Crain's Detroit Business, July 15, 2019 issue by Crain's Detroit Business

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JULY 15 - 21, 2019 | crainsdetroit.com DEVELOPMENT

Rock Ventures running $40M over budget on new jail

By Chad Livengood clivengood@crain.com

Construction of a long-sought new Wayne County jail and courthouse complex is already running $40 million over budget as businessman Dan Gilbert’s real estate development company wrestles with the complexity of design changes and the rising cost of materials and labor — problems that doomed the last jail project in Detroit. But unlike the infamous “fail jail” project on Gratiot Avenue, Wayne County taxpayers aren’t on the hook for Cullen escalating costs at the $533 million criminal justice complex project on East Warren Avenue near the I-75 service drive. Gilbert’s Rock Ventures LLC is shouldering that burden under the deal the company struck last year with Wayne County Executive Warren Evans’ administration that gave Gilbert the “fail jail” site on Gratiot — 15 acres of prime real estate at the eastern entrance of downtown Detroit. Matt Cullen, principal of Rock Ventures, confirmed the new jail project is currently projected to cost $573 million, though the company is working to lower construction costs as bids come in. “We knew there was exposure to it going up,” Cullen told Crain’s. “I’m not happy we’re over budget. I hope we can reduce that.” When Rock Ventures struck a deal in the spring of last year with Evans’ administration to build the jail and courthouse complex in exchange for getting the half-built Gratiot Avenue jail site, the company agreed to cover all costs exceeding $380 million — the county’s maximum contribution to the project after losing $149.2 million on the last jail project under former Executive Bob Ficano’s administration.

In this month’s Crain’s Forum

MICHIGAN’S MEDICAID TIGHTROPE ▶ In 2013, the Healthy Michigan program asked Medicaid recipients to make small copays for medical treatment. Those copays have largely failed to materialize — a collection firm has collected only $23.8 million of $70.7 million owed. That raises questions about whether a new rule that would require some recipients to pay 5 percent of their income toward coverage will work as intended – or just result in more people losing insurance. Crain’s Forum, pages 14-17

ILLUSTRATION BY RETROROCKET

Goldfish Swim School dives into expansion Page 3 MANUFACTURING

3-D printing transitioning from hype to wide use By Dustin Walsh dwalsh@crain.com

In January 2015, Arizona startup Local Motors 3-D printed a car live at the North American International Auto Show in Detroit. A machine the size of a single-car garage, a scrolling arm much like the paper printer on your desk scrolling back and forth, added successive layers of carbon fiber-infused plastic to build the vehicle up micron by micron. The vehicle, called the Strati with a top speed of 25 miles per hour, took 44 hours to print. An electric battery, motor, suspension and wheels were added to complete it. It was an engineering marvel. Futurists at the time projected homes, cars, televisions and nearly another other durable product could be manufactured in this new, innovative form — additive manufacturing. But like most shiny new inventions, the hype has subsided and four years later, 3-D printed cars aren’t much closer to mass production. Yet the industry is blossoming as it’s moved further along the hype cycle from the peak of inflated expectations toward the plateau of productivity. 3-D printing machines are nearly commonplace in manufacturing plants — at the 2019 Detroit auto show, Ford Motor Co. said it would begin using 3-D manufactured parking brake brackets for the Ford Mustang GT500, auxiliary plugs for the F-150 Raptor and lever arm service parts for the Ford Focus — and it’s building big business in metro Detroit. EOS North America in Novi, a subsidiary of Germany’s EOS Holding GmbH, manufactures and sells around 1,000 3-D printing commercial manufacturing machines annually, a far cry from its meager beginnings 30 years ago. “We were not an overnight success,” said Glynn Fletcher, president of EOS North America. “It took 20 years to sell the first 1,000 machines and another five years to sell the second 1,000. Now we’ve ridden the hype cycle and are selling more than that a year.”

SEE JAIL, PAGE 21

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SEE 3-D PRINTING, PAGE 21

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

Enbridge ship on way to Line 5 testing project

A European vessel that specializes in geological investigation in turbulent waters departed Friday from Detroit for the Straits of Mackinac for a three-month mission to drill into rock formations below Lake Michigan as part of Enbridge Energy’s project to bury its controversial Line 5 oil pipeline. Enbridge brought the Norwegian-built Highland Eagle into the Great Lakes from the Irish Sea to drill 18 4-inch bore holes 100 to 200 feet deep into the bedrock below the environmentally sensitive waterway connecting Lakes Michigan and Huron as pipeline engineers chart a course for a four-mile tunnel 100 feet below the lakebed. The 236-foot-long vessel will spend 72 days on the lake drilling for bedrock core samples that will dictate the tunnel design, said Amber Pastoor, Enbridge’s Line 5 tunnel project manager. The Calgary-based oil pipeline giant is spending $35 million on geotechnical and pre-engineering work — more than half of which is tied up in the Highland Eagle’s work — this summer and fall as it seeks to build a tunnel within five years, Pastoor said.

“Conducting this geotechnical analysis of the Straits this summer is critical to design of the tunnel, the design of the tunnel boring machine, the regulatory applications we’re going to make and, ultimately, the timeline in which we can get the tunnel completed,” Guy Jarvis, executive vice president for liquids pipelines for Enbridge, said last week. Built in 2003, the Highland Eagle is a vessel used in the seas surrounding the United Kingdom that contains computer-controlled dynamic positioning, allowing the ship to remain in nearly the same position — down to a sway of less than 5 inches — while a mid-deck drill cuts into lakebed hundreds of feet below. The Straits of Mackinac reach depths of 270 feet in the area west of the Mackinac Bridge where the Highland Eagle will be drilling for rock samples, Pastoor said. The Enbridge team will begin the geotechnical drilling just weeks after Attorney General Dana Nessel sued the company in a bid to stop the flow of oil through Enbridge’s existing 66-year-old twin underwater pipelines, citing concerns about the potential for a disastrous oil spill. Enbridge has taken its own legal action, seeking a court order that validates its deal with former Gov. Rick Snyder’s administration to build the tunnel.

CLASSIFIEDS

LARRY PEPLIN FOR CRAIN’S DETROIT BUSINESS

Enbridge Energy has brought the Highland Eagle to the Great Lakes from the Irish Sea to conduct geotechnical drilling for bedrock in the Straits of Mackinac.

Whitmer rejects selling pension bonds to free up road cash

Gov. Gretchen Whitmer is not interested in a plan floated by west Michigan business leaders to sell $10 billion in bonds and pump the money into the state’s school employee pension system to free up cash to fix the state’s roads. “I think that this is an idea maybe retrieved out of Gov. Snyder’s trash can,” Whitmer said last week at an

event in Detroit promoting skilled trades. “This was something that was floated, and he rejected because it was not a good idea. And any solution that comes at the cost of educating our kids to fix roads is not a real solution.” Former Gov. Rick Snyder routinely rejected financial proposals to add to the state’s debt, including selling infrastructure bonds to jump start road construction and counter a decline in pavement conditions of state and

OPINION

OTHER VOICES

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RUMBLINGS

WEEK ON THE WEB

local roads that occurred during his eight years in office. Dennis Muchmore, Snyder’s first chief of staff, said he couldn’t recall when a pension bonding plan was floated to Snyder. But he does recall “it was pretty quickly dismissed.” In the Legislature, Senate Majority Leader Mike Shirkey is advancing the idea of issuing bonds to pay down the unfunded pension liability of the Michigan Public School employees’ Retirement System, lock in a longterm repayment schedule and free up nearly $1 billion that could be diverted to roads.

New track laid at Port Huron-Sarnia tunnel

Crews last week finished laying new track in the international rail tunnel joining Port Huron and Sarnia, Ontario, after a derailment resulted in a 13,700-gallon sulfuric acid spill and halted trade through the major Michigan cargo passage. The first train successfully cleared the tunnel last Tuesday afternoon. New track was laid for the whole span of the tunnel and the spilled sulfuric acid has been removed from the site or neutralized.

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HEALTH CARE

Beaumont’s insurance addition changes landscape

LOCAL BUSINESS

COURTS

Kefallinos paid $300,000 to settle housing discrimination lawsuit

By Jay Greene jgreene@crain.com

By Kirk Pinho kpinho@crain.com

Beaumont Health’s proposed acquisition of Summa Health in Ohio creates the potential for a new major player in managed care among Michigan’s hospital companies. For years, Beaumont executives have had their minds set on purchasing a managed care organization that would allow it to negotiate direct contracts with employers and doctors, and also sell insurance directly to patients. The deal would put Beaumont on a more even field with Michigan rivals Henry Ford Health System, Spectrum Health, Sparrow Health System and McLaren Health Care Corp., which own insurance companies and use them to manage patient care costs and reduce hospital readmissions.

A controversial Detroit landlord and real estate investor paid $300,000 early this year amid allegations of housing discrimination against people with children in violation of federal law. Dennis Kefallinos, in federal court documents, denies running afoul of fair housing law — and says he regularly rents to people with children. However, he agreed to the $300,000 consent order with the nonprofit Fair Housing Kefallinos Center of Metropolitan Detroit in January after more than two years in court. One-quarter ($75,000) of that created a fund that pays up to $2,500 each to people found to have been discriminated against, according to the order filed in January. Another $124,265 in damages was awarded to the center to further its mission, plus about $100,000 in attorney fees.

Need to know

 Beaumont Health signs letter of intent to acquire Ohio-based health system, insurer  How soon will Beaumont use Summa Health’s insurance subsidiary to contract with employer, payers in Michigan?  SummaCare has 46,000 covered lives in several health plans and third-party administrator expertise that Beaumont covets

Last week, Southfield-based Beaumont signed a letter of intent to acquire Akron, Ohio-based Summa Health, a deal that would add four hospitals, $1.4 billion in revenue and a health insurance operation to Beaumont as a wholly owned subsidiary. Officials for the health companies declined to disclose closing costs for Beaumont, but financial statements filed by Summa for 2018 indicate that a 30 percent investment by Cincinnati-based Mercy Health was valued at $250 million. Summa has listed total assets of $1.92 billion and total liabilities of $903.4 million, indicating Beaumont would gain up to $1 billion in assets from the transaction. Under the terms of the agreement, which is considered a merger, Summa’s assets would be Fox combined with Beaumont’s at the time of closing. Summa would become a wholly owned subsidiary of Beaumont. After the assets are combined, Beaumont would “write a check” to pay Summa’s minority owner Mercy Health the balance owed. If all regulatory and financial hurdles are met, Beaumont CEO John Fox said he hopes the merger can close this fall, or at least by the end of the year. It would be the first purchase of a health care company outside of Southeast Michigan for Beaumont and one of only a few outside of the state by a Michigan-based health care company. SEE BEAUMONT, PAGE 18

IT’S GROWING SWIMMINGLY Jenny and Chris McCuiston of Goldfish Swim School.

 Lawsuit alleged his properties refused to rent to people with children in violation of federal law  Consent order calls for $300,000 to go to nonprofit Fair Housing Center of Metropolitan Detroit  Second unrelated occupancy lawsuit ends with appeals court win for Keffalinos

JOHN SOBCZAK | LORIEN STUDIO FOR CRAIN’S

Troy-based Goldfish Swim School lures franchisees with model of rapid expansion By Kurt Nagl | knagl@crain.com

Need to know

oldfish Swim School’s pond has become much bigger than its owners envisioned when they opened their first location in 2006. What started as a small business in Birmingham teaching 500 kids each year to swim has ballooned into a $150 million franchise operation with new locations surfacing around the country and in Canada. The Troy-based company seems to have struck gold with its model of swim lessons focused on making kids feel comfortable.

 Started as small business in Birmingham; expanded to 88 franchised locations

Need to know

 Company on track to hit $150 million in systemwide revenue this year  It aims to hit $385 million in revenue across 260 locations in five years

our kids if they wanted it,” said Chris McCuiston, CEO of Goldfish Swim School Franchising LLC. He and his wife, Jenny, who swam for the University of Arizona, founded the company in 2006 after becoming discouraged over the lack of swim lesson options for their kids. “Our expectations were “I thought maybe four or five loca- reset very, very quickly.” SEE SWIM, PAGE 20 tions and call it a day — give it to

Court documents also reveal that Kefallinos was under federal investigation by the U.S. Department of Justice as part of the case. In a February 2018 email, Luttrell Levingston, an assistant U.S. attorney, wrote that “the United States has an open investigation related to some of the same claims that are at issue in the current litigation.” “Our office did have an investigation relating to the same claims that were alleged in the private civil lawsuit but that investigation has since been closed,” Gina Balaya, a spokeswoman for the DOJ in Detroit, said in an email. “The resolution reached in the private lawsuit contains terms that we would have sought if we had actually filed suit.” However, Kefallinos did notch a key win in state appeals court last month when the court upheld a summary dismissal of a 2014 class-action lawsuit brought against him by dozens of current and former tenants who said they leased apartments or lofts from Kefallinos when he knew he had no certificates of occupancy for any of the buildings and that there were safety hazards. SEE SETTLE, PAGE 20

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Sanford Nelson plans to tear this Eastern Market building down, although a timeframe for that and what will replace it have yet to be determined. He’s inviting public input as part of the process.

