Crain's Detroit Business, May 30, 2016 issue by Crain's Detroit Business

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is where Andy Appleby’s heart is. Sports entrepreneur launches a league of his own, Page 3 MAY 30-JUNE 5, 2016

RTA to unveil millage 20-year proposal would raise billions to pay for bus rapid transit, commuter rail

By Bill Shea bshea@crain.com

The Regional Transit Authority of Southeast Michigan on Tuesday will unveil a proposed four-county tax that would raise billions of dollars over 20 years to pay for a bus rapid transit system in the region and a commuter rail line between Detroit and Ann Arbor. The specifics of the tax, which is intended for the November ballot in Oakland, Wayne, Macomb and Washtenaw counties, won’t be made public until the RTA Michael Ford: releases its master plan Rapid bus lines, during a news conference commuter trains at 10 a.m. Tuesday at hang in balance.

Lawrence Technological University in Southfield.

RTA CEO Michael Ford told Crain’s recently that the tax likely would be about 1 to 1.2 mills, which would raise money to build bus rapid

JEFF JOHNSTON/CDB

transit lines on the Woodward, Michigan and Gratiot avenue corridors, and on Washtenaw Avenue between Ann Arbor and Ypsilanti, create the long-discussed commuter rail service, and cover annual operating costs. Once the master plan is released Tuesday, a four-week public comment period will begin. The RTA will process the opinions and suggestions it receives from a series of public meetings and refine the plan, if necessary. After that, the master plan will be presented to the RTA’s 10-member board for approval. The board will vote on the plan, its budget and the language for the ballot proposal. A multimedia "vote yes" campaign, created by and financed largely by the pro-transit Detroit Regional Chamber Founda-

tion and Troy-based Kresge Foundation, is expected to begin a month or two before the Nov. 8 vote. The RTA itself is forbidden by state law from advocating a yes vote but will conduct an informational campaign through the election. If voters approve the transit tax, all property owners in the four counties would pay it — there would be no opt-out provision, unlike the suburban bus tax. The RTA millage would be atop the other transit taxes already in place in the Ann Arbor area and Detroit suburbs. To build public support for another transit tax, Ford and other RTA officials have spent a SEE RTA, PAGE 16

Survey: Midsize employers adjust to reduce health care cost increases By Jay Greene jgreene@crain.com

Health care costs for Southeast Michigan midsize companies are expected to increase by 4 percent this year, a slight uptick from 2015’s near-historic low of 3 percent, but still below national projections of 4.3 percent, according to a new report from Troy-based Marsh & McLennan Agency LLC. Most employers managed health

“We are trying to figure out how to incorporate wellness to drive down costs for employees.” Brittany Nessel, NS International Ltd.

care costs by boosting deductibles for PPO and HMO benefit plans, using high-deductible health insurance plans, wellness programs tied to incentives, aggressive prescrip-

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tion drug management and telemedicine programs, according to the 440 employers that participated in Marsh & McLennan’s 13th annual Southeast Michigan Mid-Market Group Benefits Survey. But some employers lowered health care costs by shifting from fully insured plans to self-insurance. Troy-based NS International Ltd. shifted to self-insurance with Blue Cross Blue Shield of Michigan, cut the number of dental and vision carriers to three from 10 and reduced company health benefit costs by 14.6 percent, said Brittany Nessel, HR business partner.

“We have a younger workforce, and looking at our numbers with claims, we are hoping to reduce our costs,” Nessel said. The company offers two PPO plans with $500 and $1,000 deductibles, which is similar to the fully insured plan offered the past several years with Blue Cross, she said. NS International, an automotive supplier that employs 240 people, mostly engineers in Michigan and Ohio, is owned by Nippon Seiki Co. Ltd. of Japan. Rebecca McLaughlan, vice president with Marsh & McLennan, said drug price increases are driving higher employer costs and leading some employers to add higher copayment tiers for specialty medications. For example, 30 percent of companies now offer a fourth tier of drug copays, which range from $60

to $75, compared with 23 percent of companies in 2015. Tier one usually includes lowest-cost generic drugs and features the lowest copays, with a second tier for brandname drugs and a third tier for nonpreferred brand-name drugs. Generally, the higher the Rebecca tier a drug is in, McLaughlan: the higher the Drug prices are a copayment. challenge. Drug costs “are the highest in years, especially for biotech drugs,” McLaughlan said. While employers continue to offer high-deductible health plans (47 SEE SURVEY, PAGE 17

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 3 0 , 2 0 1 6

MICHIGAN

BRIEFS Snyder halts Flint probes after prosecutors object

Gov. Rick Snyder last week temporarily halted civil and administrative investigations into how the state De-

partment of Environmental Quality

contributed to Flint’s lead-tainted drinking water crisis, after being warned they are hampering state and federal criminal investigations, The Associated Press reported. Snyder’s office released letters from state Attorney General Bill Schuette and U.S. Attorney Barbara McQuade raising concerns about an already-concluded state police investigation of the DEQ’s role in the lead contamination of the city’s tap water. Schuette also complained about an ongoing inquiry targeting the state Department of Health and Human Services that is being conducted by the state auditor general and the department’s inspector general at the governor’s request. Also last week, key Republican lawmakers and Snyder’s administration agreed on the framework of a spending plan that would direct $165 million more to the Flint water crisis and significantly scale back a

plan to address underground infrastructure needs statewide. The Republican governor and GOP legislative leaders still have to sign the accord, but unsettled details were described as small.

Army to test driverless vehicles on I-69 in June A convoy of U.S. Army vehicles will cruise along I-69 in Lapeer and St. Clair counties in late June as part of an initial testing of driverless military vehicle equipment on public roadways, officials from the U.S. Army

Tank Automotive Research, Development and Engineering Center and the Michigan Department of Transportation said.

The vehicles will test a piece of technology critical in the development and testing of driverless and connected vehicles, the Times Herald of Port Huron reported. Someone will be behind the wheel of each vehicle, which is equipped with features from the driverless vehicle systems. I-69 will remain open to traffic. If the testing is successful, the driverless-vehicles technology could save the lives of soldiers serving over-

seas by reducing accidents and dangerous combat situations for soldiers, especially in places where bombs and improvised explosive devices could be hidden, officials said. The I-69 stretch was chosen for testing because of its proximity to an international border crossing and to the R&D center’s headquarters at the U.S. Army Detroit Arsenal in Warren.

MICH-CELLANEOUS n Coopersville-based Admiral Pe-

troleum Co. — a long-standing price

leader at Michigan gas pumps — has been sold to Sun Capital Partners Inc., a Boca Raton, Fla.-based private equity firm. The acquisition includes 130 Admiral-branded gas and convenience stores and nine Lemmen Oil Co. stores across Michigan and northern Indiana, MLive. com reported. Terms of the sale were not announced. n Six volleyball courts or four full-sized basketball courts will replace the roller skating rink at the Woodland Skating Center in Grand Rapids, DV5 Properties LLC, a sports academy owned by Amway Corp. heir Cheri DeVos, announced. MSA Woodland, the new 105,000-squarefoot facility, will offer indoor turf for lacrosse and soccer and have an outdoor sand volleyball league and outdoor soccer fields. It replaces what was built in 1969 as West Michigan’s largest skating center. DV5 bought the facility for $2.075 million in April, according to city property records. Renovations are expected

to be completed by November. n Manistique-based Mackinac Financial Corp. will extend its footprint in Wisconsin with a planned acquisition of Niagara Bancorp. The two banks expect the $7.3 million deal to close in the third quarter or early fourth quarter of this year, MiBiz reported. Mackinac Financial, with assets of $732.9 million as of March 31, is the parent company of mBank, which has 13 offices in the Upper Peninsula and three in the northern Lower Peninsula, including one in Birmingham, plus three in Wisconsin. Niagara Bancorp., the holding company of First National Bank of Niagara, has four offices in Wisconsin with assets of about $70 million. n A cafe in the northern Lower Peninsula has to change its name after a couple was accused by coffee store chain Caribou Coffee of trademark infringement. Eric and Kelly Chorley have to change the name of the Blue Caribou Cafe in Beulah., the Grand Rapids Press reported. The Minneapolis-based chain claimed the name and logos were too similar

INSIDE THIS ISSUE

CALENDAR .........................................13 CLASSIFIED ADS...............................15 DEALS & DETAILS.............................13 KEITH CRAIN....................................... 6 MARY KRAMER .................................. 6 OPINION .............................................. 6 RUMBLINGS .......................................19 WEEK ON THE WEB ..........................19

COMPANY INDEX: SEE PAGE 18 and filed suit. Caribou Coffee said it has contributed to a GoFundMe fundraising page to help with the Chorleys’ rebranding efforts. n Long a favorite of Lansing sports fans, Tripper’s Sports Bar & Grill closed last week after 27 years in business. Owner Steve Tripp told the Lansing State Journal that more and more people are staying home to watch games on their big-screen TVs, and that with new state regulations, its business for charity poker tournaments had diminished.

Corrections n The headline on the May 23 article about Bank of America Merrill Lynch naming Senior Vice President Matt Elliott as head of business

banking for the Midwest region should have abbreviated his title as SVP. n A May 23 story about Aghogho Edevbie should have said he worked at Butzel Long PC for two years and that while there he prepared depositions in a federal lawsuit. n A May 23 story about Tyson Gersh should have said his urban farm has produced 50,000 pounds of food over the past five years.

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Straith Hospital remolds itself

“Why do we want to buy teams in other markets when I can create just as good here, and create the mascots, colors, nicknames and uniforms?” Andy Appleby, General Sports

Focus moves beyond plastic surgery roots By Jay Greene jgreene@crain.com

Straith Hospital for Special Surgery, a hospital in Southfield found-

Penske Corp. and Grand Prix chairman. “And we’re going to keep doing it for years to come.” The event, set for June 3-5, has sold 74 sponsorships — an all-time high — and has sold out all 33 of its corporate and spectator chalets. The race is expected to have an economic impact on the region of near $50 million. “We’ve got the same amount of

ed by a plastic surgery pioneer, is branching out under new CEO Jan Rys, CFO Bradley Bescoe and longtime Chairman James Straith. Founded and open for business in 1954 by Claire Straith and his physician son Richard, 34-bed Straith Hospital is looking to expand medical rehabilitation, eye surgery and general inpatient services. “People either think we only do plastic surgery or they have never heard of (Straith),” said Rys, who became CEO last October after being a nurse at the hospital Jan Rys: More since 1984. than 30 years at “We have a hospital, now CEO. new team here and are looking to rebrand the hospital,” she said. “We have five new (operating rooms), good OR times, and have underutilized space. We are also looking at adding other inpatient services,” including cardiovascular care. Straith Hospital is the last independent, nonprofit hospital in Southeast Michigan. The other three independent hospitals in metro Detroit are for-profits Oakland Regional Hospital, also in Southfield; Michigan Surgical Hospital in Warren; and Pontiac General Hospital, which emerged from bankruptcy earlier this month under new management. “They have as good a quality as anybody in the market for surgery and rehabilitation, and they are lower cost because they don’t have a lot of overhead,” said Harry Dalsey, president of Dalsey & Associates in

SEE GRAND PRIX, PAGE 17

SEE HOSPITAL, PAGE 18

Hoping for hits Utica baseball stadium, which opens Monday, part of wider Midwest expansion plan By Bill Shea

M-59 in Utica. And Appleby doesn’t just own the 2,000-seat ballpark he built for $15 million. He also owns the three-team developmental United Shore Professional Baseball League, which he plans to expand to 20 teams in 10 Midwest stadiums over the next decade. By 2017, he wants at least four to six teams playing, and 10 to 12 teams by 2020. And all of those teams, unaffiliated with Major League Baseball’s minor leagues, would be owned by Appleby through his

bshea@crain.com

When Andy Appleby owned the Single-A Fort Wayne Wizards baseball team, he’d make the threeand-a-half hour drive from his sports management business in Rochester to northeast Indiana and often dream of building a stadium closer to home. “It was probably 12 years ago, coming back from Fort Wayne, I was thinking I’d like to build a ballpark near my house,” he said. That dream becomes reality on Monday when Appleby’s Jimmy John’s Field opens for play along

SEE STADIUM, PAGE 15

PHOTOS BY JACOB LEWKOW

Of the stadium’s 24 suites, all but three have been leased under five-year contracts that range in annual cost from $35,000 to $55,000.

