been determined. Making the races attractive to families — sponsors want eyeballs on their brand names, after all — is a key part of business strategy. That’s especially critical because motorsports has seen marketing budgets tighten, Weber said. “(Races have) to rethink how they’re doing business,” Weber said. “Lifestyles have a lot to do with that. It’s not as attractive as it was maybe just 10 years ago, but we are encouraged about Hydrofest; we have made sure it stays as a family event and outing to have fun.” The Gold Cup and the H1 boats could return one day if the business case makes sense, Weber said. “We don’t intend or want to burn bridges,” he said. “We can go back to H1 hydroplanes in Detroit if we feel the product is deserving of fans.” The race, a 2.5-mile river course near the Renaissance Center, also includes food, music and other entertainment. It stayed in Detroit from 1916-24 before rotating to various cities. It’s been in Detroit since 1990. The nonprofit Detroit River Regatta Association organized the Gold Cup race from 1990 until 2014, after which it collapsed from lack of money and debt. It wasn’t held in 1928 and 1960 because of bad weather, and from 1942-1945 because of World War II. Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

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“(DCFC) is a symbol of how people feel about Detroit and want to root for something based in the grassroots of the community and isn’t corporate.” — Stephan Szymanski, DCFC season ticket holder and informal team advisor

DCFC

A rendering of the VIP seating made from refurbished industrial shipping containers planned for Keyworth Stadium in Hamtramck.

SUITES FROM PAGE 1

There will be a pre-order catering menu for suite goers, Mann said, and a bartending staff. The food will come from the stable of food trucks that are on-site for DCFC matches. The 40-foot containers were bought from Detroit-based Container Port Group on Fort Street, which advertises used containers starting at $1,800 each. Mann didn’t disclose a purchase price but did say each cost “four figures” and included a rehab and paint job by the seller. DCFC management hand selected the containers from the company’s storage yard, Mann said. The soccer club is further cleaning up the containers and adding TVs, high-top seating, refrigerators, shelving and other amenities. Delivery of the six containers is scheduled for this week, Mann said, and the team will use a handful of local individual contractors to finish the build-out before the season opens on May 19. “For us, it’s a fun tie-in to the rail yard and the aesthetic of Keyworth and the surrounding neighborhood,” Mann said. Mann said the club got the idea for using shipping containers as premium seating suites after seeing the Detroit RiverFront Conservancy’s Dequindre Cut Freight Yard that uses nine of the steel boxes for food, drinks, retail and entertainment. “That got our heads spinning about ideas we could do,” he said. DCFC’s containers replace the old sold-out VIP section. “That gave us the idea there was a

market there,” Mann said. Revenue from the suites is one of the cash sources the club is using to capitalize its transition from the amateur National Premier Soccer League to professional status in a still-forming league this year, Mann said. The primary funding to pay for new expenses such as player salaries — Mann said DCFC players will get about $20,000 a season plus housing and meals — will come from more games. “We are committed to paying a living wage,” Mann said. DCFC relies on season and single-game ticket sales, game-day concessions and merchandise sales, corporate advertising and money generated from its rental of its 75,000-square-foot ice rink-turnedfieldhouse opened last year in Detroit’s Elmwood Park neighborhood for the bulk of its revenue, Mann said. He said this year’s DCFC budget would be “north of $2 million.” That includes game day operations that includes 125 workers, front office and coach salaries, travel, insurance, etc. Detroit City will have 16 home matches this season, up from 13 last year. This season’s Keyworth schedule announced so far will include seven NPSL regular-season games, one friendly and five NPSL Founders Cup matches. Yet to be announced are three international friendlies at Keyworth, Mann said. Last season, Detroit had six home friendlies, one Lamar Hunt Cup match, and six NPSL matches. “Playing more games helps dramatically, as does playing on Saturdays,” Mann said, adding that the new games are predicted to boost revenue by 30 percent. DCFC last season averaged 5,584

fans per match. Of those, about 2,000 were season ticket holders and Mann said they’re on pace to match that number of season ticket holders despite price increases. The formal transition to a professional club commences with the NPSL Founders Cup, a 10-team competition that will run after the conclusion of the 2019 NPSL regular season, from August to November. Details of the subsequent new professional soccer league to begin play in the spring of 2020 are still being finalized. DCFC’s new revenue also is paying off the $741,250 raised by the team in a non-equity crowd-funding campaign in 2015 and 2016 that financed improvements to Keyworth’s grandstands, bleachers, locker rooms and restrooms, Mann said. The 500 investors, who functionally loaned the club money in ranges from $250 to $50,000, split $107,000 in revenue sharing money, the team has said. Paying back investors eats up 22 percent of the club’s revenue, Mann said. Adding the suites, clubhouse and more games hastens the payback schedule, he added. “We’re looking to be a year or two years ahead of paying everybody back,” Mann said. That could happen by the end of 2019. Without going into detail, Mann said he and the other four co-owners have taken on some debt to further finance the club’s plans. “We’ve had some investors, people we’ve gotten to know through the process,” he said. Mann did say that the team is profitable. DCFC also has looked closely at the fundraising model used by NPSL team Chattanooga FC, which earlier

