Crain's Detroit Business, May 18, 2015 issue by Crain's Detroit Business

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CRAIN’S Readers first for 30 Years

DETROIT BUSINESS May 18-24, 2015

BEAUMONT, HENRY FORD POST PROFITS

CREAM AND SUGAR? ... VITAMINS?

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Former churches find new uses in the afterlife Page 3

Van Buren Township is suing Visteon Corp. after a failed bond deal that could bankrupt the community. Should the company share blame?

Poll: Biz willing to pay more Visteon: Lesson in caution for better roads By Dustin Walsh dwalsh@crain.com

Fuel or sales tax hikes are favored options By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

Metro Detroit businesspeople say they would be willing to pay more out of their own pockets to repair Michigan’s failing roads and bridges, both in the form of higher taxes and fees — and nearly half of them would even consider corporate income tax changes. The roads, they agree, are broken. What they don’t agree on is just what Plan B for roads should look like. Of the 300 business owners and managers surveyed in a poll commissioned by Crain’s Detroit Business and law firm Honigman Miller Schwartz and Cohn LLP , a majority, 56 percent, believe some combination of fuel tax and fees could fill the funding gap. The polling was conducted by Lansing-based Epic-MRA. Respondents said lawmakers and Gov. Rick Snyder must make reaching a deal on an alternative funding plan a priority in the wake of Proposal 1’s defeat this month. These respondents to the Crain’s poll said coming up with Plan B quickly is essential. But they nearly uniformly opposed cuts to some existing state programs to match the $1.2 billion that Proposal 1

The road to funding 4% 10 %

56%

31%

It will be necessary to raise state taxes, fees or both Funding can be raised by cutting existing programs and services It will take a combination of both cuts and new taxes Undecided/refused

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crainsdetroit.com Vol. 31 No 20

[LARRY PEPLIN]

Denita Donahoo (left) gets a grip lesson from instructor Terri Anthony-Ryan last week at the Belle Isle Golf Range.

New owner aims high for Belle Isle golf, but expenses put her in the rough By Bill Shea

NEWSPAPER

See VISTEON, Page 22

Survey: Biz owners, managers would pay for roads, if plan is right

Source: Crain’s/Honigman poll See ROADS, Page 25

A lawsuit between Van Buren Township and its largest corporate resident, Visteon Corp., underscores the risks of government-led investment in economic development — and whether corporations should be held accountable when these kinds of projects go awry. The suit, filed May 12 in U.S. Bankruptcy Court in Delaware, alleges the multinational auto supplier breached its contract over bonds tied to the construction of Visteon’s opulent 263-acre campus near Ecorse Road and I-275.

The case isn’t the first time economic development desires have burned municipalities, but experts say this case should serve as a cautionary tale. The biggest issue: vague language about shared risk and the dollars involved. Legal experts in this area of law say indemnity clauses in any contract like this must be ironclad. The Visteon development opened in 2004. When the Visteon Village campus was envisioned, it wasn’t known that Visteon would ultimately end up in bankruptcy court or that the commercial real estate market

bshea@crain.com

$2 a copy. $59 a year.

Since she took over the Belle Isle Golf Range on April 1, Francine Pegues said she has had only enough time to hit a single bucket of range balls. That’s distressing for the president of the Michigan Women’s Golf Association who first took up the game 39 years ago, but her time has been occupied by keeping the driving range and golf training center open and maintained. “At this point, I have spent more money than I an-

ticipated,” she said. “The state underestimated what it would cost to open the doors here.” Michigan, which made the island a state park last year, gave Pegues a three-year contract in February to operate the golf facility, and her intent has been to use the center as a tool to bring golf to underserved populations, especially children, she said. Unexpected expenses and troubles have made that a difficult goal. See GOLF, Page 21

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MICHIGAN

BRIEFS The lesson here: Beware of Greeks bearing ski poles

… well, call it bacchanalia, in keeping with the overall Greek theme. The Detroit Free Press reported that Sigma Alpha Mu paid Treetops $11,500 for damages and for having too many guests in 2014. Treetops attorney Paul Dillon said the fraternity was invited back because 2014 problems weren’t seen as “intentional acts.” To the credit of both fraternities, no such ambiguity was present this year.

Perhaps this explains why Greeks tend not to excel at the Winter Olympics. Upon further review, officials at Treetops Resorts in Gaylord last week said they would file a civil lawsuit against individual members of the Sigma Alpha Mu and Sigma Delta Tau fraternities at the University of Michigan for their alleged roles in the destruction of nearly 50 rooms at the ski resort during the Jan. 17-18 weekend. The Otsego County prosecutor already had criminally charged three members of Sigma Alpha Mu when Treetops lawyers issued a statement that said, “Several facts … now suggest that legal action beyond the criminal matter should be pursued.” Treetops officials said they decided to pursue a civil suit partially because only three people have been charged. Treetops estimates $430,000 in costs from the vandalism. So assuming your hackles have been raised, consider this: A police report says Sigma Alpha Mu had created problems in 2014 — yet the frat was allowed to return for this year’s

Verizon, Sprint to pay back customers over ‘cramming’ Michigan is to receive $538,934 from Verizon Wireless and Sprint Corp. as part of a $158 million nationwide deal to settle charges that the mobile giants allowed phony charges on their customers’ monthly bills so they could keep a cut of the profit, The Associated Press reported. In total, Michigan has received nearly $1.3 million as a part of four national cramming settlements with major carriers. The two mobile providers had partnered with vendors that sell premium text messaging services, such as daily horoscopes, trivia and sports

scores. But consumers who hadn’t signed up for the services were being billed anyway, according to the Federal Communications Commission and several state attorneys general. Both companies said in statements that they had stopped allowing premium text messaging before the government investigation began.

That’s all, for Holland mall; enter, the shopping center From the Mall of America to demall of Holland. Starting next month, Westshore Mall will undergo about $20 million of work to turn an enclosed mall along U.S. 31 into an exterior-designed shopping center known as The Shops at Westshore. Greg Erne, a principal at Southfield-based Versa Development, the parent company of Westshore Mall Investors, told WZZM-Channel 13 in Grand Rapids that the switch is a response to, naturally, shoppers in the area. The entire project is expected to last about 18 months. Upon completion, the shopping center will have about 20-25 stores ranging from large department retailers to small businesses, Erne said. Westshore Mall Investors purchased the mall from Coastline Michigan LLC in 2012 for about $5.5 million.

MICH-CELLANEOUS 䡲 Three Federal Trade Commis sion staff members sent a letter to state Sen. Darwin Booher, R-Evart, urging legislators to drop Michigan’s

requirement that automakers sell through franchised dealers only, The Detroit News reported. The law has been criticized by electric car maker Tesla Motors. 䡲 The coal-fired SS Badger passenger ferry is set to return to service after undergoing a makeover to meet terms of a deal with the U.S. Environmental Protection Agency , the Ludington Daily News reported. The Badger, which sails between Ludington and Manitowoc, Wis., will have a new ash retention system as part of a requirement to stop discharging ash into Lake Michigan. 䡲 A $75 million settlement was reached with Enbridge Energy over the 2010 oil spill that sent 800,000 gallons of oil into Talmadge Creek and the Kalamazoo River, the Kalamazoo Gazette reported. The spill affected more than 38 miles of the Kalamazoo River and 4,435 acres of shoreline habitat. 䡲 Atlanta-based Georgia-Pacific will close its packaging plant in Parchment just north of Kalamazoo by the end of the year, eliminating 57 jobs, MiBiz reported. 䡲 Elkhart, Ind.-based Forest River Manufacturing Inc. , whose products include travel trailers and pop-up tent campers, broke ground on a $7 million plant in White Pigeon west of Kalamazoo, the Kalamazoo Gazette reported. Forest River plans to hire 396 people within three years. 䡲 Allegan-based Perrigo Co. plc acquired the Mexican operations of Patheon, a pharmaceutical compa-

INSIDE THIS ISSUE BANKRUPTCIES . . . . . . . . . . . . . . . . . . 7 BUSINESS DIARY . . . . . . . . . . . . . . . . 19 CALENDAR . . . . . . . . . . . . . . . . . . . . . . 20 CLASSIFIED ADS . . . . . . . . . . . . . . . . 21 CRAIN’S LIST . . . . . . . . . . . . . . . . . . . . 17 MARY KRAMER . . . . . . . . . . . . . . . . . . . 9 OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . 8 PEOPLE . . . . . . . . . . . . . . . . . . . . . . . . . 19 RUMBLINGS . . . . . . . . . . . . . . . . . . . . 26 WEEK ON THE WEB . . . . . . . . . . . . . . 26

COMPANY INDEX: SEE PAGE 25 ny based in Durham, N.C., for $34 million in cash, The Holland Sentinel reported. 䡲 A Michigan Senate committee voted to let the filing deadline for Flint’s mayoral primary be extended after city Clerk Inez Brown told candidates their nominating petitions with at least 900 valid signatures were due April 28. The actual deadline was April 21. 䡲 Frankenmuth Brewery’s Batch 69 American IPA was awarded the 2015 Gold Medal for Best IPA (neophytes can Google it) at the World Expo of Beer, considered the largest beer sampling event in Michigan. 䡲 Faced with a $21.9 million deficit, the Flint Board of Education voted unanimously to close three elementary schools at the end of the school year, The Flint Journal reported.

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2 health systems find profits, optimism Lower per-patient costs help weather cuts to reimbursements By Jay Greene jgreene@crain.com

Despite ongoing reimbursement reductions from Medicare and possible changes in lucrative auto no-fault medical payments, two of the six major health systems in Southeast Michigan, Henry Ford Health System and Beaumont Health, had financial success in 2014 and are cautiously optimistic for the future.

Recovering from a $12 million net income loss in 2013, Henry Ford bounced back last year by posting $27.8 million in net income, said CEO Nancy Schlichting. Henry Ford’s turnaround in 2014 was aided by a 3 percent increase in revenue to $4.71 billion, a 4 percent reduction in uncompensated care costs and a 15 percent increase in Medicaid payments. “We showed tremendous work on (re-

ducing) costs,” said Schlichting. “To come out of it (financial losses in 2013) was pretty significant.” Henry Ford, which last year saved $65 million through productivity improvements from its new Epic Systems electronic health record, is on track to cut $300 million in costs by 2016, said Edward Chadwick, Henry Ford’s CFO. Other health systems operating in

Southeast Michigan, including St. John Providence Health System, St. Joseph Mercy Health System, McLaren Health Care and University of Michigan Health System, have fiscal years that end in July or September and financial data was unavailable. Marianne Udow-Phillips, director with the Ann Arbor-based Center for Healthcare Research and Trans formation , said lower per-patient costs

NancySchlichting: Medicaid payments aid HenryFord books

See SYSTEMS, Page 23

Sharing sacred spaces Group links low-use religious sites with space-needy organizations By Sherri Welch swelch@crain.com

A space-sharing pact with St.John-St.Luke Evangelical United Church of Christ provides ArtLab J founder Joori Jung space for performances. [JOHN SOBCZAK]

The sounds of children playing once filled the gymnasium at the historic St. John-St. Luke Evangelical United Church of Christ in the city’s Eastern Market area. But they faded as the size of the congregation there — over 1,300 strong in 1874 when the church was built — dwindled to just 50 today for the church now occupying the building. Things are looking up for the church to find new use, and even new membership interest, however, thanks to a new space-sharing agreement between the church and two local performing arts groups. ArtLab J and its fledgling contemporary modern dance company moved into St. John-St. Luke’s auxiliary building last summer, joining United Church of Christ performing arts outreach program Young Fenix

Physical Theatre. With its lofty ceilings, wood floors and balcony, the former gym is perfect for dance performances, and the classroom-like space on the building’s second floor is perfect for rehearsals and classes, said ArtLab J founder and artistic director Joori Jung. Next year, she and ArtLab J plan to host performances inside the sanctuary — complete with its towering stained glass windows and candelabras as a backdrop. Space at the church is affordable — ArtLab isn’t charged rent but does make donations to the church — and parking is free, Jung said, unlike its previous locations in the downtown area. For the church, the agreement is bringing new people and new donations through its doors, someSee CHURCHES, Page 24

Drink to health: Vita Perk brews ‘smart coffee’ biz By Laura Cassar Special to Crain’s Detroit Business

It all started with a cup of coffee. Brad Kifferstein, a daily coffee drinker, was driving down the road considering the drink on hand. “If there are smartphones, smart cars and even smart water, why not smart coffee?” he wondered. With an entrepreneurial spirit

and a passion for health, Kifferstein, 36, wanted to infuse well-being into his favorite beverage and find opportunity in the convergence of two industries — coffee and nutrition supplements. This was January 2010. As he began to develop the idea, he turned to friend, fellow coffee enthusiast and former co-worker Jeb

Belchinsky, 44. Together, they began researching what was out there. They found coffee that was already infused with vitamins, but they wanted to be able to add vitamins to any coffee. “Coffee is like a religion to people,” Belchinsky said. “We wanted to bring something to market that could be added to any coffee you like.”

Kifferstein, with a background in business development for a textiles company, and Belchinsky, with a background in sales, began to refine the product concept. Together, the two came up with Bloomfield Hills-based Vita Perk, a powdered coffee supplement with See VITAPERK, Page 23

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Vita Perk powder adds 15 vitamins and minerals to any cup of coffee.

MUST READS of the week... Practicing medicine with a Net

‘Collaboration equals profits’

30 years ago, health care made its marketing house calls through TV and radio ads. Now the Internet and social media have become alternative therapies. Read this week’s installment of Crain’s 30th anniversary feature, Looking Back, Page 4

The bottom line of an annual survey of supplier-automaker relationships? As one analyst puts it: “Basically, (automakers) are paying for their pattern of behavior.” Meaning, being nice pays off, Page 6

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In Crain’s May 27, 1985, issue, metro Detroit TV station managers called the 39 percent increase

LOOKING BACK in spending for health care advertising “astonishing” and “incredible.” While health care TV advertising is still strong, there’s also a big shift to the Internet and social media. More at crainsdetroit.com/30

Health care ads make shift to Internet, social media By Jay Greene jgreene@crain.com

Television and radio advertising in the health care industry is taking a slight backseat these days to social media and individualized direct advertising. While total spending on health care appears to be holding steady the past few years, the percentage devoted to TV, radio and print advertising has declined somewhat as Internet media advertising has grown, advertising executives told Crain’s. But back in mid-1980s, television, radio and print advertising were exploding as health care giants like Henry Ford Health System , De troit Medical Center , and later William Beaumont Hospital spent millions to get their brand message out and highlight superstar doctors. For example, DMC spent hundreds of thousands of dollars as it hired actor E.G. Marshall to tout Harper University Hospital in television ads. In a May 27, 1985, article, Crain’s quoted metro Detroit TV station managers who called the 39 percent growth in health care spending for advertising from 1983 to 1985 “astonishing” and “incredible.” One manager said there is a “lot of competition for the message.” Christopher Rohrs, who at the time was general sales manager with NBC’s WDIV-TV Channel 4, said health care advertising catapulted to the fifth largest category in 1985 after failing to crack the top 10 the previous year. Ahead of health care ad revenue were restaurants, beverages, automotive and phone companies. Marla Drutz, current general manager at WDIV Local 4, said health care still is a top 10 category in metro Detroit. Factors why include the high percentage of people with health insurance and the larger

number of quality health insurers, physicians and hospitals. “That stimulates competitiveness in that whole segment,” Drutz said. “There is a lot of creativeness in the health care community. We see that in their image campaigns.” Tom Canedo, general manager of CBS’ WWJ-TV and WKBD-TV in Detroit, said television advertising continues to be a top category, especially the past few years with the number of hospital mergers and acquisitions in Southeast Michigan. “We are anticipating a continued strong presence on television from the new consolidated companies,” Canedo said. But today health care organizations are also more often using targeted or individualized marketing and advertising to tout their clinical service expertise. While blanketed brand advertising is still used — note the tag lines of “Do you have a Beaumont doctor” or “We’re Henry Ford. When others can’t, we can” — the idea now is to tailor more messages to specific populations using the Internet or direct mail. For example, Henry Ford Health System spent 9 percent of its ad budget on digital spending in 2011. By 2015, however, those numbers are pushing up to 40 percent, said Liz Schnell, Henry Ford’s vice presiLizSchnell: Con- dent of brand sumers want per- strategy. sonalized message. Schnell, who has been with Henry Ford for 28 years, said customers want their health care ads to be authentic and resonate with them.

