The Royal Oak Hospital system that thinks big is getting big.

Starting as a single 238-bed community hospital in rural Oakland County some 50 years ago, Beaumont Hospitals has transformed itself into a booming medical center with more than 1,300 hospital beds at its Royal Oak and Troy campuses; 2,400 doctors' offices in southeast Michigan; and a third hospital in Grosse Pointe acquired last year.

But the coming years may be the most ambitious yet for the 53-year-old hospital.

After decades of focusing on its flagship medical campuses in Royal Oak and Troy, Beaumont is casting a wider net to snare a larger share of Metro Detroit's health care market. The health system has more than a half-billion dollars in new building projects on the boards, a small private medical school in the works and plans to strike out on its own in developing a rare $160 million cancer treatment center with a private Indiana partner. Renovations are also planned for Beaumont's Grosse Pointe hospital, which it bought from Bon Secours in October, making it the first hospital addition since it expanded to Troy in the late 1970s.

In the process of bulking up, Beaumont has stepped on a few toes as it pushes into geographical and service areas that some say are well-served by other institutions.

Beaumont CEO Ken Matzick says such growth is needed to stay relevant in Metro Detroit, where it finds itself fending off competition from rival hospital systems that are moving onto its Oakland County turf. Two regional systems -- Henry Ford Health Systems and St. John Health -- have hospitals under construction on the county's western edge, and both will open within the next year.

"Will that impact us? You bet. If you're not responding to competition, you're out of business," Matzick told The Detroit News.

Outpatient fuels growth

At the heart of much of Beaumont's expansion is investment in its network of outpatient centers, a move that hospital officials say will bring better medical care closer to a growing patient base.

"In the earlier days, everybody came to the hospital. These days the hospitals are going to them," said Matzick, who has been with the hospital system for nearly 40 years and helped lead the development of the Troy hospital in the late 1970s.

The hospital system is building two outpatient centers in Oakland County — a $70 million one in Commerce Township and a $37 million center in Independence Township. It's also spending $59 million to expand its ambulatory care centers in West Bloomfield and Novi — the same cities in which St. John and Henry Ford plan to open their hospitals.

"From a business standpoint, how do you grow in a shrinking or flat market when southeast Michigan's economy is tanking and you lose 400,000 manufacturing jobs in the state?" Matzick said. "You have to have a different strategy."

Part of that strategy is to get Metro Detroiters' attention. The health system has established itself as one of the more aggressive advertisers in the region with a long-running advertising campaign featuring a cautionary tagline asking, "Do you have a Beaumont doctor?"

Industry experts question whether Beaumont's ambitions are healthy for an overcrowded suburban market.

"Having more capacity even closer to people does not mean more access. If you live next door to a hospital, but can't afford to go there, you have no access," said Larry Horwitz, president of the Economic Alliance of Michigan, a nonprofit group composed of businesses and labor unions. Some physicians are also wary that all this competition will contribute to rising health care costs while doing little to address a growing number of patients who can't afford medical treatment.

"I think most physicians decry this arms race," said Dr. Chris Bush, acting president of the Wayne County Medical Society.

"They're all acquiring expensive technologies that are duplicative," he said. "I just think that when patients are struggling to get their basic services met, the resources would be better allocated to primary care of our population. There are many people in Detroit and in the suburbs who aren't getting their diabetes checked; they aren't getting their blood pressure taken care of."

New cancer center planned

Beaumont, however, said it believes it's tackling the access problem on other fronts.

The new proton beam cancer treatment center, its leaders say, will bring a more precise form of radiation therapy to thousands of patients and make the region a hub for this kind of treatment. Only five such proton centers exist in the country.

And the development of a new private medical school with a starting class size of about 50 students and a partnership with Oakland University will help alleviate a projected statewide doctor shortage expected to hit Michigan by 2020. The medical school, set to open in 2010, will split its teaching facilities between the Oakland and Beaumont campuses and may eventually include the construction of one or two buildings, said Michael Killian, Beaumont's vice president for marketing and public affairs.

Both projects will provide much-needed jobs to the region, Matzick said, noting that the proton beam center alone may create as many as 100 high-tech jobs.

Still, both projects also have their critics.

Some medical groups question whether a new medical school should open so close to the one at Wayne State University, which recently expanded its class size. While a doctor shortage is expected, there also have been major reductions in residency funding on the state and federal level, Bush said. Producing a surplus of medical students won't necessarily mean they'll be able to perform their residencies in Michigan, he said.

"Before any new medical schools are built, the whole issue should be thoroughly researched," Bush said.

Rival hospital systems have aligned to block Beaumont's plans to lead the development of the new proton beam center, even appealing to the state to mandate a cost-sharing collaboration that will allow all hospitals access to the technology.

"I don't think a single-ownership model in the state is the appropriate way to develop this technology," said Henry Ford CEO Nancy Schlichting, after last month's decision by the state Certificate of Need Commission supporting creation of a hospital consortium to build the proton beam treatment center.

"$160 million is very expensive," Schlichting said. "Given the health care crisis in the state, it is important that we do this the right way."

Beaumont, however, is pressing forward with its bid for the center, in hopes the regulatory commission's mandate will be vetoed by the Legislature or governor. It says it is trying to put together its own collaboration by offering neighboring hospitals an equity share in the venture.

"We've tried to argue that it would be extremely difficult for this many centers to agree on a site, a business plan," said Dr. Frank Vicini, Beaumont's chief of oncology. "You know, it's never been done."

East side investment

On top of its technological expansions, Beaumont plans to invest about $100 million into its new Grosse Pointe hospital, which it bought from Bon Secours for an undisclosed sum. Included in those upgrades are new technologies and improvements to the structure of the four-story building.

In buying the hospital, the Royal Oak hospital system enters a market dominated by two major regional players -- St. John and Henry Ford.

"Beaumont is brand new to the community. They're certainly doing a lot of outreach," said Grosse Pointe Mayor Dale Scrace, noting that Beaumont has started investing in upgrading the hospital. "Certainly, they've been aggressive because they want to gain as much market share as they can."

In fact, it's a hospital system with big ambitions — hoping to one day be a major medical institution on a par with some of the nation's top 20 or 30, such as Massachusetts General Hospital or the Cleveland Clinic, say its leaders.

For now, though, Beaumont leaders are working hard to just get the word out that it is thinking big, and getting bigger.

"Historically, we have been viewed as a large Oakland County hospital," Matzick said. "The reality is we're much more than that."

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last updated: 06/03/08

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