this year raised more than $500,000 in the first month of a limited stock sale. However, Detroit City won’t use that model now because it’s a complex process that required an immense amount of sophisticated financial work — keeping track of hundreds of investors alone is difficult for small clubs, Mann said. The preference, he added, it to keep the ownership group small. “It best suits us right now for navigating the next steps,” Mann said. Chattanooga sold 8,000 shares to finance its move from the NPSL to the Founders Cup alongside Detroit City FC. The team said it had investors in 44 states and 10 countries. One of those investors, the team said, is University of Michigan sports economics professor and soccer analyst Stephan Szymanski, who is a DCFC season ticket holder and informal team advisor. “(DCFC) is a symbol of how people feel about Detroit and want to root for something based in the grassroots of the community and isn’t corporate,” he said. Szymanski said the Detroit City would quickly raise a lot of capital if it sold ownership shares, but he understands why DCFC prefers to keep a limited ownership circle and avoid the paperwork headaches. Opting to raise money via suites, increase ticket sales, and other ways can work just as well. “They’d find a lot of willing supporters (but) if they don’t need it, why should they,” Szymanski said. In the meantime, suites are one of several changes at Keyworth Stadium this season. In December, the club got a grant of up to $450,000 from the Ralph C.

Wilson Jr. Foundation grant to replace Keyworth Stadium’s 20-yearold turf. New artificial turf from Calhoun, Ga.-based Shaw Sports Turf is now being installed, Mann said. The decision was made to stick with synthetic turf instead of natural grass because the stadium is Hamtramck’s primary public greenspace and is used after school by hundreds of kids, Mann said. Real grass for pro sports competition has to be protected and would require closing the stadium to the public, he said, and the team didn’t want to do that. DCFC has developed a reputation as a progressive, community-based sports organization. Other stadium work in 2019 includes finishing concrete restoration and final bleacher replacement in the east grandstand, Mann said. In the future will be rehab of the east grandstand bathrooms. DCFC in January hired Trevor James as both head coach and general manager. The English-born James has been coaching since 1985, including in Europe and in Major League Soccer, and he replaces Ben Pirmann, who resigned in December after six seasons to become an assistant coach with expansion Memphis 901 FC of the second-tier USL Championship. James is simultaneously managing the upcoming final NPSL season while assembling a 26-man professional roster for the professional move, and Mann said he’s been given a budget to pay for players. “It’s taking a good amount of creativity,” Mann said. Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

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FIFTH EYE FROM PAGE 3

Analyzing ECG date, Fifth Eye software correctly distinguished with 100 percent accuracy which interventions were a result of hemodynamic instability, and detected it with a mean lead time of 7.7 hours over the time it took for health care workers to realize what was happening. “Despite continued advances in healthcare technology, clinicians do not have adequate tools that allow them to consistently identify patients prior to rapid worsening of their clinical condition,” Tom Shehab, a physician and managing partner at Arboretum, told Crain’s. “The Fifth Eye technology has the potential to provide early warning of hemodynamic collapse (and) allows clinicians the opportunity to intervene and improve patient outcomes.” “Invest Michigan is honored to have played an integral role in assisting Fifth Eye’s early startup, leading to the support of Arboretum and Cultivation Capital,” said Charlie Moret, president and CEO of Invest Michigan, which led the seed round. “We have been inspired to see how an experienced and talented entrepreneur is commercializing this innovative technology.” Baird is one of the most successful serial entrepreneurs in Southeast Michigan. Her biggest fundraising success was with Ann Arbor-based Accuri Cytometers Inc., which made desktop instruments for cellular research. She joined the startup as president and CEO in 2004, raising $27 million from angel and venture-capital investors over the years to keep the company alive until it could begin generating revenue. In 2011, it was sold to New Jersey-based Becton, Dickinson & Co. for $205 million. Baird next was president and CEO at Ann Arbor-based Accio Energy Inc., a company that made wind-power generation systems that didn’t use wind turbines. Instead, it pumped water through recycled aluminum tubes as the wind blew, with the flow of water creating a charge that could be stored. Shortly after joining Accio, she raised a $1.9 million seed round for the company and later raised another round of $750,000. In 2014, the U.S. Department of Energy awarded Accio $4.5 million to develop largescale offshore generation systems. In 2015, Crain’s named Baird as one of 25 women to watch in technology. In 2016, Crain’s named her as one of the state’s 100 most influential women. Baird and company founder Dawn White pulled the plug on Accio in April 2017 following the dramatic decline in costs for competing renewable energy technologies. Jeff Basch, who was CFO at Accio, is CFO at Fifth Eye. “The Arboretum team is excited to once again invest in a company founded by Jen Baird,” said Shehab, whose company was an investor in Accuri. “She has a keen eye for new technology and does an excellent job of building strong teams and executing operating plans.” “We’ve talked for a long time, now, about the need for home-grown CEOs capable of leading fast-growing startups, and Jen is the prototype for that. She has become a top-notch CEO. Having Jen at a company gives investors a sense of confidence,” said Chris Rizik, CEO of Ann Arbor-based Renaissance Venture Capital Fund, a