While blanketed brand advertising is still used — note “Do you have a Beaumont doctor” or “We’re Henry Ford. When others can’t, we can” — the idea now is to tailor messages to specific populations using the Internet or direct mail. “The consumer has changed so much. They want a personalized interactive experience and don’t want mass media pushed at them,” Schnell said. “They are fast forwarding past the commercials.” Nationally, digital advertising revenue rose 16 percent to $49.5 billion in 2014, setting an all-time record, according to the IAB Internet Advertising Revenue Report, an annual survey by PricewaterhouseC oopers. Retail ads accounted for 21 percent, followed by financial services at 13 percent and automotive at 12 percent. Health care, which includes pharmaceutical, insurance and hospitals, accounted for 5 percent, the same amount as the previous year. Social media advertising — that includes Facebook, Twitter, LinkedIn and Digg — also increased 57 percent to $7 billion in 2014 for all industry categories, the report said. In metro Detroit, DMC outspent second-place Henry Ford in 2014 $5.4 million to $4.1 million. Both systems accounted for nearly 60 percent of total hospital ad spending, with Beaumont coming in third at $2.9 million. On TV, Henry Ford spent 70 percent, DMC 33 percent and Beaumont 35 percent, according to Voicetrak Inc. Birth of hospital TV advertising

During the early 1980s, Henry Ford and DMC were beginning to extend into the suburbs as they followed patients with outpatient centers. And Rose Glenn, Henry Ford’s chief marketing officer, said Henry Ford was at the leading edge of health care advertising in the 1980s. “Patty McCarthy and MarRose Glenn: Henry cie Brogan Ford was on leading (chairman of edge in advertising. Brogan and Part -

ners ) were breaking ground on the TV side with commercials. It was a big thing for us,” said Glenn, who has been with the system 30 years. “We needed to bring in patients to our doctors,” Glenn said. “Our employed group is an important way to get the message out to prospective patients.” McCarthy, former vice president of market communications and community affairs with Henry Ford from 1975 to 1992, said Henry Ford began TV advertising to get the message to the public about its clinical centers Patty McCarthy: of excellence in Capitalized on what heart, bone and “made us different.” joint and neurosurgery, and how its employed medical group contributed to hospital operations. “We did a lot of research at Henry Ford and understood the differentiator was the Henry Ford Medical Group . We had an opportunity to capitalize on what made us different,” McCarthy said. “We are more than a hospital. It was a very bold and somewhat controversial.” McCarthy said some of Henry Ford’s 1,200 employed doctors were placed front and center in advertising spots with the branding tagline: “More specialists make us more than a hospital.” But McCarthy said some physicians were uncomfortable with presenting themselves personally in advertisements to the public. “They were physicians. Marketing had never been a part of medical school. They felt, build it and they will come, but times were changing dramatically,” said McCarthy, noting that consumerism was just beginning to take hold in the mid-1980s. “People were making educated choices about where to go,” she said. At the time, Michael Killian, who recently retired after more than 35 years with Beaumont Health, said Beaumont was nearly 100 percent full with patients in the 1980s and felt it didn’t need to advertise. Michael Killian: “One arguAd philosophy ment was why changed in 1985. spend money on advertising if you are already full,” said Killian. “The counter-veiling argument was we were just beginning to replace medical leadership and were bringing in more specialists — oncologist Alvaro Martinez from Mayo Clinic, pediatrician Jeffrey Maisels from Penn State University and urologist Ananias Diokno from University of Michigan.”

For years, Killian said, Beaumont’s primary strategy had been to court journalists to help them write stories about Beaumont, what he called “earned” coverage as opposed to paid advertisements. “We changed dramatically in 1985 and spent about $1.5 million in advertising over 18 months,” he said. Killian said Henry Ford and DMC advertisements were very effective, but they were not hurting Beaumont’s bottom line, so it downplayed paid advertising again for another decade. But on April 13, 1999, Killian said, Beaumont unveiled its now-famous tagline “Do you have a Beaumont doctor?” exclusively on radio. “It was not a big campaign,” he said, noting Beaumont was still only spending 20 percent of what Henry Ford and DMC were at the time. “We spent all our money on radio, but people began talking about it and thought it was everywhere.” Killian said Beaumont’s pitch rang true for people, similarly as the University of Michigan’s earlier “Knowledge heals,” which was developed by now-retired marketing executive Ken Trester. “I thought Michigan had a fabulous campaign, the best in the country at the time,” he said. “They stopped it after a leadership change.” UM’s current campaign is around its “leaders and best” tagline that highlights clinical areas that include trauma medicine, prosthetic limb replacements, stem cell research and cancer treatments. While most health care advertising in Southeast Michigan hadn’t been antagonistic toward competitors, Killian said former CEO of DMC Mike Duggan, now Detroit mayor, broke ground when in 2004 he started DMC’s 29-minute emergency room guarantee. Earlier, Oakwood Healthcare began to guarantee to patients they would see a doctor within 30 minutes in their emergency departments. “Duggan’s stuff was political advertising rather than normal marketing,” Killian said. Other notable taglines have been Barbara Ann Karmanos Cancer Insti tute ’s “When you think cancer, think Karmanos, St. John Provi dence Health System ’s “Passion for healing,” DMC’s “The specialty hospitals of DMC. When it’s serious come to Detroit” and Oakwood’s “Points of pride.” But regardless of the type of hospital ads, McCarthy said the best messaging is word of mouth. “If a patient and a family have a good experience, that will win the day,” she said. 䡲 Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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Report: Poor supplier relations cost automakers millions By Dustin Walsh dwalsh@crain.com

U.S. suppliers that have quality relationships with automakers are more willing to give price concessions, share technology and offer support beyond what contracts stipulate, according to a new report on automaker-supplier relations. Just how much do relationships matter to the bottom line? Automakers spend 60 percent to 70 percent of revenue on contracts with suppliers. Suppliers who rated their working relationship with au-

tomakers as “good to very good” were nearly twice as likely to meet automaker demands, according to the annual study, released by Birmingham-based Planning Perspec tives Inc. The study examines the automaker-supplier relationship and how it affects automaker bottom lines. “Basically, (automakers) are paying for their pattern of behavior,” said John Henke, president and CEO of Planning Perspectives, marketing professor at Oakland University and research fellow at Rutgers

University . “If the relationship is good, automakers are getting money from the suppliers and the suppliers are happy to give them that money because it’s also good business on their part.” On the flip side, poor relationships are individually costing the Detroit 3 millions every year. The worsening relations between General Motors Co., Ford Motor Co. and FCA US LLC and its U.S. suppliers caused the OEMs to lose a collective $1.8 billion in operating profit in 2014 alone, according to the study. The study also compares the compa-

nies to peers Toyota Motor Corp. and Honda Motor Co. Ltd. Henke said buyers at the Detroit 3 are reverting to “adversarial” ways of doing business, causing contention in its supply base. “(Automotive) buyers and management have to remember that cost reductions, contract changes and other similar programs do not of themselves result in poor supplier relations,” he said in a statement. “It’s the manner in which these programs are administered that causes poor relations with suppliers.” This directly led to the drop in the

Detroit 3’s working relations index scores, generated from responses from 541 supplier sales personnel. The index measures communications; profit opportunities; supplier relations; “help” (willingness to help suppliers cut costs and improve quality); and “hindrance” (late engineering changes, conflicts between engineers and purchasers, etc.). GM had a relationship score of 224, down from 244 last year. FCA also scored a 224, down from 245 last year, while Ford scored a 261, down from 267 in 2014. Competitors Toyota and Honda increased their scores to 336 and 330, respectively, or a total average of 8.7 percent from last year, according to the study. Mike Wall, director of automotive analysis for Southfield-based IHS Automotive Inc., which does its own automaker-supplier relations study, said pricing pressures have returned to the U.S. market, but suppliers are pushing back, which could create a more tenuous relationship. “Suppliers are feeling the pressure more and more,” Wall said. “But the suppliers I’m talking to are pushing back and, frankly, automakers have a greater need for suppliers due to technology, so it’s becoming more difficult to navigate the relationships.” Henke said if GM, Ford and FCA had improved by that 8.7 percent, they could have increased operating profit, earnings before interest and tax, by nearly $1.8 billion in 2014. Those figures break down as an increase in operating profit in 2014 of $750.2 million for GM, $661.3 million for FCA and $354.3 million for Ford. “Clearly, collaboration equals profits,” Henke said. “If the (automakers) put as much money into their relationship as they did contract management, they’d make more money.” The number of suppliers who were identified as having a poor relationship with GM and FCA reached a three-year high of 58 percent and 54 percent, respectively, according to the survey. Henke attributes this to an increase in price pressures from the automakers without effective communication. Julie Fream, president and CEO of the Troy-based Original Equip ment Suppliers Association, said the relationship between automakers and suppliers breaks down when the needs of each company aren’t considered. “It’s more than costs … it’s trust that allows suppliers to move forward and support the (automakers) on whatever their goals may be,” Fream said. “When the buyers at the (automakers) understand that being the advocate for the supplier internally and vice versa, that’s what translates to the strongest relationships.” 䡲 Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

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Mattress man trades in law for a good night’s sleep By Laura Cassar Special to Crain’s Detroit Business

When Crain’s honored Gregory Yatooma in 2007, he was a corporate attorney at Foley & Lardner LLP handling mergers and acquisitions. He also was chairman for the nonprofit he founded, Michigan Tournament of Charities. Today, he sells several thousand mattresses a year through his four Mattress Closeout Center locations. And, unfortunately, the Michigan Tournament of Charities was a “victim of the Great Recession.” Yatooma didn’t intend to open a chain of mattress stores. He just “fell into it. I didn’t even know what a good mattress was,” he said. What Yatooma knew was that he did not enjoy practicing law: “My personality GregoryYatooma: is not a big-firm A soft landing for lawyer. It wasn’t former lawyer. the life for me.” He left Foley & Lardner in 2009 and started doing legal work for a handful of clients while trying to figure out what was next. Meanwhile, a friend who works for a mattress manufacturer offered Yatooma a $4,000 mattress — a floor model from a Las Vegas trade show — for $900. Yatooma bought the mattress and had the “best night of sleep in his life.” “I didn’t toss, I didn’t turn. I don’t think I moved,” he said. “And when I woke up in the morning, my back didn’t crack. I felt great.” Over the next six months, he bought similar mattresses for his mother, aunt, cousin and brother. There was so much demand that he finally asked his friend if he could buy a truckload. The friend agreed and Yatooma purchased 60 mattresses and borrowed a warehouse from another friend. He put an ad on Craig’s List and did a cash-and-carry business — until a woman needed one delivered. “Another friend had an out-ofwork buddy who owned a truck,” he said “He helped me out and now he’s the general manager of all my stores.” From a truckload of mattresses, Yatooma has grown his business into four locations: Bloomfield Hills, Rochester Hills, Wixom and West-

land. The mattresses he sells are closeouts, clearance and liquidations, name brands at half off. He tries to make buying a mattress fun for his customers. “Our closing table is a foosball table; we have basketball nets, televisions and iPads in the stores. I couldn’t ask for a better gig. Best of all, I come to work in shorts.” His staff is paid hourly, not on commission, and Yatooma says they get a ton of referrals, recommendations and repeat business. Now married with one child and another on the way, Yatooma said

On June 1, Crain’s will announce its 10th class of 20 in their 20s winners. In honor of this milestone of recognizing rising leaders, we’re catching up with dozens of former winners to see where they are now. Check in on Annis Stubbs — now Brown — who is leading innovation for Teach for America, or Sharon Carney, who left Detroit to become the chief of staff for the Urban Institute in Washington, D.C. Each day leading up to our June 1 report on the 2015 class of winners, we’ll highlight someone new at crains.com/20slookback. To get you started, catch up with Gregory Yatooma in the story below, who is perhaps the “most changed” out of all previous nine classes. — Amy Haimerl, entrepreneurship editor

he has no regrets. “I would not change a single

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have extreme pride in my time at Foley & Lardner.”

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BANKRUPTCIES The following businesses filed for protection in U.S. Bankruptcy Court in Detroit May 8-15. Under Chapter 11, a company files for reorganization. Chapter 7 involves total liquidation. Therma-Scan Reference Labora tory LLC , 34100 Woodward Ave., Suite 100, Birmingham, voluntary Chapter 11. Assets: $59,737.77; liabilities: $526,909.42. Zahn’s Auto Body Inc., 723 Wagner Road, Ann Arbor, voluntary Chapter 11. Assets and liabilities not available. — Natalie Broda

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CRAIN’S DETROIT BUSINESS

OPINION ‘Visteon Village’ is a cautionary tale nother local government is finding how risky economic development can be. Especially when it’s liable for the bonds it sold to finance a company’s project. Case in point: Visteon Corp.’s Van Buren Township headquarters, financed by township-backed, tax-increment bonds. The idea was that “Visteon Village” would lead to additional investment and tax revenue would increase, enough to pay off the 30-year bonds. The township sold $29 million in bonds to pay Visteon’s developer. (See story, Page 1.) But Visteon — and its “Visteon Village” — ended up in bankruptcy in 2009 when the supplier filed for Chapter 11 reorganization. And property values and tax collections never hit expectations. Now the township is facing a shortfall in bond payments to the project. And lawyers are arguing over the meaning of the word “assist” in agreements that pledged the supplier would “assist” should a shortfall occur. The township has company; other municipalities have shared this particular kind of pain. This should be instructive for other governments desperate to add jobs and tax base to their rolls.

Right-to-work didn’t snag Volvo When Michigan enacted a “right-to-work” law in 2013, the expectation was the state would soon attract new investment from union-wary companies. Asian companies in particular are noted for antipathy toward unionized workforces. And yet, when Chinese-owned Volvo announced it would build an assembly plant in South Carolina, it was a competition between Carolina and Georgia. Michigan wasn’t even on the “maybe” list. Volvo plans to employ up to 4,000 people and make 100,000 vehicles a year. The new plant is near the Port of Charleston. “We didn’t even have the opportunity to pitch,” a state official told a breakfast briefing of the Association for Corporate Growth last week. “We weren’t on the radar.” Tony Vernaci, vice president of global business development at the Michigan Economic Development Corp., said the state needs to delve into the “why” of that omission. Vernaci said the state hoped to meet with officials at Geely, the Chinese owner of Volvo, to understand the dynamics of the decision — not to change it. For years, as more foreign-owned auto companies elected to build assembly plants in southern states, some faulted Michigan’s unionized reputation for missing out. At the same time, Michigan has bragging rights for R&D tied to auto. Does right to work in Michigan matter? Economic developers and policy makers should be ready to answer that question.

LETTERS

Fairness must drive rules on companies like Uber Editor: At Quicken Loans, we have been following the debate in Lansing about the degree to which transportation network companies like Uber should be regulated, and we recently read Matt Oddy’s April 27 opinion piece with great interest (“New for-hire vehicles must be subject to transportation laws,” Page 9). Between Quicken Loans and others in our family of companies, we have more than 12,000 team members working in downtown Detroit — many of whom also live downtown. Our people rely heavily on Uber to get around. In addition, we have many tenants in our downtown buildings whose customers frequently use services like Uber as an additional transportation option. Our team members and customers find Uber to be very safe and convenient. While we agree with Mr. Oddy that the regulatory framework should provide for a level play-

Send your letters: Crain’s Detroit Business will consider for publication all signed letters to the editor that do not defame individuals or organizations. Letters may be edited for length and clarity. Email: cgoodaker@crain.com

ing field in which passengers are adequately protected, we must be sure that any such framework provides for fair and open competition and does not include onerous requirements that would effectively eliminate Uber as a choice for consumers. David Carroll VP of miscellaneous stuff, Quicken Loans

Michigan’s leadership apparent at health care road show Editor: A thank you to Crain Communications (parent company of Crain’s

Detroit Business) for bringing the Modern Healthcare “road show” on population health to Michigan on May 7. With a panel represented by three strong health care leaders — Tom Simmer, M.D., Blue Cross Blue Shield of Michigan; Herman Gray, M.D., Detroit Medical Center; and Bruce Muma, M.D., Henry Ford Physician Network — Michigan looked like the leader it is in advancing health care initiatives that provide outstanding, coordinated care while increasingly looking to establish community support systems for underserved populations in the region. Equally important: The growing collaboration among Southeast Michigan’s health care community was palpable at the event, as those of us who lead patient-centric organizations come to deeply understand the need for shared expertise and programming to realize true health reform. Ewa Matuszewski CEO, Medical Network One, Rochester

Congress must act to put an end to patent trolls OTHER VOICES Joe Golden is the co-founder and co-CEO of Collage.com. e at Collage.com make cusproducts like photo books and photo blankets for anyone to make using simple and powerful software tools our team designs in-house. We’re always rolling out new fea-

Wtom

tures and new products but are worried about the threat posed by “patent trolls,” shell companies that exist solely to extort other companies for alleged patent infringement. We hold a patent and have several currently pending for our proprietary software algorithms. We absolutely respect the right of companies and individuals to legitimately protect their own innovations. However, patent trolls seek only to sue others for broad and exceptionally vague patents that they hold only for

the purpose of filing patent lawsuits and extorting others. These tactics stifle innovation and force companies to spend money litigating instead of hiring workers or coming up with new, useful products and services. For example: One troll company threatened more than 16,000 small and midsize businesses for using scanners that can email documents, claiming a patent that covers nearly any modern multifunction printer or scanner. This patent wasn’t used for

any product. It was just purchased by a patent troll and used to threaten small businesses. Ultimately, the Federal Trade Commission stepped in to curb this company’s abuses. This was a good outcome, but it does nothing to stop the wider problem of using patents to stifle innovation. How big is the problem? Patent trolls filed more than 2,700 lawsuits in 2014, up nearly three times from 2010. According to Colleen Chien, assistant professor at the Santa

Clara University School of Law, the average patent troll settlement costs a company $1.33 million — and to defend a patent in court costs $1.75 million. Congress must act to fight back against patent trolls in 2015. The recently introduced bipartisan Patent Act is a great place to start, as it would curb the worst practices of patent trolls and increase transparency around our patent system. Patents should be used to protect innovation, not stifle it. 䡲

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Thereâ&#x20AC;&#x2122;s not so much difference between â&#x20AC;&#x2DC;old,â&#x20AC;&#x2122; â&#x20AC;&#x2DC;newâ&#x20AC;&#x2122; Detroit MARY KRAMER: Publisher n December, Detroit News colum-

Inist Nolan Finley noticed that the

customers in the â&#x20AC;&#x153;hot newâ&#x20AC;? restaurants in downtown Detroit were largely white in a city thatâ&#x20AC;&#x2122;s largely black. The topic of â&#x20AC;&#x153;two Detroitsâ&#x20AC;? has kind of gone viral, with commentary on local TV, at live and online forums, and in print. Finley and WDIV anchor Devin Scillian will lead a â&#x20AC;&#x153;town hallâ&#x20AC;? discussion at the Detroit Regional Chamberâ&#x20AC;&#x2122;s Mackinac Policy Conference on May 29. (A mite ironic that two white guys will head up this discussion.) Are there really two Detroits? In a recent blog, Tonya Allen, CEO of the Skillman Foundation, called for â&#x20AC;&#x153;legacy Detroitâ&#x20AC;? and â&#x20AC;&#x153;new Detroitâ&#x20AC;? to rally around the idea that thereâ&#x20AC;&#x2122;s really â&#x20AC;&#x153;oneâ&#x20AC;? Detroit. She also calls for intentional diversity by ensuring we set a table for everybody in Detroit. (Which is a good reminder that Detroit is not solely black and white; it includes Hispanic, Middle Eastern and Asian populations, too.)

TALK ON WEB Reader responses to stories and blogs that appeared on Crainâ&#x20AC;&#x2122;s website. Comments may be edited for length and clarity.