Grand Prix organizers believe they’re on right road now By Dustin Walsh

Chevrolet Detroit Belle Isle Grand Prix

dwalsh@crain.com

Organizers of the Chevrolet Detroit Belle Isle Grand Prix have found

the winning formula for IndyCar racing in Detroit. The seventh race weekend since the event’s return, Roger Penske and partners have invested $13 million in the track and other improvements to Belle Isle to create one of the largest events in the city, with no

When: Friday through Sunday More details: Page 17

signs of slowing down. The Grand Prix was mothballed after 1997 until Roger Penske, the Bloomfield Hills-based Penske Corp. founder and Penske Racing

team owner, championed and invested in the 501(c)(3) nonprofit race’s return to Detroit in 2007. The Great Recession also crippled the event, which was not held in 2009, 2010 and 2011. Penske is past chairman of the Downtown Detroit Partnership, of which the race is a subsidiary. “We’re starting to stabilize; we know what to expect now,” said Bud Denker, executive vice president of

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Ford to buy nearly 2 blocks in downtown Dearborn By Kirk Pinho kpinho@crain.com

Ford Motor Co. is purchasing nearly two blocks of prime property in west downtown Dearborn, including a historic former hotel and a pair of well-known restaurant sites. Ford

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Chairman and CEO Donna Inch confirmed Friday the planned purchase of property on the south side of Michigan Avenue between Mason Street to the west and Oakwood Boulevard to the east. She declined to provide specifics on plans for the properties, but redevelopment is expected with office and retail space. â&#x20AC;&#x153;Ford Land is exploring options to acquire and develop office and retail space in downtown Dearborn to support its campus transformation plan,â&#x20AC;? Dawn Booker, communications manager for Ford Land Development Corp., the real estate division of the Dearborn-based automaker, said in a statement. â&#x20AC;&#x153;Ford Land will continue to work with the city of Dearborn and share more detail when finalized.â&#x20AC;? That could be in a couple weeks, Inch said. The properties â&#x20AC;&#x201D; which include the former La Shish and Talalâ&#x20AC;&#x2122;s restaurants at 22039 and 22041 Michigan Ave. â&#x20AC;&#x201D; have a mix of public and private ownership. For example, the Dearborn City Council on Tuesday passed a resolution authorizing the sale of those two buildings totaling about 10,000 square feet to Ford Land, which is in the beginning stages of an ambitious 10-year plan to transform its headquarters campus and research and engineering center through new construction and demolition to the tune of at least $1 billion. The city resolution called for a purchase price of $200,000. Another one of the properties, the historic 120-year-old former Wagner Hotel at the corner of Michigan and Monroe, is part of the redevelopment. Last year, a technical assistance panel of the Urban Land Institute Michigan drafted a 40-pluspage report that called for the development of 26,000 square feet of new retail space along with 71 units of residential housing ranging from 440 to 900 square feet, renting for $1.57 per square foot in the area. Last year, a technical assistance panel of the Urban Land Institute Michigan drafted a 40-plus-page proposal on the historic 120-yearold former Wagner Hotel at the corner of Michigan and Monroe. The report called for the development of 26,000 square feet of new retail space along with 71 units of residential housing ranging from 440 to 900 square feet renting for $1.57 per month in the area. According to data from CoStar Group Inc., a Washington, D.C.-based real estate information service, the

â&#x20AC;&#x153;Ford Land is exploring options to acquire and develop office and retail space in downtown Dearborn to support its campus transformation plan.â&#x20AC;? Dawn Booker, Ford Land Development Corp.

two blocks bounded by Michigan to the north, Oakwood to the east, Mason to the west and West Village Drive to the south contain about 20 buildings totaling nearly 130,000 square feet. Some of the properties in that area are expected to retain the same ownership. West downtown runs on both sides of Michigan between Outer Drive to the west and east of Brady Street. East downtown generally surrounds the intersection of Michigan Avenue between west of Schlaff

and Oakman Boulevard and Schaefer between Ruby and Bryan streets. Both of the city's downtown development authorities were established by ordinance in 1977. The automaker has also signed a lease for about 220,000 square feet in the former Lord & Taylor department store in Fairlane Town Center as well as a connected wing of the mall. The store is about 120,000 square feet and the connected wing is about 100,000. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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Trademark squawk

Toast the 2016 Class of

This is the tale of two Shacks — the locally beloved Chicken Shack and the New York phenomenon Shake Shack — and their squabbles over the ‘Chicken Shack’ name, told in a graphic-novel format. The text and art are by Crain’s reporter Chad Halcom. It’s an experiment in form for Crain’s; let us know what you think by sending an email to Managing Editor Michael Lee at malee@crain.com.

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OPINION Yahoo bid hints at Gilbert’s vision

etroit as the “fintech capital of the world.” With that offhand remark, Dan Gilbert hinted at a strategy that may lie behind his reported bid for Yahoo, the ailing digital behemoth that put itself on the block. Yahoo Finance is a major asset of the online portal. Gilbert’s Quicken Loans is as much a technology company as a mortgage originator. And the growth of Quicken is helping to fuel Gilbert's downtown investments. Gilbert, whose bid is backed by financial help from investor Warren Buffett, has been largely silent on Yahoo, but was asked about it during a panel discussion about financial technology companies last week during Detroit Startup Week. Many suitors are after Yahoo, but the confidential auction process is expected to conclude in early June. You can say a lot of things about Gilbert, but “he thinks too small” isn’t one of them.

Dec. 1 looms for new OT rules You can’t really say employers had no warning. The new overtime rules — announced by President Barack Obama earlier this month — had been drafted 10 months ago and will require companies to pay overtime to salaried workers earning $47,476 or less. That’s a big jump from the current level of $23,660. The U.S. Department of Labor estimates 4 million more Americans will be eligible for overtime. But how many of those folks are working OT now? Estimates vary. Employers — and their human resources and legal counsels — are scrambling to figure out how the ruling applies before a Dec. 1 deadline. If companies want to keep their payroll costs stable, the monitoring of the hours people actually work will begin now. In some cases, employers may figure out which is cheaper — bump up the pay of some employees to make them exempt — which is the compensation-boosting goal Obama had all along — or converting salaried jobs to hourly. Or employers could opt to begin “editing” job assignments in ways that could hurt people in the early stages of their careers. An employer may refrain from sending a junior worker out of town because of difficulty in tracking hours worked. Whatever the strategies, employers have until Dec. 1 to figure it out.

Paying the whistleblower: A necessary evil? T

attletale, snitch, disloyal” were among the words two wellknown whistleblowers said were used to describe them after they went public with corporate misdeeds. Sherron Watkins, who blew the whistle on energy giant Enron Corp., and Cynthia Cooper, who did the same at now-defunct WorldCom Inc., told attendees at Crain’s General and In-House Counsel summit earlier this month that they paid heavy personal and professional penalties for their actions. Similar whistleblowers today, however, can be eligible for financial incentives — 10 percent to 30 percent of what the government recovers for violations of securities and federal laws. Whether it’s a boon or a bane depends on where you sit. It certainly has created a new legal niche for some lawyers who are now experts on the terms of whistleblower laws. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 came too late to help Watkins and Cooper. But they applaud the incentives because some inside officers and executives don’t blow the whistle on corporate misdeeds

Once again, Detroit shines There are a couple of events every year that are now a part of the fabric of Detroit. Every January, we celebrate the car and the car companies on an international stage. Thousands of journalists from around the world descend on Detroit to cover the North American International Auto Show. The impact on the economy is substantial, and it certainly puts Detroit in the most positive light possible. It re-establishes Detroit as

the motor capitol of the world. It is a great week for publicity and a second week for giving the public a chance to see hundreds of cars on display. By now, it has become an institution for Detroit. This weekend, we have what has become the second half of our Motor City spectacular. Three days of racing on Belle Isle, following the 100th running of the Indianapolis 500 on Memorial Day. Lots of motor racing events will

KEITH CRAIN Editor in chief

share the spotlight during the weekend. But the stars of the show are still the Indy race cars — all still vying for the very coveted national championship. If you ever want to see De-

MARY KRAMER Publisher

because they fear retaliation — the kind both Watkins and Cooper experienced. One such drama is playing out locally in the case of George Karadsheh, the former practice manager in Farid Fata’s oncology practice who so far has earned nearly $2 million for alerting authorities to Fata’s scheme to intentionally poison patients by treating them for cancer they didn’t have. Fata is serving a 45-year prison sentence. Karadsheh knew enough to call attorney David Haron after several employees shared concerns about Fata with him. That led to the filing of a sealed lawsuit in federal court that allowed him to claim some of the money feds seized as part of the fraud recovery. Haron told reporters troit shine, get a look at how the television cameras show off Detroit from the Belle Isle vantage point. There is some spectacular racing, but for a global audience, Detroit has never looked better. Over that three-day weekend, tens of thousands of race fans from all over will descend on Belle Isle to watch first-hand some very competitive racing. It has become a rare doubleheader that has Indy cars racing for victory both Saturday and Sunday. It's a great way to enjoy Belle Isle. And like our motor show, it is a wonderful way to enjoy the heritage of

his client settled for 10 percent of dollars recovered because he wanted more money to go to Fata’s victims. But Haron has also amended the original complaint with additional allegations and new parties. The U.S. Attorney’s office has until July 15 to determine whether additional actions will be taken. Hardly a day passes without a news story about new ethical lapses, investigations and attorneys’ fees, whether it’s Detroit’s Land Bank, Medicare fraud allegations, Detroit Public Schools or the Flint water crisis. But Haron’s own caseloads show that whistleblowing is alive and well in corporate America, too. One case involved two former drug salespeople who alleged a drugmaker was illegally marketing a drug for nonFDA approved uses. Maybe it has ever been thus. And I guess that’s why taxpayers, ultimately, now pay tipsters. Mary Kramer is publisher of Crain’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.

racing. I understand that there are plenty of packages for the whole family to enjoy. I have always said that the first automobile race happened five minutes after the second car was built. Well, this weekend, Chevrolet and Honda will be duking it out for bragging rights. And they, and their teams, are very serious. The Detroit Belle Isle Grand Prix is a second great automotive event of which our city can be proud. It's another one of those must-see events. Be sure and put it on your bucket list; it's worth it.