fund-of-funds that invests both in Michigan VC firms and in out-ofstate firms willing to look at deals here. As for Fifth Eye, Rizik said: “There is an ongoing trend to reduce costs in health care by addressing issues early, and Fifth Eye fits into that mold by identifying big problems early in a less-invasive way.” Baird said the founding of Fifth Eye and subsequent funding is proof of the strength of the entrepreneurial ecosystem in Ann Arbor. Before the company was founded, Arboretum helped her vet the technology for commercial viability. “They were vital in giving us feedback in deciding whether to bring this technology out of the university,” she said. Concurrently, Cultivation and Ar-

boretum, both focused on investments on health care, were looking to do a deal together, a deal that was encouraged by one of Cultivation’s existing investors. “Cultivation found out about Fifth Eye from one of their investors, who is a doctor,” said Baird. “He had found out about us and said to Cultivation, ‘Hey, you ought to look at this company.’” Menlo Innovations, a software developer in downtown Ann Arbor, is another piece of that entrepreneurial puzzle. Fifth Eye is based in Menlo’s Startup Garage, a tech incubator adjacent to Menlo. Menlo is also helping develop the software Fifth Eye uses. As Menlo did with Accuri, it reduced its fees for software development in exchange for equity. Baird said Fifth Eye, which employs five, will remain in the Startup

Garage for the rest of this year. She said the company will continue to use local contract research organizations as well as Menlo to keep employee count low. It has also started using Amazon Web Services Inc. to build out its cloud-computing platform. She said if human trials are successful, she will hire a marketing team next year, which might require the company to find its own headquarters. Mark Salamango, Fifth Eye’s co-founder and chief technology officer, was formerly chief information officer at UM’s Center for Integrative Research in Critical Care; co-founder and chief analytics officer Ashwin Belle was on the research faculty at the Center for Integrative Research; and co-founder and chief data scien-

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tist Bryce Benson was a computer research analyst at Michigan Medicine. All three joined the company full time last May. “The technology that Fifth Eye is commercializing was developed over the past five years by this team embedded in Michigan Medicine, where there were doctors and nurses providing lots of input to guide the development,” Baird said. “Talk about living the dream of customer input from every angle to make sure the product is a great fit.” In addition to equity capital, Fifth Eye’s technology has received $4.5 million in grants since the research began in 2014. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

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DTE

FROM PAGE 3

Earlier this year, Consumers submitted its own integrated resource plan, which will be decided by the MPSC in April. Other energy producers in Michigan also are filing their plans. IRPs are comprehensive five-year plans on how utilities will meet customer power needs and provide reliable and low-cost electricity. The plans address renewable resources, energy waste reduction and provide a glimpse into each utilities priorities and strategic plans. “Carbon reductions are at the heart” of the energy plan, said Anderson, adding that DTE also worked hard in Gerry Anderson: the plan to imCarbon reducprove affordabilitions at heart of ty and service reenergy plan. liability for its 2.2 million electric customers. By 2023, DTE plans to cut carbon emissions by 32 percent, primarily by shutting off three of its four remaining coal plants, and reducing carbon by 50 percent by 2030 and 80 percent or more by 2040. DTE had planned to cut 80 percent by 2050. “We will substitute more renewables for a full phase-out of coal and increase our investments in efficiencies,” Anderson said. By 2022, one year ahead of schedule, DTE plans to replace its three

ANALYSIS FROM PAGE 1

Beyond the funding loss, Wayne State officials have told Crain’s that working to develop a top-rated academic medical center with for-profit DMC was impossible because of the different cultures and priorities of the two longtime health partners. DMC did not have a comment at deadline. Last week, Henry Ford Health System CEO Wright Lassiter III pulled the plug on months of negotiations to finalize an affiliation agreement after several weeks of public acrimony among the eight-member Wayne State board of governors. Lassiter sent a letter Wednesday to WSU President M. Roy Wilson, M.D., informing him of Henry Ford’s decision. In an email March 28 to Henry Ford employees and doctors, Lassiter said the “volatility between the university’s administration and its board of governors continues to persist, as evidenced by the most recent public board meeting and subsequent media reports. This has made constructive negotiations impossible.” Wilson responded March 29 by telling WSU employees that he wants to work with board members to “chart a strategic path for our future. I am optimistic that the path includes Henry Ford Health System.” He said he understands the frustration Henry Ford had with the delays and the public process the university must follow. “Although disappointed, I understand and fully respect the decision of Wright and his leadership. We will, of course, continue to partner with HFHS, and remain open to ex-