Re: Van Buren Township sues Visteon Corp.over bond payments This idea of government acting as a lender to corporate entities makes no sense at all . There was a reason that Visteon didnâ&#x20AC;&#x2122;t use conventional lending sources, and it was so wrong of the local politicians to step into this role. MikeInMI

Government will get a new city hall with posh desks and hefty retirement packages. Lawyers will be wealthy for life. And the people of Van Buren Township will have to eat hot dogs and drive on bad roads. Steve Petrovich

Re: Beaumont Health turns blue, renames hospitals Choice of color on a sign has zero impact on quality and a negative (albeit small) impact on cost. Hire good people, pay them and treat them well, practice evidence-based medicine, and donâ&#x20AC;&#x2122;t worry about the color of your sign.

Skillmanâ&#x20AC;&#x2122;s annual report pulls together some numbers compiled by Data Driven Detroit to compare â&#x20AC;&#x153;oldâ&#x20AC;? and â&#x20AC;&#x153;newâ&#x20AC;? Detroit. (Disclosure: I am a trustee on the Skillman board.) The data shows that â&#x20AC;&#x153;oldâ&#x20AC;? Detroit and â&#x20AC;&#x153;newâ&#x20AC;? Detroit are predominantly African-American. And the median income for the greater downtown â&#x20AC;&#x201D; about 7 square miles out of the cityâ&#x20AC;&#x2122;s 139 â&#x20AC;&#x201D; is actually less than the citywide median of $24,472. It is a reminder that not everyone living in the core is earning big bucks. Because I live in the city, I probably see more diversity than Finley does: in restaurants I frequent; in Eastern Market on Saturdays;

among the RiverWalk and Belle Isleâ&#x20AC;&#x2122;s walkers, joggers and bicyclists; Noel Night in December; the fireworks in July. Those are affordable â&#x20AC;&#x201D; and fun â&#x20AC;&#x201D; and plenty of Detroiters of all backgrounds enjoy them. And Detroit is attracting investment from people of color. Some examples: äĄ˛ PowerMoves in April drew minority entrepreneurs to boot camps and public pitch events. It was a great opportunity to spotlight entrepreneurial opportunities in the city. äĄ˛ About 45 percent of 500 graduates of the Build Detroit, formerly D:hive program for aspiring entrepreneurs, are black, so the entrepre-

neurial interest is strong. äĄ˛ George Stewart risked his retirement fund from General Motors to stake his investment in the Garden Theater block. Today, this African-American entrepreneur has a restaurant, theater venue and apartments to show for it. äĄ˛ Detroit native John Rhea, former public housing chief in New York City, recently announced an investment in housing in Brush Park, joined by prominent AfricanAmerican Detroiters. Detroitâ&#x20AC;&#x2122;s new restaurants could not survive if they relied solely on Detroiters â&#x20AC;&#x201D; remember that median income â&#x20AC;&#x201D; so itâ&#x20AC;&#x2122;s fortunate that sub-

urbanites are re-discovering the city. But how many people â&#x20AC;&#x201D; black or white â&#x20AC;&#x201D; want to pay $12 for a glass of wine? Or eat â&#x20AC;&#x153;small platesâ&#x20AC;? of food high on the list of many â&#x20AC;&#x153;foodiesâ&#x20AC;? but maybe not as satisfying as, say, a plate of ribs at one of Detroitâ&#x20AC;&#x2122;s many restaurants that serve them? It may not be a racial divide as much as an economic one. Mary Kramer is publisher of Crainâ&#x20AC;&#x2122;s Detroit Business. Catch her take on business news at 6:10 a.m. Mondays on the Paul W. Smith show on WJR AM 760 and in her blog at www.crainsdetroit.com.

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Young companies to pitch for DVP, others to hear fall pitches at Demo Week funding at growth symposium By Tom Henderson By Tom Henderson thenderson@crain.com

Forty early- and growth-stage companies from around the Midwest will make pitches for funding Tuesday and Wednesday at the 34th annual Michigan Growth Capital Symposium at the Eagle Crest Mar riott in Ypsilanti. About 450 will attend the conference, including angel investors, venture capital investors and service providers from around the county. Tuesday’s keynote address will be by Brad Keywell, CEO and cofounder of Chicago-based Uptake Technologies LLC , a data analytics company for industrial clients, and managing partner of Lightbank , a Chicago-based venture capital firm. Keywell is a graduate of the business school and law school at the University of Michigan. Bill Coughlin, president and CEO of Ford Global Technologies, will be Wednesday’s keynote speaker. In addition to ongoing 15minute presentations by companies seeking between $1 million and $20 million in equity funding, there will be a series of panel discussions over the two days of the symposium, including:

Brad Keywell: CEO, Uptake Technologies

Bill Coughlin: CEO, Ford Global Technologies

To get involved For information on registering for the symposium, go to www.michigangcs.com/ register/registration.asp.

Women in the entrepreneurial ecosystem. The Internet of Things. Cybersecurity. Venture capital investment trends and opportunities in the Midwest. Companies making pitches will include Plymouth Township-based Delphinus Medical Technologies Inc., a spinout from the Karmanos Cancer Institute that makes a device for ultrasonic detection of breast cancer; Varsity News Network LLC of Grand

Rapids, a website for high school sports that won the $500,000 first prize at the 2013 Accelerate Michigan Innovation event; Ann Arbor-based Stratos Inc., which markets one card that tracks all credit cards and membership reward programs; Ann Arbor-based HistoSonics Inc., which makes devices that use ultrasound to noninvasively shrink prostates and destroy cancer cells; and Ann Arborbased SkySpecs LLC, a maker of drones for infrastructure inspection. An addition to the agenda this year is a university pitch track Wednesday afternoon that will feature emerging startups from UM, University of Notre Dame, University of Chicago and University of Pittsburgh. Another addition is a shark-tank contest Wednesday afternoon by participants in the Fast Forward Medical Innovation program at UM’s medical school. Former Michigan Economic Development Corp. President Mike Finney, now an adviser to Gov. Rick Snyder, will moderate. Four venture capitalists will serve as judges, with the winning startup getting $2,500. Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2

thenderson@crain.com

Starting this September, in what is being billed as Demo Week, area startup companies will have a series of venues in Ann Arbor and Detroit to make pitches for equity capital and customers. Until recently, this week’s long-running Michigan Growth Capital Symposium in Ypsilanti was the chief venue for groups of startups and growth-stage companies to meet angel investors and venture capitalists and persuade them to invest. (See story, this page.) Some of the 40 companies making pitches at the symposium this week will get another crack at funding this fall. Others will be making their debut before would-be investors. On Sept. 9, Detroit Venture Partners , the VC firm founded by Dan Gilbert, Josh Linkner and Brian Hermelin, will hold a demo day for its most promising portfolio companies at the Madison Building in downtown Detroit.

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On Sept. 10, Techstars , a Boulder, Colo.-based organization that provides mentoring and seed funding for tech startups, will hold a demo day at a location yet to be determined in downtown Detroit for the 10 members of the inaugural class of Techstars Mobility, a partnership with Ford Motor Co. that was announced last September. Each year for three years, 10 startups will spend three months in an accelerator program headed by Ted Serbinski, a former partner at DVP, with graduation being a pitch for funding. On Sept. 11, two accelerator-incubator programs — the Desai Family Accelerator and Coolhouse Labs — will put on a joint demo day at a location yet to be determined in Ann Arbor. Last year, it was announced that Bharat Desai, the founder of Troy-based S y n t e l I n c . , and his family had donated $1 million to the U n i v e r s i t y o f M i c h i g a n to launch the accelerator, a joint venture of the Ross School of Busi ness and the College of Engineering to support student startups. Kelly LaPierre, the former marketing director at Detroit-based Grand Circus, is the managing director at Desai. Coolhouse Labs launched its first incubator class of companies in Harbor Springs in 2013. It has since moved to Petoskey and is about to start its third class of startups from around the U.S. Coolhouse Labs will open a second incubator facility in Ann Arbor next year, but it will kick off its presence there when this year’s class of companies travels south in September to pitch for capital. “The growth of the startup scene in Detroit continues to amaze me. When I moved here three years ago from San Francisco, I never imagined Ted Serbinski: there would be “The growth of four different the startup scene in groups putting Detroit continues on demo days to amaze me.” in the same month,” said Serbinski. “It is very exciting to be seeing true momentum and density forming.” “I think it’s important to focus on how cool it is to see actual collaboration within the startup ecosystem, to see collaboration between Detroit and Ann Arbor, from DVP to Techstars to Coolhouse Labs and Desai,” said DVP partner Jake Cohen. “It’s very promising for the future of our startup community.” Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2

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CRAIN’S DETROIT BUSINESS // May 18, 2015

PEOPLE IN

SPECIAL REPORT

HEALTH CARE

Submit news items and photos to cdbdepartments@crain.com.

Kathleen Yaremchuk, M.D., chairwoman of the department of otolaryngology and head and neck surgery at Henry Ford Yaremchuk Hospital, was recently appointed to a two-year term as co-chair of the National Quality Forum’s Steering Committee.

Read more health care news and sign up for our Health Care Extra newsletter at crainsdetroit.com/healthcare

Eden Wells, M.D., a clinical associate professor at the University of Michigan School of Public Health, was named chief medical executive of the Michigan Department of Health and Human Services.

Michael Simon, M.D., leader of the breast cancer multidisciplinary team and coleader of the population studies and Simon disparities research program at the Barbara Ann Karmanos Cancer Institute, was honored with the 2015 Blue Cross Blue Shield of Michigan Foundation McDevitt Excellence in Research Award for Physicians. Kelly Smith, senior vice president of Oakwood Healthcare; Judith McNeeley, senior manager of Oakwood public relations and sponsorships; and Beverly Beltramo, director of Oakwood spiritual support services, were given the Shining Star Award by Michigan Secretary of State Ruth Johnson.

Theresa Duller, R.N., a staff nurse in the rehabilitation unit at Beaumont, Royal Oak; Anne Ronk, R.N., director of nursing for women’s, Duller children’s and psychiatric services at Beaumont, Royal Oak; and Michelle Wood, R.N., a staff nurse in the intermediate care unit at Oakwood Hospital-Taylor, were recently awarded top honors at the Oakland University School of Nursing and Board ofVisitors’27th annual Nightingale Awards for Nursing.. Stan Chetcuti, M.D., the Eric J. Topol Collegiate Professor of Cardiovascular Medicine; and Himanshu Patel, M.D., the Joe D. Morris M.D. Collegiate Professor of Cardiac Surgery, were named codirectors of the University of Michigan Frankel Cardiovascular Center’s structural heart program.

Debra Guido-Allen, R.N., vice president and chief nursing officer at Beaumont Hospital-Troy, recently received the 2015 Macomb Foundation Athena Award.

[LARRY PEPLIN]

Sue Craft of Henry Ford Hospital on the challenge of reducing readmissions: “We have put a lot of interventions in place,but they are very people-intensive.It requires case managers to do a lot of follow-up to make sure patients are getting the services they need when they are discharged.”

Unhappy returns Hospitals cut readmission rates but continue to pay stiff penalties By Jay Greene jgreene@crain.com

ust because hospitals in Michigan have improved their own Medicare patient readmission rates the past three years doesn’t mean fewer hospitals are paying financial penalties to the Centers for Medicare and Medicaid Services. Nationally, Medicare fined a record number of hospitals last year — 2,610 — for having too many patients return within a month for additional treatments under the 3-year-old Hospital Readmissions Readmission rates. The Medicare Reduction Program. hospital readmission rate in In Michigan, some 71 hospitals, or Southeast Michigan is higher than 52 percent, will be fined this year a total that of the rest of the state, Page 13 of $25 million for having too many Minding mental health. A new non-managed care Medicare patients study suggests that one way to readmitted for heart attack, heart reduce hospital readmissions is to failure, pneumonia, and two new do a better job at identifying people categories — knee or hip replacements with mental health conditions, and chronic bronchitis and Page 14 emphysema. The average financial penalty in Michigan this year will be 0.48 percent deducted per Medicare hospital patient stay, a slightly higher percentage than in 2014, when only 55 hospitals were fined a total of $14 million at an average 0.23 percent penalty rate.

Medicare fines: What local hospitals pay (1) Percent penalty is the percentage deducted from each Medicare inpatient (2) Financial penalty is the estimated penalty deducted in 2015 Percent penalty (1)

Financial penalty (2)

Beaumont Hospital, Royal Oak

1.68%

$3.86 million

Providence Hospital, Southfield

1.50%

$1.94 million

Beaumont Hospital, Troy

1.36%

$1.37 million

St. John Hospital, Detroit

1.26%

$1.31 million

St. John Macomb-Oakland, Warren

1.29%

$1.31 million

Henry Ford Hospital, Detroit

0.74%

$1.12 million

DMC Sinai-Grace Hospital, Detroit

1.28%

$1.07 million

Oakwood Hospital, Dearborn

0.65%

$812,234

DMC Harper Hospital, Detroit

0.82%

$747,481

St. Mary Mercy Hospital, Livonia

1.28%

$733,262

Name

Southeast Michigan totals: Total Medicare fee-for-service payments: $2.28 billion Total penalties: $20.8 million Source: Centers for Medicare and Medicaid Services, MPRO

See READMISSIONS, Page 12

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SPECIAL REPORT: HEALTH CARE

READMISSIONS, from Page 11: Medicare fines hit Southeast Michigan hospitals harder Some 39 hospitals nationally lost the maximum 3 percent of their Medicare payments because of high readmission rates relative to the national average, but none of those are in Michigan. The fine works this way: If Medicare normally pays a hospital $15,000 for a kidney failure patient, a hospital with a 1.5 percent penalty would be paid $14,775 from Medicare, after deducting the $225 fine. Readmission penalties are part of a broader push under health care reform to improve quality while saving federal money and extending the life expectancy of the Medicare Trust Fund. Each year, unnecessary hospital readmissions account for more than $17 billion of Medicare costs. But some are criticizing Medicare for lowering payments to hospitals — even those that have reduced their readmission rates from the year before, said Bob Yellan, CEO of Farmington Hills-based MPRO , a quality improvement organization

Medicare hospital readmission rate higher in region than rest of state Medicare claims data show the overall hospital readmission rate was 67.67 readmissions per 1,000 beneficiaries in Southeast Michigan from July 2013 to June 2014, said Farmington Hillsbased MPRO, a quality improvement organization. On the other hand, the hospital admission rate was 351.38 admissions per 1,000 beneficiaries residing within Southeast Michigan, which includes the counties of Livingston, Macomb, Monroe, Oakland, St. Clair, Washtenaw and Wayne. Statewide, the readmission rate was 53.07 read-

that has been studying hospital readmissions since 2008. For example, executives at Beaumont Hospital in Royal Oak and Henry Ford Hospital in Detroit said they have lowered their readmission rates over the past several years. But these two hospitals, and several others in Southeast Michigan, continue to pay relatively high fines.

missions per 1,000 beneficiaries, and the admission rate was 305.97 admissions per 1,000 beneficiaries, during the same study period, MPRO said. Wayne County had the highest readmission rate of 81.38 per 1,000 while Livingston had the lowest at 38.04, MPRO said. Last year, nearly 18 percent of Medicare patients who had been hospitalized were readmitted within a month, said the Centers for Medicare and Medicaid Services. While that percentage is lower than past years, about two million patients are readmitted

There are several reasons for this. First, the readmission data for the 2015 fines were calculated from the period from July 1, 2010, to June 30, 2013. Thus, improvements in readmission rates the past 18 months haven’t led to reduction in fines. Yellan said Medicare uses a controversial formula and grading scale — similar to curved grading — that penalizes hospitals whose readmis-

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to hospitals each year, costing Medicare $26 billion. Officials have estimated that $17 billion is lost through avoidable readmissions. In 2015, Medicare estimates that more than 2,600 hospitals – more than half of the nation’s total – will be fined about $428 million. While some penalties are as small as a hundredth of a percent, hospitals with the highest readmission rates are losing 3 percent of each payment, an increase from a maximum punishment of 2 percent last year.

sion rate is higher than the national average. In other words, hospitals must reduce their rates faster than the industry average to pay less in financial penalty in any given year. Traditionally, hospitals earned money for readmissions because Medicare and private payers reimbursed them for all admissions. Now, hospitals are losing private and government payments by improving their readmission rates, and in some cases also are having their Medicare rates cut. “There is a push in Congress to consider socioeconomic factors when penalizing hospitals,” said Yellan, noting that Detroit fared more poorly than most of Michigan because of such factors. “Inner-city Bob Yellan: Inner- communities city hospitals face have higher regreater burden admission rates, and large teaching hospitals have higher rates (more complex medical cases) than small community hospitals” because it is more difficult for lowerincome people to afford necessary medications and transportation to see their doctors for follow-up visits,” Yellan said. Health systems that operate inner-city hospitals like Detroit Medical Center , Henry Ford Health System and St. John Providence Health System are working hard to reduce their readmission rates, Yellan said. “The penalties affect them considerably,” he said. “They are working with skilled nursing facilities, home

— Jay Greene

health agencies and area agencies on aging, but they have a very challenging patient population.” Yellan said Michigan hospitals have steadily reduced readmissions, but much work needs to be done to meet Medicare’s goal of 20 percent reduction. He said Michigan hospitals have reduced readmissions by about 13 percent from 2012 to 2014. “Southeast Michigan hospitals have reduced readmissions (faster than other hospitals in the state), but they (had higher rates) than the rest of hospitals in Michigan,” said Yellan, a former hospital administrator. The average readmission penalty in Southeast Michigan for 2015 was 0.72 percent of total Medicare payments compared with 0.42 percent last year, MPRO said. The total penalty payments for the 34 hospitals this year will be about $21 million compared with $12 million in penalties for 31 hospitals in 2014. Yellan said the increase in penalties for 2015 is likely because of the three added conditions and the maximum penalty increased to 3 percent from 2 percent. Southeast Michigan hospitals

Beaumont Hospital in Royal Oak is projected to pay the largest readmission penalty this year at $3.86 million for a 1.68 percent financial penalty rate, which is based on patients served between 2010 and 2013. But Oakwood Hospital in Wayne had the highest readmission penalty rate, 2.22 percent, and will pay about $645,160 in penalties in 2015.