Eastern Market building will be torn down; what’s next is TBD A property along Eastern Market’s main drag is not long for this world. However, just how long remains for what Sanford Nelson KIRK refers to as PINHO “Building No. 1” at 2701 Russell St. is not known. Nor is what will take its place. But Nelson — who has sparked controversy and debate in the city’s food district since starting a real-estate buying spree more than two years ago with the $1.3 million purchase of the 2701 Russell property — and his investors say it’s time to turn over a new leaf. One part of that includes inviting public input on what should replace the Russell Street building, which Nelson says is not structurally sound. Nelson, the son of serial entrepreneur Linden Nelson, says those interested can email hello@firmdet.com with the subject line “2701 Russell Street” and offer their suggestions. “We haven’t given the community the opportunity to engage and give input on how to preserve and renew Eastern Market, and that starts now and we want to kick it off with this property,” Nelson said, sitting at a picnic table in a new park area with art installations, a mural and four topiary installations: a dragon, a horse, an elephant and a bear. “We want your input and here is how you can give it. We plan to host meetings and we want to listen.” Last week, I sat with Nelson and Marvin Beatty, who is among Nelson’s investment partners, in the park just north of the building they own that houses Bert’s Warehouse. (Bert Dearing, the mainstay’s owner, stopped by to say hello to his landlords in the park area. “Three months ago, this was an eyesore,” he said of the property. Nelson and Beatty said it cost more than $100,000 to convert it into the new space.) It’s the site that had been targeted for new mixed-use development with 79 units by Joey Jonna of Birmingham before Nelson bought it as part of his spending spree that has resulted in a roughly 20-building, 250,000-squarefoot Eastern Market real estate portfolio. The property that Nelson’s Detroit-based Firm Real Estate wants to

demolish is actually four buildings, including one that houses Mike Coney Island. Mike wouldn’t say much about his plans when I talked with him briefly last Tuesday as he cooked for a patron, but he said the space has been a restaurant, although not under his ownership, for decades. “I plan to close the restaurant and start a new business somewhere else,” he said in a text message later that afternoon, noting that he “was busy and couldn’t really talk.” “I want to be out of the restaurant business and do something different. This is my own decision and has nothing to do with being forced to close. I have had great communications with the Nelsons. They treat me fair.” There are three buildings that line Russell Street and one that has Division Street frontage and that spans north to an alley. Nelson says the four foundations are in poor condition, and a wall is buckling. “Not all four buildings were built at the same time, but they are all very old. You have four different foundations that are all compromised. They have varying degrees of deterioration,” he said. “It would be one thing if it was one foundation in one building. You could repair that. But here, you have basement in parts and not in the other.” Beatty said that whatever takes its place will be done deliberately and with input from the community. “We would much prefer to structure whatever we do with a plan, not just throwing shit against a wall and trying to figure out how people are going to react to it,” he said. “For us, the best thing to do is to plan something, to structure something that we think will work for the entire community.” What ultimately ends up at that site will be the byproduct of lots of discussion and ideas, Beatty said. “By that time (that community meetings start), we’ll have some conceptual understanding or conceptual idea of what we want to put here. Like any development, it’s like a horse that started out before the committee and ended up as a camel,” Beatty said. Indeed. Nelson’s tenure as a landlord in Detroit has been bumpy to date, almost a year after I first wrote about him. Concerns about rising rents have prompted backlash over fear that the eclectic food district will lose some of its identity as a go-to spot for affordable space for artists and small businesses. Several have closed or are

leaving under Nelson’s ownership, including Russell Street Deli and Mootown Ice Cream & Dessert Shoppe LLC, but he is also bringing in new restaurants, like Jose’s Tacos. He said he is aware of the concerns, as well as some of the criticism and name-calling he has taken in the media and elsewhere, including a meme featuring Photoshopped chain restaurant logos onto the key Russell Street building that houses/housed Supino Pizza/Mootown/Russell Street (to close in September)/Zeff’s Coney Island. For Firm Real Estate, he says, “renewal” in Eastern Market “is when you are building new construction and when you are attracting new businesses to make sure that it is within the character that makes Eastern Market unique. It’s not chain restaurants.” I made a remark about the meme. “Well, I wonder, 10 years from now, when those (chain) businesses are not in those buildings, what will the fans of those memes say? But I cannot predict the future. It’s building buildings that fit within the scale and feel of the market,” Nelson said. He is just one of a new corps of landlords swooping into Eastern Market, but he has by far attracted the most attention even though others have done nothing of note with their properties for a variety of reasons. Others include Detroit developers and economic development professionals Roger Basmajian and George Jackson and New York City-based developer ASH NYC, replacing the street-level business operators in Eastern Market that traditionally owned their own properties (and sometimes others). According to Dan Carmody, president of Eastern Market Partnership, some existing businesses have expressed concerns about rent increases as the new landlord crop pours money into improving the district’s older buildings. Part of that concern arises because the space has been comparatively inexpensive for decades, Carmody said in October. Nelson said that eight of his buildings are currently under renovation, and that work on the Supino/Russell Street Deli/Mootown/Zeff’s building should be done in about a month. Nelson has said that rents in his properties will be “market rate” and previously said that he plans on carving out affordable space for artists and food users as his overall vision for his portfolio progresses.

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OPINION COMMENTARY

Duggan’s credibility at stake amid questions

usinesses from across the planet have invested billions of dollars in Detroit in recent years with confidence in the integrity of Mayor Mike Duggan and his administration. That integrity now has doubts swirling about it. For months, unanswered questions have lingered about Duggan’s relationship with Sonia Hassan, a Wayne State University doctor who founded a program focused on improving prenatal health of Detroit women and lowering the city’s high rate of infant mortality. It’s a worthy cause. But the Democratic mayor can’t use that goodwill as a shield — at least not forever. Duggan’s administration gave $358,000 to Wayne State for Hassan’s Make Your Date program and reportedly made efforts to line up other donors, including The Carls Foundation in Bloomfield Hills. His office has given contradicting answers about the fundraising efforts. And both Duggan and Hassan have refused to comment on whether they had a relationship that was anything other than professional before, during or after the period of time in which the mayor’s administration forked over a six-figure grant to Hassan’s program (from which she does not draw a salary). “I’m never going to talk about my personal life, as you well know,” Duggan told me at a news conference in April. On Friday, the Detroit Free Press revealed that someone within the Duggan administration ordered emails related to fundraising for Hassan’s program to be deleted — just as the newspaper was preparing to publish an investigation into the mayor’s close ties to Hassan and the program. The newspaper’s source for the story was Kennedy Shannon, the former assistant director of Duggan’s Office of Development and Grants. Shannon was fired June 1 for falsifying her time records and “a chronic disciplinary problem,” said Lawrence Garcia, the city’s corporation counsel. “She never made any claim about emails or whistleblowing or whatever until after she had been suspended and she knew that she was getting into trouble for falsifying time records,” Garcia told Crain’s. “Her saying that she was disciplined for being a whistleblower, that’s just wrong.” Garcia confirmed Friday the emails were deleted and were later recovered by Chief Financial Officer Dave Massaron and Chief Development Officer Ryan Friedrichs. “As soon as people here in the administration found out that there was an issue about missing or deleted emails, they went out and got all of the emails,” Garcia said. “So there’s no unaccounted for emails now.” It’s a complicated situation. Nobody has alleged that the order to delete the emails came from the mayor. This is all now part of a probe by the

CHAD LIVENGOOD clivengood@crain.com

city’s Office of Inspector General, and the mayor’s attorney says Duggan can’t comment because of the ongoing investigation. Kennedy’s allegations also caught the attention of Attorney General Dana Nessel, who ordered her criminal division to reopen a review of the claims that someone higher up in Duggan’s administration ordered an email purge. “Our criminal division was going to stand down and when Dana heard about it she said, ‘Hell no, we’re taking a look at it ourselves,’” Nessel spokeswoman Kelly Rossman-McKinney said Friday. These investigations raise a cautionary flag for any businessperson looking to invest in Detroit right now. While Duggan can claim he can’t talk about issues while the OIG is investigating, sooner or later he’ll have to clear the air about Hassan so the public can judge whether her organization got favorable treatment or not. The mayor is entitled to have relationships with whomever he wants. His wife, Lori Maher, filed for divorce in May after 32 years of marriage. Where lines are crossed is whether a relationship between Duggan and Hassan was the motivating factor in a specific public policy dictate from the mayor to his underlings to use taxpayer resources to both raise money for Hassan’s program and give $358,000 of tax dollars to Make Your Date. The public doesn’t know the answers to that question, because neither the mayor nor the doctor are talking about it. And it will dog his administration until it is answered. As a former Detroit Medical Center CEO, Duggan’s data-driven and results-demanding management of city government restored corporate confidence in investing in Detroit. Global business giants such as Ford Motor Co. ($740 million), Fiat Chrysler Automobiles ($2.5 billion), JPMorgan Chase & Co. ($200 million) and Google’s Waymo ($13.6 million) as well as regional players such as Dan Gilbert’s Quicken Loans, DTE Energy Co. and Chemical Bank have invested in Detroit with confidence that they can trust Duggan and city government after the corrupt Kilpatrick years and the spiral into bankruptcy. In Duggan, they trust. But until these questions are answered, that confidence could very well be in jeopardy. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

USMCA ‘vital’ to small-business growth

hen I was lieutenant governor of Michigan, I saw firsthand the importance of trade with our North American neighbors. Trade deals such as the North American Free Trade Agreement have opened up markets, supported hundreds of thousands of jobs, and made Michigan’s economy stronger and more diversified. In 2017, 338,300 jobs in our state were supported by trade with Canada and Mexico. In the same year, $39.1 billion in Michigan goods and services were exported under NAFTA. Free trade with our neighbors has allowed our auto industry to compete better with China using North American supply chains, including many Michigan small businesses. It increased innovation and productivity and improved American auto competitiveness. Our agricultural sector also has thrived with free trade, with Michigan farms accounting for almost $1.1 billion in exports yearly. Now, as the president of the Small Business Association of Michigan, I have heard from our members how free trade has been absolutely vital to the well-being and long-term success of their businesses. Under NAFTA, small businesses all across this country have seen incredible growth and greater opportunities to expand. 75.4 percent of exporters to Canada and 72.7 percent of exporters to Mexico have fewer than 50 employees. The number of exporting firms has also shot up dramatically since NAFTA’s ratification — an 81.4 percent increase to Canada, and a staggering 365.5 percent increase to Mexico. This increase has been a growth

OTHER VOICES Brian Calley

It is vital to our state and to our small businesses that free trade remain uninhibited. engine for small businesses who now have access to these incredibly profitable export markets. Here in Michigan, where our small businesses employ about half of the state workforce, small business growth drives a thriving economy for all workers and employers. It is vital to our state and to our small businesses that free trade remain uninhibited. Which is why Congress needs to pass the United States-Mexico-Canada Agreement so that we can maintain the trilateral deal and build upon the success started with NAFTA. This new deal modernizes NAFTA through market expansion and the inclusion of provisions designed to help businesses, including small businesses, compete in the 21st century economy. The USMCA includes the first small-business-specific chapter in a U.S. trade agreement. It establishes a small-business committee comprised of government officials from each

country that assists small businesses in boosting their exports and reaching new markets. The new deal also cuts red tape at the border, decreasing costs and streamlining paperwork that often hurts small businesses as they don’t have the manpower to navigate through the complex regulations. The agreement will also enforce new intellectual property provisions that will bolster innovation and support small businesses engaging in digital trade. Strengthening intellectual property protection is vital for small businesses, as they produce 16 times more patents per employee than the average large firm. And new e-commerce rules prevent tariffs on digital products and raise the minimum cost of shipments subject to taxes through online sales. This will allow Michigan small businesses to fully participate in our increasingly digital 21st century economy. I strongly urge Congress to pass USMCA. Small businesses in Michigan and around the country rely on free trade for their livelihood, and they eagerly await the additional growth opportunities that the agreement will bring. Former Lt. Gov. Brian Calley is president of the Small Business Association of Michigan.

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Biostar Capital expands VC fund to $91 million By Tom Henderson thenderson@crain.com

BioStar Capital Partners LLC, a venture-capital firm in Petoskey that focuses on health care investments, plans to announce Monday that is has closed on a funding addition to its BioStar Ventures Fund III LP, a $68.8 million fund raised in 2015. The company wanted to raise an additional round to allow it to make further investments as needed in the 15 portfolio companies in its third fund. BioStar had targeted an additional $20 million but was able to close fundraising at $22 million and bring the fund’s total to $91 million. Louis Cannon, the VC firm’s senior managing partner and a heart surgeon who is president of the Cardiac & Vascular Research Center of Northern Michigan in Petoskey, said one use of the adCannon ditional funding will be $1 million for what is termed a PIPE investment in Waltham, Mass.based Corindus Vascular Robotics Inc. (NYSE: CVRS), a portfolio company BioStar previously invested $5 million in. Other money may also be used to invest in new companies. “We’ve got some really good deal flow,” said Cannon. PIPE stands for a private investment in a public equity, which involves the selling of publicly traded common shares or some form of preferred stock or convertible security to private investors without having to go through a public offering in a stock exchange. Cannon said the investment will help Corindus evolve its telerobotics platform. In February, the company filed a submission with the U.S. Food and Drug Administration for permission to use its devices to do neurovascular interventions for stroke patients. The goal to eventually have doctors many miles away from a patient, through the assistance of a technician at a patient’s side, via telerobotics guide a catheter or a stent from an entry incision at the wrist to the heart. Cannon said a physician in India has already performed such a stent placement. Corindus began the year trading at 86 cents a share and has steadily risen, trading at $3.45 to begin trading on July 9. On July 30, Beaumont Hospital in Royal Oak is scheduled to make the first polymer aortic valve replacement in the world. It is made by another BioStar portfolio company, Salt Lake Citybased Foldax Inc., a maker of polymeric heart valves. In a story in Crain’s in 2016, Cannon said he had begun letting investors know that BioStar would soon start raising a fourth fund that he hoped would hit $250 million. The largest VC fund ever raised in the state was the $250 million announced in June by Ann Arbor-base Arboretum Ventures LLC, which also focuses on health care. When asked if this extension of $22 million gave BioStar flexibility to make new investments while it raises its larger fund, Cannon said that since the 2016 article, his attorneys have asked him not to comment on current fundraising or future plans for fear of violating U.S. Securities and Exchange Com-

A polymer mitral valve (left) and an aortic valve.

mission rules. BioStar has had several major events lately. On May 6, one of its portfolio companies, TransMedics Group Inc.

BIOSTAR

(NASDAQ: TMDX), announced its initial public offering had raised $104.7 million. The company, which is based in Andover, Mass., has developed tech-

nologies to preserve organ quality before transplanting for patients being treated for end-stage heart, lung and liver failure. In March, Kalamazoo-based Stryker Corp. (NYSE: SYK) announced it had bought one of BioStar’s portfolio companies, OrthoSpace Ltd. of Caesarea, Israel, for an upfront payment of $110 million and possible future milestone payments of $110 million. OrthoSpace’s technology helps repair severe rotator cuff tears in the shoulder. If milestones are met, Cannon said the return to his investors would be about 6.5 times the initial investment. In January, Kalamazoo-based Abla-

tive Solutions Inc., whose technology delivers dehydrated alcohol in small doses directly to the renal artery to block overactive signaling that leads to high blood pressure, raised a funding round of $77 million, the largest in state history for a medical-device company. BioStar was founded in 2003 by Cannon and Steven Almany, a heart surgeon who is director of the catheter lab at Beaumont Hospital in Troy and a partner of the Michigan Heart Group in Troy. The firm raised its first fund of $28.7 million in 2005 and its second fund of $38.4 million in 2010.

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C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // J U LY 1 5 , 2 0 1 9

FOCUS

TOP PRIVATE DINING ROOMS Bistro 82

Diamonds Steak and Seafood

A ROOM OF YOUR OWN

Otus Supply

Willow

Private dining rooms offer your team a change of pace â&#x20AC;&#x201D; and menu By Rachelle Damico | Special to Crain's Detroit Business

onsider skipping the in-office party this year. Metro Detroit offers many private dining rooms that offer co-workers a change of scenery. Aside from supporting local restaurants, off-site company events can help validate employees and boost morale. Our selection of metro Detroit options includes spaces of various sizes, cuisines and decor. Dine in a historic mansion, library or former church. Take employees to a local brewery, treat them to an upscale meal or sip cocktails on a private patio. Prices and food are subject to change by season and group size.