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 3 0 , 2 0 1 6

Food companies sought for Aug. 22 Crain’s summit Crain's Detroit Business is seeking food companies looking for investment to take part in an event this summer tied to the state’s food economy. The Crain's Food Summit on Aug. 22 at Eastern Market will shine a light on the state’s dynamic food companies and the innovative players in that space. Part of the event is designed for investors to meet investment-worthy food-related companies. Food companies interested in taking part can apply at CrainsDetroit.com/ foodcompanies. Crain's is looking for companies that fit into three categories: n Impact companies, those that are helping to bring healthy food to underserved communities, and that with some coaching and mentoring can take their business to the next level. n Early-stage companies that have some investment and revenue but are looking for additional investors to get the company to the next level. n Second-stage companies that have more than 100 employees and $1 million in revenue and can showcase the kinds of investment-worthy companies we have in the state. A team of food executives and experienced investors will help Crain's vet the companies. On the day of the event, a small panel of judges will help pick three winners. The Michigan Good Food Fund is title sponsor of the investor portion of the event and will also be sponsoring the award for the impact companies. The fund is a new $30 million effort that provides financing and business assistance to healthy food production, distribution, processing and retail projects. Deadline for companies to apply to be part of the event is July 1. Email questions to Dan Duggan at dduggan@crain.com.

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Wayne County helps win $700,000 grant to boost summer jobs program Wayne County has helped secure a $700,000 grant that will employ up to 1,000 people enrolled in Grow Detroit’s Young Talent summer jobs program. The grant from the Michigan Child Care Fund, announced Thursday, will be paired with $700,000 raised from the philanthropic community and the Detroit Employment Solutions Corp.

The money comes one week after the Obama administration and Mayor Mike Duggan announced that the summer jobs program would receive a $2 million federal grant. The jobs program teams youths with employers for summer jobs and provides work readiness training, transportation and employer support services.

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C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 3 0 , 2 0 1 6

Q&A: PAUL HOGLE

Departing DSO’s Paul Hogle looks back at legacy, memories By Sherri Welch swelch@crain.com

The Detroit Symphony Orchestra’s second-in-command, Executive Vice President Paul Hogle, will depart after July 8 to become president of the Cleveland Institute of Music. He spoke with Crain’s Senior Reporter Sherri Welch about his six-year tenure at the DSO. His remarks have been edited for length and clarity.

Q: You joined the DSO in 2010 with the musicians’ strike on the horizon. Ever have second thoughts? The

thunderclouds were beginning to form, but I never had a second thought. Anne (Parsons) told me that when I got to Detroit I would know quickly whether the Detroit story, character and excellence was for me. I knew before the first morning was over that Detroit was for me. Detroit doesn’t hide who she is. That is either really attractive to you or it’s not. To me, it was very attractive. Q: In what way has your position at the DSO prepared you for your new role in Cleveland? I truly have been the clas-

sic No. 2. I’ve been responsible for day-to-day operations, from artistic to education to fundraising and marketing programs. I’ve spent my

whole career working with boards of directors and some of the world’s best musicians in Detroit and other places. I got into this field 30 years ago bePaul Hogle: Never cause I wanted had second to run an instituthoughts coming tion. Last June to Detroit. when I became acting CEO, I reconnected with that mission and got to see it play out when Anne went on her sabbatical. I knew I wanted to get back to that early ambition. Q: What legacy do you think you have left at the DSO? People. We

brought and promoted more than 30 people from across the region and the country to the staff. That is the most obvious legacy I will leave here — strong people, well-prepared for work here or whatever their futures might hold. There will be other things that will be my legacy, but I will be most proud of the people, because they will continue the work.

Q: What other things do you see as part of your legacy? I would never

say it was all me, but we are definitely a stronger organization now than in 2010. Fundraising and ticket sales have grown. Webcasts were established, neighborhood concerts were launched.

Q: Did you play a role in launching the DSO’s $125 million endowment campaign in 2012, which has raised $40 million to date? Of course it was

the full enterprise behind the campaign. Sustainability is something that will be a permanent challenge for arts organizations in Detroit unless they can capitalize through endowment. Was I a voice? Certainly, but not the only voice. As result of the endowment fundraising over the past few years, we will have doubled the size of our endowment when the gifts are all paid in to $80 million.

Q: What memory stands out the most for you as you prepare to leave the DSO? Carnegie Hall, the DSO’s

first time back in 17 years, in 2013. That opening night when everybody was waving their red, Detroit flags; I’ll never forget that. Half the hall was from Detroit.

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C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 3 0 , 2 0 1 6

TOM HENDERSON thenderson@crain.com Twitter: @tomhenderson2

At United Shore, it’s not all about the work How important is culture? All-important, says Mat Ishbia, president and CEO of Troy-based United Shore Financial Services LLC. In 2011, the company did about $1.8 billion in mortgages, with most of its employees crammed into 25,000 square feet of space in a former Farmer Jack grocery store in Birmingham. Last year, United Wholesale Mortgage, United Shore's fast-growing wholesale division, was the top wholesale lender in the U.S., according to Inside Mortgage Finance. It did $12.96 billion, a year-overyear increase of 54.6 percent and nearly $1 billion ahead of the runner-up. The company is on track to set another record this year. It had its best first quarter ever, ending what is normally a slow three months by closing 14,576 loans worth $3.9 billion. It did $1.8 billion in March alone. Nobody is crammed anymore. The company occupies 250,000 square feet in the former Entertainment Passbook building at Stephenson Highway and Maple Road. Employees are offered plenty of amenities. There is free valet parking for the 1,500 employees, about 250 of whom were hired this year. The parking lot that surrounds the building is often filled, so employees are offered offsite parking with a free shuttle bus. On the ground floor, there is a Starbucks, a deli and a fitness facility. There is a concierge available for any employee who might need a card picked up for a spouse’s birthday, or flowers bought for a sick mom. On a recent midday tour, I got to catch up on the Tigers game as I walked past the various large, flat-screen TVs scattered about on the walls. Fifty-eight percent of employees are millennials. Renee Harmon is definitely not one of them. She started in the mortgage business 30 years ago and had her own mortgage company in Wyandotte for 10 years. She's been at United Shore for five years. “When I first walked in, I thought, ‘I’m older than all these kids. What have I got myself into?’ ” she said. “But I love it here. I’m here for life, or until I retire to that boat in the Florida Keys.” Ishbia, who learned about teamwork as an end-of-the-bench guy for Tom Izzo at Michigan State, has several rules. No one is allowed to eat at his or her desk. They need to take a break from the job. Get out of the office, go for a run, go shopping. The other? What he calls the “firm 40.” At some other mortgage outfits, work often means coming in early, staying late, full days on Saturdays and maybe Sundays. The “firm 40” means work hard when you work. No tweeting or sharing on Facebook. But go home after eight hours, have a life. And on Thursday afternoons, everyone is invited to a 15-minute dance party. Shake some booty, shake off the cobwebs, then get back to business. “I want people to love coming to work,” Ishbia said.

SPECIAL REPORT

FINANCE Banks invest in digital age Institutions big and small adapt with more mobility, fewer branches By Tom Henderson thenderson@crain.com

What do tiny Clarkston State Bank and big Ally Bank have in common? Almost nothing except their approaches to banking in the 21st century. For both, mobile banking and the internet are replacing brick-and-mortar branches. Clarkston, which has $178 million in assets, introduced mobile banking two years ago. The almost-immediate dropoff in branch visits by customers was shocking, said J. Grant Smith, the bank’s president and CEO. Half of his customers now do mobile banking. “We analyzed our data and saw such a decline in traffic, we closed two of our four branches a year ago,” he said. That closing included what had been the bank’s headquarters building, a stately historic stone structure on Main Street in Clarkston. It “It didn’t have a drive-thru, seems and small-town downtowns don’t get the foot like we traffic they used to, so hishave toric or not, it was closed. had “We go see prospects now; we close deals at smarttheir offices. Fewer people phones come to banks. The feedforever, back you get is there’s no reason to go to a bank,” but it’s said Smith, who said his bank has been aggressive only in teaching older custombeen ers how to go mobile, “We’ve migrated a lot of since customers over who 2007.” weren't using technology.” Carrie Sumlin, Carrie Sumlin is the digAlly Bank ital consumer executive at Utah-based Ally, a division of Detroit-based Ally Financial Inc. (NYSE: ALLY), which means she oversees all online and mobile banking. In 2013, Ally was honored by the research firm Forrester for having the most customer-friendly mobile banking platform in banking. In 2009, the former GMAC Bank rebranded

LARRY PEPLIN

Comerica’s interactive teller machine connects customers with a live teller if needed.

Troy-based Talmer Bank and Trust (left) just opened this 1,500-square-foot branch in Birmingham, replacing one of 6,000 square feet.

itself as Ally Bank with the premise of building a bank entirely without branches, a decision Sumlin said has never been second-guessed. Even as banks around the country were being shut down during the Great Recession by fed-

eral regulators and were available for cents on the dollar, bank officials never considered getting into the brick-and-mortar business. SEE BANKS, PAGE 10

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 3 0 , 2 0 1 6

SPECIAL REPORT: BANKING

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COURTESY OF PNC BANK

No more teller windows: Pittsburgh-based PNC Bank’s new branch in downtown Birmingham features a cross-trained “universal banker” who helps customers from a central kiosk.

BANKS FROM PAGE 9

“We never had any serious discussion about doing that,” she said. “We were seeing such growth from what we were doing, we didn't see any advantage to going to a brick-and-mortar environment.” In 2012, Ally surpassed the million-customer mark. This year it passed $55 billion in deposits, and for the fifth straight year it was named the nation’s best online bank by Money magazine. “In the last five years in the U.S., there has been a 333 percent increase

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in weekly banking mobile users and a 60 percent drop in weekly branch users, so the numbers are going our way,” Sumlin said. “The mobile banking shift and speed of adoption has been amazing.” In March, Ally launched Apple Pay, in which customers with Ally debit cards could pay merchants with their Apple devices. Area bankers say the mobile revolution in banking has changed nearly everything about branch banking, from either their disappearance or shrinking footprint, to the mix of employees who work at them. “The adoption of mobile continues to accelerate,” said Matt Elliott, the Michigan market president for Bank of America. The result is a different look to the inside of a branch. Instead of walking in and immediately seeing a line of teller windows, there are now more small conference rooms and offices. Instead of seeing tellers, customers see bankers who can handle a range of duties, from starting a mortgage to to small-business lending. “We want to use branches less as a place to do a transaction than a place where you come in and speak to someone face to face about what you need,” Elliott said. That often includes, he said, branches that have on-site financial advisers from Merrill Lynch, one of Bank of America’s business units. There are no tellers behind bars at Bank of America’s newest branch on Adams Road in Rochester Hills. There’s someone to greet you at the door and lead you to a meeting room. There’s a smart ATM that will give you money in denominations you ask for. On May 23, at a Google conference in Mountain View, Calif., BofA announced it was rolling out its cardless ATM technology to 5,000 ATMs nationwide, including 40 in branches in metro Detroit. Using what is being billed as a digital wallet stored on smartphones, customers can make withdrawals, transfer money or check balances without a bank card. Earlier this year, BofA rolled out the ATM technology in Boston; Charlotte, N.C.; New York City; San Francisco; and Silicon Valley.