The readmission fine works this way: If Medicare normally pays $15,000 for a kidney failure patient, a hospital with a 1.5 percent penalty would be paid $14,775 from Medicare, after deducting the $225 fine.

See Next Page

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SPECIAL REPORT: HEALTH CARE From Previous Page

Collectively, eight-hospital Beaumont Health will pay $7.9 million, which includes the four former Oakwood Healthcare hospitals and Botsford Hospital in Farmington Hills. Sam Flanders, M.D., Beaumont’s chief quality officer, said the health system has embarked on many readmission reduction projects over the past several years, including standardization of care in the orSam Flanders: thopedics unit. Some readmissions The readmiscan’t be avoided sion penalty for Beaumont, Royal Oak, “reflects the high volume of Medicare patients that we serve” compared with other hospitals in the nation, said Flanders. “Royal Oak’s low mortality rate is also a factor that drives readmissions up.” Flanders also said readmissions sometimes are beyond a hospital’s ability to control. Patients’ socioeconomic status, ability to afford medications and their diet can affect post-discharge health, he said. Barb Medvec, Oakwood’s chief nursing officer, said the Dearborn hospital has been working hard to reduce infections by working with physicians to prevent urinary tract infections, blood stream inBarb Medvec: fections and sepOakwood targeting sis. infections Oakwood also is working with Wayne-based The Senior Alliance to make home visits with recently discharged patients who are considered high risk for readmission, Eric Widner, president of Oakwood Hospital — Wayne. Henry Ford Health System operates four medical-surgical hospitals. Its flagship, Henry Ford Hospital, an 802-bed hospital in Detroit, is expected to pay $1.12 million in penalties this year for a 0.74 percent readmission rate for the previous year. Sue Craft, a nurse and director of Henry Ford’s care-coordination initiatives in the office of clinical quality and safety, said Henry Ford Hospital has improved readmission rates in each of the first three years and has also reduced the percentage of the financial penalty. For example, in 2012 Henry Ford Hospital was penalized the maximum 1 percent rate, but that number dropped to 0.8 percent in 2013 and to 0.74 percent in 2014, Craft said. This year, Craft said Henry Ford is concerned because three new conditions are being added to the financial penalty mix: hip and knee replacements, and such lung ailments as chronic obstructive pulmonary disease. “The challenge with COPD is the cost of inhalers, which are expensive,” Craft said. “There are socio-

economic factors connected to readmission rates. People who are poorer have higher readmission rates because they lack transportation and basic services.” Depending on the discharge, Craft said Henry Ford gives patients a 30-day supply of medications and sets up primary care physician appointments. Craft also said it was difficult for Henry Ford to reduce readmissions in 2014 because the health system was in the final throes of installing its electronic health record, Epic Corp. CareConnect. “We have put a lot of interventions in place, but they are very peo-

ple intensive,” Craft said. “It requires case managers to do a lot of followup to make sure patients are getting the services they need when they are discharged.” For example, nurse case managers follow up with patients to ensure they have seen their primary care physician and taken their medication, she said. Overall, Henry Ford Health System is projected to pay $1.7 million in penalties this year. The other Henry Ford hospitals include Henry Ford Macomb Hospital with a 0.4 percent rate ($278,000); Henry Ford West Bloomfield Hospital at 0.21 percent ($65,000); and Henry Ford Wyandotte

Hospital for 0.61 percent ($299,000). Over the last several years, Yellan said MPRO has learned that hospitals cannot reduce readmissions on their own. “The causes of readmission are multiple. There are medication issues, behavioral health issues, patient discharge management, getting them to see their doctors in a timely manner, transportation, and having good communication” with post-acute care facilities, Yellan said. Despite improvement in online electronic health record exchange, Yellan said the major barrier is exchanging information among providers.

“The ability to transfer electronic information is limited outside one’s own system,” Yellan said. Besides barriers with provider communication, Yellan said the ability of some patients, especially the elderly, to understand and recall physician and hospital postdischarge instructions is challenging. “Addressing readmissions is less what the particular diagnosis is than whether you have a process and communication in place for all of your patients once they leave your hospital,” Yellan said. 䡲

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SPECIAL REPORT: HEALTH CARE

Mental health screenings could reduce readmissions, study says By Jay Greene jgreene@crain.com

Marketing Management Strategic Communications Business Development Services Executive Suite Services Special Solutions

A new study suggests that one way to reduce readmissions to hospitals is for health care professionals and doctors to do a better job at identifying people with mental health conditions. The study, conducted by the Center for Health Policy and Health Ser vices Research at Detroit-based Henry Ford Health System, concluded that patients with psychiatric conditions, along with other medical problems, in the previous year were readmitted to the hospital 3 percent to 5 percent more often within 30 days than those without a psychiatric diagnosis. “About 16.5 percent of people without a mental health condition are getting readmitted within 30 days, but about 21.5 percent of those with a mental health condition are readmitted,” said Brian Ahmedani, a research scientist with the Henry Ford health policy center. Ahmedani, who was lead author of the study published in the Feb. 1 issue of the journal Psychiatric Services, said the researchers did not look at why the patients needed to be readmitted. The study looked at data on more than 160,000 patients who had been admitted to the 11 health centers affiliated with the Mental Health Research Network between January 2009 and December 2012. The study was conducted by researchers in the Mental Health Re search Network, a consortium of 13 large health care systems with affiliated health insurance plans. The systems include Henry Ford, Group Health Cooperative, Harvard Pilgrim Health Care, HealthPartners, Baylor Scott & White Health and Kaiser Permanente plans in Colorado, Georgia, Hawaii, Oregon and California. The patients reviewed were diagnosed with the three medical conditions targeted by Medicare for readmission financial penalties. The three conditions are heart failure, pneumonia and acute myocardial infarction, or heart attack. Mental health conditions included depression, anxiety, substance abuse disorders, paranoia and schizophrenia. “It appears that mental health conditions may complicate the general medical conditions,” Ahmedani said. “We believe these conditions are complicating the diagnosis and make it more difficult to heal.” Medicare does not adjust hospital financial penalties based on whether patients have mental health conditions, Ahmedani said. “We feel there are quite a few people not identified, not part of the calculations, and are at an increased risk for readmissions,” Ahmedani said. In 2012, the Centers for Medicare and Medicaid Services began penalizing hospitals for readmissions

within 30 days. Hospitals, including Henry Ford, have lost millions of dollars in penalties each year, despite reducing readmissions. Brian Ahmedani: Ahmedani A little extra work recommended would cut costs. that hospitals conduct a closer psychiatric evaluation for the three medical conditions — heart failure, acute myocardial infarction and pneumonia — covered by readmission penalties. “We think that doing that little extra work would definitely result in cost savings down the line,” he said. At Henry Ford, Ahmedani said additional screenings have been made since 2007, but more need to be done. “This study is new and needs to be disseminated to hospitals,” he said. Last year, Farmington Hillsbased MPRO completed a depression screening pilot program with several Southeast Michigan hospitals and mental health providers.

“We wanted to start to raise awareness of implementing screening, providing education and expand current screening processes,” said CEO Bob Yellan. “We build very strong (links) between mental health authorities, providers, area agency on aging and hospitals.” Yellan said providers now have a better idea where to send patients who have multiple conditions, including mental health issues. Henry Ford, which participated in the project, has been working on its depression screening admission process the past several years, said Sue Craft, a nurse and director of Henry Ford’s care-coordination initiatives in the office of clinical quality and safety. Since Henry Ford completed the installation of its Epic Corp. electronic health record system a year ago, Craft said the Detroit-based system has been screening all patients for depression, anxiety and other behavioral health conditions so it can provide appropriate care such as home care and telehealth services. 䡲 Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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SPECIAL REPORT: HEALTH CARE

Bortz Health Care to be sold after 57 years of family ownership more acute care, fee-for-service reimbursement is ending and experimentation is taking place with other reimbursement models such as bundled payments, risk-based managed care contracts and quality incentive withholds,” LaLumia said.

By Jay Greene jgreene@crain.com

Donald Bortz Jr. bought his first nursing home in 1958 with his father, Don Sr., when there were no rules or regulations for nursing homes, just a promise to patients that they would be cared for in their old age. Now, 57 years later, Bortz Jr., 89, has decided with his wife, Valeria, and reluctant consent of his three adult children, Donald Jim Bortz III and daughters Bridgett and Shaun, all of whom are key managers in Warren-based Bortz Health Care, to sell the family business. The buyer is Villa Healthcare, a Skokie, Ill.-based nursing home chain with 16 long-term care and assisted living homes in Illinois, Wisconsin and Minnesota. Villa was selected as the buyer, said Bortz Jr., because the 4-year-old company has a similar business philosophy as Bortz. “My wife has been asking me to slow down,” Bortz Jr. said. “I’ve had 10 to 12 offers the past three or four years. The more we talked with (Villa), the more we found out their slogan — ‘We Care’ — is exactly like ours. That has been a very strong motivation for our company over the years.” The transaction is expected to close in July or August, said Bortz and Villa officials, who declined to disclose the sale price. Bortz Health Care, which posted $95 million in annual revenue in 2014, operates 11 nursing homes and assisted living facilities, 10 in Michigan and one in Hobe Sound, Fla. Six are in Southeast Michigan. In 2013, Bortz sold two nursing homes, Elmwood Geriatric Center and Cranbrook Geriatric Village, to Detroit-based Lakeshore Healthcare LLC . Earlier this month, Bortz filed WARN (Worker Adjustment and Retraining Notification Act) notices with the state that seemed to indicate massive layoffs at its 10 Michigan nursing homes. But that state filing is misleading because the plan all along has been to sell to Villa, said Brian McCullough, a partner with Bloomfield Hillsbased Strobl & Sharp PC who has worked for Bortz the past 35 years. “I have every anticipation Villa will retain the vast majority of the work-

Autos to nursing homes

[BORTZ FAMILY PHOTO]

“Mywife (Valeria) has been asking me to slow down,” said Donald BortzJr.,explaining why he’s selling Warren-based BortzHealth Care.“ The more we talked with (Villa Healthcare),the more we found out theirslogan — ‘We Care’— is exactly like ours.” force (1,500 employees),” McCullough said. “Some upper management (Bortz family) have contracts to stay on for at least one year.” While there are no contractual promises to keep all employees or facilities open, David Mills, Villa’s COO, said Villa understands it is inheriting high-quality homes with staffs that have been on the job in some cases 20 to 30 years. “When you walk through the door, the people, the personalities and the culture, you can see it and feel it,” Mills said. “Our team feels very fortunate to continue the legacy that Bortz created.” David LaLumia, CEO of the Health Care Association of Michigan, said the Bortz family has a reputation over the years of providing high-quality services to patients at its nursing homes. He said he expects Villa Healthcare to continue with that tradition. “A number of long-standing nursing facility owners and operators in Michigan have sold their businesses over the past few years,” said LaLumia, adding that besides owners who are retiring, major changes in reimbursement and regulations appear to be accelerating the process. “Skilled nursing facility operators are being affected by an expanding number of payers as managed care becomes more commonplace,” LaLumia said. Unlike hospitals and physicians, which are partially reimbursed by the federal government to meet information technology requirements, LaLumia said, nursing homes have to foot the bills themselves. “Infrastructure and building improvements and the importance of installing electronic health records

are all required to maintain a competitive edge,” he said. Mills said Villa plans to invest several million dollars to upgrade the physical plants, add health information technology and expand rehabilitation services. “We see this (purchase) as being a part of the Bortz family. They have taken a group of facilities over last 50 years and done an exceptional job, focusing on patient care, employee and patient satisfaction,” he said. Mills said Villa plans to continue to expand in the Midwest, and possibly Michigan, with selective acquisitions. LaLumia said nursing homes are forging close relationships with hospitals, health plans and physician practices to create integrated delivery systems of care to address changing patient needs. “Patients are sicker and require

After Don Bortz Jr. was honorably discharged from the U.S. Navy in 1946, he went to work for his father, who owned a used car business. But in 1957, Bortz Jr. said, his father wanted another challenge, and together they bought a nursing home in Orchard Lake. “I was known as the buyer of very poorly run nursing homes,” Bortz Jr. said. “I would take those over, some in bankruptcy and in bad shape, all in trouble with the state, and would immediately improve the status of them.” Bortz Jr. said he personally would judge the quality of care in his homes by staying overnight in them. “We would stay there a few nights, and we knew how well it was run,” he said. “We would be on that floor at 12:30 in the night and in the morning. We didn’t get much sleep, but it gave you a feeling of accomplishment” when a troubled nursing home became a successful one. Over the years, state and federal rules governing nursing homes became more and more difficult to meet, especially with reimbursement payment cuts, Bortz Jr. said. “You wouldn’t believe how the

rules have changed,” he said. “Back then, there were no rules. You provided shelter and food for patients. They were much different, not as sick as today. You could talk with them.” But over the years, the rules started piling up and the residents were admitted to the homes with more serious medical conditions, including many more with Alzheimer’s disease, Bortz Jr. said. Under health care reform, Bortz Jr. said, it is difficult for smaller nursing home chains to flourish. He said chains need to diversify revenue sources into rehabilitation and physical therapy and own their own laboratories to generate sufficient profit margins. Jim Bortz III said he understands the reason his father is selling the family business. “We understood the pressure he is under daily,” said Bortz III. “Dad is getting older. … It is hard because we have been so close, talking daily about the business, even at 11 p.m.” Interrupting, Bortz Jr. said: “My state nursing home license is 0000024. I am the oldest operator in the state of Michigan … and maybe in the country.” So what is next for Bortz Jr.? Retirement? “If a business pops into a picture, I might be interested in buying,” Bortz Jr. said. “I don’t want to limit myself. I like a flexible approach to business.” 䡲 Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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CRAIN'S LIST: LARGEST LOCAL AUTO DEALERS Ranked by 2014 revenue Company Address Rank Phone; website

SPOTLIGHT: LOCAL AUTO DEALERS

Top executive(s)

Revenue ($000,000) 2014/ 2013

Number of dealerships

Number of new vehicles sold/ leased 2014/2013

Number of used vehicles sold 2014/2013

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

David Fischer chairman and CEO

$1,914.5 $1,599.3

34,621 29,629

18,425 16,319

Victory Automotive Group Inc. 46352 Michigan Ave., Canton Township 48188 (734) 495-3500; www.victoryautomotivegroup.com

Jeffrey Cappo president

1,033.5 B 830.1 B

21,321 B NA

14,532 B NA

663.3 577.1

12,508 10,016

6,615 6,199

Southfield Dodge Chrysler Jeep Ram 28100 Telegraph Road, Southfield 48034 (248) 354-2950; southfieldchrysler.com

Michael LaFontaine owner and president Maureen LaFontaine owner and vice president Paul Steel president

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

477.4 368.7

NA NA

Prestige Automotive LLC 20200 E. Nine Mile Road, St. Clair Shores 48080 (586) 773-2369; www.prestigeautomotive.com

Gregory Jackson chairman and CEO

400.1 414.3

15,071 13,963

2,168 2,183

Stewart Management Group Inc. 20844 Harper Ave., Suite 100, Harper Woods 48225 (313) 432-6200; www.gordonchevrolet.com

Gordon Stewart president

342.2 320.8

NA NA

Elder Automotive Group 777 John R Road, Troy 48083 (248) 585-4000; www.elderautogroup.com

Tony Elder president

303.3 343.6

4,284 3,972

Snethkamp Automotive Family 16400 Woodward Ave., Highland Park 48203 (313) 868-3300; www.snethkampauto.com

Mark Snethkamp president

235.0 198.0

Jim Riehl's Friendly Automotive Group Inc. 32899 Van Dyke Ave., Warren 48093 (586) 979-8700; www.jimriehl.com

James Riehl Jr. president and CEO

231.7 184.5

Buff Whelan Chevrolet 40445 Van Dyke Ave., Sterling Heights 48313 (586) 939-7300; www.buffwhelan.com

Kerry Whelan president

183.9 162.8

Pat Milliken Ford Inc.

Bruce Godfrey chairman

165.0 153.0

Royal Oak Ford/Briarwood Ford 27550 Woodward Ave., Royal Oak 48067 (248) 548-4100; www.royaloakford.com

Eddie Hall Jr. president

Bill Perkins Automotive Group

Jeffrey Tamaroff Automotive Family 28585 Telegraph Road, Southfield 48034-1928 (248) 353-1300; www.tamaroff.com

Milosch's Palace Chrysler-Jeep-Dodge Inc. 3800 S. Lapeer Road, Lake Orion 48359 (248) 393-2222; www.palacecjd.com

Who was at the top Ranked by revenue, in millions Company

1985 revenue 1. Bill Wink Chevrolet/GMC 1 $253 2. Buff Whelan Chevrolet Inc.