The Whitney

C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 1 5 , 2 0 1 9

220 Merrill

The Apparatus Room

Rich chocolate tones, 14-foot ceilings and soundproof sliding glass doors separate the room from the main dining area. For social or corporate events, the space offers independent volume, lighting and temperature controls, fireplaces and TVs for presentations. Capacity: 40 people seated Cuisine: Mainly contemporary American, including steaks, seafood and pasta Cost: Generally the food and beverage minimum is around $500-$3,000 depending on the day of the week Contact: afardell@theiconiccollection. com Address: 220 E. Merrill St., Birmingham

The Apparatus Room The industrial-chic space at the Detroit Foundation Hotel offers a private dining area with plush velvet curtains, leather-backed chairs and rustic wood tables. The menu is presented family-style and parties of 10 or more can enjoy a tour of the chef’s dinner menu. Capacity: Up to 30 guests Cuisine: New American fare with a seasonal menu that rotates daily and includes selections from local farms

ply

220 Merrill

Cost: $500 room charge for 12 or fewer guests Atwater Brewery

Contact: privatedining@detroitfoundationhotel.com Address: 250 W. Larned St., Detroit

Atwater Brewery The Game Room is Atwater’s most popular private space. Features include rustic original brick, barrel-aging beer, community-style seating and access to party games like cornhole, giant Jenga and pingpong. Corporate entities are encouraged to inquire about tasting dinners and team building events. Capacity: Up to 60 guests Cuisine: Full catering menu available featuring beer-inspired American standards. Cost: $100 per hour with a three-hour minimum Contact: eventsdetroit@atwaterbeer. com Address: 237 Joseph Campau, Detroit SEE ROOMS, PAGE 10

C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 1 5 , 2 0 1 9

SPECIAL REPORT: TOP PRIVATE DINING ROOMS

Frame

ROOMS FROM PAGE 9

Bacco Ristorante Italian paintings, stone walls and a surrounding wine cellar are some of the decor touches found in Bacco’s three private rooms. AV equipment is available. Capacity: Up to 18 guests seated in the Tinello Room, 30 guests seated in the Grotta Room and 20 guests seated in the Cantinella Room Cuisine: Simple, fresh Italian food inspired by the regional traditions of Italy, including house-made pastas, meat, fish and vegetarian options Cost: There are no room rental fees. There’s a minimum food and beverage spend of $1,000 in the Tinello room, $1,800 minimum in the Grotta room and a $1,500 minimum in the Cantinella room. The minimum food and beverage spend is $4,000 for the entire space. Contact: (248) 356-6600 Address: 29410 Northwestern Highway, Southfield

BESA Located in Albert Kahn’s historic Vinton building, BESA offers two private dining rooms that include mid-century modern touches. Capacity: 36 seats in the lounge and 15 seats at the Chef’s Table Cuisine: Meat, seafood and vegetarian dishes Cost: No room rental fee. Food and beverage minimums vary depending on the day of the week and range from $1,600$5,000 Contact: (313) 315-3000 or besadetroit. com/contact Address: 600 Woodward Ave., Detroit

Bistro 82 A private room located on the top floor of the restaurant offers AV capabilities and a view of some of the restaurant’s finest wine offerings. Three private spaces are available. Capacity: 18 seated in the smallest room, 50 seated in the Lafayette Room,

60 seated in the Ultra-Lounge Cuisine: French-inspired plates and three-course pre-set menu items include meat, seafood, vegetarian and dessert options

BESA

Selden Standard

Cost: No cost for room rentals. Food and beverage minimums are between $750-$2,500 and over. Strolling stations are offered as well Contact: (248) 542-0082 or lschofield@ afbhospitalitygroup.com Address: 401 S. Lafayette Ave., Royal Oak

The Detroit Club The 1892 Romanesque Revival building houses intricately decorated rooms with vintage touches and paintings in elaborate frames. The historic 40,000-square-foot building underwent a multimillion-dollar overhaul less than two years ago. Capacity: 15-20 seats in the Fort Room, 70 seated in the Grand Ballroom, 100 seated in the Presidential Ballroom Cuisine: Executive Chef Kirk McKinney’s menu includes contemporary French items with an American flair inspired by cultures from around the world. Locally sourced produce, meats and lake fish, as well as globally sourced specialty ingredients Contact: (313) 338-3222 or thedetroitclub. com/#welcome Cost: Starting at $52 per person Address: 712 Cass Ave., Detroit

Diamonds Steak and Seafood Two private dining areas accommodate guests, including a space with glass French doors that open up to the main restaurant. Diners face floor-to-ceiling views of downtown Royal Oak. Capacity: 40-50 guests Cuisine: A pre-set menu with seafood, meat and vegetarian options. Menu items include surf and turf and twin lobster tails Cost: $250 rental fee and set menu options between about $40-$80 per person Contact: (248) 291-5201 or diamondsroyaloak.com/banquets-and-private-dining Address: 100 S. Main St., 1st Floor, Royal Oak

Detroit Club Fort Room

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Frame Located within Latido @ Joebar, Frame offers natural lighting, a full-service bar and an open kitchen, if requested. Brick walls, minimalist furniture and elaborate light fixtures enhance the space. Capacity: Up to 50 guests Cuisine: South American ingredients and flavors. Popular appetizers include homemade empanadas and tuna ceviche. Entrees range from Peruvian brick chicken to shrimp stew. Custom pastries and cakes are also available Cost: No room rental fee. Food and beverage minimum vary depending on the date and number of guests Contact: Joebar@joebar.com Address: 23839 John R Road, #1, Hazel Park

Ike’s Restaurant

Ike’s Northern Room

Central to Van Dyke Avenue in Macomb County, Ike’s offers many private dining rooms that include round table seating, ivory-linen tablecloths and a full-service bar in some rooms. Capacity: 20-40 guests in the Western Room and 40-80 guests in the Southern Room and Northern Room. The Ballroom can accommodate 85-100 guests Cuisine: Lebanese-focused, with substantial American, Greek and Italian options. Appetizers include baba ghanouge, hommus, spinach pies and tabbouleh Cost: Starting around $14 per plate, with room rental fees

Address: 300 River Place Drive, Detroit

Selden Standard

Cuisine: Small plates and seasonal menu items with internationally influenced New American cuisine Cost: $35 per person for lunch or brunch, around $70 per person per dinner. Room fees may apply Contact: events@seldenstandard. com or (313) 438-5005

Cuisine: A variety of chicken, fish and vegetarian items Cost: $25-$27 per person

Capacity: Single room rental or rental of the entire first floor 70-160 guests, second floor up to 98 guests, third floor up to 100 guests. The entire mansion can be rented for up to 350 guests

Cuisine: From-scratch menu items inspired by the Great Lakes region, with items from local purveyors

Cuisine: Upscale New American cuisine, including beef wellington, filet mignon, twin lobster tails and duck breast

Cuisine: A seasonal set menu Cost: $50-$85 per person based on the season

Tier 1 Metropolitan Ranking Real Estate Law and Real Estate Litigation 2019

The Whitney

Capacity: 25 seated in the library, 45 seated in the extended library, 35 seated in the hangar, 75 seated in the patio and hangar and 50 seated in the Parliament Room

Capacity: 16 seated in the Heritage Room, 22 seated in the Kahn Room, 30-40 guests seated in the Renaissance Room, up to 70 guests seated in the Stroh Room, 300 seated in the Stroh River Place Atriums, 100 seated in the East Patio/Garden Terrace and 40 seated in the semi-private Grill Room

Corporate transactions

Capacity: 40

The historic 1894 Midtown mansion offers upscale cuisine among its multiple dining rooms, dessert parlor and garden. The former home belonged to David Whitney Jr., the wealthiest man in Detroit at the time.

The Rattlesnake Club offers many private dining options, including rooms that provide views of the city’s skyline or the Detroit River.

Real estate land acquisition, development, financing and leasing

Built in 1965, the brewery and restaurant offers house-made bread, cheese and bakery items and a selection of microbrews. A private dining room in the brick-lined restaurant offers a quiet space from the hustle-and-bustle of the city. Produce is grown on Traffic Jam’s roof and greenhouse.

Otus Supply offers a number of private dining options, including a library with a fireplace and a covered patio with an open-air mural. A multitude of AV options are available.

Rattlesnake Club

Traffic Jam & Snug

Address: 511 West Canfield St., Detroit

Address: 345 E. Nine Mile Road, Ferndale

Contact Kevin Macaddino at ksmacaddino@varnumlaw.com

Address: 3921 Second Ave., Detroit

Address: 38550 Van Dyke Ave., Sterling Heights

Contact: (248) 291-6160

In Your Corner.

Capacity: Up to 36 seated

Contact: (313) 831-9470

Cost: Varies depending on factors, including the date, room and food requests

Real Estate Experience

A minimalist black-and-white room lit with hanging Edison bulbs houses a wall of French glass doors that open up to a private outdoor space.

Contact: (586) 979-4460

Otus Supply

Rattlesnake Club

Contact: (313) 567-4400, Michelle@ rattlesnakedetroit.com or alina@ rattlesnakedetroit.com

Cost: $150-200 rental room fee depending on the date Contact: events@thewhitney.com, (313) 832-5700 Address: 4421 Woodward Ave., Detroit

Willow Located downstairs from SavannahBlue, Willow features a minimalist space with exposed brick walls. A private entrance, bar and restroom provides convenience for guests. Capacity: 40 seated comfortably Cuisine: a set menu that can be customized includes contemporary soul food dishes with Southern flavors Cost: The food and beverage minimum ranges from about $1,500-$5,000, depending on the date Contact: willoweventsreq@gmail.com or (313) 286-6898 Address: 1431 Times Square, Detroit

A F e e - O n l y We a l t h M a n a g e m e n t G r o u p

Michigan’s #1 Financial Advisor* Charles C. Zhang CFP®, MBA, MSFS, ChFC, CLU CEO and Founder

Charles was ranked #7 on Forbes’ list of America’s Top Wealth Advisors and is the #1 Fee-Only Advisor on the list.**

We Uphold a Fiduciary Standard 101 West Big Beaver Road 14th Floor Troy, MI 48084 (248) 687-1258 or (888) 777-0126

www.zhangfinancial.com Minimum Investment Requirement: $1,000,000 in Michigan $2,000,000 outside of Michigan. Assets under custody of LPL Financial, TD Ameritrade, and Charles Schwab *As reported in Barron’s March 8, 2019. Rankings based on assets under management, revenue generated for the advisors’ firms, quality of practices, and other factors. **As reported in Forbes September 13, 2018. The rankings, developed by Shook Research, are based on in-person and telephone due diligence meetings and a ranking algorithm for advisors who have a minimum of seven years of experience. Other factors include client retention, industry experience, compliance records, firm nominations, assets under management, revenue generated for their firms, and other factors. For fee-only status see NAPFA.org

C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 1 5 , 2 0 1 9

SPECIAL REPORT: WOMEN IN LEADERSHIP

Serena Johnson works as the director of Victim Services for Equality Michigan. ALI LAPETINA FOR CRAIN’S

She wanted to see change

Serena Johnson is making Michigan safer for LGBT communities By Rachelle Damico

Special to Crain's Detroit Business

Serena Johnson didn’t initially plan to work for an LGBTQ nonprofit. She began her career advocating for children and families who were victims of domestic crimes. Often, the crimes were serious. Sometimes, the victims were even deceased. She also saw discrimination, especially toward trans women of color. “Within the city of Detroit, the discrimination, poverty and crime towards trans women of color is horrendous,” Johnson said. “I wanted to see change.” Johnson now works as the director of Victim Services for Equality Michigan, which was founded in 1991 and aims to achieve equality and respect for all Michigan residents regardless of sexual orientation, gender identity or gender expression. Johnson hired the Detroit-based nonprofit’s victim services team, including Jeynce Poindexter, transgender victims advocate, and Genny Maze, lead victims advocate. Equality Michigan has an operating budget of $870,000 and a staff of four people, including the group’s executive director, Erin Knott. In her role, Johnson leads advocacy and support services to individu-

“I decided I wanted to work in a profession that supported change, both with widescale politics and also within my neighborhood and amongst my friends.” als who have been affected by violence, including from hate crimes. Services include helping victims through criminal or civil legal processes (such as filing personal protection orders) and supporting and filing complaints of discrimination with local, state and federal agencies. She also develops the curriculum for the nonprofit’s training sessions, which include workplace diversity training and understanding LGBTQ communities. What drew you to social work?

I was born and raised in Kansas City. When I was 14, my parents divorced and I moved with my mom to Detroit. As you can imagine, Kansas and Detroit are completely different envi-

ronments socioeconomically. I moved from the suburbs into the inner city, specifically Brightmoor. Once I was in the community of Detroit, I saw all the poverty, hardships and what life is like for many people today. I decided I wanted to work in a profession that supported change, both with wide-scale politics and also within my neighborhood and amongst my friends. My initial goal was to help create change with families, youth and children. A few jobs after I graduated, I became the first domestic violence victim advocate at the 36th District Court. That was the beginning of my real social work experiences, seeing those really tragic cases in the city of Detroit.

do you live?” I found out she was homeless. It was hard to find housing or a shelter for a trans woman of color. There weren’t any shelters that provided specific spaces for them. I was instructed to send her to the same place that we normally send our male probationers that need housing. I knew at that point I would probably never see her again. I gave her the address of where she was supposed to go. About two weeks later, I called her and went to do a home visit. Obviously, she never showed. Then the next step for me was to write a warrant, but that’s just continuing the cycle. This is someone who could have been provided more understanding, intercessional services.

Was there a particular case that stuck out to you?

What led you to Equality Michigan?

When I was at Michigan Department of Corrections, I had a client on my caseload who was a trans woman of color, which means that she was born a male and transitioned to female. When you’re a probation officer, your key duty is to know where your probationer is and where they live. Your goal is to keep the greater community safe. She came in and missed probably two important court dates. I asked her, “What’s going on; where

While working at MDOC, I saw a lot of the hardships members of the LGBTQ community had just with reporting (providing written documents to verify change in residence, employment, expenses and community service hours) and finding housing. This was especially true of trans women of color. I’d talk to my supervisors and other reporting officers about how they were placed (in housing). SEE JOHNSON, PAGE 19

The Johnson File

Education: Bachelor of Science in family studies, child and family development from Western Michigan University. Master’s degree in criminal justice and public safety from Capella University. Currently working toward a master’s in social work from Widener University. Career Ladder: Johnson has worked in advocacy and social work positions for more than 10 years. She began her career in 2008 at Orchards Children’s Services in Southfield, where, as a Family Reunification Worker, she advocated for children who were in the process of being reunited with their birth families. From there she moved to the 36th District Court in Detroit, where she assisted those with court cases with services that included providing housing and counseling referrals and informing them of their rights and court date procedures. Next, she worked as a parole agent for the State of Michigan Department of Corrections from 2013-2016. Her role involved coordinating services for the offender that included mental health treatment, substance abuse counseling, housing and employment. She left to join Equality Michigan in 2016. Current role: Director of Victim Services, Equality Michigan. Fun fact: A fan of bikram yoga, yoga performed in a 105-degree room. “It is my self-care that adds the most value to my life,” Johnson said.