Still a demand for brick and mortar “We’ll still have a demand for brick and mortar. Some people want to go in and interact with people,” said Dave Girodat, president of the east Michigan region of Cincinnati-based Fifth Third Bank. “But we won’t need a 4,000-square-foot branch on every corner any more.” Girodat said that when the bank began offering online banking in 2005, usage plateaued for a while at 15 percent, slowly climbed to 25 percent, then a couple of years ago began spiking. Sixty-three percent of customers now use digital regularly, and 73 percent of new customers use it regularly. Mobile is up 21 percent year over year to 39 percent of the customer base, and is at 59 percent for new customers. He said banks will carve out a bigger presence in malls and David Girodat: shopping cen- Expect smaller ters, with 1,000- branches in malls, or 1,500-square- shopping centers. foot branches that will have smart ATMs and computer screens that allow you to access tellers or other service providers. Girodat said in his teller days in the early 1980s, on Fridays, a branch might be staffed with a dozen tellers awaiting the onslaught. The tech fear then was about the pneumatic tubes being installed to make drivethrus more efficient. One branch he worked at had a drive-thru unattached from the main building, but it didn't have pneumatic tubes. Tellers accessed it through an underground passage. “When pneumatic tubes came along, it was, ‘My God, is technology going to replace us?’ With tubes, one teller could do more than one transaction at once.” Girodat said the prototypical new SEE NEXT PAGE

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C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 3 0 , 2 0 1 6

SPECIAL REPORT: BANKING FROM PREVIOUS PAGE

branch is Fifth Third’s at the Northwest Activity Center in Detroit. Customers can open accounts there, but it is a cashless branch, except for a full-service ATM. Another prototype branch is a socalled end-cap branch at the end of a retail center in Redford that opened two years ago. Columbus, Ohio-based Huntington Bank has been at the forefront of putting small-footprint branches in retail settings. It has 85 branches in Meijer stores in Michigan and 91 in Giant Eagle stores in Ohio, ranging from a few hundred square feet to about 1,000, with bankers’ hours now including 11 a.m. to 4 p.m. on Sunday and staying open until 8 p.m. Monday through Friday. Like Girodat, David Provost, president and CEO of Troy-based Talmer Bank and Trust, remembers what it was like as a teller early in his career, when 15 teller stations would be manned on a Friday, with backup tellers ready to relieve those who had to go to the bathroom. “Automatic deposit of paychecks was the start,” he said. “It began the process of ‘Why do you have to go into a bank?’ ” “Staffing has been dramatically affected. You always had to overstaff for the rush hour at lunch or at closing. Now, we have more cross-trained employees. Fewer tellers and more relationship officers,” he said. One of Talmer’s oldest branches, the former Detroit Commerce Bank in the Penobscot Building in downtown Detroit, has 10,000 square feet. Typical branches now have 2,000. Talmer just opened a 1,500-squarefoot branch in Birmingham, replacing one of 6,000 square feet nearby. In April, Pittsburgh-based PNC Bank had a ribbon-cutting for its prototype 21st century branch on Woodward Avenue in downtown Birmingham. In two years, the bank has seen non-branch banking activity go from 38 percent to 55 percent. Teller windows are gone, replaced by an employee known as a universal banker who stands at a kiosk in the middle of the office and is crosstrained to handle a wide range of customer needs. “We're turning coming into a bank from a transactional event into an interactional event,” said branch manager Josephine Obasuyi. There’s fresh coffee brewing all day, and two smart ATMs where you can deposit a check or get money in denominations you choose. In one alcove in a Josephine corner are Obasuyi: From self-service safetransactions to ty-deposit boxes. interactions. Since 2011, web banking at Comerica has increased from under 10 percent to more than 75 percent. Comerica opened a prototype branch of what it calls an “experience center” in Auburn Hills in 2014. There are now 32 nationally, and more are

planned. They are much smaller than a typical Comerica branch. The first thing a customer sees is a service pod in the middle of the floor, where a banker greets those coming in. More employees are being crosstrained, as customers coming in need more advice and fewer deposit or withdrawal transactions. There is a digital teller on-site for after-hours transactions, where the customer is connected via computer screen to a live teller if needed. A program called Expert Connect allows customers during normal business hours at the branch to talk via Skype to off-site mortgage bankers or wealth managers.

Surprised by the numbers When Pat Fehring, president and CEO at Farmington Hills-based Level One Bank, launched his community bank eight years ago, “I thought I'd need more than 10 branches to have more than $1 billion in assets. But part of all the digitization that is going on means you don’t need that many branches. More than half of all our consumer transactions are done digitally.” He said as branches see fewer customers, “we see more complex transactions in branches. We’re more consultatively oriented. We do more small-business lending, and more wealth management.” Level One recently opened its first branch in downtown Detroit. It

LENDING

has 2,500 square feet, compared with 3,500-4,000 in a typical branch. Gone there, too, are the teller cages. One interesting result of converting brick-and-mortar customers to mobile customers? “You get an increase in loyalty with customers who are digitally savvy. Customers who set up digitally score a lot higher on loyalty,” Fehring said. Sandro DiNello, president and CEO at Troy-based Flagstar Bank, has somewhat of a contrarian view of banks and their branches. “This year, I’ll be celebrating my 40th year in banking. When I first got in, people were talking about the death of branches, and here we are. Despite ATMs and mobile, branches are still here and continue to be a major way people do their banking, and will do their banking for a long time,” he said. And yet, Flagstar launched a new digital platform last year and began doing mobile deposits two years ago. DiNello said Flagstar began building a lot of branches in 1994, with teller windows in the back and sit-down areas up front. “We were ahead of our time for 1994,” he said. The design has worked well with customers doing more simple things online and coming in for things like loans. “Our sit-down branch model lets us be less transactional and more consultative,” he said. Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2

TREASURY

MANAGEMENT

Report: Alternative financing growing fast The alternative financing market, including crowdfunding and peer-to-peer lending, is exploding, according to a report by KPMG LLP, the Cambridge Centre for Alternative Finance and the Polsky Center at the Chicago Booth School of Business. Alternative financing generated more than $36 billion in 2015, up from just $11 billion in 2014, according to the report. Peer-to-peer lending totaled more than $25 billion last year. U.S. businesses are learning how to tap into these alternative funding sources. In 2013 and 2014, such funding totaled $10 million. It was $6.8 billion last year.

Council: PE returns better than public markets According to the Washington, D.C.-based Private Equity Growth Capital Council, private equity returns continue to outperform public markets on both shortand long-term horizons. For the year that ended Sept. 30, 2015, the median private equity return was 6.4 percent, while the return for the Russell 3000 Index was a minus 0.5 percent and the return for the S&P 500 was a minus 0.6 percent.

BANKING

Over 10 years, the median private equity return was 11.8 percent on an annualized basis, compared to 6.9 percent for the Russell 3000 and 6.8 percent for the S&P 500. Over five years, the PE return was 14.4 percent, compared to 13.3 percent for the Russell 3000 and 13.3 percent for the S&P 500.

Lake Michigan CU listed 2nd in performance The Grand Rapids-based Lake Michigan Credit Union was ranked as

the second-best-performing credit union in the U.S. in 2015, according to SNL Global Market Intelligence, based on a variety of metrics. The other state credit unions in the top 50 were Genisys Credit Union of Auburn Hills, at No. 11; and Consumers Credit Union of Kalamazoo, No. 24.

Level One Bank ranks 10th in performance Farmington Hills-based Level Bank ranked as the 10th-best-performing bank in the U.S. with assets under $1 billion for the year that ended Dec. 31, 2015, based on a variety of asset and revenue metrics, according to SNL Global Market Intelligence. One

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C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 3 0 , 2 0 1 6

Turmoil in Brazil stalls student exchange By Chad Halcom chalcom@crain.com

A recent impeachment move against Brazilian President Dilma Rousseff likely cements a $5 million-plus revenue loss this fall for Michigan universities, who have hosted more than 1,000 engineering and science students, including more than 140 this past year, under a program Rousseff launched. Local university officials said the Brazil Scientific Mobility Program, which has placed about 25,000 students in the U.S. since 2011 for up to a year of undergraduate study funded by the Brazilian government, is on hold. The country stopped sending applications around the time legislators first convened a panel to explore proceedings against Rousseff late last year, some said. The Senate in Brazil voted 55-22 in mid-May to put Rousseff on trial on accusations she padded a deficit by borrowing from banks to make Brazil’s budget look healthier before her 2014 re-election. The move automatically suspends her from office pending those proceedings. Michigan was a top-five destination state for BSMP students for several years, and Wayne State University was its third-largest host institution nationwide, according to reports from the Institute of International Education, a nonprofit that administered the program in the U.S. Other host universities have included Western Michigan University,

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“It’s a shame since we actually had some great students come because of the program. We’re saddened to see this happen.” Darnishia Slade, Michigan Technological University

the University of Michigan, Michigan State University, Lawrence Technological University and the University of Detroit Mercy, according to IIE. “Every year they have been announcing a group of students who were coming to the U.S., and we are one of the destination schools and we start regularly getting applications,” said Ahmad Ezzeddine, associate vice president of educational outreach and international programs at Wayne State, the largest BSMP program recipient in Michigan since its inception. “(But) in light of political transitions within the country, the Ahmad program is on Ezzeddine: Taking hold, and we’re a wait-and-see waiting to see approach. what occurs.” Other university administrators said they stopped receiving applications either toward the end of 2015 or at the beginning of this year, and were told that no new cohorts would be arriving for the fall. IIE did not return phone calls seeking comment. Wayne State was hosting 22 students on campus in fall 2013, according to data from the institute in New York, but that number swelled to more than 200 the following year as the BSMP program ballooned in size. That made Brazil the No. 4 home country in 2014-15 for the school’s 2,000-plus international students from 70 nations. But WSU was still a leading host university in Michigan even when the program scaled back last year to 54 students, according to IIE and Ezzeddine. Most universities reported a smaller cohort of BSMP students that arrived last fall for the academic year ending in April or early May. A handful of those students are continuing their studies through the summer, but Wayne is not currently expecting new applications to attend this coming academic year. “Mexico has also attempted its own version of the program, and we have seen some students attending for shorter periods focused on more limited studies,” Ezzeddine said. “But nothing so far has been on the scale of this (Brazil’s) program.”

The Senate vote automatically put opposition party Vice President Michel Temer in power in Brazil, pending the outcome of Rousseff's trial. The BSMP program aims to give overseas training to more than 100,000 Brazilian science and engineering students to help the country’s college graduates become globally competitive. Students typically study two years in Brazil, one year abroad as an upper-class undergraduate plus a summer research project or an internship with a local employer, before a final year of study back home. Internship sponsors with the program have included Ford Motor Co., Delphi Corp., Daifuku Webb Holding Co., Kelly Services Inc. and Pfizer Inc.