$102

3. Don Massey Cadillac Inc. 2

$99

Company

1990 revenue

1. McInerney Inc.

$196

2. Don Massey Cadillac Inc. 2

$183

3,067 3,282

3. Suncare Dealerships 3

$141

5,500 4,050

2,200 1,850

Company

NA NA

4,705 4,151

1,341 1,296

4,488 4,163

678 635

2. The Suburban Collection

$543

157.7 148.9

4,062 3,984

1,324 1,290

3. Elder Ford

$484

Bill Perkins president

146.9 134.3

3,009 2,625

3,226 3,274

Company

Marvin Tamaroff chairman emeritus Jeffrey Tamaroff chairman and CEO Donald Milosch president

146.1 133.1

NA NA

142.3 112.2

Ray Laethem Inc. 1677 Mack Ave., Grosse Pointe 48224 (313) 886-1700; www.raylaethem.com

Jeff Laethem president

134.0 104.5

Avis Ford Inc. 29200 Telegraph Road, Southfield 48034 (248) 355-7500; www.avisford.com

Walter Douglas Sr. chairman and CEO

125.7 126.1

Village Ford Inc. 23535 Michigan Ave., Dearborn 48124 (313) 565-3900; www.villageford.com

James Seavitt president and CEO

Gorno Automotive Group 22025 Allen Road, Woodhaven 48183 (734) 676-2200; www.gornoford.com

Telegraph Road, Redford Township 48239-1492 11 9600 (313) 255-3100; www.patmillikenford.com

Gratiot Ave., Eastpointe 48021 13 21800 (586) 775-8300; www.merollischevy.com

1995 revenue

1. Don Massey Cadillac Inc.2

$774

2. Troy Motors

$468

3. Mel Farr Auto Group 4

$382

Company

2000 revenue

1. Don Massey Cadillac Inc.2 $1,000

2005 revenue

1. Penske Automotive Group $10,190 2. Prestige Automotive

$1,010

3. The Suburban Collection

$932

2,655 2,033

1,496 1,395

NA NA

1. Penske Automotive Group

$10,714

2. The Suburban Collection

$1,055

NA NA

3. Prestige Automotive

120.4 103.0

2,787 2,427

634 597

Ed Jolliffe president and general manager

118.5 110.4

3,161 NA

1,276 NA

George Matick Chevrolet 14001 Telegraph Road, Redford 48239 (313) 531-7100; www.matickchevy.com

Karl Zimmermann owner and operator

115.4 92.4

2,476 2,022

1,127 878

Roseville Chrysler Jeep Inc. 25800 Gratiot Ave., Roseville 48066 (586) 859-2500; www.mikeriehls.com

Michael Riehl president

96.3 76.7

2,232 1,759

813 571

Rodgers Chevrolet Inc. 23755 Allen Road, Woodhaven 48183 (734) 676-9600; www.rodgerschevrolet.com

Pamela Rodgers president

74.1 67.3

NA NA

Bob Jeannotte Buick GMC Truck Inc. 14949 Sheldon Road, Plymouth 48170 (734) 453-2500; www.jeannotte.com

Robert Jeannotte CEO

53.0 41.0

1,097 815

282 340

Glassman Automotive Group Inc. 28000 Telegraph Road, Southfield 48034 (248) 354-3300; www.glassmanautogroup.com

George Glassman president

51.6 38.0

1,257 898

935 651

LIST RESEARCHED BY SONYA D. HILL

2010 revenue

$524

1 Lost GM franchise as a result of bankruptcy restructuring. Continued to operate a Class B dealership.

This list of local auto dealers is an approximate compilation of the largest such businesses in Wayne, Oakland, Macomb, Washtenaw and Livingston counties. Dealership companies must have local stores to be included on this list. It is not a complete listing but the most comprehensive available. Unless otherwise noted, information was provided by the companies. Actual revenue figures may vary. NA = not available.

B Automotive News.

Company

2 Sold in 2002 to Sonic Automotive Inc. 3 Sold in 2002 to Victory Automotive Group. 4 Mel Farr sold the last of his franchises in 2003.

What about Penske? Crain’s has changed the criteria for the auto dealers list to better reflect the big players in metro Detroit. That means Penske Automotive Group, which is locally headquartered but doesn’t have local car dealers, is no longer part of the list. Penske’s Michigan holdings are three motorcycle dealerships at 1765 S. Telegraph in Bloomfield Township.

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CRAIN’S DETROIT BUSINESS // May 18, 2015

Hampton Inn first of 4 new hotels in Troy RE HEALTH CA UP DATE

swelch@crain.com

Last week’s opening of a new Hampton Inn & Suites in Troy launched the first of four hotels set to open in the city by late this year or early next. The four projects will add 416 hotel rooms to the market. Hampton Inn & Suites Detroit/Troy, on Wilshire Drive near Big Beaver Road and I-75, opened last week with 122 new rooms and suites. Owner Farmington Hills-based Group 10 Management Co. Inc. is also developing a Hilton Garden Inn next to the new Hampton Inn. The two will share a parking lot. The Hilton Garden is expected to open with 114 rooms near the end of this year, Hampton Inn General Manager Peggy Desrosier said. Meanwhile, two hotels on the west side of Stephenson Highway just north of 14 Mile Road in Troy are to open by early next year. Local hotel owner and developer Akram Namou, a shareholder and principal at A&M Hospitality Man agement , said construction of a Fairfield Inn & Suites and a Towne place Suites by Marriott extended stay, each with 90 rooms, is about 20

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percent completed. Not far away, Marriott TownePlace Suites Hotel, a three-story, extendedstay hotel with 80 rooms, opened in April near Great Lakes Crossing Outlets. The $4.6 million development, on Baldwin Road next to the outlet center, is owner and developer Basil Bacall’s fourth hotel in Auburn Hills for a total of 352 rooms and an investment of about $16 million, Steve Cohen, director of community development, wrote in the city’s community development blog. Bacall’s Ring Hospitality Management Inc. manages the new hotel. His other developments include the Hampton Inn and Holiday Inn Express, both of which are north of the new hotel along the mall’s ring road near I-75. 䡲

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CRAIN’S DETROIT BUSINESS // May 18, 2015

PEOPLE

ON THE MOVE Send news items and photos to cdbdepartments@crain.com

SPOTLIGHT

CONSTRUCTION William Parker to safety manager, Roncelli Inc., Sterling Heights, from corporate safety director, RicMan Construction Inc., Sterling Heights.

CHARLES MOORE: managing director, Alvarez & Marsal Charles Moore, who recently played a pivotal role in the restructuring of the city of Detroit, has joined the global professional services firm Alvarez & Marsal as a managing director in its Detroit office. Moore facilitated the $1.7 billion reinvestment Moore plan for the city of Detroit’s bankruptcy. He also was operational adviser to the Detroit Public Schools and provided expert testimony in the Stockton, Calif., municipal bankruptcy. Moore led Greektown CasinoHotel, the first commercial casino owned by an American Indian tribe, through its bankruptcy reorganization. Moore, 43, joins Alvarez & Marsal from Conway MacKenzie Inc., where he was a senior managing director. Earlier in his career, he was CFO of Horizon Technology Group. Moore holds a bachelor of arts degree and an MBA from Michigan State University.

Parker

MANUFACTURING Rob Speed to president, aftermarket and trailer and chief procurement officer, Meritor Inc., Troy, from vice president and chief procurement officer.

McCormick

Diane McCormick to director of security and facilities, Carhartt Inc., Dearborn, from senior director of global security programs, Kelly Services Inc., Troy.

NONPROFITS Lettice Craw ford to vice president-credit, Invest Detroit, Detroit, from banking analyst, Urban Partnership Bank, Detroit.

Crawford

DEALS

& DETAILS Submit news to cdbdepartments@crain.com

Submit news to cdbdepartments@crain.com

CONTRACTS Matchbox Learning Solutions Inc., Johns Creek, Ga., has been named charter management organization for Michigan Technical Academy with schools in Detroit and Redford Township. Websites: mtacademy.us, matchbooklearning.com. Jervis B. Webb Co., Farmington Hills, a subsidiary of Daifuku North America Holding Co. and a provider of material handling solutions, announced that Bastian Solutions, Indianapolis, an independent system integrator, will join its network of SmartCart automatic guided cart value added resellers. Websites: daifukuwebb.com, bastian solutions.com. Atwater Brewery, Detroit, a craft brewery, contracted with Elite Brands of Colorado, Denver, to distribute its beer throughout Colorado. Websites:atwaterbeer.com, elite-brands.com.

Energy Products Inc., Madison Heights, a battery distributor, has been named master distributor in the Michigan and Ohio regions, for Trojan Battery Co., Santa Fe Springs, Calif., a manufacturer of deep cycle batteries. Energy Products will supply and support batteries used in aerial lifts, floor cleaning equipment, renewable energy, marine and golf and electric vehicle markets. Websites: energyprod.com, trojanbattery.com. Logi-Serve LLC, Farmington Hills, a software-based business execution and talent assessment firm, was selected by American Express Global Business Travel, New York City, to provide tools and services to help select and train its customer service staff. Website: logi-serve.com. Dynamic Computer Corp., Farmington Hills, a reseller of hardware and software, was selected as a prime contractor to U.S. federal and defense agencies under a contract managed by NASA. Websites: dcc-online.com, sewp.nasa.gov. ZipLogix, Fraser, a real estate technology company, agreed to provide its products to members of the Commercial Brokers Association, Seattle, a member-owned coopera-

Angela Rogensues to executive director, Playworks Michigan, Detroit, from program director. Caen Thomason-Redus to community catalyst/director of community programs, Detroit Symphony Orchestra, Detroit, from Thomason-Redus director of corporate partnerships, the Sphinx Organization, Detroit. Trish Dewald to executive director, development and communications, Danialle Karmanos’ Work it Out Inc., Detroit, from chief development officer, Coalition on Temporary Shelter, Detroit. Kelly Kozlowski to COO, Downtown Detroit Partnership, Detroit, from senior director, Automation Alley, Troy. Also Gina Cavaliere to director, Business Improvement Zone, from deputy director, Wayne County Economic Development Growth Engine, Detroit. Julie Ermler to vice president of finance and administration, HudsonWebber Foundation, Detroit, from director of finance and administration. People on the Move announcements are limited to management positions. Email cdbdepartments@crain.com. Include person’s name, new title, company, city in which the person will work, former title, former company (if not promoted from within) and former city in which the person worked. Photos are welcome, but we cannot guarantee they will be used.

tive that provides commercial real estate multiple listing services to its members. Websites: ziplogix.com, commercialmls.com.

EXPANSIONS Domino’s Pizza Inc., Ann Arbor, opened a store in Tbilisi, Republic of Georgia. Domino’s Pizza in Georgia is a joint venture between Turkven, Domino’s master franchisee in Turkey, and Geo Pizza LLC, led by Tea Shengelia, Domino’s CEO, Tbilisi. Website: dominos.com. Cornish, Zack, Hills & Associates Inc., an insurance and surety agency, has moved its headquarters to the Penobscot building, 645 Griswold St., Suite 3274, Detroit. The company will continue to operate its service center at 24225 W. Nine Mile, Suite 204, Southfield. Telephone: (248) 353-58950. Website: cornishzack.com. Deals & Details guidelines. Email cdbdepartments@crain.com. Use any Deals & Details item as a model for your release, and look for the appropriate category. Without complete information, your item will not run. Photos are welcome, but we cannot guarantee they will be used.

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20 WEDNESDAY MAY20

Inforum 53rd Annual Meeting. 11:30 a.m.-1:30 p.m. Inforum Professional Women’s Alliance. Writer and public speaker Iyanla Vanzant. The Henry, 300 Town Center Drive, Dearborn. Tickets: $50 Inforum members, $75 guests (nonmembers), $700 table sponsors, $25 students. Register: inforummichigan.org.

THURSDAY MAY21

Family Owned Business Institute Summit. 8 a.m.-noon. Grand Valley State University’s Family Owned Business Institute. Workshop includes working with family and nonfamily managers to find solutions unique to each business; defining core strengths and understanding how to leverage them more profitably; learning the 10 types of innovation and how leveraging them gives companies a competitive edge; turning ideas into action; and leaving with a plan to implement new concepts in a way that will inspire growth. $100 per person, $75 two or more. L. William Seidman Center, Pew Grand Rapids Campus.

CALENDAR Contact: (616) 331-7278 or visit gvsu.edu/fobi.

UPCOMING EVENTS Summit on Information Technology and Cybersecurity. 8 a.m.-2:30 p.m. May 28. Schoolcraft College. Elevate the role and awareness of Michigan’s IT and cyber communities at the local, state and federal levels. $75. VisTaTech Center, Schoolcraft College, Livonia. Contact: Alexander Masters, (734) 462-4438; email: amasters@schoolcraft.edu. Zingerman’s 12 Natural Laws of Business. 11:30 a.m.-1:30 p.m. May 28. Washtenaw Economic Club. Ari Weinzweig, CEO, Zingerman’s, will share the approach to business that has led to Zingerman’s success, including the natural laws of business as introduced in his book, Zingerman’s Guide to Good Leading: Part 1, A Lapsed Anarchist’s Approach to Building a Great Business. Washtenaw Community College, Morris Lawrence

Building No. 104, Ann Arbor. $77.50 for nonmembers. Preregistration is required at washtenaweconclub.org. Tickets will not be available at the door. Phone: (734) 973-3637; email: washtenaweconclub@wccnet.edu. Website: washtenaweconclub.org. Inclusive Nonprofit Workplaces. 8:30 a.m.-4 p.m. June 3. Michigan Nonprofit Association. Presentations by local nonprofit experts, panel discussions on developing inclusion strategies with Stephen Henderson of the Detroit Free Press, and a keynote presentation by inspirational speaker Steve Robbins. McGregor Memorial Conference Center, Wayne State University. $75 members and $115 nonmembers. Contact: cvent.com/events/ inclusive-nonprofit-workplaces. Michigan Infrastructure Conference. 7:30 a.m.-5:30 p.m. June 4. American Council of Engineering Companies of Michigan, the Michigan Section of the American Society of

Civil Engineers and the Urban Land Institute. Speakers include Kirk Steudle, director of the Michigan Department of Transportation; Mark Hackel, Macomb County executive; and Tom Murphy, senior resident fellow of the Urban Land Institute. $175 members; $250 nonmembers; $85 government agency. Inn at St. John’s, Plymouth. Phone: (517) 3322066. 5th Annual Compensation and Benefits Conference. 8 a.m.-noon June 9. American Society of Employers. The conference provides a look into pay and benefit trends,best practices in compensation and benefits; and identifying ways to make an impact on the bottom line. $89 ASE members; $119 nonmembers. VistaTech Center, Schoolcraft College, Livonia. Contact: Kevin Marrs, (248) 223-8025; email: kmarrs@aseonline.org. Michigan Marketing Minds - International Marketing Momentum. 5-7

Crain’s 2015 General & In-House Counsel Summit Crain’s fifth annual General & In-House Counsel Summit will feature keynote speaker John Dean, former counsel to President Richard Nixon. Dean’s most recent book — The Nixon Defense:What He Knew and When He Knew It — is a cautionary tale of mistakes that can been avoided, much like the legal issues organizations grapple with daily. Also included in the summit are educational sessions on managing the ups and downs of the business cycle, what your CFO wants you to know, e-discovery and cybersecurity. The event is 2-7:30 p.m. June 10 at the Westin Book Cadillac, 114 Washington Blvd., Detroit. Tickets are $150 in advance or $140 each for groups of 10 or more. Preregistration closes at 9 a.m. June 8. If available, walk-in registration will be $170 per person. For information, contact Kacey Anderson at (313) 446-0300, email cdbevents@crain.com or visit crainsdetroit.com/events.

p.m. June 9. Ann Arbor Spark. Panelists share the best practices for marketing across borders. Moderator is Paul Koch, creative strategist, Q LTD. Panelists are Jimmy Hsiao, Logic Solutions; Francis Glorie, TechTown; Julie Oldham, Small Business Development Council. Ann Arbor Spark, Ann Arbor. Free. Email: alissa@ annarborusa.org. The Talmer Bank Story: Concept. Acquisitions. Marketing. 8-10:30 a.m. June 10. Marketing and Sales Executives of Detroit. Talmer Bankcorp Inc. Chairman Gary Torgow will share how purchasing troubled banks in the middle of the recession enabled the organization to grow nearly 8,000 percent. Management Education Center, Troy. $35 MSED members, $50 nonmembers. Website: msedetroit.org. Small Business Unlocked Morning Mingle 7:30 a.m. June 11. Detroit Regional Chamber. Interact with potential business clients and strengthen relationships with other chamber professionals. Flagstar Bank, 2050 W. Big Beaver Road, Troy. Cost: Free for chamber members, $595 for future members. Contact: Marianne Alabastro, (313) 596-0479.

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Calendar guidelines. Visit crainsdetroit.com and click “Events” near the top of the home page. Then, click “Submit Your Events” from the drop-down menu that will appear. Fill out the submission form, then click “Submit event” at the bottom of the page. More Calendar items can be found at crainsdetroit.com/events.

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GOLF, from Page 1: Bringing the sport to Belle Isle takes a lot of drive for range operator Detroit Public Schools, Pegues said, and is developing programming for the golf range and finding grants. Pegues, Anthony-Ryan and Golf Links were part of a group that bid a few years ago on the city’s golf course management deal, for historic Rackham Golf Course and three other links, but lost to Oakland Township-based Vargo Golf Co. Pegues is solely financing the Belle Isle effort. Anthony-Ryan is bringing four teaching professionals to work at the center, and the women’s golf team from the University of Detroit Mercy , coached by Anthony-Ryan, will work with kids at the range.

For example, the clubhouse’s wooden steps and ramp need $2,000 in repairs because they were never treated for long-term weather exposure, she said. “They’re starting to disintegrate,” Pegues said. But that’s not the worst headache. “The power surges and electrical problems here are just horrific,” she said. When the power goes out — she said it happens for hours at a time, sometimes for days — she has to take her groundskeepers off the course and have them fill buckets. That’s because one of her startup expenses was an electronic pointof-sale system that also operates the machine that fills buckets of balls. “Blackouts, brownouts, power failures,” she said. “I cannot operate if I am always losing power.” Plans are to buy an uninterruptable power supply, another unexpected expense, she said. Temporary fixes have been made by DTE Energy Co. The driving range is on the unreliable city-owned electrical grid that’s being replaced over the next four years by DTE, which is spending $200 million on electric cables, transformers and substations as it assumes service for Detroit. So far, Pegues has spent about $45,000 of her own money on the golf center, including $5,000 in golf equipment. She’s purchased machinery to cut the grass, aerate the turf and trim the trees, and 12,000 golf balls. The grass must be cut four times a week, and the driving range can take more than a day to cut. A major uncertainty is the utility bill: Belle Isle has a single electric meter and a single water meter, and users are sent a bill diced from master bills, she said. Her plan is to wade into the bureaucratic process to get her own electric and water meters, she said.