C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // J U LY 1 5 , 2 0 1 9

CRAIN'S LIST: LARGEST MICHIGAN MANUFACTURERS

Ranked by 2018 revenue

Top executive(s)

Employees Revenue Revenue Jan. 2019 Number of ($000,000) % Michigan/ plants 2018/2017 change Worldwide in Michigan Michigan plant locations

Ford Motor Co. 1 American Road, Dearborn 48126 (313) 322-3000; www.ford.com

Jim Hackett president and CEO

$160,338.0 $156,776.0

2.3%

46,000 NA

Dearborn, Flat Rock, Wayne, Woodhaven, Romeo, Sterling Heights, Livonia, Ypsilanti

Automotive

General Motors Co. 300 Renaissance Center, Detroit 48265 (313) 556-5000; www.gm.com

Mary Barra chairman and CEO

147,049.0 145,588.0

1.0

52,027 167,440

Automotive

FCA US LLC 1000 Chrysler Drive, Auburn Hills 48326-2766 (248) 576-5741; www.fcagroup.com

Michael Manley B CEO

81,659.0 C 79,183.3 D

3.1

36,835 92,722

Bay City, Brownstown Township, Detroit/ Hamtramck, Flint (3), Grand Rapids, Lansing (2), Milford, Lake Orion, Pontiac, Romulus, Saginaw, Swartz Creek, Warren, Ypsilanti, Wixom Detroit (3) Sterling Heights (2), Trenton (2), Warren (2), Dundee

Dow Inc. E 2211 H.H. Dow Way, Midland 48674 (989) 636-1000; www.dow.com

James Fitterling CEO

49,852.0 44,772.0

11.3

5,300 NA

Dow Michigan operations, Bay City, Auburn Packaging, infrastructure and (Dow Central Campus), Auburn Operations, consumer care Freeland

Lear Corp. 21557 Telegraph Road, Southfield 48033 (248) 447-1500; www.lear.com

Raymond Scott president and CEO

21,148.5 20,467.0

3.3

3,645 169,000

Rochester Hills, Detroit, Traverse City, Roscommon, Farwell, Flint, Taylor, Southfield (HQ), Highland Park, Sparta

Automotive supplier

Whirlpool Corp. 2000 N. M-63, Benton Harbor 49022 (269) 923-5000; www.whirlpoolcorp.com

Marc Bitzer chairman and CEO

21,037.0 21,253.0

-1.0

3,472 91,870

None

Household appliances

Magna International of America Inc. 750 Tower Drive, Troy 48098 (248) 631-1100; www.magna.com

Jim Tobin chief marketing officer

20,547.0 19,571.0

5.0

10,716 174,000

Adient plc 49200 Halyard Drive, Plymouth 48170 (734) 254-5000; www.adient.com

Douglas Del Grosso president and CEO

17,439.0 16,213.0

7.6

5,715 85,000

Holland, Brownstown Twp., Sterling Automotive parts supplier Heights, Plymouth Twp., Grand Haven, Battle Creek, Warren, New Hudson, Novi, Highland Park, Troy, Shelby Twp., Newaygo, Alto Twp., Kentwood, Auburn Hills, Grand Blanc Twp., Delta Twp., Delhi Twp. and Boyne City Detroit, Warren, Lansing, Battle Creek, Automotive Lakewood, Charlotte and Madison Heights

ZF North America Inc. 12001 Tech Center Drive, Livonia 48150 (734) 855-2600; www.zf.com

Franz Kleiner CEO

15,000.0 13,970.0

7.4

4,223 73,000

14,500.0 13,700.0

5.8

4,000 410,000

Company Address Rank Phone; website

1 2

Industry

Automotive

Fenton, Fowlerville, Livonia, Marysville, Lapeer

Automotive

St. Joseph, Kentwood

Automotive, industrial, consumer electronics

Mike Mansuetti Robert Bosch LLC 38000 Hills Tech Drive, Farmington Hills 48331 president (248) 876-1000; www.boschusa.com

Aptiv PLC 5725 Innovation Drive, Troy 48098 (248) 813-2000; www.aptiv.com

Kevin Clark president and CEO

14,435.0 12,884.0

12.0

NA NA

None

Automotive

Stryker Corp. 2825 Airview Blvd., Kalamazoo 49002 (269) 385-2600; www.stryker.com

Kevin Lobo chairman and CEO

13,601.0 12,444.0

9.3

NA NA

Kalamazoo, Portage

Health care

Kellogg Co. One Kellogg Square, Battle Creek 49016 (269) 961-2000; www.kelloggcompany.com

Steven Cahillane CEO

13,547.0 12,854.0

5.4

NA NA

Battle Creek, Grand Rapids, Wyoming

Food products

Samir Salman 12,563.6 F CEO, Continental, North America 12,966.6 region

-3.1

2,073 244,000

Continental Automotive Systems U.S. Inc. 1 Continental Drive, Auburn Hills 48326 (248) 393-5300; www.continentalcorporation.com/en-us

Auburn Hills, Brimley, Dearborn, Rochester Automotive Hills, Troy

Denso International America Inc. 24777 Denso Drive, Southfield 48033 (248) 350-7500; www.denso.com/us-ca/en

Kenichiro Ito, chairman and CEO, Denso North America

11,162.5 9,600.0

16.3

1,787 171,992

Battle Creek

Automotive

BorgWarner Inc. 3850 Hamlin Road, Auburn Hills 48326 (248) 754-9200; www.borgwarner.com

Frederic Lissalde G president and CEO

10,529.6 9,799.3

7.5

1,000 30,000

Cadillac, Livonia, Marshall

Automotive

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

Milind Pant CEO

8,800.0 8,600.0

2.3

3,000 16,000

Ada

Direct selling business

Masco Corp. 17450 College Parkway, Livonia 48152 313-274-7400; masco.com

Keith Allman president and CEO

8,359.0 7,642.0

9.4

850 26,000

Ann Arbor, Adrian, Novi, Brownstown, Lapeer

Home improvement, construction

American Axle & Manufacturing Holdings Inc. David Dauch chairman and CEO One Dauch Drive, Detroit 48211 313-758-2000; www.aam.com

7,270.4 6,266.0

16.0

4,057 22,756

Three Rivers, Auburn Hills, Fraser, Oxford, Royal Oak, Troy, Litchfield, Warren, Kingsford, Sterling Heights, Coldwater

Automotive supplier

6,372.1 NA

629 54,255

Auburn Hills, Pontiac

Automotive safety systems

Joyson Safety Systems (formerly Key Safety Systems Inc.) H 2025 Harmon Road, Auburn Hills 48326 (586) 726-3800; www.joysonsafety.com

Guido Durrer I global president and CEO

Want the full Excel version of this list â&#x20AC;&#x201D; and every Crain's list? Become a Data Member: CrainsDetroit.com/data This list of manufacturing companies is an approximate compilation of the largest such companies 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. Companies with headquarters elsewhere are listed with the address and top executive of their main Michigan office. Actual revenue figures may vary. NA = not available.

B Succeeded Sergio Marchionne as CEO on July 21, 2018 after Marchionne's death. C The 2018 revenue is based on Dec. 31, 2018, euro to dollars rate of 1.1492. D The 2017 revenue is based on Dec. 31, 2017, euro to dollars rate of 1.2002. The 2016 revenue is based on Dec. 31, 2016, euro to dollars rate of 1.0522. E DowDuPont split into three separate companies in 2019. The agriculture division is called Corteva Agriscience, the specialty products division is DuPont and the materials science division is Dow. F The 2018 revenue figures represent NAFTA sales of Continental AG, based on a Dec. 31, 2018, euro to dollars rate of 1.1492. The 2017 revenue figures represent NAFTA sales of Continental AG, based on a Dec. 31, 2017, euro to dollars rate of 1.2002.

G Succeeded James Verrier as CEO on Aug. 1, 2018. H A deal finalized in April 2018 resulted in a combined Takata and Key Safety company renamed Joyson Safety Systems. I Succeeded Yuxin Tang in June 2018. Tang had served as interim president. LIST RESEARCHED BY SONYA D. HILL

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FORUM

Brian Peters:

Healthy Michigan has room to get healthier.

Page 16

JULY 2019

MEDICAID

CHASING DOLLAR BILLS: MEDICAID COST-SHARE PAYMENTS FAIL TO MATERIALIZE

By Chad Livengood clivengood@crain.com

hen Michigan’s Legislature authorized expansion of the state’s Medicaid insurance program in 2013, the conservative Republican majority required working low-income adults enrolled in the welfare program to make small contributions toward the cost of their taxpayer-funded health care coverage. Depending on income levels, the fee schedule prescribed by lawmakers called for $2 or $4 copays for seeing a doctor or going to an urgent care facility, $3 or $8 charges for visiting a hospital emergency room for a non-emergency medical need and $50 or $100 charges for hospitalizations. But the so-called “skin in the game” contributions have largely failed to materialize as the authors of the law intended. During the first five years of the Healthy Michigan program, just onethird of the copays and contributions owed by Medicaid recipients have been collected, according to the most recent monthly report on the collections. About $23.8 million had been collected through February, a fraction of the $70.7 million owed since the program began in 2014, according to the May report from Maximus, a Reston, Va.-based firm that’s been contracted by all Medicaid managed care companies to collect copays and contributions from Healthy Michigan enrollees. SEE NEXT PAGE

ILLUSTRATION BY RETROROCKET

Th cate gram rule twee cent the Th teet bitu the cent “I exac owe dire Tran “Thi coll who Se Jack Hea the buti erty “H ing frus thin H $4.7 say t

C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 1 5 , 2 0 1 9

n About $23.8 million had been collected through February, a fraction of $70.7 million owed. The low collection rate has alarmed advocates and administrators because starting next year a new rule kicks in requiring enrollees earning between $12,490 and $16,612 a year to pay 5% of their income toward the cost of their health insurance.

The new cost-share requirement has more teeth than the current rules — up to 30,000 habitually low-income adults could be tossed off the Medicaid rolls for failure to fork over 5 percent of their income.

ILLUSTRATION BY RETROROCKET

The low collection rate has alarmed advocates and administrators of the Medicaid program alike because starting next year a new rule kicks in requiring enrollees earning between $12,490 and $16,612 a year to pay 5 percent of their income — $600 to $800 — toward the cost of their health insurance. The new cost-share requirement has more teeth than the current rules — up to 30,000 habitually low-income adults could be tossed off the Medicaid rolls for failure to fork over 5 percent of their income. “It’s going to be the same problem, maybe exacerbated some because it’s a higher amount owed,” said Marianne Udow-Phillips, executive director of the Center for Health and Research Transformation at the University of Michigan. “This is not unlike the problems hospitals have collecting deductibles and copays from people who are insured and employed.” Senate Majority Leader Mike Shirkey, the Jackson County Republican who authored the Healthy Michigan legislation while serving in the House, acknowledged that requiring contributions from Medicaid recipients living in poverty “hasn’t jelled” as he envisioned it would. “Health plans have been like, ‘We’re not going to chase $2,’” Shirkey said. “It’s one of my frustrations of what I still think was the right thing to do at the time.” Health insurance companies that manage the $4.74 billion Healthy Michigan Medicaid plans say the cost of chasing low-dollar copays is near-

ly canceled out by the cost of paying Maximus to collect what amounts to bad health care debt. For the 2018 fiscal year, United Healthcare Community Plan of Michigan was owed $2.2 million in cost-share payments from its Healthy Michigan members, health plan CEO Dennis Mouras said. Maximus collected about $600,000 — 27 percent — and charged United Healthcare $485,000 — 80 percent of the amount of copays recovered in the collections process, Mouras said. “If you were looking at this from a pure business standpoint — the cost-benefit analysis — you would not do this,” said Udow-Phillips, a former state human services department director. Health insurers have been required to base their managed care rates assuming the entire copays will be recovered. “Paying out over 80 percent of what’s collected … that’s been tough on us,” Mouras said. The $115,000 United Healthcare netted from copays after the collection company’s charges amounts to a 5 percent recovery of the cost share payments owed to the health plan. “I think the intentions were good, but there’s just not an incentive for folks to actually pay that cost share,” Mouras said.

‘Administratively burdensome’ Health insurance companies that administer Medicaid to the 680,000 low-income adults in Healthy Michigan would like the Legislature to rethink the copays altogether, said Dominick

Pallone, executive director of the Michigan Association of Health Plans, which represents 10 of the 11 Medicaid managed care companies. “We’re tasked with trying to teach a public policy lesson to enrollees who just don’t have the resources to have skin in the game,” Pallone said. Pallone said four of his member health plans combined paid Maximus $2.05 million in the 2018 fiscal year to recover $2.26 million. Under their contracts with the state Department of Health and Human Services, the Medicaid health plans are forced to pay the collections firm to recover as much as possible because their payments from the state assume they’ll be made whole by the Medicaid recipients, Pallone said. “Almost all of what we are collecting is needed to cover the costs of the collection — and capitated rates to health plans are required to be developed based on the impossible assumption that 100 percent of cost-shares are able to be collected,” Pallone said. The way the 2013 legislation set up collection of the copays for Healthy Michigan recipients runs counter to how normal private health insurance copays and deductibles are collected. Instead of doctors and hospitals collecting the copays at the point of use or through bills in the mail, the collections responsibility fell to the managed care companies and insurers administering the Medicaid program. Medical providers lobbied lawmakers and then-Gov. Rick Snyder against having to be re-

quired to collect copays and income-based contributions. Kevin McFatridge, a spokesman for the Michigan State Medical Society, said adding bill collection responsibilities to physicians who treat Medicaid patients would “not be conducive to a positive relationship” between the doctor and patient. “Furthermore, this could be seen as a way for health insurers to offload costs onto the providers, which they have already done so in cases such as prior authorization,” McFatridge said in an email. “A vast majority of prior authorizations are approved, yet the physician must invest in hours and resources to get the approvals to care for their patients. Prior authorizations do nothing more than drive costs and delay patient care.” In the private health insurance sector though, doctors or hospitals routinely write down small-dollar debts. “I don’t know too many health systems that would be diverting this level of resources to chasing down such small amounts of cost share,” Pallone said. “There’s a reason for that — you write down your losses and move on.” Some of the Medicaid health plans are spending additional money to educate Healthy Michigan enrollees on their responsibility to pay their MI Health account bills, said Kathy Stiffler, director for the state’s Bureau of Medicaid Care Management and Customer Service. But because low-income Medicaid recipients tend to be more transient, robo calls reminding them of their copays owed have been more successful than paper bills that can get lost in the mail, Stiffler said. “All of this is administratively burdensome. Nobody would question that,” Stiffler told Crain’s. “I don’t know that when the bill was originally approved (we knew) how complex it would become.”