DTE ENERGY

DTE Energy Co.’s Trenton Channel power plant would close in 2022, one of three plants now scheduled to shut down a year earlier than previously planned.

coal-fired plants, which provide 15 percent of the company’s electric energy production in Michigan, with a new $1 billion gas-fired plant in East China Township in St. Clair County. “Blue Water (gas plant) will be a state-of-the-art power plant,” said Anderson. “We will have reliability (and base power load) to replace coal. Wind and solar fluctuate (in power production). Blue Water by far will be the biggest (contributor) to reduction in carbon (70 percent of total

reduction).” But Anderson upped DTE’s renewable energy pledge of 25 percent of production by 2025 to at least 30 percent by 2030. He said he wouldn’t be surprised if by 2040 DTE’s fuel mix would be 50 percent renewable, 30 percent gas and 20 percent nuclear. By 2020, DTE’s renewable energy portfolio will provide electricity to 620,000 people, by 2030 increases in renewable energy will provide power for 1.15 million people, and by 2040

ploring opportunities for further expanding our partnership in the future,” Wilson in his email. In an interview with Crain’s three weeks ago, Wilson said that if the affiliation with Henry Ford goes down in flames, WSU would try to make the best of a bad situation. He also said it doesn't appear WSU can work out a solution with DMC, which as a for-profit hospital has different priorities and is only interested in limited contracts for teaching and clinical administrative services. “Ultimately, it is going to mean the university will continue to subsidize” the school of medicine, Wilson said. “Some people are hopeful the state would come in and buy DMC, but the state is not in that position, and I don’t think owning a safety-net hospital is the best investment at this time.” Sources have told Crain’s that Wayne State has been annually subsidizing the medical school and faculty practice plan by $10 million to $60 million per year since 2015. Included is $10 million to help prop up University Physicians Group, which is now in bankruptcy proceedings, and up to an estimated $50 million annually to support clinical and basic research costs at the medical school that grants and other funding sources don’t cover. On buying DMC, a solution to the medical school’s problems offered by at least three WSU board members, Crain’s has reported DMC could cost $2 billion to purchase from its owner, Tenet Healthcare Corp., a Dallas-based investor-owned chain. Outside of a minority of the WSU board, no one believes that purchasing DMC is a feasible alternative for Wayne State as a state-funded public university.

The affiliation that could have been While it is unclear what Wayne State’s response will be to Henry Ford’s decision to halt negotiations, sources tell Crain’s that the WSU board should quickly issue a statement of unity, recommit to restarting talks with Henry Ford and hope Henry Ford isn’t so turned off that it will agree. Other sources, who also asked for anonymity, said they believe Henry Ford has lost patience with the Wayne State’s board and doesn’t trust restarting affiliation talks would lead to a different outcome among those three or four members opposed to a deal. Most agree, however, that the inevitable alternative for Wayne State going alone is that its medical school will continue to struggle, recruiting a new dean and replacing lost faculty over the years will become even more difficult, and the university will be required to continue financial subsidies, draining money from other projects. Wayne State and Henry Ford officials have declined further comment. But last September when a letter of intent to affiliate was announced, both sides called a potential final agreement “transformational,” one that could lead to benefits on each sides and bolster both organizations’ national standing. Lassiter explained in his statement to employees last week that the agreement could have had “a transformational impact on the health of our communities, as well as the economic success and national recognition for our region.” He said that substantial progress was being made on the talks, but this was before four objecting board members halted them

the number of people supplied by renewable energy could equal 1.8 million or more, Anderson said. “We will exceed all the renewable energy in production in Michigan today,” he said. Anderson hinted that another major company, joining Ford and GM, would soon sign a contract with DTE to purchase a large percentage of its electric power from wind turbines, the company’s main source of renewable energy. “You take the three (companies) together, and that is 350 megawatts above what the utility is doing now” in its voluntary renewable energy program, Anderson said. “That is a half a billion dollars investment ... for 15 percent of renewable” energy production. With DTE speeding up its plan to reduce carbon emissions, Consumers and DTE now have both pledged to eliminate coal by 2040. Consumers plans at least 43 percent renewable energy mix by 2040, but like DTE, said it could increase that amount depending on the prices of wind and solar energy production. Anderson said DTE could build another natural-gas fired plant to replace Belle River coal plant, which it intends to shutter by 2030, but added that it is impossible to accurately plan that far ahead. Still, for DTE to produce 30 percent of its power from gas by 2040, another plant would be needed. DTE’s path toward zero coal and at least 80 percent carbon emission reduction is tougher than Consumers’ because the Detroit-based power giant currently relies on coal to produce 65 percent of its power. Con-