Western Michigan, the second-largest Michigan host school to date, according to IIE, peaked around 54 students in fall 2013 but had declined to 31 students who wrapped their studies in April, said Cheryl Roland, executive director of university relations at WMU. “The type of program they were in is sometimes called a sandwich exchange program ... (and) classes they took here were at the thirdyear level of undergraduate education,” Roland said in an email. But at full-time, out-of-state tuition rates of more than $11,000 per semester at Wayne State and $13,000 at WMU, the program likely generated nearly $1 million of annual revenue at Western last year and double that at Wayne, to say nothing of the other schools. Lawrence Tech and Michigan Technological University both reported receiving 13 students apiece for the program last fall, but no new students since then. As with the other schools, they expect the last of the exchange students to complete summer internships, research projects or other studies, but all had been told no more are coming in the fall, with little explanation. “It’s a shame since we actually had some great students come because of the program. We’re saddened to see this happen,” said Darnishia Slade, director of international programs and services at Michigan Tech. “There were rumors starting early this year, but they didn’t go into much detail.” Chris McKenzie, assistant director in the Office of Study Abroad at MSU, said the school was hosting 36 BSMP students last fall, of which fewer than half a dozen remain for the summer. But most said the Rousseff trial means they expect no decision soon from Brazil on resuming the program. Rick Fitzgerald, director of public affairs at UM, said the school’s College of Engineering does not participate in the BSMP program. But IIE reports indicate nearly 100 had attended the institution as of late 2014, mostly at the University of Michigan-Dearborn. Chad Halcom: (313) 446-6796 Twitter: @ChadHalcom

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 3 0 , 2 0 1 6

CALENDAR THURSDAY JUNE 2

Scaling Up Your Business Through Mergers and Acquisitions. 9 a.m.-

noon. National Association of Women Business Owners. A strategic merger or acquisition can often be a faster, less expensive way to grow than through the traditional method of marketing and sales. Presenters from UHY tell about the advantages, how to go about it, and the risks. UHY, Farmington Hills. Free for members; $10 nonmembers. Contact: nawbogdc.org.

UPCOMING EVENTS Driving Innovation and Engagement: The Role of the University Research Corridor in the Motor City. 11:30 a.m.-1:30 p.m. June 7. Detroit

Economic Club. Guest speakers are Mark Schlissel, president, University of Michigan; Lou Anna Simon, president, Michigan State University; and M. Roy Wilson, president, Wayne State University. $45 DEC members; $55 guests of members; $75 nonmembers. Phone: (313) 963-8547; email: info@econclub. org. The Multi-generational Workforce. 11:30 a.m.-1 p.m. June 7. Automation Alley. Jason Morga, vice president of Kelly Services Americas marketing group, talks

about the global phenomenon of a multi-generational workforce where four generations are employed in one workplace. Automation Alley, Troy. $20 members; $40 nonmembers. Phone: (800) 427-5100; email: events@automationalley.com.

Brand Storytelling. 11:30 a.m.-1:30 p.m. June 8. Adcraft Detroit. Featuring Bridget Russo, chief marketing officer, Shinola. College for Creative Studies, Detroit. $40 members; $50 nonmembers; $25 junior/student members. Website: adcraftdetroit.com/events. 2016 Detroit CIO Executive Leadership Summit. 7 a.m.-5:30 p.m. June 9. HMGStrategy. A panel of IT

leaders will explore, among other things, the mindset needed by CIOs to react to future trends, emerging technologies CIOs should know about, and the future role of the digital technology leader. Free. Westin Book Cadillac, Detroit. Phone: (203) 221-2702; email: hunterm@hmgstrategy.com.

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.

ACQUISITIONS & MERGERS Oxford Cos., Ann Arbor, a commercial

real estate portfolio manager, has acquired Concord Center. The building consists of 92,000 square feet and expands Oxford’s commercial portfolio to more than 2.2 million total square feet. Website: oxfordcompanies.com.

Soaring Pine Capital, Birmingham, a Simon Group Holdings company, said it purchased Technology Solutions Inc., Chicago, a fulfillment and

construction services company, by Soaring Pine Capital Growth Fund I. Website: soaringpine.com.

CONTRACTS PublicCity PR LLC, Southfield, a public relations agency, has been retained to manage and execute all media relations activities and assist with the event’s sponsorship and community partnerships initiatives for the 2016 UAW-GM Spirit of Detroit HydroFest, a hydroplane race on the Detroit River. Website: publiccitypr.net. Qualitech, Bingham Farms, a

technology integrator and software reseller, was selected by Seabolt Law Firm, Livonia, to provide a new office system, including an Intel Xeon server, workstations, office cabling, hosted phone service, conference room with necessary hardware, installation and Tab3

DEALS & DETAILS Practice Master software. Website: qualitech.net.

Minacs Ltd., Farmington Hills, a

global outsourcing business solutions partner, will work with Nippon Systemware Co. Ltd., Tokyo, an IT provider, to offer customer experience management for connected devices and the IoT market. Websites: minacs.com, nsw.co.jp. zipLogix LLC, Fraser, a real estate

technology company, announced that CurbCall Inc., Boston, a real estate technology company, is joining its zipAlliance program to help CurbCall Protect get into more agents’ hands faster, creating safer showings and keeping brokers connected to their agents with a tracking tool. Websites: zipform.com, curbcall.com.

EXPANSIONS Martin Midwest Group LLC, Northville, a cleaning chemical developer, opened its newest subsidiary, Detroit Garage Works,

Detroit, offering innovative industrial cleaning products designed for niche industrial and automotive markets. Website: detroitgarageworks.com.

NEW PRODUCTS Henkel Corp., Madison Heights, a subsidiary of Germany-based Henkel AG & Co., announced that Henkel Adhesive Technologies

introduced two interior adhesive technologies for passenger vehicles: Aquence PL 5101, a one-component waterborne laminating adhesive, and Technomelt AS 8383, a nonreactive APAO hot melt. Website: henkel-northamerica.com. Humantech Inc., Ann Arbor, an ergonomics consulting firm, announced a new e-book, Three Ways to Establish a Strong Foundation for Your Ergonomics Process, the second in a series about the five steps required to build and sustain a successful ergonomics process. Website: humantech.com.

Gale Group Inc., Farmington Hills, part of Cengage Learning Inc., and a publisher of research and reference resources, launched Gale Researcher, a research platform and curriculum tool designed to help students easily connect to citable content aligned to introductory college courses, and American Fiction, 1774-1920, a new digital archive. Website: gale.cengage.com. Acromag Inc., Wixom, a designer and manufacturer of industrial electronics, measurement and control products, announced a new series of general purpose I/O modules for embedded computing applications. Website: acromag.com. Freudenberg-NOK Sealing Technologies, Plymouth, developed

a two-part sealing system, consisting of its radial shaft seal, Merkel Radiamatic RPM 41, and a new water guard, the deflector Merkel Enviromatic. Website: fst.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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C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 3 0 , 2 0 1 6

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Brian Vestergaard

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Corporate Officer Cooper Standard Christine Krathwohl also serves as vice president global supply chain. As a seasoned supply chain professional, Krathwohl leads the Company-wide strategy for purchasing, procurement, logistics, vendor management and supplier quality using her more than 20 years of experience in logistics, supply chain and purchasing. Krathwohl earned an Executive Master of Business Administration degree and a bachelor’s degree in materials and logistics management from Michigan State University.

For more information or questions regarding advertising in this section, please call Lynn Calcaterra at (313) 446-6086 or email: lcalcaterra@crain.com

CrainsDetroit.com/JobConnect

May 30, 2016

STADIUM FROM PAGE 3

Rochester-based General Sports & Entertainment. “We would want to own and control all the stadiums and teams, so there’s that tremendous level of professional and quality in everything we do,” he said. Appleby, 53, is relentless about quality control and customer service with his new league and stadium. He said he’s using his 30 years of sports management and marketing experience to bring every best practice to Jimmy Johns Field — and avoid every mistake. Owning all of the teams also is a safeguard against failure, he said. “Almost always, a league is only as strong as its worst owner,” he said. “Why do we want to buy teams in other markets when I can create just as good here, and create the mascots, colors, nicknames and uniforms. We will only go into markets that make sense, and not be beholden to an owner that may be undercapitalized, who may not be a good marketer. Our league scales extremely well to other towns across the Midwest.” Appleby’s future stadiums would be home to two teams each. Jimmy Johns Field has three, and they’ll play their 75-game May-September schedules round-robin style, mainly on weeknights and weekends. He termed summer weekends “the Holy Grail of scheduling” because those are the most attractive times to get families to the ballpark. “Every new ballpark will have two home teams. That’s the trick behind allowing you to play every Saturday night in the summer,” Appleby said, as opposed to starting in April. The three-team league’s inaugural game is the Birmingham-Bloomfield Beavers vs. Utica Unicorns at 2 p.m. Monday. The third team is the Eastside Diamond Hoppers. While the stadium idea isn’t new, it was just a couple of years ago Appleby decided to also create his own league. “When you do own your own league, you have a much greater level of control and professionalism,” he said. “We’ve got to service the heck out of customers — suite holders, diamond table holders, our sponsors. Everyone that comes here will want to come back again and again.” The financial success of the stadium is one business metric for Appleby. The other is the actual baseball, and his long-game strategy there is to get players into Major League Baseball. “All I need is my first major leaguer,” he said. “It’ll happen. We’re trying to make every kid better, to the majors. The minute I get a major leaguer, we will have 100 percent validation for this league.” The USPBL, whose teams will have up to 25 players each, is for players ages 18-25 who have not yet made it into Major League Baseball’s minor leagues. Rosters were put together after tryouts in recent weeks, and Appleby said players are both local and from elsewhere in the country. He said he’s spending $1 million this year on baseball operations alone, and termed his league a “fin-