The intent is to have potable water from the city system, she said, and to separately install a pump, at her own cost, to draw water from the Detroit River to use to water the facility’s greens. Golfers see the verdant turf, lush trees and landscaping — and in Belle Isle’s case, water and boats — but they don’t see the headaches behind the scenes, said Kate Moore, executive director of the Michigan Golf Course Owners Association , a Lansing-based trade group. “The general public really doesn’t understand what goes into running a golf facility,” Moore said. “It’s about infrastructure, it’s about staffing, it’s about history...” Moore said Pegues has the willpower to overcome the Belle Isle issues. “She’s a good businessperson. I don’t think there could be anyone more driven to make this happen for the community than Francine,” she said. The 9-acre facility has 30 natural grass driving range stations, a chip-

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Francine Pegues hopes to use business

connections built as a former marketing executive at Blue Cross Blue Shield and as a member of nonprofit boards to build business for the Belle Isle Golf Range.

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and-run practice area, sand bunker practice area, five-hole mini course that will be expanded to six, three United States Golf Association quality sand-based putting greens, and a clubhouse. Cost and program details are at belleislegolfrange.com. The golf facility pays four groundskeepers for maintenance, and three to four more staffers to work inside and for events, Pegues said. A college student will be hired this summer to handle social media and other tasks, she said. The facility has 12,000 new golf balls purchased from Wilson Sport ing Goods Co., along with a few sets of clubs and some individual 7- and 9-irons, and putters. Dave Coy, who operated the golf center for 16 years prior to the state takeover, couldn’t be reached for comment. Building relationships Pegues, 67, retired in 2007 after 24 years in marketing with Blue Cross Blue Shield of Michigan , and she’s using her business connections to build up the golf center’s clientele. She also has relationships built through her board memberships, including The Parade Co. and Girl Scouts of Metro Detroit. A few years ago, Pegues, a Grosse Pointe Park resident, was president of a company called Dan Teak LLC that kept a database of registered businesses for subcontractors working on the now-mothballed Wayne County Jail project in downtown Detroit. Collaborating on the Belle Isle golf effort are Terri Anthony-Ryan, who has been head teaching pro for the city of Southfield’s golf courses for more than 20 years, and Huntington Woods-based nonprofit Golf Links Detroit, which was created to promote golf to underserved groups. Golf Links Detroit has relationships with

The contract, the kids Pegues said the programming plans, especially programs focused on kids, are what earned her the contract. The deal to run the Belle Isle golf center has fairly simple terms: Pay the state $4,000 annually or 5 percent of revenue, whichever amount is greater, she said. In addition to teaching golf, the center will have someone from Wayne State University ’s medical school on hand to do short sessions on healthy eating. She said she’s working with the MWGA to subsidize the cost of up to 200 kids to learn golf at the center. Other plans include launching a women’s golf league, and another for military veterans and their families. The range has a golf cart, and a cart will be added that allows someone who doesn’t have use of his or her lower legs to play golf. Pegues also said she’s talked to the physical therapy department at Beaumont Hospital about starting a rehab golf program for patients. Revenue streams The primary revenue will come from regular golfers seeking practice time, and from Pegues’ efforts

to market the center to businesses. She’s just launched a five-week learn-to-golf program at $50 a person that she’s taking to local companies as an offer for their employees. She said she intends to discuss the program with the Downtown Detroit Partnership. The Detroit Medical Center signed up and sent 40 employees on Wednesday and Thursday. For company outings, the center divides participants into groups, sorted by the area of interest (putting, etc.) to golfers. Already signed up for outings are a group from within Pegues’ old employer, Blue Cross Blue Shield of Michigan, and another from the Detroit CPA firm George Johnson & Co., she said. The origins The golf practice range opened in June 1999. It was built by Ford Motor Co. for $2.1 million and donated to the city, with Visteon Corp. donating $1 million for operations. All proceeds from the center supported the nonprofit First Tee of Michigan Foundation , which aimed to teach life skills, build character and reinforce math and science lessons to youth through golf. The relationship with the city and First Tee eventually fell into limbo as the economy soured and Detroit went into bankruptcy. When the state took over the island last year, it included control of the golf center. The Michigan De partment of Natural Resources created a slew of contracts for various operations on the island. “In golf, it is the short game that kills everybody. You can drive the ball 250 yards, but from 100 yards in, can you get it in the hole?” Pegues said. “We have the best facility in Southeast Michigan for you to do that.” 䡲 Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

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VISTEON, from Page 1: ‘Local governments are going to be a lot more cautious’ would deteriorate after the national financial meltdown. But questions remain about whether the 28,000resident township did enough to protect its own interest in structuring the bond deal. Visteon is holding to its claim that the township alone took on the liability. The township, for its part, claims Visteon is a poor corporate citizen and is culpable for a projected bond payment shortfall as high as $36.4 million by 2018. The shortfall has potential to bankrupt the small, mostly rural community. “This case should send ripples through the economic development community,” said Kurt Brauer, a partner specializing in business incentives at Warner Norcross & Judd LLP in Southfield who is not tied to the case. “Local units of government are going to be a lot more cautious about how they draft these agreements going forward.” The lure of development Visteon was a hot commodity for local economic development managers following its spinoff from parent company Ford Motor Co. in 2000.

Communities were eager to lure the automotive supplier and its headquarters in hopes of securing a windfall in property taxes. By July 2002, Van Buren Township successfully wooed Visteon, and its board of trustees established the Local Development Finance Authority to secure bonds to pay for public facilities for the development. The township agreed to pay $22 million to the contracted developer, Detroit-based Walbridge Aldinger Co. , using proceeds from 30-year tax increment financing bonds. The total bonds issued for the project were $29 million. On its end, Visteon agreed to spend $270 million toward the Visteon Village build-out. The company initially expected Visteon Village to be home to more than 4,000 employees. About 800 employees work there now. Initially, Visteon struggled with profitability coming out from under Ford and reported mounting net losses in 2001, 2002 and 2003. The township projected the assessed value of the property to be $300 million with a taxable value of

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$150 million. But soon after Visteon moved into its new headquarters in 2004, it began asking for a reduction in the property’s taxable value, the township said in its May 12 lawsuit. Visteon, meanwhile, continued to bleed cash, and reported a net loss of $1.5 billion in 2004. By 2006, tax revenues from the property were already failing to meet bond payments, according to the suit, and Visteon reported its sixth straight year of losses. The township refinanced the bonds, delaying bond repayment — and alleviated the projected shortfalls at that time. Bankruptcy On May 29, 2009, in the midst of an economic and industry collapse, Visteon filed Chapter 11 bankruptcy. Van Buren Township quickly became an unsecured creditor over its tax abatement agreement, in which it said Visteon failed to meet the terms of the plan. Specifically, the township said, Visteon didn’t meet the terms of the agreement because it didn’t further develop Visteon Village to increase the corporate campus’ taxable value. Visteon, in turn, sought yet another reduction of the assessed value of the property, threatening legal action if a new agreement wasn’t reached, the township said. The township and Visteon came to yet another agreement over value and bonds, which dropped the assessed value from $165 million to $60 million, $30 million of which was taxable, according to the suit.Van Buren Township then sold its $9.8 million unsecured claim tied to the tax abatements to Fulcrum Credit Partners for $5.7 million, the proceeds of which were delegated to meet the bond payments. Visteon has since recovered financially by scrubbing $2 billion in debt from its books during bankruptcy and implementing an aggressive M&A strategy. For 2014, it reported revenue of $7.5 billion and a loss of $295 million. Sticking points

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Visteon agreed to consider the Van Buren Township’s bond shortfall as part of the bankruptcy settlement agreement, but only as an “assist.” The agreement states that Visteon agrees to “negotiate with the township in good faith to determine the amount of the shortfall with respect to these bonds and make a non-payment, payment in-lieu-of tax, to the township to assist the township in making timely payments on the bonds.” Visteon sold Visteon Village in 2012 for $81 million to New York City-based real estate firm Sovereign Partners LLC, which later renamed the development Grace Lake LLC. It’s likely Visteon cleared Sovereign of any liability to the bonds, but that remains unclear. Visteon declined to answer questions concerning the matter. Calls and emails to Sovereign were unreturned. In 2013, Van Buren Township hired Philadelphia-based Public Fi nancial Management Inc. to calcu-

late the township’s potential shortfall in bond payments tied to the project, according to the lawsuit. The firm established that the township would see a shortfall ranging between $23.7 million and $36.4 million by 2018 — barring an influx of additional tax revenue. In September 2013, Van Buren Township asked Visteon to begin negotiations toward a shortfall payment. The shortfall payment, the payment-in-lieu of tax the company ultimately offered, was just $6,125.06. Robert Rhodes, partner at Detroitbased Dickinson Wright PLLC and representation for Visteon, responded in a letter dated Oct. 8, 2013. Rhodes wrote: “The township undertook the liability for the bonds. If there is to be a shortfall for which the townships is liable, Visteon promised no more than an assist, which means the township would have to pay any shortfall with only an ‘assist’ from Visteon.” Rhodes declined to comment further on the case. Big stakes Doug Bernstein, managing partner of the banking, bankruptcy and creditors’ rights practice group at Plunkett Cooney PC, said vague terms like “assist” could be the product of an involved negotiation with bankDoug Bernstein: ruptcy creditors, “You obviously want where more submore definition” stantive language or a pledge of collateral weren’t feasible objectives. “With the benefit of hindsight, you obviously want more definition. But it’s a process, and this is the product of a negotiation,” he said. “If you wanted the agreement to say ‘cover the shortfall’ for example, it’s a guarantee, it’s an unlimited guarantee, and one the company can’t be prepared to make in its position.” Van Buren Township Supervisor Linda Combs said in a statement last week that Visteon’s inaction could lead the township to default on the bonds, “which would lead to financial chaos for the township.” Kaveh Kashef, partner at Clark Hill PLLC and representation for Van Buren Township, said the courts should hold Visteon accountable. “A shortfall has been identified, and the language (in the agreement) states very clearly that they should make a payment,” Kashef said. Brauer, on the other hand, isn’t as confident. “The township so badly wanted this project, they took on the risk and seemingly didn’t indemnify Visteon,” Brauer said. “The township tied its own hands.” The learning curve Van Buren Township joins a list of municipalities burned by economic development efforts. Allen Park, for example, lost out in its ill-fated plans for an upstart movie studio in the city. Allen Park issued $28.3 million limited tax

bonds in November 2009 for the project and another $2.7 million of general obligation limited tax bonds in June 2010 toward the build-out of Unity Studios. Bond payments were to be covered by rental fees for the studio, which the city owned, but the development never fully materialized and the city was stuck with $2.6 million in annual bonds payments. The U.S. Securities and Exchange Commission eventually filed fraud charges against city officials, alleging they lied about the project’s viability. The SEC reached settlements with two former officials, including a $10,000 fine to former Allen Park Mayor Gary Burtka. A judge in U.S. District Court for the Eastern District of Michigan later vacated those settlements, but the SEC asked the court earlier this year to reinstate them. East Lansing narrowly missed its own bond debacle in 2012 when it planned to issue $20 million in citybacked municipal bonds toward the $105 million City Center II project. The city planned to use the bonds to pay for a parking structure and performing arts center. But after an assessment of the plan, it was revealed that the tax incremental finance revenue wouldn’t increase enough to cover the bond payments, leading to a $3.1 million shortfall. The city council voted unanimously in June 2012 to ditch the project. It has since began entertaining new plans for that site. Brauer said municipalities must engage in proper due diligence and indemnity clauses before entering into these agreements and issuing bonds. “Frankly, I’m working with several communities on these types of deals, but they are being responsible,” Brauer said. It’s possible other municipalities with tax capture bonds may try to get better terms in future deals due to this deal, Bernstein said. “What you do in these situations is learn from other cases and adapt your (strategy),”he said. Bad corporate citizenship? The court will likely decide whether Visteon is culpable, but the company’s lack of compassion for the community is indicative of a bad corporate citizen, Brauer said. “Visteon, it appears, is doing everything it can to duck responsibility for shortfall,” Brauer said. He said regardless of Visteon’s ultimate legal liability, economic development agencies at the local and state level should take note. In the Visteon project, the Michigan Economic Development Corp. had authorized a 13-year, $15.7 million tax credit. However, the MEDC terminated the credits before they were distributed. The reasons why aren’t clear. “Visteon should absolutely be denied any economic assistance by local or state entities if they come looking for a handout in the future,” Brauer said. 䡲 Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

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SYSTEMS, from Page 3: Beaumont, Henry Ford bounce back on bottom lines for Michigan’s health systems puts them in a good position to deal with reimbursement cuts or other financial challenges this year. “Michigan has lower costs than the two other states we studied (Indiana and Wisconsin),” UdowPhillips said. “The (Michigan) health systems will become more profitable as Medicaid expansion” takes Udow-Phillips: hold in 2015. Profits looking up At Beaumont for systems in state Health, which last September became the region’s largest system through the merger with Oakwood Healthcare and Botsford Hospital , 2014 was a year in which the eighthospital system bucked conventional wisdom that the first year of a merger is fraught with peril. CFO John Keuten said Beaumont increased consolidated revenue for its eight hospitals by 5 percent to $3.95 billion and net income by $40 million to $182.6 million, a 4.6 percent total margin. Unlike the overall market, which was flat, Beaumont increased admissions by 4 percent to 174,675 and saw emergency room visits rise by 2.9 percent to 506,743. Beaumont Health’s combined market share last year was about 35 percent, according to data submit-

ted by hospitals to the Southeast Michigan Data Exchange. “We have seen growth in Troy and Dearborn (hospitals), and at our Royal Oak campus,” Keuten said. Outpatient volume was up about 2 percent, he said. “Every month when we close the books we are always surprised our inpatient is so strong and continues to beat budget.” While inpatient admissions dropped about 2 percent for Henry Ford in 2014, Schlichting said Henry Ford’s market share in Southeast Michigan remained about 18 percent. “We are not trying to grow inpatient care,” she said. “The real growth is happening in the outpatient side.” Chadwick said total revenue growth is a better indication of a system’s strength because it combines inpatient and outpatient. In 2014, Henry Ford’s net patient service revenue increased 3.6 percent to $2.172 billion from $2.095 billion in 2013. “We are not as hospital-centric as other organizations,” Chadwick said. “Most of our growth is in ambulatory with good growth” in its two HMOs, Health Alliance Plan and HAP Mid west Health Plan, its Medicaid HMO. Health insurance premiums for Henry Ford increased 4 percent to $2.27 billion in 2014 from $2.17 billion the prior year. Medicaid expansion’s impact Like at most hospitals in Michi-

gan, Keuten said Healthy Michigan Medicaid expansion has been a big contributor, adding 11 percent, or $30 million in net revenue, to $305.5 million during the nine months the expansion was in effect last year. Healthy Michigan, which began April 2014, also helped Beaumont reduce uncompensated care, which includes bad debt and charity care. For example, Beaumont reduced uncompensated care costs by 31 percent to $265 million last year. Charity care dropped to $112 million from $182 million and debt dropped to $154 million from $203 million. At Henry Ford, Medicaid expansion added about a 15 percent revenue increase from $330 million to about $381 million. While Henry Ford’s bad debt costs increased 9.5 percent to $92 million in 2014 from $84 million, charity care costs declined 22 percent to $48 million from $62 million. Overall, uncompensated care declined 4 percent to $140 million last year from $146 million in 2013. No-fault proposals’ impact Despite positive financial news, Keuten said storm clouds are gathering on the horizon. Proposed changes in the state’s auto no-fault medical reimbursement system could impact Beaumont’s future finances. Under Senate Bill 248, which was

approved last month in the full Senate, Beaumont would lose $55 million per year in reimbursements, Keuten said. John Keuten: InThe House patient volume approved similar stays strong legislation, but legislative sources told Crain’s that the House doesn’t yet have the votes needed to approve auto no-fault. Henry Ford spokesman David Olejarz said SB 248 would cost the fivehospital system $6 million annually. “The proposed legislation would impact our high-level trauma, emergency medicine and other specialty services that care for trauma patients as well as diminish access to essential health care services for patients injured in an auto accident,” Olejarz said in a statement to Crain’s. Statewide, the Michigan Health & Hospital Association has estimated that proposed changes in no-fault insurance reimbursement could cost the health care industry more than $1 billion in revenue. For 2015, Keuten said Beaumont’s “goal is to continue to hit 4 percent margins and our projections are to slightly beat the $123.8 million in operating income.” However, he said, “A lot depends

on what the Legislature does in the next week or two on no-fault.” If no-fault reform is approved in its current form, Keuten said the change could cut no-fault insurance payments to 150 percent of Medicare and directly affect the system’s bottom line. The payment reduction could affect patient care, he said. But business and insurance industry supporters of no-fault reform contend one of the main reasons for Michigan’s high automobile insurance rates is provider reimbursement charges that are four times higher than Medicare rates and three times higher than what Blue Cross pays. Under health care reform, hospitals also face various Medicare reimbursement cuts, financial penalties for high readmission rates and excessive hospital-acquired infections. For some hospitals, the Medicare payment cuts could be as high as 5 percent. For these reasons and to improve health care efficiency, system executives at Henry Ford and Beaumont say they continue to seek lower per patient operating costs through various cost containment projects. Beaumont’s merger savings are projected to total about $130 million over the next three years, including saving $37 million in 2014, Keuten said. 䡲 Jay Greene: (313) 446-0325 Twitter: @jaybgreene

VITA PERK, from Page 3: The iconic morning cup of joe enters the era of ‘stealth health’ 15 vitamins and minerals packaged in a thin, single-serving pouch. As Kifferstein said: “While people may often forget to take a vitamin, or even dislike swallowing one, they never forget their morning coffee.” “Stealth health” is a growing trend in the food industry, according to Brad Kifferstein: Darren Tristan, May forget vitamin executive vice — but not coffee. president of Technomic , a Chicago-based food research and consulting firm. “We’re seeing vitamins moving into food space — whether it’s kale in smoothies or fish oil in more foods.” With an idea of the product they wanted, the duo turned to a vitamin consultant who liked the concept and recommended a formulator, Best Life PharmaNaturals in Tempe, Ariz. Kifferstein, Vita Perk CEO and co-founder, and Belchinsky, Vita Perk president and co-founder, presented the scientists with their concept. They imagined the product would be on the shelves in about a year. They were wrong. “Like any big project, you should expect it to take two to three times longer and cost two to three times more than originally planned,” said Kifferstein, who left his position as head of business development at Bloomfield Hills-based Crypton Inc.