sumers uses coal for only 32 percent. While electricity demand has been flat in Michigan and the rest of the country for years, DTE also plans to attack the demand side of the equation by ramping up efficiency programs and using data-driven technology to guide incentives, known as “demand response,” for customers to reduce electricity from energy-hogging air conditioners. “We have a large demand response program, in the top 25 percent” of all utilities, Anderson said. “We have 700 megawatts that will go to 850 megawatts over the next few years.” Under demand response, DTE and other utilities give companies price breaks if they agree to reduce electricity usage on peak days. “Our customers care about climate change and want us to make sure we are doing everything we can to transition to cleaner energy,” Anderson said. The one wild card is the automobile industry’s move to develop and sell electric vehicles. Demand for electricity could increase over the next decade depending on how many people purchase electric-powered cars and trucks. “There are lots of forecasts. I’ve seen 15 percent to 20 percent of sales by 2030. It might be at that level, which is meaningful demand” for electricity and could change future energy projections, Anderson said. DTE Energy (NYSE: DTE) serves 2.2 million electric customers and 1.3 million natural gas customers in Michigan.

in February. Then, 10 days ago at a board meeting the three WSU board members — Michael Busuito, M.D.; Sandra Hughes O’Brien; and Dana Thompson — read statements that publicly blasted Wilson’s handling of the affiliation talks. Thompson called Wilson “unfit to serve as president.” New board member Anil Kumar, M.D., has sided with the three objecting board members. That split the board as the other four members support Wilson and efforts to complete talks with Henry Ford. A final agreement was projected to be completed by March 31. The proposed affiliation agreement was called “Leapfrog,” as it was intended to create a powerhouse academic health center that would exceed eight-hospital Beaumont Health in scope and rival the University of Michigan Health System. The WSU board approved the preliminary agreement in two 8-0 votes last year. Officials insist the agreement was never intended to be a merger. Each organization would retain autonomy and control over their institutions. Employees of each organization would remain with their current employers, and governance would remain separate. But by closely aligning research, certain clinical service line planning and investment decisions, both institutions would benefit well into the future, Henry Ford and WSU executives had said. However, it is not clear what options Wayne State has left. Besides belt-tightening, sources told Crain’s that one short-term strategy could be for Wayne State to ask the state of Michigan for permission to use an additional amount of the $10 million it is paid in enhanced

Medicaid funds to rebuild parts of its delivery system that takes care of Medicaid and indigent patients. The bulk of the funding, estimated at 90 percent to 95 percent, goes to faculty doctors who treat Medicaid patients. Wayne State receives a small administrative fee to cover costs but also a small amount is allowed by the state to develop strategies to expand access to care for Medicaid patients. But the problem is that Wayne State is in danger of losing the $10 million to Central Michigan University, which has applied to the state Department of Health and Human Services, to manage the funds as the designated public entity, on behalf of University Pediatricians, a private group affiliated with DMC. No decision has been made yet and Wayne State and Central are both lobbying the state. Meanwhile, Henry Ford has a backup plan without Wayne State. Its ongoing strategic plan calls for further building out its outpatient medical center network, further expanding its oncology, neurology and heart programs to make them destination programs for patients living in the Midwest and using its employed medical group and health plan to negotiate direct contracts with employers. Officials have told Crain’s that Henry Ford will continue to wring out unnecessary costs, increase efficiencies and work on quality initiatives to improve patient care. Although Henry Ford’s net income in 2018 dropped by 42 percent, net patient revenue grew by 9 percent and quality improvement and cost-reduction efforts are paying off, said CFO Robin Damschroder of Henry Ford.

Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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Changing landscape A sampling of multifamily housing projects in and around downtown Detroit. They range from small 12-unit condominium projects to more than 100 for sale in Brush Park.

Michigan Ave

CONDOS FROM PAGE 1

He said increased construction costs — a pervasive threat to real estate development efforts because of a shortage of skilled trades workers, a host of large projects underway claiming the attention of those that are available, and rising costs of materials — were to blame. “Construction costs from the time that project was conceived until the time it was launched increased by about 30 percent,” he said. It was initially billed at $30 million. The for-sale units were listed at $430 to $501 per square foot, a high-water mark for new multifamily for-sale construction. “We established that we could sell units at $450 a square foot. That’s pretty much what we were averaging in our contracts. What we didn’t establish was that we could make money at $450 a square foot,” Cummings said. Mike Ferlito — whose small 12unit The Selden condominium development at 438 Selden St. is expected to sell its last unit this week at $400-$450 per square foot — said it cost $200 per square foot to build. “The Platform can sell those units at $450 all day,” he said. “But because of construction costs, they would have to increase to $550, and you can’t sell that high right now.” Cummings said 10-12 of the units were pre-sold before putting the plans on hold. In addition, the Ashton Detroit condominium building that was going to have 83 condominiums at 600 W. Lafayette Blvd. has been reimagined as a 154-room Cambria Hotel, a project anticipated to cost $47 million. The developers, a joint venture between Detroit-based The Means Group Inc. and Holdwick Development Group, said financing was difficult to secure. About 30 units were pre-sold, they said.