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 3 0 , 2 0 1 6 CRAIN’S DETROIT BUSINESS and lawn seating. ishing school” for players en route vised that to around $3 million. The Utica stadium will have Wi-Fi, to the affiliated minor leagues and, Among the companies with suite one day, “the show” — what aspir- or other corporate sponsorship and green aspects such as LED field ing ballplayers call the majors. deals at the ballpark are Budweiser, lighting, separate trash and recycling Appleby launched General Sports General Motors Co., Ford Motor Co., receptacles and waterless urinals. The stadium sits on 7.8 acres east & Entertainment in 1998. The com- AAA, Scotts Miracle-Gro Co., Pepsi, of Moscone Drive and north of Aupany does about $30 million in rev- and Birmingham-based Belfor USA. A year ago, Troy-based mortgage burn Road. Appleby said he privateenue annually, and specializes in consulting, team management, lender United Shore Financial Ser- ly financed the stadium and league marketing, sponsorships, financing, vices LLC signed a 10-year deal to through General Sports. A second phase, to be built at a and education, and had a synthetic put its name on Appleby’s baseball turf division. Before starting his league, and Champaign, Ill.-based date yet to be determined, is a retail company, Appleby had risen to se- Jimmy John’s Franchise LLC and its and condo development just across nior vice president at Palace Sports franchisees jointly signed a 10-year the Clinton River on 1.4 acres. and Entertainment LLC, the Detroit contract for the stadium name. Utica’s DDA, which owns the Pistons’ parent company in Auburn Financial terms were not disclosed. 15.7-acre project site, is leasing the Hills, where he worked from 1986 Appleby said he negotiated al- land to General Sports for $1 annuuntil launching General Sports. most all of the deals himself, and he ally under a 30-year lease with two Appleby cites former longtime relied on 30 years of relationships to 10-year options. General Sports PS&E President Tom Wilson as one of get them done. “Every one of those owns the stadium. the major influences on his career. decisions (to do a deal with the The stadium’s general contractor “Working for Wilson was a figura- league) was made either by the is Rochester-based Frank Rewold & tive Ph.D. in sports management at global chief marketing officer or the Son Inc., and Kansas City-based Penage 23,” Appleby said. president of that company,” he said. dulum is the architect. Pendulum’s Wilson, who now is president of About 500 season tickets have local current Detroit work is as deOlympia Entertainment in Detroit, been sold, he said. Season ticket signer of the proposed $15.5 million praised his former employee and plans range from $475 to $3,000, Detroit Police Athletic League headsaid he intends to visit the new sta- and single-game tickets are $6 for quarters and training facility at the old Tiger Stadium site. dium within a couple of weeks. the lawn to $40 for front-row seats. There are skeptics of Appleby’s “He was always studying every “We’re selling a lot right now aspect of the business. He always since the ballpark is almost operahad higher aspirations. ..., ” Wilson tional,” Appleby said. said. “If anybody can make this Minor-league baseball, especially work, it’s Andy.” at the lower levels, traditionally With General Sports, Appleby has thrives on being an entertainment owned the Fort Wayne baseball product rather than on its players — team (an affiliate of the San Diego Pa- most of whom will never reach the dres he bought for $4.75 million in majors. Appleby knows that, and AUCTIONS May 1999 and sold for an undis- plans to make USPBL games fun beclosed sum in 2006) and the sec- yond balls and bats. There will be fireGOVERNMENT AUCTION ond-division British soccer club works after Friday night games, and Derby County. He also unsuccessful- theme nights such as “Star Wars.” ly tried to buy the National Hockey “It’s as much about the extravaLeague’s St. Louis Blues. ganza,” Appleby said. Appleby and his ownership group Games will be played at 7:25 p.m. sold Derby last year for an undis- Wednesdays, Thursdays and Saturclosed sum, but one he confirmed is days; 7:45 p.m. Fridays; and 2 p.m. 36.35 - ACRE more than the $100 million they on Sundays. FORMER MILITARY SITE paid for it in 2008. The past week has been a scramNEWPORT & TELEGRAPH RD. Owning Derby was a learning ex- ble to get the stadium done. “It’s reNEWPORT, MICHIGAN perience that Appleby said he’s us- ally just finishing the details,” ApU.S. GENERAL SERVICES ing to ensure the USPBL is a success. pleby said. The locker rooms were ADMINISTRATION After owning teams in both baseball getting their black walnut lockers û û û and soccer, he opted to invest in installed, and the suites were getting baseball as his legacy project. furniture and carpet. RICH BALSANO “Soccer is great, but the cost Part of the stadium’s $3 million 312-353-0302 structure in minor league baseball is cost escalation was because of the realestatesales.gov better, and it’s still more of America’s ground underneath it, the former pastime,” he said. “It’s still a great town dump. The trash turned out to model. To me, there is nothing like be just under the surface. “We’re on baseball, baseball under the stars.” 20 feet of trash,” Appleby said. Appleby, a former Crain’s 40 under The turf comes from Kogelmann’s 40 honoree, usually is the front man Creek-Side Sod Farm in Macomb of an investment group, the same Township, he said. Appleby said the biggest challenge strategy he’s using with the Utica MISCELLANEOUS baseball stadium. He is the stadium was a lack of state funding for the site and league’s majority owner, and said cleanup. State law forbids such fundthere is a small group of minority ing for stadium sites, he said. SURVEY “We could have put a bump shop owners from “all over the world,” but he declined to identify them or say if on their property on this site and got ANALYZE any of them also were part of the more than what we got,” he said. Because the land is a capped group that owned Derby County. MATCH The local business community brownfield site, Utica’s Downtown has been impressed enough with Development Authority provided Appleby’s baseball effort to write $400,000 in federal brownfield redevelopment funds for cleanup. some big checks. Other spending upgrades include Of the stadium’s 24 suites, all but three have been leased under five- an elaborate scoreboard, upgrades CrainsDetroit.com/JobConnect | year contracts that range in annual to the VIP club, and full netting to cost from $35,000 to $55,000, he said. protect fans from foul balls. “We invested in the very best netAnd all 18 of the half-moon-shaped Call or email today for information “On Field Diamond Tables” that each ting that MLB teams use,” Appleby seat four have been leased under five- said. “We pretty much have the best of on a custom advertising plan! everything here. It’s very much a bouyear contracts for $20,000 annually. Appleby previously thought his tique ballpark. I wouldn’t trade this stadium and league would do about ballpark for any ballpark in America.” The stadium has 1,900 seats with $1 million in corporate sponsorship revenue this year, but he’s since re- capacity for 4,000 with premium

REAL ESTATE

JOB FRONT

cdbclassified@crain.com 313.446.6068

Page 15

field of dreams. “The component that is minor-league baseball sounds to me to be very difficult. Very few independent teams are consistently profitable. The market has to be exactly right,” Andrew Zimbalist, a sports economist at Smith College and author of several sports finance books, previously told Crain’s. There are other hurdles, he said. One is that independent teams must pay the salaries and equipment costs that aligned minor-league teams have covered by their MLB parent clubs. How does Appleby define a successful first season? “It will be to sell out at least half the games, but we’re hoping to sell out most every game,” he said. Additionally, the baseball itself has to be good, and the players have to develop into professionals. “There are a plethora of excellent baseball players out there. (Critics) think it’s ‘Bad News Bears.’ It’s not,” he said. Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

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RTA

FROM PAGE 1

year hosting meetings with the public and business, political and civic leaders to get opinions about transit needs and to educate the public about mass transit plans. The RTA tax would be the local money required to access matching federal funding to build and operate bus rapid transit and train systems. The RTA would have to apply for such funding from the federal government, and the process is vigorously competitive and often lengthy. Under a bus rapid transit system, buses operate much like a rail line, with specialized train-like wheeled vehicles with dedicated lanes, priority traffic signaling and higher speeds. Bus rapid transit lines typically cost $15 million to $25 million per mile, meaning the Woodward project could range from $405 million to $675 million, according to a 2014 estimate from Carmine Palombo, deputy executive director of the Southeast Michigan Council of Governments regional planning agency.

Ford said the bus rapid transit system would cost about $17 million annually to operate. The commuter rail line, which has been on the books for many years, initially would have eight round trips per day between Detroit and Ann Arbor, with other likely stops in Dearborn, at Detroit Metropolitan Airport and in Ypsilanti. More trips could be added, Ford said. The RTA would buy the locomotives and passenger cars for the line, and use tracks now used by

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 3 0 , 2 0 1 6

Amtrak. “We want to have enough bandwidth and frequency that people can use it to get to their jobs,” Ford said. The millage also is expected to fund new traditional Detroit Department of Transportation and Suburban Mobility Authority for Regional Transportation bus service, a uni-

versal fare card for the region, and an express service across the region from the airport, Ford said. A regional mass transit system will boost economic development — advocates say every $1 invested in transit systems generates $4 in new development — and is aimed at connecting residents with jobs, school and to access medical services, facilitating commerce and improving mobility for the disabled and elderly, supporters say. The RTA’s intent is to link the new system into the region’s other transportation agencies, such as the bus lines, Detroit People Mover, Ann Arbor Area Transportation Authority and M-1 Rail streetcar system now under construction on Woodward Avenue. M-1 Rail, which is handling the public and private financing for what is now called the QLine streetcar line that goes into service next year, will eventually fall under the RTA’s operational control within 10 years, organizers have said. The RTA was created in 2012, after 40 years of failed attempts to do so, with the intent of creating a regional transportation plan and network for the metro area. It is responsible for coordinating mass transit operations and funding across the four counties, including cooperation among agencies such as DDOT and SMART. Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

Detroit Wayne Mental Health Authority wins temporary restraining order over Gateway Health By Jay Greene jgreene@crain.com

The Detroit Wayne Mental Health Authority last week was granted a temporary restraining order against

Gateway Community Health by the Third Judicial Circuit Court in Detroit

that protects against improper expenditures of state Medicaid funds and preserves documents, according to Circuit Judge Brian Sullivan. Gateway Community Health is a Detroit-based mental health provider network that has been under contract with Detroit Wayne the past 10 years to offer mental health, substance abuse and developmental disability services through providers to about 50,000 people. In a 10-0 decision May 18 after a closed executive session, the Detroit Wayne board voted to terminate Gateway’s three-year, $120 million contract, effective June 17, after three audits found potential financial problems with Gateway, according to documents obtained by Crain’s. Sources told Crain’s that Detroit Wayne’s decision to terminate and file a lawsuit against Gateway stemmed from long-term problems with the network’s operations and its ability to pay mental health providers for services rendered. For example, Gateway in 2013 opened a clinic, Gateway Integrated HealthCare, which some believe was in violation of the contract with Detroit Wayne because it provides direct clinical services to patients with

mental and physical health problems. Gateway’s contract with Detroit Wayne is to administrate a provider network. Problems with the treatment center were documented in February by a WDIV-Channel 4 news report. Clients of the clinic were seen going to and from counseling sessions at Gateway to purchase alcohol at a liquor store next to the clinic and openly drinking on the streets. After the state of Michigan last year mandated mental health provider networks to divest themselves of provider ownership, Gateway reportedly complied. The complaint does not state who now owns the clinic, and Gateway officials did not respond to interview requests from Crain’s. However, Detroit Wayne alleges in its 121-page complaint that Gateway “had improperly transferred approximately $20 million between it and the provider it was in the process of divesting.” Audits performed on Gateway’s accounting and business practices came from Detroit-based UHY Advisors LLC and Troy-based Rehmann Robson. Detroit Wayne hired Detroit-based Alan C. Young & Associates P.C. to conduct its own audit. “Those reports have raised concerns about, among other things, (Gateway’s) long-term ability to pay providers,” the Detroit Wayne board said in a statement last week signed by Detroit Wayne CEO Thomas Watkins and Herbert Smitherman, M.D., board chairman. The Alan Young audit also determined that Gateway CEO Radwan Khoury, M.D., received $70,000 in bonus payments in 2014 and an additional $41,000 in expense reimbursements. Other Gateway executives also received bonus payments for unspecified work. The former COO received a $62,000 severance package only to return to his job several months later.

Gateway paid vendors nearly $1.5 million without a contract, and without validating whether the services were properly completed, said the Alan Young audit. The UHY audit concluded Gateway had negative assets of $7.5 million in 2015 and “auditors effectively concluded that (Gateway) was insolvent.” According to Detroit Wayne’s complaint, Khoury informed the authority it would need a “cash infusion from an outside source, presumably (from Detroit Wayne) to avoid insolvency.” Audits estimated at least $12.2 million in provider-related liabilities and only $5.6 million in cash and accounts receivable. The Detroit Wayne board also authorized the release of the Alan Young audit on Gateway to Michigan Attorney General Bill Schuette, the Michigan Department of Health and Human Services and the U.S. Department of Health and Human Services’ office of inspector general.

