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DETROIT — In a Feb. 13 commentary in the Detroit News, business consultant and former Detroit-based U.S. bankruptcy judge Ray Graves wrote that the floundering Detroit Medical Center needed a “well-planned private turnaround, restructuring the operation outside of the Bankruptcy Court.” The Center has lost more than $500 million in the last six years and is in the process of selling five health clinics to private physicians, a move some DMC employees oppose.
Graves suggests that going private would help return DMC to sound financial status because it may: a) provide creditors with payments superior to what would be mandated in bankruptcy court; b) provide an impetus for discussing the hard issues, such as employee pay cuts and consolidation; and c) restore public confidence by giving interested parties an additional reason to examine potential conflicts of interest.
Last February, Michigan Privatization Report reported that clinics were up for sale because of poor economic performance. And while it’s good — and a sign of progress — that privatization now seems to occur to public managers as an option when faced with such performance, the most amazing thing about this story is the level of catastrophe that must overtake a public venture in order for its managers to take action. A November 2002 Detroit Free Press story explained just how bad the management of DMC has been: “Under the DMC’s ownership, the clinics have never been profitable and are expected to lose $21.6 million this year,” the paper reported.
Of course, a private venture that performed thus would have gone out of business long ago. But when public ones fail to deliver, they simply ask for — and often receive — more money. Indeed, just last year the DMC received a $50 million government subsidy. But apparently, not only the financial till, but the till of political good will, is now empty. The DMC simply has no other choice but to sell its assets.
