Mercy Buyer Looks to Flint to Chart Bankrupt Hospital’s Revival

(Bloomberg) -- The buyer that would save Mercy Hospital and Medical Center is looking to Flint, Michigan, as it plots a revival for the bankrupt Chicago facility.

Mercy and its Bronzeville neighborhood bear “striking similarities” in terms of demographics and history, Atif Bawahab, chief strategy officer of Insight, said in an interview. The Flint-based biomedical company agreed to purchase Mercy this week in a deal that still needs regulatory approval.

Bawahab said Mercy came to Insight’s attention last year after reports that owner Trinity Health Corp. planned to close it. Chicago’s oldest chartered hospital and so-called safety net facility for the area’s most vulnerable residents filed for bankruptcy last month with a plan to shut down by May 31.

Bawahab acknowledged the difficult task that lies ahead in turning around the financially distressed hospital.

“This is not something we’re assuming to be a cakewalk,” he said in an interview Thursday. “This is going to take significant work and a long-term commitment to really be able to revitalize that hospital. That’s what we’re prepared for.”

Monumental Challenge

The challenge facing Insight is monumental -- with patients grappling with poverty and chronic diseases. The most profitable hospitals have a higher mix of patients with private insurance versus the government-sponsored programs of Medicare and Medicaid.

And so-called safety net hospitals must maintain a large stable of specialists, according to John Tishler, a lawyer at Waller Lansden Dortch & Davis who specializes in transactions involving distressed and bankrupt health-care facilities. Insight also isn’t part of a large network of hospitals that can share services and expertise.

“The world is littered with the best of intentions, but you’ve got to bring knowledge and experience and fundamentals to operate a hospital,” Tishler said.

Insight got its start operating in a 600,000 square-foot complex formerly used by General Motors and auto-parts maker Delphi Technologies in 2008 in a city now perhaps best-known for the tainted tap water scandal spiked the level of lead in children’s blood.

Bawahab said Insight could spur economic development around Mercy, similar to what it did in Flint, where it helped recruit other businesses like Diplomat Pharmacy Inc. Insight has partnerships with local hospitals in Michigan, and Bawahab said it’s begun discussions toward similar agreements in Chicago.

Read more: Chicago’s Mercy Hospital Fights to Close Amid Care Concerns

An early priority is to build up physician practices in areas such as pain management and cardiology that can treat patients through a variety of conditions and procedures, and to develop a network of outpatients.

Beside focusing on Mercy’s immediate community, Insight plans to emphasize its neurosurgery and orthopedics expertise to draw patients throughout Chicago and its surrounding area, Bawahab said.

Building up profitable elective and outpatient procedures is crucial for hospitals’ survival. The falloff of those revenues in the past year due to the pandemic, along with higher safety expenses, cost hospitals more than $300 billion last year and could lop off up to $122 billion in revenues in 2021, according to a Kaufman, Hall & Associates report for the American Hospital Association.

Insight isn’t requesting additional state or federal subsidies beyond what Mercy already receives as a safety-net hospital, Bawahab said.

“We don’t have everything figured out and part of it is we don’t really have much control in terms of what happens to Mercy through Trinity between now and then,” Bawahab said. “We feel like it’s an obligation for us, that this community has been underserved, and they’re experiencing a lot of frustrations.”

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