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Topic: DMC has lawsuit aganst McLaren and Karmanos merger

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untanglingwebs
El Supremo

DMC lawsuit: Merger between McLaren and Karmanos improper

9:16 AM, December 10, 2013 |

By JC Reindl and Robin Erb

Detroit Free Press Staff Writers

The Detroit Medical Center says it has an exclusive partnership and ironclad contract with the Barbara Ann Karmanos Cancer Institute and is asking a judge to block what it says is an improper merger and marketing partnership between the research center and Flint-based McLaren Health Care.

Even though Karmanos would remain on the DMC campus in Midtown, the news of the acquisition in October stunned leaders at DMC and at the Wayne State University Physicians Group, which treats many Karmanos cancer patients.

In its claim, filed late Friday in Oakland County Circuit Court, the DMC asked Judge Wendy Potts for an injunction.

In the filing, DMC says Karmanos purchased its cancer treatment business in 2005 for $9.9 million, called a “sweetheart deal” by DMC at the time. In exchange for that bargain price, Karmanos agreed to exclusivity with DMC hospitals forever. The agreement specifically restricts Karmanos from affiliating with another “academic medical center.”

It also requires Karmanos to always market and promote itself on its website and within Wayne, Oakland and Macomb counties as “affiliated with the Detroit Medical Center.”

“The DMC would never have sold its cancer business to Karmanos without those reasonable restrictions,” said the medical center’s claim, which seeks triple damages without specifying an amount.

Counterclaim to suit

The request for the injunction is actually a counterclaim to an Oct. 30 lawsuit filed by McLaren and Karmanos asking the same judge to approve their deal. That lawsuit is still active.

In that suit, McLaren and Karmanos say the DMC did not live up to its end of the agreement with Karmanos because it did not attract enough cancer patients from outer areas.

McLaren says that continuing to enforce the 2005 agreement between Karmanos and the DMC restricts competition, violating antitrust laws. The next scheduled hearing in that case is Feb. 12.

Greg Lane, McLaren’s chief administrative officer, said Monday that the merger has been finalized and is completely legal.

Lane said McLaren filed the lawsuit for a court opinion on Karmanos’ ability to operate and advertise under McLaren in Oakland County, which DMC’s exclusivity agreement deems a restricted area.

“The 2005 agreement was predicated upon the DMC attracting cancer patients to Karmanos from all over the tri-county area, including from Pontiac and Clarkston where McLaren now has cancer treatment facilities,” said Thomas McNeill of Dickinson Wright, one of the Karmanos Cancer Institute’s lawyers. “This just hasn’t happened. Based upon today’s reality, it would be unlawful now for the DMC to try to prevent patients in Oakland County from having access to Karmanos through McLaren.”

Rocky relationship

DMC and the Karmanos Cancer Institute have had a rocky relationship.

In 2007, DMC successfully used the exclusivity agreement in court to stop the Karmanos Cancer Institute’s then-plan to abandon the DMC campus for the old Detroit Riverview Hospital property. At the time, DMC lawyers argued that losing Karmanos would cost the DMC tens of millions a year.

Under the McLaren deal, Karmanos says it could extend the reach of its cancer treatments to McLaren’s 10 acute care hospitals and 14 cancer treatment sites throughout the state.

Neither McLaren nor Karmanos will release the full terms of the acquisition deal, but Lane said Monday that McLaren has pledged “tens of millions” for upgrades to Karmanos’ facilities.

Joe Mullany, DMC’s CEO, told the Free Press that the Karmanos-McLaren deal calls into question Karmanos’ commitment to metro Detroit.

He said DMC and Karmanos leaders met Oct. 26, after DMC found out about what he called the “covert” talks between Karmanos and McLaren. He said DMC offered Karmanos financial and other help and felt the conversation was “positive.”

Four days later, he said, DMC leadership says it was blindsided by the Karmanos-McLaren announcement.

“This deal does not make sense,” Mullany said.

Contact Robin Erb: rerb@freepress.com or 313-222-2708. Contact JC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @JCReindl.
Post Wed Dec 11, 2013 9:39 pm 
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untanglingwebs
El Supremo

Imagine my surprise after reading this article yesterday and then seeing all of the Flint media celebrate the merger going forward. Detroit and Oakland news stories are focusing on the lawsuit. Seems to be a disconnect in media coverage.
Post Wed Dec 11, 2013 9:41 pm 
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untanglingwebs
El Supremo

DMC pact to keep Karmanos name off local McLaren sites

By Jay Greene

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Flint-based McLaren Health Care Inc. plans a major statewide branding campaign after the ink dries sometime in early December on its acquisition of Karmanos Cancer Institute, one of the nation's 41 comprehensive cancer centers.

But, with a couple of exceptions, it won't be in Wayne, Oakland or Macomb counties.

That's because when Karmanos acquired the Detroit Medical Center's $100 million cancer operation in 2005 for $10 million, Karmanos agreed to advertise, market services and brand its name only with the DMC in Wayne, Oakland and Macomb counties, officials with McLaren, Karmanos and DMC confirmed to Crain's. Karmanos also leases space on the DMC campus in Detroit.