‘Jeopardy’ looms The biggest test for the Legislature’s policy requiring Medicaid recipients to contribute to the cost will come in January, when the state’s third Medicaid waiver for Healthy Michigan takes effect — and the higher 5 percent of income contribution requirement kicks in. Under the third waiver, Medicaid recipients earning between 100 percent and 133 percent of the federal poverty line who have been on the program for more than four years could lose their coverage if they don’t pay. Approximately 30,000 Medicaid recipients who have been in the Healthy Michigan program for 48 months will be subject to the mandatory cost-share requirement next year, according to the Michigan Department of Health and Human Services. Adults in this income bracket are currently required to contribute 2 percent of their income toward the cost of their health insurance. But there’s been no penalty for not paying. “The jeopardy will become real,” Pallone said. “That (33 percent) collection rate inherently won’t improve, it will get worse.” Medicaid recipients earning less than 100 percent of the poverty level — less than $12,490 annually — will still be required to pay copays for their health care needs. Mouras, who oversees United Healthcare’s Medicaid and Medicare Advantage dual enrollment plans in Michigan, said the threat of losing coverage might correct the inherent flaws in the existing cost-share requirement. “There will actually be some incentive or penalty” for not paying, he said. Though Shirkey said the cost-share requirement has “been my biggest disappointment” with the Healthy Michigan law, he’s not ready to get rid of it altogether. He said the responsibility falls on the Legislature to revisit the policy after a half-decade of being in effect. “We just don’t spend enough time on oversight,” Shirkey said. “We’re too frequently chasing the next bill.” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

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CRAIN’S FORUM | JULY 2019 ENERGY | AFFORDABILITY

MEDICAID | MENTAL HEALTH CARE

Shutting down Enbridge’s Line State funding is needed for 5 would cause already high F UP electricity rates to rise

ast month, Gov. Gretchen Whitmer convened an Upper Peninsula Energy Task Force and charged the group with drawing up a plan to ensure the region will have a ready supply of propane in the event that Enbridge’s Line 5 is decommissioned. For many Yoopers, the oil and gas pipeline that runs from Wisconsin to Ontario by way of the UP is currently the only source of energy they have to heat their homes through the region’s long, cold winters.

It doesn’t have to be that way. calculate how much money it was Ideally, the governor’s task force out and request that the Michigan will be a forum to work through Public Service Commission allow sustainable alternatives in a transit to raise the equivalent amount by increasing rates for customers parent process that puts the who remain. well-being of UP residents first. But just as UP households reliThey deserve to know that propane prices will not spike as they ant on propane cannot afford surdid during the record-shattering prise price spikes, UPPCO customwinter of 2013-2014, rising in some ELISE ers cannot afford to let our state’s parts of the UP to upwards of $5 a MATZ leadership take a wait-and-see apgallon from a little over $1. proach to their electricity bills. But in order to avoid unpleasant surprises Instead, the UP Energy Task Force must stemming from the decommissioning of the work to proactively discover how much UPline, task force members must also address PCO’s stranded costs would be and develop an issue that has the potential to increase a plan that minimizes the economic harm electricity costs for for the utility’s cussome UP residents: The fact that decommissioning tomers. Enbridge is one of the Line 5 could adversely affect The fact that debiggest customers of UPPCO customers is of commissioning Line 5 UPPCO, a small inves- immediate concern. However, could adversely affect tor-owned electric the fact that the loss of a single UPPCO customers is of immediate conutility that serves customer could significantly cern. However, the 52,000 customers impact ratepayers across fact that the loss of a spread over portions UPPCO’s service territory points to more systemic single customer could of 10 UP counties. significantly impact UPPCO supplies challenges for the utility, and electricity to several raises difficult questions about ratepayers across UPPCO’s service territoEnbridge pump sta- its future. ry points to more systions along Line 5’s path from where it enters the western UP temic challenges for the utility, and raises near Ironwood and continues southeast difficult questions about its future. Which is why I hope the task force goes a through Rapid River and then on to the step further and considers the possibility Straits of Mackinac. From the perspective of UPPCO, shutting that, in the long term, UPPCO should not be down the line would leave the utility’s inves- operated as a for-profit, investor-owned utiltors with stranded costs, which, under Mich- ity, but instead as a member-owned rural igan law, they are entitled to recover from electric cooperative. Parts of the UP with customers who remain in their service terri- similar service territory characteristics are served by cooperatives today. tory. Historically, UPPCO’s challenges have But as of June 1, 2019, UPPCO’s residential electricity rates were 68 percent higher than made it difficult to predict what the compathe Michigan average, and by far the highest ny’s revenues will be from year to year. In an attempt to make the utility more in the state for an investor-owned utility. The executive order the governor issued to autho- profitable, UPPCO’s current owners, Lonrize the task force nods to this, acknowledging don-based private equity firm Basalt Infrathat “parts of the UP have some of the highest structure Partners, have embarked on a risky double-leveraging strategy to maximize their electricity rates in the nation.” The cruel irony of UPPCO’s high rates is investors’ return on equity. As a result, UPPCO’s holding company is that they are borne by Michigan families who $200 million in debt. It has been downgradare among the least able to afford them. To put this in perspective, consider data ed by Moody’s Investors Service to Ba-1, from the ALICE project conducted by the which is below investor grade and, by defiMichigan United Way. ALICE is an acronym nition, “judged to have speculative elefor Asset Limited, Income Constrained, Em- ments and is subject to substantial credit ployed. It is a standard developed to measure risk.” We can do better. UPPCO’s customers dethe well-being of households that struggle to afford basic necessities like food, health care serve affordable energy and the opportunity to have a say in their future. I hope the UP and safe housing. Statewide, 43 percent of households fall Energy Task Force will take bold action to within the ALICE standard. But in parts of ensure that they get both. UPPCO territory, rates are significantly higher. In Baraga County, 58 percent of house- Elise Matz is a Marquette resident and former holds are at or below the ALICE threshold. In political staffer. In 2019, she was appointed to Houghton, the rate is 50 percent; in School- the State of Michigan’s Utility Consumer Participation Board, which grants funding to craft County, 54 percent. Ordinarily, the size and scope of any UP- nonprofit groups that represent the state’s PCO rate increases would be determined af- residential ratepayers in cases before the ter the line shuts down. The utility would Michigan Public Service Commission.

or the past two years, a group of county-based Community Mental Health Service Programs, including ours, has worked closely with the state to implement an innovative new way to deliver mental health services. The 298 Pilot Program (named for the boilerplate 298 section of 2016 legislation) is designed to encourage increased coordination of physical and mental health services to invest more resources directly to patients. Over the last year, teams have worked to reach consensus on a model to pilot these coordinated services. We continue to define components to test and what necessary administrative changes are needed to begin the program. With successful implementation, this program could fundamentally change the way patients receive mental health services across Michigan — an outcome desired by legislators and governors for decades. Our CMHSPs are committed to a strong pilot program that could

lead to broad-scale implementation in just a few years. The current challenge, however, is reaching an agreement on a model for the final stage of pilot integration. The following areas must be addressed before we can implement the program successfully: J Sufficient funding to appropriately pay for services provided to consumers and communities served by the Community Mental Health Service Program participating in the pilot. His-

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MEDICAID | EXPANSION

Michigan’s expansion plan has room for improvement

ix years ago this month, the Michigan Health & Hospital Association, along with dozens of other groups, were in the midst of one of the most critical battles we’ve ever fought. We, the Expand Medicaid coalition, with then-Gov. Rick Snyder’s support, were pushing to pass what would become Public Act 107 of 2013, or the Healthy Michigan Plan.

for those seeking assistance. There were failed votes, difficult Michigan’s Medicaid program has conversations, concessions made by been an early adopter of other all sides — but in the end, in Septemhigh-value, cost-effective programs ber 2013, one of the most impactful beyond expanding coverage. Just last pieces of legislation ever to pass year, Michigan was just the second through the Michigan Legislature bestate to gain federal approval for a came law. plan by the Michigan Department of Mere months later, hundreds of Health and Human Services to enter thousands of people enrolled, prointo outcomes-based contracts with viding access and coverage to people BRIAN drug manufacturers for drugs providwho’d never had primary and pre- PETERS ed to Medicaid patients. ventive care before. It was a monuMichigan also was one of the earliest states to mental achievement; so, where does the Medadminister its Medicaid plans through a manicaid program as a whole stand now? Top of mind is the pending implementation aged care model, which better serves patients of the Healthy Michigan Plan work require- and is a more efficient use of taxpayer dollars. While our state has had many Medicaid sucments. What will this mean to the program’s enrollees? Legislators tried to make accommo- cesses, two areas that need additional attention dations that would allow as many individuals are behavioral health and maternal health. Data tells us that emergency department visas possible to maintain coverage. We’ve also seen other its among Healthy Michistates’ work requirements Two areas that need gan Plan patients have not lead to coverage losses for additional attention are gone down in the early thousands of people. A behavioral health and years of the program. That study recently published in maternal health. same data tells us that an the New England Journal of astonishing number of Medicine shows that while many lose coverage, these ER visits are for behavioral health/subthere has been little effect on employment. Is it stance use issues. time for work requirements to be re-examined? The fact that Healthy Michigan covers behavIt is our hope that the systems in Michigan ioral/substance use care is critical to the surwill allow for data from other sources to be used vival of these patients and allows hospitals to to verify employment, eliminating the burden ensure they are triaged appropriately. At the on enrollees to report. It is also our hope that same time, there are too many instances where the education of enrollees is robust, and that there is simply nowhere for these patients to go hospitals can continue to be centers of support for proper treatment. Many need inpatient care

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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 // J U LY 1 5 , 2 0 1 9

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torically underfunded, CMHSPs need the resources necessary to meet the requirements of the pilot if they are expected to be successful. Inadequate funding will negatively impact the success of the pilot and could hurt citizens served by it. J Risk-management and ownership of the specialty provider network including utilization

Our Community Mental Health Service Programs are committed to a strong pilot program that could lead to broad-scale implementation in just a few years. The current challenge, however, is reaching an agreement on a model for the final stage of pilot integration.

management, claims and other managed care responsibilities, rates, payment and risk structures. To make these decisions, we need time for the state of Michigan to determine a shared-savings model and what decisions will be delegated to the pilot sites. J After the rate and risk areas are addressed, time will be required for implementation and

securing federal-waiver approval. New contracts will need to be established between the CMHSPs and our providers. Questions will need to be answered about how best to finalize technology needs, report changes and establish new payment flows. Accreditation reviews may also be necessary. We propose working toward an agreement by Oct. 1 that will create a more detailed model for full financial integration allowing pilot sites to effectively manage — in partnership with contracted CMHSPs and providers — the whole health of enrolled Medicaid beneficiaries who would benefit from a robust 298 Pilot Program. With the successful resolution of a detailed model for full financial integration, we propose launching the pilots no later than Oct. 1, 2020. Work will continue as we implement a number of the proposed activities that came out of the 298-workgroup process to support system co-

ordination and improve readiness for pilot implementation in 2020. At a minimum, new care coordination workflows and data-sharing processes will be established this next fiscal year. The pilot CMHSPs remain committed to full financial integration and working together on this pilot. We have asked the Michigan Department of Health and Human Services and the Michigan Legislature to work with us on this phased-in approach to this pilot. We believe this project could redefine the way local providers coordinate physical and mental health outcomes for our most vulnerable citizens and make a difference to all of Michigan. Danis Russell is CEO of Genesee Health System. Julia Rupp is executive director of HealthWest. Lisa Williams is executive director of West Michigan Community Mental Health.

MEDICAID | WORK RULES

Reduce ‘administrative burden’ of work rules to prevent mass health coverage losses M

edicaid work requirements are scheduled to take effect in Michigan on Jan. 1. Yet a recent study from Arkansas adds to mounting evidence that such requirements can result in major losses of health coverage without meaningfully increasing work effort. As the Michigan Legislature continues to deliberate on the 2020 fiscal year budget, this study should spur action to ensure that Michigan doesn’t follow the same path as Arkansas.

AH_DESIGNS/ISTOCK

with specialized staff and facilities. We must continue to push government and the private sector to work together to create solutions for those in need of behavioral health care — especially as we hope to continue the de-stigmatization of these issues. Lastly, and most certainly not least important, is the critical issue of maternal health and inequities in care we see across our state. Women continue to die in or after childbirth, and there are significant differences in the outcomes of minority women. Given how many births are paid for by Medicaid, the Medicaid coverage provided to new mothers is ripe for innovation and improvement. For example, coverage for 60 days postpartum will often never result in a postpartum obstetrical check-up for a new mom. Are we doing enough to listen to moms after birth? Are we doing enough to share those concerns with her doctor? We as a state of health care professionals, doctors, nurses, employers and legislators can do better. Medicaid covers 25 percent of the people in this state. It means every person reading this knows people who are enrolled. It’s a huge part of the state budget. All-in, every Michigan resident — not just the MHA and our member hospitals and health systems — is a stakeholder in the Medicaid program. Let’s work as a state, together, to make sure it serves its patients and its taxpayers well. Brian Peters is CEO of Michigan Health & Hospital Association.

because those affected During Michigan’s legdidn’t want to work. The islative debate on Medicresearchers report that aid work requirements, “95 percent of persons we raised concerns about who were targeted by the the potential for major policy already met the rehealth coverage losses; quirements or should concerns based on the rehave been exempt.” Rathcord of such requireer, they conclude that ments on the nation’s “bureaucratic obstacles cash welfare program, MARIANNE LUKE played a large role in covand on some recipients of UDOWSHAEFER erage losses under the food stamps, now called PHILLIPS policy.” the Supplemental NutriAlmost half of those tion Assistance Program. Yet at the time there was no direct evidence surveyed were uncertain about whether the about the impact of Medicaid work require- requirements applied to them. Some who ments because no state had ever implement- were not impacted assumed they were. Others thought that they hadn’t met the requireed them. In June 2018, however, Arkansas became ments even though they had, and some the first state to impose Medicaid work re- didn’t have an internet connection to report quirements, and we now have evidence on their hours. Other evidence has emerged about reinwhat happened as a result. Official reports from the state find that 17,000 adult Arkan- stated work requirements among some sans received notice that they had lost health adults receiving SNAP. In Kansas, half of coverage by December 2018. Because of those affected dropped off benefits after the requirements were reinthese major losses, a fedstated; in Georgia, particeral judge suspended the Official reports from Arkansas find that 17,000 ipation among this group requirements in March. declined by 62 percent in Were these losses in adult Arkansans received counties facing the reincoverage a result of the notice that they had lost stated policies, and in new policy? A new article health coverage by Maine and Alabama parpublished in the New En- December 2018. ticipation dropped by gland Journal of Medi- Because of these major more than 80 percent in cine compares the expelosses, a federal judge just a matter of a few rience of impacted adults months. These findings in Arkansas — before and suspended the don’t utilize the same after work requirements requirements in March. sort of research design as — to similar adults in Kentucky, Louisiana and Texas, states with- the Arkansas study, but the evidence — taken out such requirements. Their findings are together — paints a consistent picture of striking: They conclude that the new require- what can happen. In February 2019, legal and consulting firm ments “were associated with a significant loss of Medicaid coverage and rise in the per- Manatt estimated that Michigan work recentage of uninsured persons,” yet they found quirements would result in the loss of cover“no significant changes in employment asso- age for between 61,000 and 183,000 people. This estimate was based largely on the expeciated with the policy.” This lack of impact on employment wasn’t rience in Arkansas. If the goal of imposing

work requirements in Michigan is to encourage work engagement, the recent study on Arkansas should help guide additional steps that must be taken. Adding back the additional funding for work supports would be a good start. But the Arkansas experience further shows a great deal must be done to increase outreach and engagement of those affected. To their credit, Michigan legislators have shown they are aware of the Arkansas experience. Senate Bills 362 and 363 passed recently in June, and both were designed to reduce the administrative burden on reporting for Medicaid beneficiaries. SB 362 would give recipients the full month to report on work requirements and a grace period before losing coverage. SB 363 would exempt recipients from reporting if the state has other data to verify work compliance. However, more could be done. Gov. Gretchen Whitmer’s proposed budget included $10 million in funding to help those subject to work requirements overcome barriers that keep people from working, like lack of child care or job training. As of now, the Legislature has eliminated those funding requests. Finally, as Medicaid work requirement policies are still untested beyond the short experience in Arkansas, careful evaluation of the pros and cons of this program as it is implemented in Michigan will be essential. This should include the highest-quality experimental or quasi-experimental testing of employment, health outcomes and economic impact. Doing so would set Michigan apart in its commitment to really understanding the full impact of work requirements. Marianne Udow-Phillips is executive director of the Center for Health and Research Transformation. Luke Shaefer is an associate professor of public policy and director of Poverty Solutions at the University of Michigan.