about six months after having the idea. The first round, which took about five months to produce, was too sweet in flavor. They scrapped 100,000 sticks (1.5 grams each) of product. The second round was ready in fall of 2012. This time the taste issue was resolved, but the product didn’t quite dissolve in the coffee. “It would float on top and create a sludge on the bottom of the cup,” Belchinsky said. Another 100,000 sticks were disposed of. Starting a product is never for the faint of heart, but around this time the founders got a dose of positive feedback at Coffee Fest 2013, an international trade show held that year in New York. “We found out our product has legs,” Belchinsky said. Moving on from mocha Kifferstein and Belchinsky decided to step up their game. They made the move from Best Life to DSM Fortitech based out of New York after their three-year contract with Best Life ended. DSM was capable of bigger batch production. It took the new company a year to re-engineer the product. Along the way, there was another complication with one of their planned flavors. Kifferstein said they spent eight months trying to develop a mocha flavor that didn’t clog the production machines; when they finally got it right, the price of cocoa skyrocketed. Then, it didn’t make fi-

nancial sense to keep the flavor. “There are so many factors with startups, especially with food,” said Nicole Nassif, COO of Solutions A La Carte, a Royal Oak-based operational consulting business specializing in restaurants and food retail. “It’s operating within your business plan and knowing, ‘If I do this, I make that.’ If a company veers from that, the hemorrhaging of pennies starts.” One of the “eureka” moments for Vita Perk’s leaders was the realization that instead of fighting with the mocha, they could replace it with an energy option to round out their four offerings (the other three being original, vanilla and hazelnut). Kifferstein and Belchinsky, who still does sales for Spinal Fuzion LLC in addition to his Vita Perk work, brought on a local consultant to raise capital through individual investors and build a board of advisers. The company is closing in on its first half-million, the co-owners said. Up to this point, the pair had financed Vita Perk through their own savings, about $250,000. In addition, Brad Shanahan, 46, a CPA with experience working for big-box retailers like Wal-Mart , Kmart and Target, was brought on. Nassif said recruiting top talent can be an important move for a startup. “You have to have the people on board that can support the growth within your best business practices,” she said. In the fall of 2014, the team was excited to have a possible investor

on board. “He told us he showed all potential investments to his wife. He took some Vita Perk home and whatever creamer his wife uses coagulated when the Vita Perk was added,” Kifferstein said. “He called us to say he decided not to invest.” Another 100,000 sticks were discarded, and it was back to the drawing board. Staying positive “It’s all about the P’s when you’re trying to create something that’s never been made before,” Kifferstein said. “Patience, persistence, passion, perspiration and staying positive.” It took three more months to reengineer the product, finding the three problem minerals and replacing them. Vita Perk’s West Bloomfield office became its own research/development lab with cups of coffee and every kind of creamer spread over all surfaces. Round 4 is “as perfect as it can get,” according to Shanahan. It launched on Feb. 1 and is available in about 50 Midwest stores and online. Single sticks sell for 99 cents in convenience stores, gas stations and coffee shops. A seven-stick package can be purchased at grocery stores — like Fresh T h y m e F a r m e r s M a r k e t , Hiller’s Mar kets (which is being acquired by Kroger Co.) and Nino Salvaggio International Market — for $4.99, and the 30-stick box can be bought online for $19.99. Vita Perk also has a contract with one of the largest office coffee serv-

ice brokers, Florida-based National Coffee , which will use its international broker network to supply interested clients with Vita Perk. The contract is being finalized now. Projected revenue for 2015 is $456,000. Next up, the company plans to release a Vita Perk product for tea and a Vita Perk sweetener made with a sugar substitute, stevia. Both lines should be on the market in 2016 when Vita Perk projects revenue to grow to $1.6 million. With business growing, Vita Perk brought on Shaylyn Silorski, 23, as vice president of marketing and business development. She is a recent graduate of the University of Notre Dame . She, in turn, brought their biggest investor on board: one of her former professors, Chris Stevens, who encouraged his students to keep in touch. Stevens is a retired vice president of corporate relations for Keurig Premium Coffee Systems , and one of the original members of Keurig’s senior leadership team. He became a Vita Perk investor in April. He said he’s “thrilled” with consumer response to the idea of smart coffee. The Vita Perk executives say as they work on brewing business deals and expanding distribution, they’ve also learned a lot along the way. “You have to believe everything happens for a reason,” Shanahan said. “After everything we went through with the mocha flavor, its replacement, energy, is our top seller.” 䡲

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CHURCHES, from Page 3: Havens for creatives

UPCOMING

PARTNER EVENTS

Marketing & Sales Executives of Detroit (MSED) Annual Automotive Roundtable: International Edition Join us and our panel of experts for this annual offthe-record discussion. Panelists include Tom Bodell, Dirk Hartmann, Sujit Jain and Michael Robinet. Moderator: David Andrea, Senior VP, Industry Analysis & Economics, OESA. May 21 • 5-8 p.m. Somerset Inn, Troy MSED Members: $45 Non-Members: $60 For additional information and to register, visit www.msedetroit.org or call Meeting Coordinators at (248) 643-6590. Concept. Acquisitions. Marketing: The Talmer Bank Story Learn the perils, pitfalls and rewards of starting a new business. Speaker: Gary Torgow, Chairman, Talmer Bancorp Inc. June 10 • 8-10:30 a.m. Management Education Center, Troy MSED Members: $35 Non-Members: $50 For additional information and to register, visit www.msedetroit.org or call Meeting Coordinators at (248) 643-6590. Southfield Area Chamber of Commerce 3rd Thursday May 21 • 4:30-6:30 p.m. Plum Hollow Country Club, Southfield Non-Members: $10 www.southfieldchamber.com Annual Golf Outing June 15 • 11 a.m. Plum Hollow Country Club, Southfield Tickets available online www.southfieldchamber.com

thing it needs to keep the lights on and the building maintained. It’s exactly the type of space-sharing arrangement Philadelphiabased Partners for Sacred Places hopes to spur further in Detroit, Baltimore and Austin. The organization is in town, talking with churches and religious sites about the potential value of opening their doors to artists, nonprofit cultural groups and even creative businesses. A $100,000 grant from the Doris Duke Charitable Founda tion is funding its assessment of creative sector space needs and the availability of sacred space in Detroit, Baltimore and Austin, Texas. The hope is that foundations might make grants to help faKaren DiLossi: cilitate spacePromoting shared sharing agreespace ments between the two in the three cities, said Karen DiLossi, director of arts in sacred places at Partners for Sacred Places. Such agreements give arts and cultural groups suitable and affordable space, while helping bring more people and more donations to religious organizations, DiLossi said. It sounds like a partnership made in heaven, but one local creative sector leader cautioned about guarding against the potential conflict between religious views and artistic expression. “It appears that Partners for Sacred Spaces have dealt with similar concerns in other cities, and have strong processes in place to help negotiate,” said Matthew Clayson, director of the Detroit Creative Corridor Center. Scarcity of space

Great Lakes Women’s Business Council Detroit Entrepreneur Roundtable, presented by CEED This event will focus on the construction industry and what small construction companies can do to succeed and what they can do to be part of the revitalization of Detroit. May 27 • 12:30-4 p.m. Focus: HOPE Conference Center, Detroit To register, visit MICEED.org or call (734) 677-1400 Detroit Society for Human Resource Management (Detroit SHRM) Workshop: “The Hidden Language of Business – Workplace Power, Politics & Influence” & bonus session “Workplace Trends – Survival Secrets for the Next Decade” Speaker: Margaret Morford, CEO, The HR Edge, Inc. By sharing her eye-opening, sometimes jawdropping, personal experiences and those of others, Margaret reveals the secret political skills you need to achieve peak influence and effectiveness in your workplace – as you earn the devotion of your boss, coworkers and clients. Participants need to start today to be ready for what the work world will look like in 2018 and even 2025. Don’t be caught unaware. June 2 • 7:30 a.m.-Noon Management Education Center, Troy Detroit SHRM Members: $50 Non-Members: $75 Register at www.detroitshrm.org or call (248) 478-6498.

ArtLab J and its contemporary modern dance company had a tough time finding suitable, affordable space after it launched in 2012. The organization, which is operating on a budget of just over $245,000 this year, was one of the John S. and James L. Knight Founda tion Arts Challenge grantees last fall, with a $100,000 matching grant. Initially, ArtLab J operated from a loft space above Nikki’s Lounge in Greektown, but being located in a nightlife district wasn’t ideal, and parking was a challenge. Last spring, ArtLab J moved to space in the Virgil H. Carr Cultural Arts Center. It was suitable but not dedicated space. Through a performer, Jung met the Rev. Todd Farley, senior minister of First Congregational Church United Church of Christ in Saginaw and Young Fenix Fellowship UCC — an alternative church that does a Sunday service through performance rather than preaching — that he brought to St. John-St. Luke in Detroit. This was at the request of the Michigan Conference of the United Church of Christ. Farley was operating Young Fenix Physical Theatre from the 1515 Broadway Café in Detroit but

Church spaces find new uses in Midtown The concept of repurposing sacred spaces may not be common, but it isn’t brand-new in Detroit. Here are two other local examples: 䡲 In 2011, First Unitarian-Uni versalist Church in Midtown donated its complex of buildings, including the sanctuary and attached church house with social hall and second-story church, to the East Michigan Environmental Action Council. Those buildings are now part of the council-managed Cass Corridor Commons, a multiuse, nonprofit and green space for tenants such as the Sugar Law Center for Economic and Social Justice. 䡲 Midtown Detroit Inc. is converting a former church on East Forest Avenue west of John R Street into an intimate music/performing arts venue in the main sanctuary and a 100-seat black box theater. It will also include an

moved to St. John-St. Luke Evangelical to create space sharing there as he had done at his Saginaw church. “We also wanted a cultural outreach in the community, (so) I invited Art Lab J to be involved, too” Farley said. “I believed Art Lab J was also trying to work with the community, give voice to it, express its angst and life.” The fine print As a condition of being nonprofit, St. John-St. Luke cannot rent space or engage in other profitmaking activities, said board secretary Tracy Craig. The church, built in 1874 by German immigrants, was looking for a way to signal to the surrounding community that it was not closed, as many believed, she said. “If we could have people here during the week, the community would see there was something going on and the church was open.” It’s slowly working. So far, a few people who’d come to the church for a performance presented by ArtLab J or Young Fenix have shown up for Sunday morning services, Craig said. And, coincidentally or not, there have been more donations in the donation box recently, she said. And that’s a help: “It costs at least $20,000 to operate the church annually ... and you certainly can’t bring that in (from) donations from 20 people each Sunday.” Such space-sharing agreements help both the congregation and the nonprofit arts sector, said Sacred Places President Robert Jaeger, a Mt. Clemens native who became fascinated with historic Detroit churches while pursing his MBA at the University of Michigan in the 1970s. Most of the Detroit churches he fell in love with back then are still here. And space-sharing agreements help them “to hang on ... (and) continue to take care of their buildings,” he said. Partners for Sacred Places has

outdoor patio and stage area and a permanent restaurant/bar inside the sanctuary that will operate even when the performances spaces are dark, said Executive Director Sue Mosey in an email. Built in 1915, the two-story brick building built in the Late Gothic Revival style originally housed the Church of the New Jerusalem. Crossroads of Michigan subsequently operated a soup kitchen and food pantry from the church until 2008. Art Place America awarded a $900,000 grant to Midtown Detroit in 2011 to do due diligence and acquire the property. Mosey said Midtown is continuing to fundraise for the $4.7 million project and plans to also seek federal and state historic tax credits, foundation grants, lenient-term loans and other funding, with a goal to begin the renovations next spring. — Sherri Welch

been hosting training sessions to help artists and congregations understand the logistics of sharing space and facilitating agreements between arts groups and religious organizations over the past four years in Philadelphia and Chicago, DiLossi said. Here in Detroit in early May it held a town hall-style meeting for local nonprofit arts and cultural groups and artists to brief them on the study and ask for their participation in focus groups and an online survey. “We hear from our members all the time, ‘I wish I had a place ... a presence downtown,’ ” said Lynn Friman, acting executive director of CultureSource. Partners for Sacred Places came in almost a year and a half ago and looked at half a dozen locations up and down Woodward and now is expanding its reach, she said. “The idea is they will work with CultureSource to (identify) funding and gauge opportunities.” The plan is to share the findings from Detroit and the other two cities in September during meetings at the Doris Duke offices in New York and at Drexel University in Philadelphia, which is assisting with research on the project, DiLossi said. Partners for Sacred Spaces will bring best practices and “hopefully ... a framework that ensures longterm access and affordability for ... creative groups,” the creative corridor’s Clayson said. Partners for Sacred Places is focusing initially on repurposing sacred spaces for the arts here in Detroit, but in a way, it’s an extension of what many churches offer in the way of hosting emergency food and shelter and senior programs, Jaeger said. “I think we’re also delivering a broader message — these sacred spaces have an enormous value as places that shelter, support, host and incubate a wide range of nonprofit or community purposes.” 䡲 Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

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ROADS,from Page 1: Poll finds biz willing to pay for roads, with right plan would have generated. Sales or fuel tax hikes are the most popular picks when quizzed about funding sources; only 31 percent supported finding the road money via cuts to the existing state budget. Debate over the roads issue has reached a fever pitch with many business owners and civic leaders — enough to push forward the introduction of new legislation last week from Republican lawmakers. Dennis Nordmoe, executive director of Detroit-based nonprofit Urban Neighborhood Initiatives, and one of those surveyed, said he thought Proposal 1 was a “terrible proposal” but voted for it anyway because he wanted to support investment for roads. He said he would prefer to pay higher fuel taxes before a higher sales tax, due to Michigan’s growing income disparity. “We have to take that issue seriously,” Nordmoe said. “Maybe we should just go right at the issue of people using the roads pay for the roads.” But Bob Munoz, general manager for Madison Heights-based mail presort firm Zip Mail Services Inc., said a sales tax increase would allow the state’s growing number of out-ofstate tourists to help foot the bill for roads they also use. Higher fuel taxes could also be part of the answer, he said. But overall, he’s worried that drawing on existing state spending would not generate the amount of needed road dollars without raiding government services. “It’s robbing Peter to pay Paul. It will just cause problems somewhere else,” Munoz said. “An extra tax somewhere is going to be required.” Buy-in from voters Businesspeople are raising their hands to pay taxes? Yes, that’s how important the issue has become to many of those surveyed, and the state is paying attention. “It’s a good sign that the public recognizes that we need to invest more in our foundation,” said Jeff Cranson, Michigan Department of Transportation spokesman. The state this year expects to spend $1 billion on road construction and $300 million on maintenance, a figure that includes patching, shoulder repairs and snow removal, MDOT said.

Exit polling, Cranson said, has shown rejection of Proposal 1 “was not a case of the voters saying, one, that we don’t need to fix the roads, and two, that we don’t need to pay more to fix the roads.” Proposal 1 would have raised more than $1.2 billion by raising the state sales tax from 6 percent to 7 percent and removing it from fuel sales while also boosting the gasoline tax. But 80 percent of statewide voters turned it down, in part because of its complexity. Business tax changes? In the Crain’s survey, respondents were given options to choose their preferred method of generating state revenue; options ranged from the various forms of fuel and sales tax hikes to actual income tax changes. (See box, this page.) Business owners surveyed were nearly split on whether to expand the state’s 6 percent corporate income tax to an estimated 100,000 companies not considered C corporations that currently are exempt from paying it. Forty-seven percent of respondents favored the idea, while 45 percent were opposed.“I was a little bit surprised, too, at the willingness of Crain’s subscribers to even entertain the notion of an expansion of the base of the existing business tax,” said John Cavanagh, a co-founder of Epic-MRA. New bills Sentiment supporting tax hikes appears to counter the idea behind a new proposal from Republican lawmakers that would rely heavily on existing revenue, mostly from economic development, to pay for infrastructure. House Speaker Kevin Cotter, RMount Pleasant, last week introduced a proposal that would raise more than $1 billion by 2019 in part through expected state revenue growth. The plan would raise the tax on diesel fuel from 15 cents to 19 cents, the same as regular fuel, and charge fees to drivers of hybrid and electric vehicles. But Cotter’s Kevin Cotter: plan also would Pushing proposal in eliminate the state House. state’s Earned In-

INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: A&M Hospitality Management .......................... 18 ArtLab J ...................................................................... 3 Beaumont Health .......................................... 3,4,13 Belle Isle Golf Range .................................................. 1 Bortz Health Care .................................................... 15 CenterforHealthcare Research & Transform. ....3 Clark Hill .................................................................... 22 Coolhouse Labs ...................................................... 10 Desai Family Accelerator ...................................... 10 Detroit Medical Center .......................................... 4 Detroit Venture Partners ...................................... 10 Epic-MRA .................................................................... 1 FCA US ........................................................................ 6 Ford Motor .................................................................. 6 General Motors ........................................................ 6 Golf Links Detroit .................................................... 21 Group 10 Management ........................................ 18 Health Care Association of Michigan ................ 15 Henry Ford Health System .................... 3,4,12,14 Honigman Miller Schwartz and Cohn .......... 1,25 IHS Automotive ........................................................ 6

Mattress Closeout Center ...................................... 7 Michigan Department of Transportation ........ 25 Michigan Golf Course Owners Association .... 21 Midtown Detroit .................................................... 24 MPRO .................................................................. 12,14 Oakwood Hospital .................................................. 12 Original Equipment Suppliers Association........ 6 Planning Perspectives ............................................ 6 Plunkett Cooney .................................................... 22 Ring Hospitality Management ............................ 18 St.John-St. Luke Evangelical UCC ........................ 3 Solutions a la Carte .............................................. 23 Urban Neighborhood Initatives ........................ 25 Visteon ........................................................................ 1 Vita Perk ...................................................................... 3 Warner Norcross and Judd .................................. 22 WDIV-Channel 4 ...................................................... 4 WWJ-TV62 .................................................................. 4 Young Fenix Physical Theatre .............................. 3 Zip Mail Services .................................................... 25

Biz people to Lansing: Hands off schools About 300 respondents in a recent survey by Crain’s Detroit Business and Honigman Miller Schwartz and Cohn LLP said they would not support major state budget cuts to pay for improving Michigan’s crumbling roads and bridges — especially when schools or human services spending were potentially on the chopping block. Fewer than half of undecided respondents — and the 31 percent who initially recommended budget cuts to fund roads — supported cutting from higher education, public schools, local governments and health care.