Sources said that Schuette and U.S. Attorney Barbara McQuade in Detroit launched an investigation into Gateway several months ago. Meanwhile, Detroit Wayne plans to transition services formerly provided by Gateway to CareLink Network Inc., another Detroit-based manager of a provider network with which the health authority contracts. Last week, Khoury said in a statement to its providers that Detroit Wayne gave no warning to Gateway about the impending action and characterized the audits as routine with no willful illegality or fraud identified. “A fair-minded person reading the reports would conclude that there is no disclosure or negative information that would justify a sudden contract termination,” Khoury said. Khoury did not respond to an interview request from Crain’s. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 3 0 , 2 0 1 6

GRAND PRIX

SURVEY

chalets as last year, but we’re sold out way earlier,” Denker said. “We’re working hard to find places to put people.” Race sponsors include Chevrolet, Cadillac, Quicken Loans Inc., Metro Detroit Chevy Dealers and Metro Detroit Cadillac Dealers. Other sponsors include American Axle & Manufacturing Holdings Inc., Blue Cross Blue Shield of Michigan, Cooper-Standard Holdings Inc., Dykema Gossett PLLC, MotorCity Casino Hotel and Lear Corp., among others. The weekend’s race includes the Verizon IndyCar Series’ “Chevrolet Dual in Detroit” presented by Quicken Loans; the IMSA WeatherTech SportsCar Championship; and the SPEED Energy Stadium SUPER Trucks series. The Trans Am Series’ “Motor City 100” also returns this year for the first time in 15 years. The series last participated in the Grand Prix in 2001. The opening day will once again be the Comerica Bank Free Prix Day Gate, where admission to Friday’s races is free of charge. Denker said he expects more than 100,000 attendees over the event’s three days of activities, thanks to a favorable weather forecast calling for low-80 degree highs and sun (at least as of last week). Last year's attendance, estimated at 65,000, was impacted by rain and thunderstorms. “Last year was terrible,” Denker said. “The forecast looks good so far, and we’re expecting a big (ticket sales) push after the Indy 500 (May 29). I expect great attendance this year.”

percent in 2015), the big change was the increase in median deductibles for PPO plans, which increased to $600 from $500 for single coverage and $1,200 from $1,000 for family coverage, McLaughlan said. “This was the first increase in six years,” she said. “More employers are adding HMO deductibles, and consumer-driven health plan deductibles went up for the first time since 2008.” For example, 78 percent of employers this year had an HMO deductible ($1,000 for single and $2,000 family), up from 68 percent last year, the survey showed. However, many employers held down employee HMO premium costs. Average single monthly pre-

FROM PAGE 3

FROM PAGE 1

miums dropped to $96 from $101 and average family premiums declined to $332 from $349. “HMOs are still popular in Michigan, and for many employees (are) still the lowest-cost option,” McLaughlan said. “Employers want to keep that attractive.” Interesting trends continue to feature employers adding wellness and telemedicine programs. “There is huge interest in telemedicine programs by employers with vendor participation and health plan participation,” McLaughlan said. Some 38 percent of employers surveyed offer telemedicine as a care provider option, up from 20 percent last year and only 4 percent in 2014, the survey said. McLaughlan said employers are just starting to understand that if an employee can avoid a high-cost

emergency department visit and instead use their smartphone to talk with a doctor or nurse, savings and convenience can pay dividends. “My daughter used telemedicine” at college for strep throat, McLaughlan said, and got a prescription. Nessel said NS International’s telemedicine program through Amwell and Blue Cross also allows employees and their families to be “seen” over the phone and avoid a

EXPANDING:

time-consuming office visit. Employee copayment is $10 with NS’ cost another $45. NS International also is launching a wellness program for the first time this year, Nessel said. “We are trying to figure out how to incorporate wellness to drive down costs for employees,” Nessel said. “We are looking at getting people engaged and (building) awareness for their health.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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Sunday main events: Morris Day & The Time, 12:30 p.m.; IndyCar Series race, 3:30-6 p.m.

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Tickets: $40 and up. Children under 12 free. Call (866) 464-7749, visit www. DetroitGP.com/tickets, or purchase in person at the Grand Prix office in the Renaissance Center.

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Shuttle service: Shuttles will run from various parking options; roundtrip cost is $10. Shuttles will run continuously from 7 a.m. to 10 p.m. Parking: Cobo Hall roof, Joe Louis Arena deck, marina lots at Atwater and Orleans streets Parking Saturday-Sunday only: Street-level lots east of the Renaissance Center; Renaissance Center parking decks at Beaubien Street, Port Atwater and Franklin Street Broadcast: ABC, FS1, CBS Sports Network Details: DetroitGP.com or the DetroitGP mobile app available in the Apple or Google Play app stores Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

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C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 3 0 , 2 0 1 6

HOSPITAL FROM PAGE 3

West Bloomfield Township. Originally based in Detroit and known as a hospital specializing in plastic, reconstructive and orthopedic surgery, Straith added eye surgery in 1984 and later rehabilitation services in 1993. It built a new hospital in Southfield in 1973. After World War I, Claire Straith, who originally was a dentist, decided to become a surgeon after so many doughboys returned home with facial injuries. He pioneered reconstructive surgery techniques and built one of the largest plastic surgery practices in the Midwest. In 1951, he patented the auto industry’s first crash pads, which are now presented in the Smithsonian National Museum, to protect riders from disfiguring injuries. James Straith, grandson of the founder and chairman of the eight-member board, which is mostly made up of Straith family members, also heads up TroyBrad Bescoe: Straith based Pitching Straith as Group, a boulower-cost for tique commerinsurers. cial and investment real estate company. The board members are shareholders in the nonprofit corporation. “I remember my grandfather Claire very well and remember climbing around when the hospital was being built in 1954,” said Straith, who is now 66 and has been on the board the past 25 years, the last eight as chairman. “We are trying to get the message out that we are very efficient, have low infection rates, and are very well managed,” Straith said. “Because of our small scale, we can provide state-of-the-art OR space, rehabilitation care and other care to specialists who can really appreciate it.” Straith said hospital officials are looking to attract new physicians to the 39-member medical staff and develop new relationships with physician groups and accountable-care organizations. “We have a surplus of unused OR time, and we can offer orthopedic surgeons or eye surgeons, cardiac surgeons or interventional cardiologists a better choice of OR time,” he

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STRAITH HOSPITAL

Straith Hospital for Special Surgery, Southeast Michigan’s only independent nonprofit hospital, was started by a local pioneer

in plastic surgery and is now trying to navigate a changing health care world. said. In 2009, Straith built the new five operating rooms and renovated its facade, private rooms and pre- and post-surgical areas. One of the hospital’s bright spots the past two decades has been its 24-hour rehabilitation unit for postacute care patients. The 24-bed unit’s average census is 13 patients with an average stay of 6.5 days. They are mostly seniors with an average age of 82 who have had surgery on knees and hips and require physical and occupational therapy. Straith said the combination of surgery and rehabilitation can be a plus for surgeons who want to offer patients quality post-acute care. “It’s this synergy that we want to promote,” Straith said. “Orthopedic surgeons and cardiologists can offer their patients proximity access.” Dalsey, who has provided consulting services to Straith over the years, said the challenge for Straith is how to survive in a competitive landscape that is dominated now by multi-hospital systems that have tight relationships with multiple physician groups. “Straith also needs to create appropriate packages of services because insurers are looking for low cost, price and good outcomes,” Dalsey said. “There shouldn’t be any reason why Blue Cross Blue Shield of Michigan, Priority Health and Health Alliance Plan shouldn’t support them.” But Bescoe acknowledged that Blue Cross pays Straith less than Medicare for certain services because the hospital isn’t a designated inpatient rehabilitation unit. “We don’t want to be, because that limits us to just 13 procedures,” he said. “But we are a much lower-cost option for insurers. It is very

INDEX TO COMPANIES

These companies have significant mention in this week’s Crain’s Detroit Business: Ally Bank ................................................................. 9

Level One Bank ......................................................11

Bank of America ...................................................10

Marsh & McLennan Agency.................................. 1

Chevrolet Detroit Belle Isle Grand Prix ...............3

Michigan Technological University.................... 12

Chicken Shack ........................................................5

NS International......................................................1

Clarkston State Bank ........................................... 9

PNC Bank................................................................11

Detroit Institute of Arts....................................... 8

Providence-Providence Park Hospital................3

Detroit Wayne Mental Health Authority ..........16

Regional Transit Authority of Southeast Michigan.1

Fifth Third Bank ....................................................10

Straith Hospital for Special Surgery ...................3

Flagstar Bank.........................................................11

Talmer Bank and Trust..........................................11

Ford Motor.............................................................. 4

United Shore Financial Services LLC.................. 9

Gateway Community Health..............................16

United Shore Professional Baseball League......3

General Sports & Entertainment ...................... 15

Wayne State University....................................... 12

Grow Detroit’s Young Talent.................................7

Western Michigan University ............................. 12

icult for commercial insurers to authorize payments. We are working on it.” One of the competing hospitals in the market, St. John Providence Hospital in Southfield, which is 2 miles from Straith, also operates a 16-bed inpatient rehabilitation unit. “Straith has branded themselves as a specialty surgical hospital,” said Joe Hurshe, president of Providence-Providence Park Hospital. “They have aspirations into other things.” Hurshe said rehabilitation services generally are driven by patient preference. “They have an ability to choose where care continuum is to be provided, and there is a criteria for admissions.” Because Providence Hospital is part of the St. John Providence Health System, Hurshe said, “we would look within our own system first for referrals” when the rehab unit is full. Competition and other forces have changed Straith into diversifying into other service lines. A decade ago, Straith conducted up to 6,000 cataract surgeries each year. Beginning around 2006, entrepreneur surgeons started opening competing ambulatory surgery centers, cutting Straith’s annual totals to about 250, Rys said. Total eye surgeries amount to about 1,200 annually, including retinal and corneal transplants. “We tried a transitional care unit few years ago, but it didn’t fit with our service mix,” Rys said. Bescoe said discussions are underway with several physician-led accountable-care organizations. An Obamacare initiative, ACOs are groups of physicians, hospitals and other providers who agree to accept flat payments from Medicare and share in the savings. “We could help providers avoid readmissions by using our rehab unit,” Rys said. Straith’s readmission rate is less than 5 percent, much lower than the region’s 20 percent-plus average. Dalsey said contracts with ACOs could boost patient volume and become a good arrangement for physician partners. “The challenge is to overcome the politics. If you have a Beaumont or (Henry) Ford-related medical group, do they want to take patients out of the mother hospital?” Dalsey said. “You have to find the right kind of doctors and patients to make it work.”