“Financing is very hard to find,” said Eric Means, who also worked on the $33 million conversion of the Metropolitan Building on John R into a new boutique hotel with Detroit-based The Roxbury Group. “We had reservations for over 30 of the units,” said Brian Holdwick, a former Detroit Economic Growth Corp. executive who left the quasi-governmental entity to pursue private-sector development on his own. “The issue is getting financing for construction, not just in Detroit but everywhere. Unless you have a significant balance sheet, the cost is very hard as well.” And Aamir Farooqi, head of Detroit-based developer Banyan Investments LLC, said construction costs at the Stone Soap Building on the east Detroit riverfront, which is targeted for 42 condominiums in a delayed $30 million-plus redevelopment, and the former St. Charles School have generally increased by 10 to 30 percent. The Stone Soap Building timeframe for redevelopment has been pushed back at least twice because of cost increases and project changes. “Like other developers, we have also experienced an increase in cost, both in material and labor,” Farooqi said in an email. Overall, construction in the Detroit-Warren-Livonia metropolitan statistical area has been slowing this year. New residential construction starts year-to-date are down from $365.4 million last year to $204.2 million this year, a 44 percent drop, according to Dodge Data & Analytics. In February, they were down 34 percent, falling from $190.3 million in February 2018 to $126.6 million.

Construction challenges Still other developers — granted, the wealthiest in the city — have built new ground-up for-sale product, but not without challenges. The City Modern project by Dan Gilbert’s Bedrock LLC, Farmington Hills-

based Hunter Pasteur Homes and a host of investors and contractors, is rising on 8.4 acres of formerly largely vacant land in the Brush Park neighborhood. Randy Wertheimer, CEO of Hunter Pasteur, said a lack of trades workers in Southeast Michigan has slowed the project. However, of the 102 units that have been put on the market, 84 have sold with a signed purchase agreement and a 10-percent nonrefundable deposit. Depending on when the units were purchased, the prices ranged between $230,000 and $280,000 for one-bedrooms and between $400,000 and $1 million for two-, three- and four-bedrooms, Wertheimer said. “Our first 39 units sold for an average of $310 per square foot between almost 18 and 24 months ago,” he said. “Then we released another 30 or so units and those averaged about $330 per square foot between 12 and 18 months ago, and all of the subsequent units have been in the $350 to $360 a foot range. The units we are selling now are up to $370 to $375 per foot.” And even though the project, which totals about 410 units in all, is coming out of the ground, Wertheimer echoed other developers’ concerns. “I truly believe the two biggest issues are the cost to construct and the labor,” he said. “If there was a larger labor pool and more plumbers to choose from, for example, our cost would be lower. It’s a circle and we need to figure out how to solve that. I’m extremely bullish on for-sale (multifamily homes) in Detroit, but that’s a major issue.” Wertheimer’s team is also working on more for-sale multifamily product: the $60 million Pullman Parc project on the site of the former Friends School at 1100 Saint Aubin St. in the Elmwood Park neighborhood. It’s expected to have 81 units, with properties ranging from $250,000 to $1 million, but more on

the lower end of that spectrum. The Friends School was torn down beginning last month, and vertical construction is expected to begin in August, Wertheimer said.

Rent rises, wages don’t Jerome Huez, president of Detroit-based brokerage Berkshire Hathaway Home Services The Loft Warehouse, said condominium construction can, in certain cases, be cost-prohibitive because of the common areas required that aren’t generally factored into the purchase price for individual units. That makes things like townhomes more appropriate to build in many cases. “It’s gonna take a little while on condo construction,” Huez said. “We could maybe have very specific product right on Campus Martius or the Hudson’s site, where you can command higher prices. But it costs more as labor becomes more scarce. We are going to be seeing more and more townhomes. The cost of going vertical is pretty high and you don’t have to spend too much money with townhomes.” Austin Black II, owner of City Living Detroit, a residential brokerage firm, said buyers of for-sale multifamily units are generally being priced out of the downtown area because of rising rents, a trend that’s exacerbated by stagnant wage growth. “The people entering the housing market right now are millennials, and their income is not at the same level as previous generations,” he said. That is drawing them away from the central business district to other neighborhoods, including the North End, the Villages, University District and elsewhere throughout the city. Black says that more density in downtown would drive rents down and allow more people to live there. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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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 // A P R I L 1 , 2 0 1 9