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Advertising Section

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Comcast Comcast has named Melissa Bahoora vice president of sales for the Heartland Region, which includes Michigan, Indiana and Kentucky. Bahoora will lead the three-state region’s residential field sales team. Based in Comcast’s Plymouth regional headquarters, she is responsible for developing sales strategies, tactical execution plans and core processes. A Michigan native, Bahoora graduated from Eastern Michigan University with a Bachelor of Arts in communication.

BEAUMONT

Beaumont benefits

FROM PAGE 3

Early last year, Grand Blanc-based McLaren Healthcare completed the acquisition of MDWise, an Indiana-based HMO. Beaumont Health has $4.7 billion in total annual net patient revenue, eight hospitals with 3,429 beds, 145 outpatient sites, nearly 5,000 affiliated physicians and 38,000 employees. By adding Summa’s 7,000 employees and $1.4 billion in revenue, Beaumont is expected to grow into a $6.1 billion health care company with 45,000 employees, 12 hospitals and 4,729 beds.

SummaCare could change Beaumont in Michigan One of the prizes — one that Beaumont lacks — is a health insurance arm, SummaCare. “Summa Health has competencies we don’t have with Beaumont Health,” said Fox, noting the SummaCare insurance product. “It has a (health insurance) claims shop to process claims. It is something we can use when employers” want to contract with Beaumont. SummaCare manages care for 46,000 people, including 18,000 with self-insured employers, 23,000 in a Medicare Advantage plan and about 5,000 members in commercial products. Summa CEO Cliff Deveny, M.D., said Summa has experience over the past 20 years managing insured lives. “The largest part is Medicare. We have over 20 years experience in it and gotten very good at increasing value for premiums paid,” said Deveny, who said the eight plans it operates are successful, despite being much smaller than competing plans owned by Medical Mutual of Ohio and CareSource. Fox said he believes Summa’s managed-care contracting expertise will benefit Beaumont and Michigan employers. During the merger due diligence phase the next 90 days, “We will talk more about what the opportunities in 2020 for us to bring some of these capabilities to our market in a way we think is effective,” he said.

Reaction to SummaCare, the proposed merger Tony Colarossi, a partner in health care consulting with Plante Moran in East Lansing, said the insurer is unquestionably the gem of the deal. “The idea they will gain payer knowledge (is paramount). They won’t have to invest scarce resources to do adjudication of claims. They also get a network of physicians” as part of the deal, he said. Brian Connolly, the former CEO of Oakwood Healthcare and a former Beaumont executive, said Beaumont has had interest for years in acquiring an insurance company to round out its operations. Beaumont merged with Oakwood and Botsford Hospital in 2014 to form Beaumont Health. “They did some analysis to identify a product that is suitable to expand into the Southeast Michigan, Detroit market,” said Connolly, who is president of Brian Connolly Associates. “I expect they will expand with Medicare Advantage and commercial in Michigan. It is a strategic fit for them.” Susan Moore, president of Managed Healthcare Resources in Ortonville, said adding SummaCare insurance subsidiary to Beaumont has the potential to open up many opportunities in

Connolly

Colarossi

Southeast Michigan. “There is a trend for direct employer contracting, trying to eliminate the middle man,” Moore said. “You see it with Amazon and Berkshire Hathaway (called Haven). They are trying direct-to-provider contracting to cut out extra additional administrative expenses.” “The disadvantage for Beaumont is they are coming into the market late. HAP and Blue Care Network are huge. BCN is all over the state, and (Health Alliance Plan of Michigan) has a large regional reach,” Moore said. “Beaumont will be hard-pressed to use the insurance side” to its advantage. But Moore said the addition will give Beaumont advantage in managing risk contracting with employers and with physician groups than if it started from ground zero. “Detroit is a much different area than Akron and others because it is highly unionized,” she said. “Blues and HAP do a lot of contracting with automotive (companies). Getting into that arena may be difficult.” In addition, transporting SummaCare’s third-party administrative services and managed care expertise to Michigan will save Beaumont much time and money, Moore said. Beaumont “will plug in (savings) to all their agreements so it cuts down on administrative costs versus the startup cost they would otherwise incur. They also have some broad networks that they have been developing over the last several years. That is a really decent advantage when building (a provider) network because contracting and credentialing providers is really expensive. They already have some of it in place,” she said. Carsten Beith, managing director and co-leader of the health systems merger group at Cain Brothers, a Chicago-based consulting firm, said having an insurance arm will enable Beaumont to be in better position to take full or partial risk for the cost of care from employers. “They need all the data and claims processing,” Beith said. “They can leverage systems to go to major employers in Michigan.” Ed Fishman, managing director in Cain Brothers managed care advisory practice, said scale matters in managed care just as with health systems. But not every health system owns a health plan, or runs one well. “(Beaumont) is talking about exporting Summa into Michigan to use it for traditional insured products, Medicare Advantage, direct to employer contracting,” Fishman said. “It makes sense.” Moore said Beaumont could file a Medicare Advantage application next year and have all the documents for network adequacy for the January 2021 enrollment year if it fast-tracked the application development process. However, she said January 2022 would be more likely. She said obtaining a commercial insurance license could be accomplished more quickly. Fishman said Beaumont, like Henry Ford and Spectrum, can still contract with Blue Cross and other payers. “It just makes them better at it,” he said.

Integrated delivery systems like Henry Ford, Spectrum, Sparrow and McLaren are Michigan examples of hospital-based organizations that have improved patient care outcomes and experiences within their own systems by having managed care organizations part of their DNA, experts say. “This is a strategy that other regional systems are pursuing. They want to be value-based care organizations and managed an attributed population, reduce costs of care,” Beith said. “They will have data analytics coming from the insurance side, and data analytics coming from the hospitals,” post-acute care and outpatient facilities. Knowing the costs of inpatient care, outpatient care, primary care, urgent care and medications will make them much more knowledgeable when contracting with employers and payers, Beith said. Beaumont also will become a more effective competitor against the University of Michigan, Henry Ford, Trinity Health and others in Michigan, Beith said. “By pursuing a more integrated model, this will strengthen Beaumont’s position as a strong and viable competitor,” he said A recent study by the Integrated Healthcare Association found that California-based integrated care delivery systems, which provide coordinated services to a defined population and manage costs by paying providers on a per-person per-month basis, leads to lower costs and better outcomes. The report showed that the more financial risk providers assume in their contracts with health plans, the lower their costs and the higher their quality, according to an article in the September issue of Health Affairs. “If (more people) could get care under these integrated models, it would save money that could be (used for) universal coverage,” Stephen Shortell, a leading health system researcher at the University of California Berkeley, said in the article. Dozens of other integrated systems are leaders in their markets, including 13-hospital Advocate Health Care in Oak Brook, Ill.; 14-hospital Aurora Health Care, Milwaukee; 22-hospital Banner Health, Phoenix; eight-hospital Fairview Health Services, Minneapolis; and 22-hospital Intermountain Healthcare in Salt Lake City. Integrated health delivery works best when all the providers in the system work together in a coordinated way to improve individual patients, experts say. Working toward the holy grail of the so-called “triple aim” — better care, better health and lower cost — integrated delivery systems share patient care plans, share electronic medical information, share responsibility for patient outcomes and potential profits. Dave Mazurkiewicz, McLaren’s CFO, said if Beaumont wants to get into the insurance business in Michigan, buying a plan makes sense. McLaren owns two health plans, MD Wise in Indiana, and McLaren Health Plan in Michigan, along with 14 hospitals and an employed medical group. “Starting (a health plan) from scratch is very expensive,” he said. Mazurkiewicz said Beaumont’s idea about transporting Summa’s insurance expertise into Michigan could be a good idea, but each state’s insurance market is different and could pose risks. “Buying knowledge in another state is one thing. How you use it” is another, he said. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

CRAIN’S DETROIT BUSINESS

July 8, 2019

Page 17

C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 1 5 , 2 0 1 9

SPOTLIGHT

Advertising Section

POSITIONS AVAILABLE

Webasto Roof Systems, Inc., Tier-1 auto supplier, erations and guidSalvation Army names seeks Financial Analyst in Rochester Hills, MI to perform financial for N.the inganalyses strategy, metro area commander

Amer based eld-based on IFRS principles. Duties: apply IFRS principlessupplier to perform of financial mechaTheopsSouthfi Salvation plann’g & analysis for program, project, R&D, tool’g & purchas’g controll’g & to anatronics said. Army Eastern Michigan Division has lyze deviat’ns & variances fr actual costs & income; monitor financial KPIs & draft & His business first day caswas named Maj. Timothy as& its present reports to improveMeyer business mfg processes; develop financial es for auto programs; Excel-based financial plann’g & analysis July 1. models for newdevelop general secproject & reg’nal forecast’g; perform project & regional cost account’g based on IFRS Frank Luretary and metro principles in alignm’t w/ matrix org; provide financial analyses for acquisit’n project bischer, a veteran Detroit area comquotes & eng’g changes for auto programs; monitor & validate VA/VE & commercial supplier mander. sav’gs; draft & present financial reports (quarterly forecasts, annual budgets,execu5-yr plans) for program acquisit’n project developm’t; support harmonizat’n projects to tive, of served as He &succeeds align customer quot’g, expense track’g & allocat’ns for global autopresident programs; support of the Maj. Russ Sjogren, Uhlenbecker project teams w/ financial forecast’g & controll’g analysis on developm’t projects; valiNorth who served theMin edu req: Bachelor inBrose date purchased compon’ts & mfg as costs. Account’g, Finance North American subsidiary topforeign officer in degree. the America, or Business Admin, or equiv Min exp req: 2 yr exp in financial analysis posit’n. Special skills req: Must Metro have 2 yr work exp inFahrzeugteile each of follow’g: perform’g to Brose GmbH & Co. division’s month-end clos’g (incl data validat’n, journal KG, entryfor prep post’g &up account 10&months until reconciliahis death Detroit market t’ns) for multiple business units; us’g financial consolidat’n software for multi-dimens’in December. since &fall 2015.intercompany Meyer nal data analysis; monitor’g reconcil’g balances. Must have 1 yr work Sjogren, 65,financial re- & operat’nal risks; finance controll’g to inc exp in each of follow’g: evaluat’g budget & forecast variance & analysis. Exp may be acquired tired at the end ofdevelopm’t June with&his wife monitor’g Jewish council concurrently. Webasto Systems, Inc., Attn: Jacqueline Maj. Jan Sjogren,Resume 62, whotoserved asRoof director to leave Billingsley, 1757 Northfield Dr, Rochester Hills, MI 48309, or apply online at www. divisional secretary. David Kurzmann webasto.com (Requisition ID 1079). EOE. Employer Pd. is Ad.leaving his

As the head of the metro Detroit post as executive director of the Jewarea, Meyer, 60, will oversee the policy ish Community POSITIONS and finances of the 13 Salvation Army AVAILABLE Relations Council, community centers in the region. but he isn’t going His wife, Maj. Lori Meyer,North 59, hasAmerica, Inc., Tier-1 far. supplier Henniges Automotive been appointed to the newly createdseeks Business Analyst inKurzmann, of seal’g systems for auto industry, Auburn Hills,33, to provide analysissec& guidance for corp long-range plann’g & roleMI, of spiritual lifemarket development expected to leave organizat’nal plann’g,Bloomfi evaluat’n retary for metrostructure. Detroit. Areas of responsibility incl strategic the eld of polymer developm’t for seal’g systems & organizat’nal structure in multi-culHills-based nontural & global operat’nal profit Friday, he Brose NA sett’g. hiresNat’l & internat’l travel 40%. Duties: investigate performance (due diligence, business plann’g & performance & global gov told Crain’s. July new president regs) & assist in deploym’t of strategic growth initiatives; evaluat’n of commer22 willdevelopm’t be his first Auburn Hills-based Brose Northseal’g Kurzmann cial activities for auto TPV & EPDM systems & of business day at the Jewish America has named Wilm Uhlen& growth thru evaluat’n of new technology, funct’n of compon’t & developm’t of Federation of Metbecker as itsseal’g new president. advanced systems; perform financial forecasts & analyze opportunities ropolitan Kurzmann tak54, who carries moreglobal forUhlenbecker, mergers & acquisit’ns to expand footprint Detroit. & strengthen comp’sisposiing a&newly role there as sethan experience as a written t’n intwo autodecades market; of coordinate monthly verbalcreated communicat’n between N. Amer exec team, of Directors parent comp and in nior director of ofcommunity global executive in theglobal auto investors supplier & Board China is (on topics relat’g to composite & improvem’t, fidonorcharacterizat’n relations. sector, charged with managing op- material