Bescoe said the hospital also is looking into participating in Medicare’s bundled payment pilot for hip and knee joint replacement. “We can partner with orthopedic surgeons for knee and hip payments because we are low cost and high quality,” he said. While many hospitals have reaped bankable revenue increases because of the Affordable Care Act and Medicaid expansion, Bescoe said Straith’s Medicaid revenue increased only slightly. Still, Medicaid revenue doubled last year to 2.5 percent of total revenue, up from about 1.2 percent, and bad debt declined by 30 percent. The bulk of revenue, 70 percent, comes from Medicare, with the rest from commercial and self-pay, he said. “We saw an increase in Healthy Michigan patients. They probably didn’t have insurance before. We hope that trend continues,” Bescoe said. Financially, the hospital has had good cash flow, Straith said, but it has lost money on operations the past several years. From 2010 to 2014, Straith lost $4.6 million on operations, but over the past two years net income totaled $2.8 million when investment income and other revenue is added, according to Medicare cost reports provided by Louisville-based American Hospital Directory. Net patient revenue has averaged about $10 million the past five years. But end-of-year cash and cash equivalents have averaged $2.6 million the past three years, according to the hospital’s audited financial statements. When investments are included in the cash metrics, the hospital shows a steady cash flow increase to $8.6 million last year from $7.2 million in 2013. “We are fiscally sound with tremendous ratios, and our debt coverage is excellent,” said Straith, adding that the board expects steady increases in patient volume and revenue over the next several years. “We are a small hospital, and small hospitals have been going by the wayside for years,” Straith said. “The trend is economy of scale with big hospitals gobbling up smaller hospitals. Our mission is to stay independent, and we can do so because we have an excellent administrative and staff at the hospital with strong loyalty.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

Editor-in-Chief Keith E. Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Editor Jennette Smith, (313) 446-1622 or jhsmith@crain.com Director, Digital Strategy, Audience Development Nancy Hanus, (313) 446-1621 or nhanus@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@crain.com Managing Editor/Custom and Special Projects Daniel Duggan, (313) 446-0414 or dduggan@crain.com Assistant Managing Editor Kristin Bull, (313) 446-1608 or kbull@crain.com News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Senior Editor Gary Piatek, (313) 446-0357 or gpiatek@crain.com Research and Data Editor Sonya Hill, (313) 446-0402 or shill@crain.com Newsroom (313) 446-0329, FAX (313) 446-1687, TIP LINE (313) 446-6766

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WEEK

ON THE WEB MAY 21-27

Detroit Digits Longtime numbers-driven look at last week’s supporters leave Aheadlines: $2.9M gift to DSO $95 million he The amount to be invested by Illinois-

Detroit Symphony Orchestra received a

$2.9 million gift — the second-largest in its 129-year history — from the estate of longtime supporters Clyde and Helen Wu to help sustain music education programs provided through the Wu Family Academy for Learning & Engagement. The gift brought the couple’s total giving to the DSO to more than $5 million. Clyde Wu, a cardiologist at Oakwood Hospital in Dearborn, died last year. He was preceded in death by his wife, a concert pianist.

COMPANY NEWS n Diversified Restaurant Holdings

Inc., the Southfield-based company that owns the Bagger Dave’s

restaurant chain and is the largest Buffalo Wild Wings franchisee, is getting a new CEO and plans to explore strategic alternatives for Bagger Dave’s, the company said. Michael Ansley, Diversified’s founder, chairman, president and CEO, will turn over the president and CEO titles to CFO David Burke on Jan. 1, the company said. Bagger Dave’s endured two waves of closings last year that shrunk it by 11 restaurants, including one in downtown Detroit, to 16. n Athletic apparel maker Nike became the latest addition to downtown Detroit’s retail offerings when the Nike Detroit Community Store opened Thursday in the former F.W. Woolworth building. Michigan State University basketball coach Tom Izzo was on hand for the opening; the school has an apparel contract with Nike. n Dan Gilbert played deaf and dodged a question during a Detroit Startup Week event about whether he is going to buy internet pioneer Yahoo Inc. “What was the question?” Gilbert said jokingly to an audience member during a question-andanswer session about financial technology startups at the Masonic Temple in Detroit. “I wish I could comment on that.” His response is believed to be the first public comment by the chairman of Detroit-based Quicken Loans Inc. since reports surfaced he was seeking to acquire Yahoo with the backing of Warren Buffett’s Berkshire

Hathaway Inc. n Metropolitan Hotel Partners LLC, a joint venture between the Detroit-based Means Group and Roxbury Group, will own and develop the Element Detroit at the Metropolitan Building, the city’s only

extended-stay hotel, planned for a July 2018 opening.. n Cosworth Group, the United Kingdom-based high-performance engine technologies company, will invest $30 million and create at

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 3 0 , 2 0 1 6

based automotive parts manufacturer Flex-N-Gate Corp. to buy 30 acres of Detroit land to build a new plant that will create up to 750 jobs. A $3.5 million performancebased state grant has been approved for the project.

$2 million

The amount of a grant by the Detroit-based DTE Energy Foundation to the Detroit Symphony Orchestra in support for the orchestra’s community concert series, held each September.

7,410

The team-record attendance for the inaugural match for Detroit City FC at Hamtramck’s Keyworth Stadium. DCFC and AFC Ann Arbor played to a 1-1 draw in the first National Premier Soccer League game at the renovated site.

least 50 jobs at a facility in Shelby Township. The company plans to refurbish a manufacturing facility it will lease at the Cherry Creek Business Park. n John Krafcik, CEO of Google’s self-driving car project, said the Silicon Valley tech firm would open a 53,000-square-foot development center in Novi. n Ford Motor Co. announced it will launch a pilot program to hire adults with autism on June 1. Ford will create five positions in product development suited to the skills and capabilities of workers with autism for the program, called FordInclusiveWorks and developed with the nonprofit Autism Alliance of Michigan, which is funding the training program tied to the jobs. n Ilitch Charities and its affiliate Detroit Tigers Foundation have donated $135,000 to state and local law enforcement agencies to purchase three highly trained, bomb-detecting dogs. The Michigan State Police, Wayne State University Public Safety Department and Detroit Police Department will each get one of the dogs. n New York state Attorney General Eric Schneiderman sued Ann Arbor-based Domino’s Pizza Inc., affiliates and three franchisees, alleging they underpaid workers based on payroll reports generated by the parent company’s computer system, AP reported. n The state of Minnesota is suing professional fundraising company Associated Community Services and its affiliate Central Processing Services, alleging the Southfield-based firms are deceptively soliciting money for the

Foundation of American Veterans. In

2013, Michigan Attorney General Bill Schuette ordered ACS to stop its use of what he said were misleading telemarketing tactics. n United Auto Workers members at Detroit Diesel ratified a contract that includes a wage increase and commits Daimler Trucks North America to new engine production, Automotive News reported. n The University of Michigan Health System in Ann Arbor has joined Together Health Network as a referral provider for complex, or quaternary, health care services. Together Health is a joint venture between Warren-based Ascension Health Michigan and Livonia-based Trinity Health Michigan. n The Michigan Department of Environmental Quality approved two new air permits for the Marathon Oil Corp. refinery in southwest Detroit. The state said the update will lead to reductions in air pollution, The Detroit News reported. n A Bloomfield Hills-based organization that aims to connect companies in Israel and Michigan will pilot an effort to boost Israeli firms’ Michigan supply chains with help from the state. Michigan Israel Business Bridge, founded in 2007, will team with the Michigan Economic Development Corp. and its Pure Michigan Business Connect program, which matches suppliers to in-state vendors. n Sports Authority Inc., which filed for bankruptcy protection three months ago, is closing all 460 of its stores, including four in Michigan, after it was unable to adapt to consumers’ move online. The Englewood, Colo.-based sports retailer has Michigan stores in Auburn Hills at Great Lakes Crossing Outlets, Clinton Township, Dearborn and Flint. n Shake Shack, the popular New York City fast-food restaurant chain, said it will open its first Michigan location in downtown Detroit sometime next year, in the Dan Gilbert-owned First National Building at 660 Woodward Ave.

OTHER NEWS n Prosecutors filed more charges in an investigation of Detroit Public Schools corruption, accusing a former district official of obtaining more than $1.2 million for tutoring services that were never provided, AP reported. A charge filed last week said Carolyn Starkey Darden submitted fraudulent invoices over seven years after leaving DPS. Darden worked for the district for 37 years and was director of grant development. n An appeals court affirmed the 45-year prison sentence for Farid Fata, the Oakland County cancer doctor who put hundreds of patients through needless treatments. n Five of seven people accused in a cheating conspiracy at MotorCity Casino Hotel in Detroit pleaded guilty in the case and are awaiting sentencing, officials said.

RUMBLINGS Gilbert joins lineup for Mackinac conference

resh from a billion-dollar soccer stadium proposal and a reported bid to buy Yahoo

Inc., Dan Gilbert

was a late addition to the event roster for the 2016

Mackinac Policy Conference, the Detroit Regional Chamber

announced last week. Gilbert, chairman of Detroit-based

Dan Gilbert: Late addition to Mackinac Policy Conference.

Quicken Loans Inc., will appear Wednesday at the

annual conference on Mackinac Island, which runs Wednesday through Friday. He is expected to talk about the city’s progress in recent years as his Bedrock Real Estate Services LLC has purchased more than 80 properties downtown. It’s not known if he’ll come bearing more news. Gilbert is scheduled to participate in a one-on-one discussion with Dennis Archer Jr., president of Archer Corporate Services and this year’s conference chairman. Gilbert’s involvement comes amid reports that he is seeking to acquire internet pioneer Yahoo with the backing of investor Warren Buffett, founder of Berkshire Hathaway Inc. Gilbert joins a three-day roster of speakers that includes Gov. Rick Snyder; Flint water crisis whistleblower Mona Hanna-Attisha, M.D.; Detroit Mayor Mike Duggan; former CNN anchor Soledad O’Brien; and Daymond John, CEO of the FUBU clothing line who appears on ABC’s

Workshop to offer late help for NEI applicants The New Economy Initiative will host a last-minute workshop for businesses seeking to apply for its third Small Business Challenge, the deadline for which is Wednesday. The Last Call NEIdeas Info Session & Workshop on Tuesday will be at the Northeast Guidance Center at 2900 Conner St. in Detroit from 6-8 p.m. The session is for interested business owners to get more information on NEIdeas or to talk about their ideas before turning in their applications. About 1,200 small businesses from Detroit, Hamtramck and Highland Park applied to the NEIdeas challenge in 2014 and 2015. NEIdeas has given $500,000 to 32 small businesses in those cities. Industries have spanned sectors ranging from barbers to manufacturers, mechanics to bakers and more. Seventy percent

of the idea winners are minorityowned businesses, 64 percent were woman-owned and 53 percent were both woman- and minority-owned. Businesses range from 3 to 93 years old. Businesses must be 3 years or older by the application deadline to be eligible for an NEIdeas award. NEIdeas features two types of awards: $10,000 for businesses that gross under $750,000 annually with ideas to grow, and $100,000 for businesses that gross more than $750,000 and less than $5 million annually with ideas to grow “big.” Thirty applicants will be awarded $10,000 each, and two businesses will be awarded $100,000 each. The application is available at NEIdeasDetroit.org. NEIdeas is operated in partnership with the Detroit Economic Growth Corp. The NEI is a special project of the Community Foundation for Southeast Michigan.

Rakolta Jr. to speak on rebuilding city at JVS lunch Walbridge Aldinger Co.

Chairman and CEO John Rakolta Jr. will give the keynote address on rebuilding Detroit at JVS’ 19th annual Strictly Business John Rakolta Jr.: Networking and To give keynote Awards address at JVS Luncheon on luncheon. June 23. Rakolta co-chairs the Coalition for the Future of Detroit School Children,

which issued recommendations on improving education for children in the city last year and continues to advocate for stabilizing the troubled school district. During the fundraising event, which is expected to draw nearly 800 business and community leaders, JVS will also present Detroit Labs and its co-founder and CEO Paul Glomski with its Business Leadership Award; and Zack Sklar, majority Zack Sklar: Chef owner and chef to receive Rising of Peas & Carrots Entrepreneur Hospitality, with Award. its Rising Entrepreneur Award, during the luncheon. The event is set to begin at 11:30 a.m. at MGM Grand in Detroit. Tickets are $150. For more information, visit www.jvsdet.org/ strictlybiz.

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