THE WEEK ON THE WEB

RUMBLINGS

Redevelopment plans move forward with state grants

FCA eyed GM’s Poletown plant in expansion

MARCH 22-28 | For more, visit crainsdetroit.com

wo large-scale redevelopments in metro Detroit were approved for brownfield grants by the Michigan Economic Development Corp. A planned $150 million project at the site of the old Ford Wixom Assembly Plant got the nod for a $3.48 million grant, while a $63 million redevelopment of the Summit Place Mall in Waterford Township received $12.9 million. The Wixom project would reactivate 182 acres at 29311 S. Wixom Road with 1.66 million square feet of commercial/industrial space. The new development calls for six buildings totaling 1.34 million square feet on the north part of the site and one 320,000-square-foot building on the south portion. The development proposed by Detroit Wixom LLC, a subsidiary of Solon, Ohio-based Industrial Commercial Properties LLC, is being supported by a $3.48 million grant from the state that was approved Tuesday. The grant is administered through the Michigan Strategic Fund via a Brownfield Act 381 Work Plan, which is funded through local and school tax capture. Tenants have not been identified for the development, but the developer is in discussions with manufacturers and distributors, said Chris Salata, COO of Industrial Commercial Properties. Given the high demand for build-to-suit in metro Detroit, he said he does not foresee any problem filling it. As for plans in Waterford Township, demolition of the mall at Telegraph and Elizabeth Lake roads on the Waterford/Pontiac border is expected to begin next month, clearing the way for a 1 million-square-foot new development called the Oakland County Business Center. A briefing memo to the board says the developer, Southfield-based Ari-El Enterprises Inc., anticipates the creation of 2,183 permanent full-time-equivalent jobs paying $22.50 per hour on average. The memo also says Arie Leibovitz is an 80 percent owner of Summit 327 LLC, the new owner of the Summit Place Mall site that paid $3.7 million for its four parcels last year. The minority ownership is not disclosed. The redevelopment is expected to accommodate office, flex engineering, research and development, warehouse, distribution and restaurant space. The Royal Oak office of Chicago-based brokerage firm JLL is marketing the property to tenants. Last week’s board approval is the latest step forward in getting the long-blighted 74-acre mall site repurposed after a yearslong battle between the township and the previous owner, Santa Monica, Calif.-based SD Capital LLC, which failed for years to put it to productive use. The 1.4 million-square-foot shopping center was condemned in December 2014.

BUSINESS NEWS J Sparta-based ChoiceOne Financial Services (OTC: COFS), parent of

INDUSTRIAL COMMERCIAL PROPERTIES

Cleveland-based Industrial Commercial Properties plans to build a $150 million development at the old Ford Wixom Assembly Plant in Oakland County.

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

$220

What the annual per-vehicle injured drivers fee will be in Michigan after it rises nearly 15 percent in July

$212.22

Estimated cost of taking four people to a Tigers game this season

$7 billion

Value of a German auto parts supplier’s planned acquisition of Auburn Hills-based Wabco

ChoiceOne Bank, and Lapeer-based County Bank Corp. (OTC: CBNC), the parent of Lakestone Bank & Trust, signed a definitive merger agreement to combine under the name ChoiceOne Financial Services. The merger will combine ChoiceOne’s $670 million in assets and County’s $617 million to create a company with about $1.3 billion in assets and 28 offices in West and Southeast Michigan J Zaid Elia is attempting to flip Cadillac Tower in downtown Detroit, just a couple of months after he bought it. The Birmingham-based real estate investor bought it for $24 million in December. J The Detroit Tigers lost 98 games in each of the past two seasons, fueling attendance and TV ratings declines, but the cost for a family to attend a game at Comerica Park has increased to $212.22, according to a new survey. J A full schedule of road projects will be underway this year on multiple stretches of I-94 in Wayne County that will trigger a wave of weekend lane and ramp closures from now until the end of fall, a crunch that grew out a need for repairs, maintenance and preparation for longterm projects. Six projects will be underway on I-94, totaling an estimated cost of $64 million, according to MDOT. J Icelandic budget airline WOW Air ceased operations last week, stranding thousands of passengers across two continents, including at Detroit Metropolitan Airport. J A new prototype Barnes & Noble bookstore and cafe opened Wednes-

day in Rochester Hills — the first of its kind in Michigan. The new store in The Village of Rochester Hills is a contemporary twist on its traditional store, lined with lower shelves, communal seating options and new technology. J Lisa Ludwinski of Sister Pie in Detroit and Zingerman’s Roadhouse in Ann Arbor made it to the James Beard Foundation’s list of finalists announced last Wednesday in Houston. Winners will be named May 6 at a gala in Chicago. J Clinton Township-based University Lending Group, a subsidiary of University Bank, has acquired a number of assets from Ann Arbor-based mortgage banking firm Huron Valley Financial. J The city of Detroit, in partnership with mobility-focused data firm Passport Inc. and California scooter company Lime, is launching a pilot program to study electric scooter use patterns. The six-month pilot is designed to help the city determine where the scooters would be most useful to residents and visitors.