nancial strength & impact of acquisit’ns, gov reg issues & global affiliate opportunities) to aid in ID of potential business cooperat’n opportunities; daily written & oral communicat’n w/ parent comp in China on financial, business & performthat claim they provide services for the ance data & on evaluat’n of environm’tal constraints, mfg reqs & competitor LGBTQ but they’reagennot reintel; draft doc for initial public offer’gs, liaise w/ community, gov & stock exchange ally out there promoting themselves, FROM PAGE 12 cies, consolidate corp data & develop stock exchange doc; develop strategies touching theacquisit’ns community for market penetrat’n, new product developm’t (thru or and jointprovidvenaccessible resources. She talked I askedmarket a lot of developm’t questions and wanted ingdevelop tures), & diversificat’n; & implem’t strategic busi- a lot about initiatives, that as well. When I look for to know the policies, some of which future are business ness evaluat’n criteria to measure acquisit’ns & consolidat’ns; formulate corp business structures for vehicle seal’g opsthey to employees, I want to system hear that pretty distorted still within the state of maximizeWithin growththat & profitability; align N.have Amer, Asianthey operat’nal a European passion for& what do, that Michigan. system it’s hard data (report’g, quality w/ global establishthey’ve done their matrix homework and to make changes, but&I performance) continued to to correspond ed by Chinese Minposiedu & exp req:the Master Eng’g, Materials Sciknow areasinthat need assistance. advocate. Whileparent I was comp. there, the ence, or Business, or foreign equiv degree, + 3 yr exp in business intel analyMaze, our lead victims advotion opened up of director of Victim Genny sis posit’n, or Bachelor in Eng’g, Materials Science, or Business, or foreign was referred to me. I met her at a Services at Equality Michigan and I ap- intelcate, equiv degree, + 5 yr exp in business analysis position. Special skills req: Panera Breadoperat’nal just to have a conversaplied. Must have 3 yr work exp in each of follow’g: financial, & product mawith her, and you couldfor seeTPV where terial select’n & plann’g; quality systems tion long-term strategic plann’g & herseal’g heart was. eng’g They’re thetohardest Tell me about role now. EPDM seal’gyour systems; evaluat’n of vehicle system specs develworking employees, and&I strategic haven’t had I receive about seven new cases a week op process’g parameters used for business acquisit’n models considerat’n of future product portfolio;any evaluat’n of yet. vehicle seal’g systems turnover I’m the longest-standfrom different clients that are having (innovat’n developm’t & mfg) potentialhere impact on futureMichibusiingfor employee at Equality issues. Theytrends, could eng’g be having a hard ness plann’g; evaluat’n of raw material supply & product mfg is plann’g gan, and my team also to theoptilontime finding housing, having employmize profitability Tier-1 vehicle seal’g system business; developm’t & analygest-standing. ment issues or ofvictims of serious sis of strategic for global growth; prep of docs for IPOs & ancrimes. This yearmatrix in Detroit therebusiness has nual supplem’tal financial & business fil’gs for Tier-1 auto supplier; perform’g been several incidents of serious Is there an issue in the LGBTQ due diligence in environm’tal, technical, mfg & regulatory approval process for crimes, blackof vehicle community you wish people were globalincluding merger & murders acquisit’n of targets compon’ts; consolidat’n of N. trans women of color. We’re see- data noticing right now? Amer, European & Asian duealso diligence & prep & presentat’n of reports to ing what’s going on in the communityagencies; Support and resources for LGBTQ seexec mgmt, investors & governm’tal assessm’t of technology for poand have our ear of to vehicle the street, which niors. They face tential acquisit’n seal’g systems component comp.discrimination Exp may be ac-in quired concurrently. Resume careers@hennigesautomotive.com (Submy advocates do as well. We do to a lot of nursing homes, senior housing and ject Line: Analyst), mail to Henniges training and HQ-2019-07 manage six Business sites across withinorthe workplace. A lot Automoof times as North Inc., ATTN: Paula Pilotti, 2750 tive the state that America, have pop-up offiHuman ce hours,Resources, the community ages, their resources High Meadow AuburnCity, Hills, MI 48326.ThEmployer EEO. including in BayCircle, City, Traverse dwindle. at’s an areaPd. thatAd. I am hop-

JOHNSON

Holland and Grand Rapids. For example, we have pop-up office hours in Grand Rapids at Mel Trotter Ministry Shelter, which dedicated a whole space in their shelter for the transgender community. Then we have the Grand Rapids Pride Center, which is where the whole general LGBTQ community would go for any type of services. How do you hire?

I knew I needed to hire employees that looked like the community. When I found Jeynce Poindexter, she was already an advocate within the community. I saw her speak at a community meeting in Palmer Park when I approached her about the position. She did an excellent job connecting with the community. There are a lot of services and agencies in the city of Detroit

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SWIM FROM PAGE 3

By 2024, the company intends to reach annual systemwide revenue of $385 million across 260 locations. The school’s “Hawaiian, beach-style experience” over the “hospital-like, sterile” environments of other pools resonated with kids and parents, McCuiston said, and that captured the interest of investors. Selling the model and brand to franchisees has come to be the McCuistons’ main business. For the first time, the company is putting money and resources into franchise development. It is investing $100,000 into marketing and strategy to add franchise locations with plans to ramp up efforts further in the coming months. “What people are buying into is an already-reputable brand,” McCuiston said. “The systems and processes of the entire business plan have already been in place.” There are 89 Goldfish Swim School locations around the country (nine in Michigan), two more opening later this month, a total of 100 expected by the end of the year and 260 in the next five years. Only one — the original in Birmingham — is corporate-owned. The company’s headquarters in Troy has 50 employees dedicated primarily to franchise operations, its core focus. McCuiston said his company has no plans to open any other corporate-owned locations. The franchise model is proving plenty lucrative.

Floating franchise model Goldfish Swim School’s first-year revenue in 2006 as a single location was $770,000. In 2010, after the first

Swimming lessons at the Birmingham location of Goldfish Swim School.

year of its first franchised location, total revenue reached $2.9 million. In less than 10 years, sales have jumped exponentially. That growth has lured many different types of investors — private equity companies, big developers and high net worth individuals — despite the steep upfront cost. The initial investment of starting a Goldfish Swim School franchise is $1.37 million to $3.23 million, which includes a one-time lump sum payment of $50,000 to the franchisor, according to the company’s franchise disclosure document. The fee is $40,000 for a second franchise. The other initial costs are mostly for build out according to the franchisor’s specifications. Most Goldfish Swim School locations are between 6,000 square feet

and 9,500 square feet and are located in suburban strip malls, old big box buildings and light industrial spaces. In addition to the initial franchisor fee, franchisees pay a $10,000 real estate fee that covers corporate advising on real estate selection. Picking the right place can be tricky because it involves building a custom pool, which is a major part of the estimated $1 million to $2.3 million build-out cost. To use the Goldfish name and business playbook, franchisees pay the greater of $4,000 or 6 percent of gross sales per month. They also pay 3 percent of gross sales per month for a brand fund contribution, 2 percent of gross sales per month for local advertising and a $700-per-month technology fee. For 100 locations, the franchisor

SETTLE FROM PAGE 3

The consent order is a drop in the bucket for Kefallinos. He said in a court deposition for the case that the building that prompted it all, the River Park Lofts at 227 Iron St. across from Mt. Elliott Park, has no debt and brings in $60,000 a month alone, not to mention his 10 other residential properties and other commercial buildings and businesses he owns, including Niki’s Pizza and Bouzouki, a strip club in Greektown. But it’s helpful for the fair housing center, which executive director Steve Tomkowiak said fielded 319 fair housing complaints last year on its budget of about $400,000 and a payroll that fluctuates between five and eight staffers.

Lawsuit filed in 2016 The Fair Housing Center in the June 2016 lawsuit alleged that it received a complaint that a mother with two young children, ages 2 and 5 at the time, was refused an apartment in Kefallinos’ River Park Lofts property because she had kids. The mother recounted her interaction with the leasing agent in a deposition. “She pretty much told me like, ‘Oh, I’m sorry, it’s a no kids policy,’ and then she explained to me why they didn’t want (them) there was because of dogs walking around with no leashes and the simple fact that the walls are thin, and you can hear people having sex and everything of that nature, and a lot of the tenants didn’t really like to hear all the kids’ noise and being that the walls are so thin,” the mother said in the deposition. Her attorney, Stephen Thomas, could not be reached for comment.

River Park Lofts in Detroit.

After receiving the complaint, the center then “conducted a series of tests” the next two months “confirming the policy of exclusion of families with children,” the lawsuit says. Kefallinos’ attorney argued that the potential renter “sustained no damages” and that he “could not legally rent out units at the time complained of in the plaintiff’s complaint because defendants did not have a certificate of occupancy.” They also argued that the leasing agent, an employee of Kefallinos’ Boydell Development Inc. real estate company, is originally from Poland and that English, her second language, is an issue “which she still struggles with” and which “further complicates the interactions between (her) and the testers.” Kefallinos attorney Gonek said his client has complied with the consent order and removed the woman from her managerial position. “She was concerned about a single mother wanting to rent a studio apart-

KIRK PINHO/CRAIN’S DETROIT BUSINESS

ment on the first floor where a lot of the occupants had medical marijuana cards,” Gonek said. “She gave the applicant other locations that might suit her needs better.” He said Kefallinos’ staff has also been sent to training with the Michigan State Housing Development Authority to ensure that they comply with housing laws. That was required under the Jan. 10 consent order. In addition, Kefallinos’ Detroit-based Boydell is required to develop and implement nondiscrimination standards and procedures, which would have to be approved by the Fair Housing Center. The consent order is effective for three years until Jan. 10, 2022.

Appeals court victory But Kefallinos notched a win with the June 25 unpublished state appellate court ruling. That case stemmed from an incident

JOHN SOBCZAK | LORIEN STUDIO FOR CRAIN’S

earns as much as $5 million for onetime franchise fees and nearly the same amount per year in royalties. The parent company’s consolidated net income in 2017 was $2.02 million in 2017, according to its earnings report. Financial reports and eager investors show that there’s meat left on the bone for franchisees. The average annual gross revenue of each of 78 franchises operating in 2018 was $1.7 million, according to the franchise disclosure document. After average operating expenses of $1.02 million, which does not include the initial investment to start a franchise but does include royalties and other monthly fees, the average yearly income was $709,379. This does not include expenses for rent. “There’s a high barrier to entry,” McCuiston said, adding that the initial inseven years ago on July 25, 2012, when residents of Kefallinos’ Universal Lofts building at 5805 Lincoln St. were ordered to “desist in the use of this building for residential purpose.” Kefallinos, who came to the U.S. from Greece as a teenager, said in a deposition that the units at Universal Lofts were “always habitable” and denied that there was lead paint in one of the plaintiff’s apartments, one of the key contentions in the lawsuit. He said he requested an extension to comply with city construction rules but a clerical error resulted in a certificate of occupancy not being issued. Kefallinos also said in the deposition that he wasn’t aware if from 2008-14 all of the buildings had valid certificates of occupancy because “it is not (his) Boydell Development Co.’s duty to obtain” them. Alyson Oliver, managing partner of Troy-based Oliver Law Group PC, which represented the tenants in the matter, said she does not plan to take the case to the Supreme Court after the appeals court ruled against her. “There is a written exception in the Michigan Consumer Protection Act that says if an activity is sanctioned by a government entity, it can’t be the basis of a consumer protection claim,” she said. “... In this case, the defense argued that renting properties is governed by the Detroit city code.”

Kefallinos’ portfolio Kefallinos has been active in Detroit real estate for decades. His portfolio of buildings has generated interest from deep pockets lately, and pumped tens of millions into his own. One of them, a former Wayne State University pharmacy school building

vestment, real estate and permitting requirements can dissuade investors, but there are several benefits to signing on as a franchisee. “They like the brand that we’ve built.” Mark Cory, a franchise placement specialist based in Grosse Pointe, said Goldfish Swim School’s model is unusual in its large upfront investment and requirement that franchisees find a place where they can build a pool. The financial performance of the franchises appears to be solid, he said, but it’s not a business for everyone, especially those lacking significant capital. “It’s definitely a high margin business, but you’ve got to do a high volume to cover the fixed cost of rent and other fixed expenses,” he said. Goldfish Swim Schools charge a monthly fee of $84 for customers, which comes with one lesson per week. Its target customers are middle- and upper-class families, in high-density areas, with kids 6 years old and younger. It faces competition from local rec centers, YMCAs and other companies, such as Illinois-based Big Blue Swim School and Arizona-based Aqua-Tots Swim Schools. Its ratio of one instructor per four children and beach-style ambiance at each location attract patrons, McCuiston said. The water is always kept at 90 degrees, and the pools are painted with bright colors and decorated with tropical themes. Making kids feel comfortable makes their parents feel comfortable, and that’s an important selling point in the swim business. “This is a very personal business and very high touch,” McCuiston said. “Learning to swim is never going to go out of style.” Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl called Shapero Hall in the city’s Lafayette Park neighborhood, and the land it sits on sold for $16 million a year ago to Lafayette Acquisition Partners LLC. It paid $2.3 million for the 151,000 square foot building in 2007. Lafayette Acquisition Partners, an affiliate of Novi-based Ginosko Development Co., plans 374 residential units, including a new mid-rise building, to take Shapero Hall’s place. The old building was torn down earlier this year; a fence with a scrim surrounds the now-vacant land. In November 2017, D & K Investments Group LLC, a Kefallinos affiliate, sold the Harvard Square Centre building at 1346 Broadway St. downtown to billionaire real estate mortgage mogul Dan Gilbert for $6.25 million. Kefallinos paid just $700,000 for it in 2008. Gilbert plans a mixed-use redevelopment there, although no work has started. In August 2017, Crain’s reported that Kefallinos had listed his nonresidential buildings for sale based on an offering memorandum it obtained. All told, the buildings totaled more than 2.3 million square feet sitting on north of 100 acres. Kefallinos later claimed that they were put on the market without his authorization and said they weren’t for sale. Among his real estate portfolio are the Roosevelt Hotel at 2250 14th St. across from Michigan Central Station in Corktown, now owned by Ford Motor Co. after a $90 million sale last year; the Russell Industrial Center; the Michigan Building and former Michigan Theatre at 220 Bagley St.; a former hospital at 2401 20th St.; a large former Boy Scouts of America campground in Lupton about 10 miles from the Huron National Forest totaling 630 acres; and a large Corktown building at 1448 Wabash St. totaling 437,000 square feet.