"Karmanos has an extremely attractive brand, and we are very cognizant on the restrictions placed on us," said Greg Lane, McLaren's chief administrative officer. "Nothing precludes us from using the Karmanos name outside of the tri-county area."

Lane said McLaren plans a comprehensive marketing and advertising campaign outside of the three counties in Southeast Michigan. He said McLaren does business in 53 of Michigan's 83 counties.

Kevin Tompkins, McLaren's director of marketing, said the preliminary plan is to use the Karmanos name at nine of McLaren's 10 hospitals and 11 of 14 outpatient cancer center locations in northern and eastern Michigan that include Bay City, Lansing, Petoskey and Lapeer.

The branding restrictions prevent McLaren from advertising and marketing Karmanos at one of its two Southeast Michigan hospitals — McLaren Oakland in Pontiac — and nearby outpatient centers in Clarkston, Bloomfield Hills and Pontiac.

The DMC-Karmanos agreement, Lane said, allows for exceptions at McLaren Macomb and an outpatient center, both in Mt. Clemens.

McLaren's website now includes a map of McLaren's cancer centers that include Karmanos Cancer Institute in Detroit and Karmanos' outpatient centers in Farmington Hills and Monroe.

"Those are Karmanos' existing properties. We are not changing those," Lane said, adding that McLaren does not consider listing Karmanos on its website as marketing in the three-county area.

Over time, Tompkins said, signs for the McLaren Cancer Institute, which is McLaren's existing oncology service line, will be replaced with Karmanos Cancer Institute signs at its hospitals and medical centers, and in advertising campaigns.

"We believe Karmanos is a very strong and trusted brand. We plan on extending it into our network in the communities we are in," Tompkins said.

In a previous interview, DMC CEO Joe Mullany said DMC opposed the McLaren acquisition and made an offer to Karmanos, but didn't receive an answer.

DMC was acquired by Dallas-based for-profit Tenet Healthcare Corp. in June after Vanguard Health Systems, a Nashville, Tenn.-based for-profit chain, took over DMC on Jan. 1, 2012.

Mullany said DMC will watch closely how McLaren brands the Karmanos name in Macomb, Oakland and Wayne counties.

"Karmanos has been frustrated that it cannot expand their brand because of the agreement," Mullany said.

McLaren also is prohibited by the agreement from moving the Karmanos operation outside of the DMC campus, Mullany said. DMC filed a successful 2007 lawsuit that prevented Karmanos from moving to shuttered St. John Riverview Hospital in Detroit.

Lane restated McLaren's intention not to move Karmanos' inpatient operations outside of the DMC campus.

In a statement last week, Mullany said the DMC has not been provided any details on the acquisition.

"We don't know if Karmanos has taken steps within that agreement to ensure their ongoing compliance with and commitment to the terms and conditions of the contractual arrangements between Karmanos and DMC," said Mullany, who was out of town last week.

Over the past few years, sources have told Crain's that several hospital systems were interested in forming closer affiliations with Karmanos, but the DMC agreement prevented those arrangements. The systems include Henry Ford Health System and Beaumont Health System.

Gerold Bepler, M.D., Karmanos' CEO, told Crain's that Karmanos discussed acquisition and other arrangements with other health systems in Michigan. He declined to name the systems.

Brian Connolly, CEO of Oakwood Healthcare, a four-hospital system in Dearborn, said Oakwood was prevented by DMC from co-branding services with Karmanos.

"I understand DMC is interested in having tertiary cancer business draw (to) downtown," Connolly said. "I don't think necessarily by having that brand (with other systems outside of Detroit) wouldn't result in tertiary care services still going downtown."

But Mullany said the McLaren-Karmanos combination will likely force DMC to look for other partners to further develop its oncology services.

Sources told Crain's that McLaren has pledged to spend $80 million over four years to upgrade Karmanos' downtown hospital and expand its two outpatient centers at the Weisberg Cancer Center in Farmington Hills and the Monroe Cancer Center, a joint venture with Mercy Memorial Hospital System and Toledo-based Promedica.

According to the asset purchase and lease agreement, which was referenced in DMC's May 4, 2007, complaint against Karmanos, Karmanos is required to operate the hospital under the name Karmanos Cancer Institute at the Detroit Medical Center. Other provisions include:

• Requiring Karmanos and the DMC to jointly market their services at the DMC main campus.

• Requiring the DMC to stop providing inpatient and outpatient cancer hospital services on the DMC main campus.

• Providing that "any breach by Karmanos of any provisions would cause irreparable harm to DMC (and allow for) injunctive relief."
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Ann Hollenbeck, Karmanos attorney with Honigman Miller Schwartz and Cohn in Detroit, said Karmanos is working through procedural issues with the DMC contracts.

"We are being very careful and respectful" of all the parties, said Hollenbeck, who declined to answer a series of questions about the contract limitations.

Patricia Ellis, Karmanos' director of media relations, said Karmanos is aware of the branding restrictions placed on it by the DMC cancer business acquisition.

"The DMC required that if Karmanos were to clinically affiliate with any hospital or health system based in the tri-county area that DMC would have the right to grant permission in advance (which must not be unreasonably denied)," said Ellis in a statement to Crain's.