wo automakers whose Detroit production plans are moving in opposite directions talked about meeting in the middle, but couldn’t reach a deal, Crain’s Detroit Business and Automotive News have learned. Months before announcing plans to build an SUV factory on Detroit’s east side, Fiat Chrysler Automobiles approached General Motors about buying the Detroit-Hamtramck assembly plant that GM has announced plans to idle, according to four sources with knowledge of the proposal. If a deal had been reached, it could have secured the future of the GM plant, which remains in limbo ahead of contract negotiations this year with the UAW. It also could have allowed FCA to expand production capacity as planned without having to rely on Detroit Mayor Mike Duggan’s administration to acquire more land. GM and FCA had a “legitimate” discussion about the Detroit-Hamtramck plant, one source said, but couldn’t reach a deal for various reasons. The exact time frame and terms of the proposal are unknown. Two sources said Fiat Chrysler’s proposition to General Motors came

after GM announced in late November that the 34-year-old Detroit-Hamtramck plant — commonly known as the Poletown plant — would not get “allocated” a new product in 2019. GM’s sudden cost-cutting move after Thanksgiving caused FCA to pause its planning at its Mack Avenue engine plants in Detroit to temporarily study the feasibility of building Jeep SUVs at GM’s Detroit-Hamtramck Assembly, the two sources said. Officials with both companies declined to comment directly on the talks. “We have received inquiries from interested parties related to our unallocated plants,” GM said in a statement. “We would consider any that are truly viable business opportunities.” GM’s rebuff raises additional questions about whether or not Detroit-Hamtramck, which was building Chevrolet Volt plug-in hybrids and large cars, will idle and close. The Detroit-based automaker’s November announcement called for production to end there in June, but GM decided in February to extend production to January 2020, after September contracts expire between the UAW and Detroit automakers.

REAL ESTATE NEWS J Developers planning a $22.5 million, four-story building in the Villages area on Detroit’s east side will receive $3.5 million through a state program designed to hasten community revitalization in areas of disinvestment. J The Park Avenue House downtown has a new Troy-based ownership group that plans to convert the 1925 building at 2305 Park Ave. at Montcalm Street into a hotel. The listing price was $15 million, and a source familiar with the deal said the purchase price was $13.5 million. J The city of Royal Oak is closing 190 parking spots by the Farmers Market building Wednesday to begin construction of a new police station as part of the wider city center project. The closure for construction of the $19.1 million police station will leave 88 parking spaces in the Farmers Market lots, according to a spokeswoman for the city project. J Sixty apartments and 5,000 square feet of retail are planned to rise in a four-story development near Michigan Central Station led by Detroit-based developer Woodborn Partners LLC and expected to cost $16 million, with construction beginning later this year and finishing in late 2020.

KURT NAGL/CRAIN’S DETROIT BUSINESS

New fencing has been installed at Chandler Park along I-94 on Detroit’s east side.

Detroit golf courses wrap up $2.5M in improvements D

etroit wants golfers to give its courses a mulligan. Around this time last year, City Council had just scrambled to keep the courses from closing amid talks to cut losses and potentially sell them. A bitter split with previous operators, coupled with years of underinvestment, left the golf courses in less-than-stellar condition. As spring commences and the city finalizes $2.5 million worth of much-needed improvements at its three courses, officials are promising a new chapter. First, they need to remind people the courses are open for business. “The resounding message that we’ve heard was, ‘Oh, you guys are still open?’” said Karen Peek, director of operations for North Carolina-based Signet Golf Associates, which was contracted by the city last year to run its courses. “I said, ‘you know, we are very much open.’”

Chandler Park, on the city’s east side, has opened on warm weather days for the past couple of weeks, while Rouge Park, on the west side, opened Sunday. Rackham, spread across land in Huntington Woods and Royal Oak, is open year-round during fair weather. Palmer Park, a former course on the north end of the city that had been in decline for years, was converted to a park last year. Management is trying to bring back the courses to adequate repair and at least break even, said Brad Dick, general services director for the city. Revenue last season was just shy of $2 million, with around $2.8 million of operating expenses. Projected revenue this season is $3.2 million. That would be comfortable, Dick said. “We’re trying to get the word out that we’re open again,” Dick said. “We had to start from scratch.”

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