Other highlights from the survey, when respondents were asked where to look for cuts: 䡲 The idea of cuts to universities and community colleges earned the most support — 44 percent — but failed to achieve a majority. 䡲 Twenty-six percent of respondents supported cutting revenue sharing to cities and townships that fund police and fire protection. 䡲 Fifteen percent favored cuts to health care for the poor and 14 percent cuts to K-12 education. — Lindsay VanHulle

Selected survey results Findings from Crain’s/Honigman survey:

䡲 How important is it for Gov. Rick Snyder and the Legislature to develop an alternative road funding plan as soon as possible? 67% essential 24% very important 6% somewhat important 2% not important at all

䡲 Should additional funding come from increased taxes, fees or by cutting state programs and services? 56% Raise state taxes, fees or both 31% Cut state programs and services 4% Both cuts and new taxes

䡲 Do you agree with increasing the state sales tax by one penny and specifying in the constitution that all new revenue must go to roads, bridges and transportation? 62%: total favor 41% strongly favor 21% somewhat favor 36% total oppose 28% strongly oppose 8% somewhat oppose

䡲 Do you favor increasing the 19cent-a-gallon state gas tax? One idea would be to raise it by 11 cents a year for each of the next three years, then tie its growth to inflation, and also raise annual vehicle registration fees.

come Tax Credit for low-income workers and divert money from economic development programs, including the 21st Century Jobs Fund, tribal casino funds and film incentives. In an interview with Crain’s last week, Snyder withheld comment on the specifics of Cotter’s proposal, saying only that he looks forward to working with the Legislature on a new plan. “My first plan was a combination of user fees and registration fees. There is a way to work through this,” he said. Contractor questions Whatever is decided on funding, the state needs to take more accountability on road projects to make sure the work is done well the first time, said Kim Maul, CFO for

49% total favor 25% strongly favor 24% somewhat favor 49% total oppose 39% strongly oppose 10% somewhat oppose

䡲 Would you favor a proposal to expand the Michigan business tax beyond “C” corporations to include the roughly 100,000 commercial enterprises that pay no business tax? 47% total favor 25% strongly favor 22% somewhat favor 45% total oppose 38% strongly oppose 7% somewhat oppose

䡲 Which funding alternative would you prefer the most? 36% Increase the sales tax a penny to 7 cents on the dollar and guarantee in the constitution that all of this funding go to transportation, roads and bridges 24% Raise the gas tax by 11 cents a gallon a year for the next three years and limit future increases to the rate of inflation or 5%, whichever is less 17% Raise taxes on state businesses 1% Make deep budget cuts in other state programs, including schools, universities and community colleges, health care and police and firefighters

Kulbacki Inc. The Clinton Townshipbased construction firm builds schools, churches and retail centers, among other buildings. Concrete and asphalt costs are difficult to guarantee, Maul said. She supports finding road dollars in the current budget, although not from public schools, higher education or health care for the poor as asked in the survey questions. But, she said she strongly opposes raising sales or fuel taxes, saying doing so would crunch a class of workers whose wages are not keeping up with cost-of-living increases. “You’re in a Catch-22,” Maul said. “They want to crush the middle class. Who’s spending money? If the middle class isn’t spending, then who is?” 䡲 Lindsay VanHulle: (517)657-2204 Twitter: @LindsayVanHulle

CRAIN’S DETROIT BUSINESS www.crainsdetroit.com Editor-in-Chief Keith E. Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Associate Publisher Marla Wise, (313) 446-6032 or mwise@crain.com Executive Editor Cindy Goodaker, (313) 446-0460 or cgoodaker@crain.com Managing Editor Jennette Smith, (313) 446-1622 or jhsmith@crain.com Director, Digital Strategy Nancy Hanus, (313) 4461621 or nhanus@crain.com Managing Editor/Custom and Special Projects Daniel Duggan, (313) 446-0414 or dduggan@crain.com Senior Editor/Design Bob Allen, (313) 446-0344 or ballen@crain.com Senior Editor Gary Piatek, (313) 446-0357 or gpiatek@crain.com Web Editor Kristin Bull, (313) 446-1608 or kbull@crain.com Research and Data Editor Sonya Hill,(313) 446-0402 orshill@crain.com Web Producer Norman Witte III, (313) 446-6059 or nwitte@crain.com Editorial Support (313) 446-0419; YahNica Crawford, (313) 446-0329 Newsroom (313) 446-0329, FAX (313) 446-1687 , TIP LINE (313) 446-6766

REPORTERS Jay Greene, senior reporter Covers health care, insurance, energy, utilities and the environment. (313) 446-0325 or jgreene@crain.com Amy Haimerl, entrepreneurship editor Covers entrepreneurship and city of Detroit. (313) 4460416 or ahaimerl@crain.com Chad Halcom Covers litigation and the defense industry. (313) 446-6796 or chalcom@crain.com Tom Henderson Covers banking, finance, technology and biotechnology. (313) 446-0337 or thenderson@crain.com Kirk Pinho Covers real estate, higher education, Oakland and Macomb counties. (313) 446-0412 or kpinho@crain.com Bill Shea, enterprise editor Covers media, advertising and marketing, the business of sports, and transportation. (313) 446-1626 or bshea@crain.com Lindsay VanHulle, Lansing reporter. (517) 6572204 or lvanhulle@crain.com Dustin Walsh Covers the business of law, auto suppliers, manufacturing and steel. (313) 446-6042 or dwalsh@crain.com Sherri Welch, senior reporter Covers nonprofits, services, retail and hospitality. (313) 446-1694 or swelch@crain.com ADVERTISING Sales Inquiries (313) 446-6032; FAX (313) 393-0997 Sales Manager Tammy Rokowski Senior Account Executive Matthew J. Langan Advertising Sales Christine Galasso, Catherine Grace, Joe Miller, Sarah Stachowicz Classified Sales Manager Angela Schutte, (313) 446-6051 Classified Sales Lynn Calcaterra, (313) 446-6086 Audience Development Director Eric Cedo Events Manager Kacey Anderson Creative Services Director Pierrette Dagg Senior Art Director Sylvia Kolaski Marketing Coordinator Ariel Black Special Projects Coordinator Keenan Covington Sales Support Suzanne Janik, YahNica Crawford Editorial Assistant Nancy Powers Production Manager Wendy Kobylarz Production Supervisor Andrew Spanos

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CRAIN’S DETROIT BUSINESS // May 18, 2015

WEEK ON THE WEB/MAY 9-15

RUMBLINGS

Molina to acquire parts of HealthPlus

New DEGC biz development chief takes charge amid staff changes

Nearly three months after Flint-based HealthPlus of Michigan was placed under state supervision for financial difficulties, Molina Healthcare of Michigan Inc., a forprofit Medicaid HMO, has acquired some of the assets of HealthPlus, the companies announced. The purchase price was not immediately disclosed.

ON THE MOVE 䡲 Ferndale Downtown Development Authority executive director Cristina Sheppard-Decius is leaving her job May 28 after 15 years . A message from the DDA sent to “downtown stakeholders” said the board and Sheppard-Decius, a 2009 Crain’s 40 Under 40 honoree, entered a separation agreement. 䡲 Marcella Wilson plans to step down as president and CEO of Matrix Human Services in February but will not retire from the Detroitbased nonprofit. Wilson, 58, will lead the national expansion of the Matrix Transition to Success poverty model that she developed. 䡲 Kyle Caldwell, former president of the Michigan Nonprofit Association, is leaving the Flintbased Charles Stewart Mott Foundation to lead the Grand Rapidsbased Dorothy A. Johnson Center for Philanthropy at Grand Valley State University as executive director.

COMPANY NEWS 䡲 The new Troy-based Beaumont Health will change its signs from green to cobalt blue and rebrand five of its eight hospitals with the Beaumont name. 䡲 According to an internal staff memo written by executives at the parent company of The Detroit News, New York City-based Digital First Media, a sale of the newspaper conglomerate is off the table for now. The note was obtained by Crain’s. 䡲 German auto supplier ZF Friedrichshafen AG said it completed its $12.4 billion acquisition of safety systems supplier TRW Automotive Holdings Corp. Livonia-based TRW will operate as a ZF division. 䡲 Jackson-based Consumers Energy Co. has received conditional approval to begin a 10 megawatt community solar program — Michigan’s first — by the state Public Service Commission. 䡲 Livonia-based A123 Systems LLC will settle its lawsuit against Apple Inc. over alleged employee poaching by the California tech giant. In a document filed in U.S. District Court in Boston, although the final agreement is incomplete. 䡲 Lathrup Village-based Michigan First Credit Union opened the

On deals and deal-makers

[AARON ECKELS]

Former Compuware Corp. CEO Bob Paul talked about former Detroit Mayor Kwame Kilpatrick and other topics during a Q&A with Crain’s finance reporter Tom Henderson last week at the annual Crain’s M&A Awards at the Troy Marriott. During the event, three M&A deals and four deal-makers also were honored (see crainsdetroit.com/ma2015). Kilpatrick gets partial credit, in a roundabout way, for the source relationship forged between Henderson and Paul. The result of that relationship was a series of scoops for Crain’s, including the news last year of the sale of Compuware’s iconic building at Campus Martius to Meridian Health and Bedrock Real Estate Services.

first of five planned branches in Southeast Michigan Kroger stores, in Macomb Township at 26 Mile and Romeo Plank roads. 䡲 Arbor Hospice of Ann Arbor reached agreements to expand services to Glacier Hills Retirement Community, C.S. Mott Children’s Hospital and Henry Ford Village in Washtenaw and Wayne counties. 䡲 With its $90,000 purchase of a Mount Clemens building, Macomb County Rotating Emergency Shelter Team will be able to establish its first permanent shelter for homeless women and children. 䡲 Ann Arbor-based social media firm Seelio Inc. was named entrepreneurial company of the year at the annual meeting of Ann Arbor Spark, the nonprofit economic development organization.

OTHER NEWS 䡲 The Regional Transit Authority of Southeast Michigan, launching efforts to create a master plan on future regional transit, said routes along Woodward, Michigan and Gratiot avenues will be studied over the next year in creating the Building Equitable Sustainable Transit plan, with a goal of putting a regional transit tax before voters in 2016. 䡲 Michigan tax revenue is projected to be $365 million higher over two years than previous estimates, AP reported. Lawmakers hope to approve the 2015-16 spending plan by early June.

OBITUARIES 䡲 Rachel Jacobs, CEO of Pennsylvania-based e-learning company ApprenNet and co-founder of digital expatriate alliance Detroit Nation, died May 12 in an Amtrak passenger train crash in Philadelphia. She was 39. 䡲 Sister Mary Canice Johnson, founder of the Detroit nonprofit Mercy Education Project, died May 12. She was 81.

Detroit Digits A numbers-focused look at the week’s headlines:

9 The jersey number of “Mr. Hockey,” Detroit Red Wings great Gordie Howe, whose name will live on in infrastructure. It was announced May 14 that the proposed $2.1 billion bridge connecting Detroit and Windsor will be called the Gordie Howe International Bridge.

$1 billion The amount General Motors Co. plans to spend on construction and renovations at its Warren Technical Center. The top-tobottom overhaul is expected to result in 2,600 new jobs.

1.1 The megawatts to be generated as part of a DTE EnergyCo. solar project at Domino’s Farms in Ann Arbor Township. The project is expected to produce enough electricity to power 185 homes.

$16.5 million The value of the arbitration award a circuit judge upheld in favor of former Compuware Corp. Chairman-CEO Peter Karmanos against his former company. The award stems from a lawsuit against Compuware by Karmanos after he was terminated in 2013 and stripped of his stock options.

14 The number of stops on a planned transit system on the Detroit River by the Detroit RiverFront Conservancy. The nonprofit plans to raise $3 million to fund the project, which is expected to include water taxis and trolley buses.

There’s a new face in town, and he’s responsible for selling the city. The Detroit Economic Growth Corp. recently hired Kenneth Chapa to be the new executive vice president of business development. The former economic development head for Mesa, Ariz., will oversee corporate attraction as well as helping existing businesses stay and expand. “His national network and strong reputation will raise the profile of Detroit with site selectors and corporate real estate executives,” said Rodrick Miller, DEGC president and CEO. Chapa comes Miller into a role that had been filled by Olga Stella. But this year, Stella was promoted to COO and head of small-business initiatives, which Miller said will have a much more prominent role in the organization. The staffing changes are part of Miller’s efforts to restructure the organization post bankruptcy: “The DEGC over the past 30 years has had to be in a defensive posture. Now we’re shifting to an offensive posture. For the first time in many years, Detroit is in a position where there is an appropriate business case for investment.” Miller also hired Virginia Wilkinson as director of strategy and research and Regina Bell as a special advisor. Additional staffing changes: Malinda Jensen to vice president of business development, Art Papapanos to senior vice president and chief board administration officer, Kenyetta Hairston Bridges to director of business development and small-business programs, Jennifer Kanalos to director of brownfield redevelopment, Tim Miles to director of construction management and Kelly Shovan to controller.

Retail pop-up hopes to attract Mackinac attendees Bring your wallet to the Mackinac Policy Conference this year. Four Detroit small businesses are hosting a pop-up shop and cocktail party May 28 from 3 p.m. to 7 p.m. at the Mission Point Hotel as a way of highlighting the impact of small business. “We want to tell the success stories of Michigan’s economic turnaround at the micro level,” said Rachel Lutz, who is organizing the event and is the owner of women’s clothier The Peacock Room. Lutz will make available goods from the Peacock Room as well as her second shop, Frida. Joining her will be Cyberoptix, which produces whimsical, hand-screened men’s ties that have been featured everywhere from Details to The New York Times. Rebel Nell, which hires

homeless women to make jewelry — cuff links, necklaces, rings — out of Detroit graffiti. And finally, a second-generation family business, Sweet Potato Sensations, will be on site with its delicious sweet potato pies and other goodies. “The small businesses of today are the big businesses of tomorrow, and when there’s robust civic and institutional support of small business, we remove barriers to retaining talent,” said Cindy Pasky, president and CEO of Strategic Staffing Solutions and a sponsor of the event.

Ethan Davidson releases free album of folk music Birmingham singer-songwriter Ethan Daniel Davidson — son of the late Detroit Pistons owner William Davidson — has released his 10th studio album of folk music, “Drawnigh.” The record is billed as “filled with fiery tales of hard times, dark nights lit only by a whiskey moon, troubled soldiers returning after long wars, and unfaithful servants straight out of the Old Testament.” It’s Davidson’s first album since “Silvertooth” in 2012, and it’s being released on his own label, Seedsmen Co., and distributed for free. His wife, musician Gretchen Gonzales-Davidson, plays lead guitar. Davidson, who stepped away from a full-time touring music career to help run his father’s billiondollar William Davidson Foundation, had a performance scheduled for Saturday night at the UFO Factory in Detroit, where the nine-track CD was to be given away. Fans can get the album, for the cost of shipping, by emailing Davidson’s publicists at Blue Arrow Records in Cleveland, at sarahbluearrowrecords@gmail.com. The album may also be available on vinyl at some point, said Debbie Gulyas at Blue Label. It also is expected to be available at drawnighmusic.com.

‘8 Mile’ showing set for Michigan Theatre garage Yo, check it. On May 30, you’ll be able to watch rapper Eminem’s “8 Mile” in the parking garage that once was the opulent Michigan Theatre. One of the rap battle scenes in the 2002 biopic starring the Detroit native was filmed in the former theater, built in 1925 by John Kunsky and opened in 1926. The flick starts at 9 p.m. and is free to attend, but you have to be 18 or older — which makes sense because the movie is rated R for a whole lot of swearing, sexuality, violence and drug use. Bring your own chair. There will be concessions and food from Detroit investor Dennis Kefallinos’ Niki’s Pizza restaurant. Kefallinos owns the former theater and the attached Michigan Building.

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JOIN CRAIN’S AS WE

Rewind The Tape IN AMERICAN HISTORY with keynote speaker

JOHN DEAN, former White House Counsel to President Richard Nixon

Wednesday

When it comes to fascinating tales of abuses of power and coverups, nothing tops Watergate.

June 10

Join Detroit’s legal community to hear those stories from the trenches — direct from the attorney who had a front-row seat: John Dean.

Westin Book Cadillac, Detroit 2 p.m.-7:30 p.m.

In recent years, Dean has become a national speaker on ethics and policy. His speeches for attorneys include tapes from the Library of Congress archives and his own take on an attorney’s role in advising the president of a potential wrong-doing. He’s written numerous books on his time in the White House, including the most recent: The Nixon Defense: What He Knew and When He Knew It.

Speakers throughout the day will help in-house attorneys hone their craft with perspectives from other attorneys but also from c-suite executives who interact with in-house attorneys.

3OXV PANEL DISCUSSIONS WILL HIGHLIGHT: David Behen

Dan Follis

Mike Heneka

CIO, State of Michigan

former general counsel, Compuware

CEO, Faurecia North America

Lessons learned taking a public company private

Expectations of a CEO for the legal team

Cybersecurity strategies for attorneys

Michael Hluchaniuk

Janet Kelley

Jim Merklinger

judge, U.S. District Court

general counsel, Meijer

Trends in e-discovery

Strategies to protect digital networks

chief legal ofﬁcer, Association of Corporate Counsel

•

Managing the ups and downs of a business cycle

•

Practical information on managing ﬁnance topics

•

Trends in e-discovery

•

Strategies for cybersecurity

•

Proactive approaches for social media policies

•

Lessons to learn on taking a company private

Best practices for attorneys

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