C R A I N ’ S D E T R O I T B U S I N E S S // J U LY 1 5 , 2 0 1 9

3-D PRINTING FROM PAGE 1

In 2015, EOS North America generated less than $40 million in sales. This year it’s expected to top $150 million, Fletcher said. Globally, the company projects more than $400 million in 3-D printing machine sales. It employs 200 in the U.S. in Novi and locations in Austin, Texas. “Three years ago we went through a slowdown period; additive manufacturing was exciting for a while then when the cycle didn’t meet those lofty expectations, it hit a reality check,” Fletcher said. “Most of the early adopters moved on, but it’s now penetrating mainstream manufacturers because it engages in design freedom and allows for functionality instead of designing for manufacturing processes.” 3-D printing, or additive manufacturing, is a relatively literal name for the process. An object — an engine part, chess piece, a car or whatever — is designed via software and is then manufactured by the 3-D printing machine by adding layer-upon-layer of material. That material can be plastic, metal, concrete, etc. The process provides advantages over traditional manufacturing because it can create a functioning product in one piece, without the need to construct it from multiple parts. For example, a 3-D printed gas tank could be created without any metal forming or welding to put the two halves of the tank together. Pleasant Ridge-based Fisher Unitech Inc. is a 3-D printing software provider and seller of printing machines and services. Its primary focus has been on training engineers on 3-D printing design software as the use of additive manufacturing becomes more mainstream. The production process is becoming so affordable that even smaller manufacturers are using it, said CEO Matt Wise. “We train about 2,000 engineers a year on how to use the software,” Wise said. “Then they figure out how to leverage it in their process. We are

LARRY PEPLIN FOR CRAIN’S

Jeremy Conrad operates a 3-D printing machine at EOS North America in Novi.

The Spirit of Detroit statue is re-created using 3-D printers.

really working to make these smalland medium-sized companies more efficient to compete with the bigger players.” Wise said the company expects to sell 3-D printing machines in the next few years. “We are seeing manufacturers taking on more 3-D printing in end production,” Wise said. “Companies are used to producing one-off parts or prototypes with this process and are

now finding ways to compete with it on a larger scale.” Fisher Unitech employs about 170 and is projected to generate more than $80 million in revenue this year. Its software suite costs between $3,000 and $100,000. Aerospace has been a major adopter of the process, including Boeing, Honeywell and United Technologies Corp. Planes and rockets are made in much smaller volumes, thus allowing the slower process of 3-D printing to not be as much of a concern as in automotive, which produces millions and millions of parts annually. Fletcher said modern space programs are really driving growth because they can shirk past protocols and procedures required by manned missions. “The designs are not confined by all the certifications and qualifications of the past because these spacecraft aren’t carrying people,” Fletcher

JAIL

FROM PAGE 1

Cullen said the jail deal was crafted without a final design plan, much less bids for the exact cost of the project, leaving Rock Ventures exposed to a construction market that’s already strained by numerous regional mega-projects, including Gilbert’s downtown building boom. “You don’t normally price something until you draw something or go out and get bids,” Cullen said. “Certainly the fact there’s so much construction going on in Detroit and the region doesn’t help either. That’s part of it as well.” That is driving up construction costs, with some developers and contractors saying by as much as 30 percent. Kevin Koehler, president of the Bloomfield Township-based trade organization Construction Association of Michigan, said building costs regularly change as designs become finalized. “Once the design starts to be fleshed out, there are so many elements that can change and increase pricing,” he said. “It’s not completely out of the ordinary.” In many ways, the jail project is new terrain for Gilbert’s ventures in real estate development in Detroit.

KURT NAGL/CRAIN’S DETROIT BUSINESS

Construction work is ongoing at the planned site of the new Wayne County criminal justice complex.

Unlike many of Gilbert’s downtown investments that entailed renovating decades-old office buildings for his Quicken Loans family of companies and private sector tenants, this project entails building a sprawling government complex on 11 acres that includes a 2,280-bed jail, 25 courtrooms and offices for judges, five hearing rooms, offices for the Wayne County sheriff and prosecutor, as well as a 160-bed juvenile detention facility.

“It’s way different,” Cullen said. “You’re kind of building a house for somebody else — and you’re building it for a lot of other people.” Construction of the new county jail, courthouse and office complex is expected to be complete in 2022. Demolition work at the East Warren Avenue site began in December. Excavation work is 55 percent complete and initial foundation and concrete work is 25 percent complete, according to Evans’ office.

said. “Whether it’s (NASA’s) Jet Propulsion Lab or SpaceX, they are applying additive manufacturing very seriously these days.” For automotive manufacturers, adopting additive manufacturing has been slower than anticipated because completely altering manufacturing processes is costly, said Ray Huff, associate engineer at Fort Collins, Colo.-based additive manufacturing consulting firm Wohlers Associates Inc. “The automotive industry has been using additive manufacturing mainly for prototyping and some tooling for years, but it’s taken a few years for the technology to mature. If they are forging parts, it’s going to take time before they trust a new technology,” Huff said. “For the users, like General Motors or Chrysler, they have to find the business case. People are learning to adopt it as they figure out where it’s cost efficient.” EOS’ top machines can cost up to $2 million, for instance. Still, the additive manufacturing industry is expected to grow leaps and bounds. The industry grew by 33.5 percent between 2017 and 2018 to nearly $10 billion, according to Wohlers Report 2019. The global industry is expected to reach nearly $40 billion by 2027, according to a March report from Reports and Data. The industry is expected to disrupt several manufacturing mainstays — polymers, casting and traditional machining. Those industries total nearly $400 billion in annual revenues and Fletcher believes additive manufacturing can carve out 20 percent of those markets. That leaves companies like EOS with tremendous room to grow. “I see no signs of it slowing down,” Fletcher said. “We’re planning for a 10-times gain, not 10 percent. To some extent, we’re getting a bit ahead of the game, but we’re putting in the production capabilities to allow us to scale.” Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh When the new criminal justice complex is complete, Rock Ventures also will get the county’s Frank Murphy Hall of Justice courthouse and the county’s juvenile detention facility on Saint Antoine Street and two older jails on Clinton Street. Those buildings will likely be demolished for the redevelopment of the contiguous Gratiot Avenue property. Just before the Fourth of July holiday, Wayne County announced a deal with a subsidiary of DTE Energy Co. to build a Central Utility Plant that will distribute electricity, gas, hot and cold water for between $32 million and $37.7 million. Rock Ventures has agreed to cover $2.5 million of the cost; Wayne County plans to pay its $35.2 million maximum cost through higher than anticipated property tax revenues and operational efficiencies, Deputy County Executive Richard Kaufman said. Depending on the final cost of the project, Wayne County could end up with a nearly $600 million state-ofthe-art facility for $380 million in long-term bonded debt, Kaufman said. “That’s both confidence and luck on our part,” Kaufman told Crain’s. Staff Writer Kirk Pinho contributed. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

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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 // J U LY 1 5 , 2 0 1 9

THE WEEK ON THE WEB

RUMBLINGS

Beaumont nurses battle over union drive

Earley flunks retirement, returns to Metro Detroit

JULY 4-11 | For more, visit crainsdetroit.com

urses at Beaumont Hospital in Royal Oak are taking sides, both professing to support each other and quality patient care, in what has turned into an acrimonious drive to create Beaumont’s first nurses’ union. Pro-union nurses, led by ER nurse Liz Martinez and certified registered nurse anesthetist Mary Beth Boeson, have filed an unfair labor practice charge against Beaumont’s management, contending consultants hired by the hospital have engaged in intimidation and union-busting activities. Anti-union nurses, led by nurse practitioner Lorie Hall, also have filed an unfair labor practice complaint against the Michigan Nurses Association, which is helping a faction of Beaumont nurses prepare for a union vote this year. Hall said the complaint, filed with the U.S. National Labor Relations Board in Detroit, charges the MNA supporters with intimidation for snapping digital pictures of two anti-union nurses, sneering at them and suggesting they shouldn’t be there as they were at a table in the hospital cafeteria handing out anti-union literature. Hall said the anti-union nurses are staging a grassroots effort about why they don’t want a union. “I don’t want to lose my voice. Health care is changing. Reimbursement is changing. We have merged into other hospitals. They (MNA union) haven’t figured it out yet. I don’t want someone to speak for me. We can do that as a group. We have a professional nursing council that can be expanded, and there are other avenues for us besides a union.” In late April, nurses at Beaumont Hospital in Royal Oak, the 1,100-bed flagship hospital for eight-hospital Beaumont Health, announced they were partnering with the MNA to begin a union drive. Boeson, who has worked at Beaumont for 24 years, told Crain’s the main goal once a union is formed will be to advocate for safe staffing ratios for patient and nurse protection. It is the fourth union effort nurses have made at Beaumont the past 24 years. But Hall, a Beaumont nurse practitioner for 14 years, started a petition drive in May to enlist other nurses to oppose the union that so far, she said, has gathered 350 signatures. “I am one of many nurses at Beaumont who do not want representation by the MNA,” Hall said in an email to Crain’s. “Despite the public smear campaign beginning against the Beaumont name, they have not been voted in and neither the MNA nor this group of disgruntled nurses speak for the majority of the 3,200 nurses employed at Beaumont.” Susan Grant, a nurse and Beaumont Health’s executive vice president and chief nursing officer, said Beaumont respects the nurses’ effort to decide whether they should have a union represent them. She said Beaumont is not taking sides in the dispute between the nurses.

BEAUMONT HEALTH

Beaumont Hospital in Royal Oak.

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

$100,000

Amount businessman Bill Pulte says he is giving away by the end of the year on Twitter

100-200 feet

Depth into Great Lakes bedrock Enbridge’s ship will bore for core samples

$375 million

Cost to build new jail being weighed in Macomb County

DETROIT NEWS J Supplier Dakkota Integrated Systems LLC plans to build a $55 million, 600,000-square-foot plant employing 625 people on the sites of two old Detroit public schools. The schools are to be razed to make way for the new manufacturing facility that would supply “major components” for Fiat Chrysler Automobiles’ new Jeep assembly plant on Mack Avenue on the city’s east side. The news comes as the city angles for suppliers to expand alongside FCA’s planned $2.5 billion investment in the city. J Ford Motor Co.’s Spin is the latest scooter company to join a pilot program aimed at forming a practical structure for managing supply and distribution of scooters in cities, including Detroit. In March, the city teamed up with mobility-focused data firm Passport Labs Inc. and California-based scooter company Lime to launch the pilot program, which analyzes scooter use patterns. Passport’s program will test Spin fleets in Detroit, Charlotte, N.C., and Omaha, Neb. J Vibe Ride Detroit, a fitness studio that will offer cycling, body-building, yoga classes and more, plans to open July 22 in downtown Detroit. The small chain is based in Atlanta, and the Detroit studio would be its third location. J DTE Energy Co. is launching a first of its kind program with the Michi-

gan Department of Corrections that is designed to train citizens for work once they are released from prison. The Detroit-based utility is providing consultation on a new tree trimming curriculum for soon-to-be paroled prisoners at Parnall Correctional Facility near Jackson. DTE Energy Foundation is funding the program with an initial grant of $100,000. The inaugural class of 24 tree trimmers is expected to complete the program in six to nine months. It teaches them to climb trees, trim branches away from power lines and how to obtain a commercial driver’s license, but they are not guaranteed a job.

hen former DTE Energy Co. Chairman and CEO Tony Earley Jr. left Michigan in 2011 to lead San Francisco-based PG&E Corp., he always intended to come back to his adopted city. He and his wife, Sarah Earley, chairwoman of the Belle Isle Conservancy, kept their house, their friends and their connections here. He remained a director on Ford Motor Co.’s Earley board, and she remained active in the conservancy. Now, a year after quietly moving back to Metro Detroit, Tony Earley is stepping up his civic involvement. He’s rejoined the Detroit Zoological Society board and in late June was named chairman. Earley was a longstanding member of the zoo’s board, serving from 1995-2011 before leaving to be chairman, CEO and president of PG&E.

The zoo is a great asset and stacks up well against zoos in other parts of the country and globally, said Earley, a self-proclaimed “zoo aficionado,” along with his wife. “The physical plant is in great shape, and we have great attractions,” including his favorite: the Polk Penguin Conservation Center. “But what’s made me passionate is it is also focused on the environment ... conservation issues ... and really being on the forefront of animal welfare issues.” Beyond his seats on the zoo and Ford boards, Earley is co-chairing a fundraising campaign for Cornerstone Schools in Detroit. Earley said he’s officially retired in the sense that he isn’t going to the office every day. But he’s got plenty to keep him busy. He serves as a director of Atlanta utility Southern Co.; Texas-based Clearesult, a provider of energy efficiency services; United Way Worldwide and the Exploratorium science museum in San Francisco. “My wife says I’ve flunked retirement,” Earley said.

OTHER NEWS J Cellarmen’s, maker of handcrafted mead, cider and beer, will close its doors after a little less than four years in Hazel Park. It will hold its last official day of business July 27. The bar cited factors such as the death of one the company’s founders, distribution challenges and “unreasonably excessive requests” from the landlord, who disputes the claim. J Macomb County is still considering the best time to ask taxpayers for $375 million to fund a jail in Mount Clemens that would replace one at the end of its life cycle. County commissioners are expected to vote Thursday on a resolution to delay approval of the millage proposal and abandon the idea of putting it on the November ballot. The proposal is for a 0.98-mill tax for 21 years to pay for a new 1,518-bed jail and sheriff’s office. J Ferndale’s City Council has approved a development agreement that moves forward a public-private partnership to finance and construct the city’s first downtown mixed-use parking garage development. Developer Versa Wanda agreed to spend approximately $14 million building out commercial, residential and retail space, and to go along with the city’s goals of inclusivity and affordability. J Two local businessmen bought The Tennis & Golf Co. on Woodward Avenue in Royal Oak out of Chapter 11 bankruptcy. Steve Kopitz, who previously owned Bloomfield Hillsbased Summit Sports Inc. which includes the ski shop Don Thomas Sporthaus in Birmingham and online ski retailer Skis.com, purchased the specialty shop with Andy Schepper, former COO of Summit Sports. They want to refresh the store and add online capabilities to boost sales.

BILL PULTE VIA TWITTER

Bill Pulte’s Twitter campaign caught the attention of President Donald Trump. Pulte tweeted in March 2018 that he was at the White House for “inner city meetings.”

Bill Pulte giving away $100,000 on Twitter B

ill Pulte says he is giving away $100,000 by the end of the year on Twitter. If you follow the 31-year-old grandson of the late homebuilding legend William J. Pulte on that social media platform, you’ve probably noticed the last couple of weeks that he has been giving away cash to people who say they are in need. “Where else am I going to be giving money and know that it has a direct impact?” asked Pulte, managing partner of Pontiac-based Pulte Capital Partners LLC. Here’s how it’s been happening: Pulte tweets that he is giving away a certain amount of money and laying out some pretty low-bar criteria. After the retweets and mentions start rolling in, his three-person team starts vetting the prospects by looking at their profiles for followers, activity and engagement, user photos,

etc., to determine that it’s a real person. “If they engage with you on DM, you get them on the phone or you FaceTime with them or speak to their references,” Pulte said. “But I will tell you it’s not perfect. If some of my money goes to people who don’t deserve it or are scams, that’s fine, it’s my money and I worked for it.” Pulte says he got the inspiration from Andrew Yang, the Democratic presidential candidate who is giving a random Twitter user $1,000 per month to highlight universal basic income, or UBI. Pulte’s drive even caught the attention of the nation’s best-known Twitter user. “THANK YOU BILL!” President Donald Trump tweeted in response to a challenge from Pulte that if the president retweeted him, he would give $30,000 to a veteran.

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