Ellis added that the restriction does not apply to Karmanos' educational or research programs.

Lane said McLaren has not asked DMC for co-branding permission in the three-county area, but "we believe the DMC has the right to grant additional exceptions," he said.

Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene
Post Wed Dec 11, 2013 9:47 pm 
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untanglingwebs
El Supremo

Originally Published: December 08, 2013 8:00 AM Modified: December 09, 2013 2:44 PM

Karmanos, McLaren sue to market services in Oakland County

By Jay Greene


Judge could rule within weeks on McLaren proposal for Independence Township hospital


It turns out the Barbara Ann Karmanos Cancer Institute and McLaren Health Care Corp. want to market their impending new affiliation in Oakland County after all.

The two organizations filed a lawsuit against Detroit Medical Center the day Karmanos announced on Oct. 30 it would sell its assets for an unspecified amount to Flint-based McLaren.

The lawsuit, said McLaren officials, only is intended to answer whether Karmanos can advertise and market its services with McLaren in Oakland County. It does not seek damages.

Karmanos faces restrictions because of a 2005 agreement in which the DMC sold its cancer business to Karmanos. That agreement prohibited the cancer institute, with limited exceptions, from marketing or advertising its services with anyone other than the DMC in Oakland, Wayne or Macomb counties.

McLaren did not disclose the lawsuit — despite being asked about litigation — in interviews for a Nov. 18 Crain's story in which it talked about its plans for marketing outside the tri-county metro Detroit area.

On Nov. 27, DMC filed a motion to dismiss McLaren's compliant for declaratory judgment. DMC said Karmanos is liable for breach of contract and McLaren for tortuous interference with its prior agreement with Karmanos.

Oral arguments on DMC's motion to dismiss are scheduled for Dec. 18 before Judge Wendy Potts in Oakland County Circuit Court. Potts also is expected to hear oral arguments on the McLaren/Karmanos lawsuit on Jan. 7, said Greg Lane, McLaren's chief administrative officer.

DMC officials were unavailable for comment by deadline.

In its lawsuit, McLaren said it wants to use the Karmanos name on its cancer centers at McLaren Oakland hospital in Pontiac, McLaren Cancer Clarkston and other McLaren health care facilities in Oakland County.

But DMC said it sold Karmanos' DMC's cancer business in 2005 for the low price of $9.9 million because it included an exclusive affiliation in perpetuity. Karmanos had offered $45 million for the DMC cancer operations.

"The benefit of the DMC's bargain is lost if non-DMC hospitals could market the Karmanos brand, diluting the goodwill and value to the DMC of that brand," said DMC in its response. "The new McLaren/Karmanos agreement breaches the DMC/Karmanos agreements."

Lane said McLaren believes it has the right to jointly market services with Karmanos in Oakland County. He said the DMC-Karmanos agreement allows for a co-branding exception at McLaren Macomb in Mt. Clemens and an outpatient cancer center also located in Mt. Clemens.

McLaren said top Karmanos officials — Chairman Charles Becker and CEO Gerold Bepler, M.D. — asked DMC CEO Joe Mullany on Oct. 26 if DMC would consent to Karmanos affiliating with McLaren in Oakland County. Mullany declined, said the lawsuit.

"The DMC has no reasonable or legitimate business reason to withhold its consent," said the McLaren lawsuit, adding: "The affiliation agreement is a restrictive covenant that violates Michigan's Antitrust Reform Act and the state's common law."

DMC was acquired by Dallas-based for-profit Tenet Healthcare Corp. in June after Nashville, Tenn.-based Vanguard Health Systems Inc., another for-profit chain, took over DMC on Jan. 1, 2012.

McLaren is asking the court for a declaratory judgment that grants it the right to jointly advertise with Karmanos in Oakland County.

But DMC said the court should enforce the DMC-Karmanos agreement.

"(McLaren and Karmanos) know that there is intense competition among cancer care providers, both within and outside of Michigan, from small and large health care providers, including Beaumont, Henry Ford, St. John, Botsford, Oakwood, Trinity Health/Catholic Health East, the University of Michigan and McLaren," the DMC said.

"McLaren is free to compete, but not by interfering with the DMC's agreements and converting to its own benefit the DMC's exclusive affiliate and brand — Karmanos," DMC said.

Lane said the lawsuit to gain joint branding rights with Karmanos in Oakland County "is not a critical thing related to the sale. We are 110 percent comfortable doing this transaction. It is just whether the court will agree with us or not."

Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene
Post Wed Dec 11, 2013 9:58 pm 
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untanglingwebs
El Supremo

I find it interesting that McLaren failed to tell Crain's about the lawsuit when asked in a prior interview. Now McLaren wants to move into the three county area covered under the DMC-Karmanos contract.

From the flurry of media coverage today, it is obvious the hospital is playing their public relations angle. But the area media has to be aware o the conflicts and they are not raising the tough issues or even asking questions. They seem to be just taking handouts and no real journalism.[/b]
Post Wed Dec 11, 2013 10:04 pm 
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