Michigan’s health care boom is reshaping its economy — and its skyline

But the building that for generations was a monument to raw corporate power might become the headquarters of a major hospital system, a head-spinning indicator of how much Michigan’s economy has changed. 

Henry Ford Health, which is spending $2.2 billion to build a 20-story hospital down the street from the former GM building, is considering buying the 1.4 million square-foot behemoth for its headquarters. The development was first reported by Crain’s Detroit Business. 

The former GM building, now known as Cadillac Place, is owned by the state of Michigan. GM decamped from its grand headquarters and moved to more modern digs in Detroit’s Renaissance Center, which it purchased from Ford Motor Co. in 1996.

But earlier this year, a shrinking GM moved out of the Ren Cen and relocated its headquarters to Dan Gilbert’s Hudson’s Detroit building. By one account, GM occupies more space and possibly has more employees at its Silicon Valley tech center than it at its Detroit headquarters. 

Meanwhile, hospital-related construction in Michigan is booming, creating thousands of new jobs for health care workers, a development that is often overlooked in a state that prizes factory investments and jobs. 

New inpatient and outpatient facilities are popping up around the state. The University of Michigan alone has recently allocated more than $1.4 billion for new hospitals and outpatient centers in Ann Arbor, Lansing and Troy. 

One of those facilities, a $360 million specialty care center, is under construction on the site of the former headquarters of defunct Kmart Corp. in Troy—another sign of Michigan’s shifting economy. 

Among other projects around the state, Grand Rapids-based Corewell Health plans to spend hundreds of millions of dollars to build new inpatient towers at its Butterworth Hospital in Grand Rapids at its Beaumont Hospital in Troy. 

Traverse City-based Munson Healthcare is building a free-standing, 24-bed Neonatal Intensive Care Unit at its flagship Munson Medical Center campus, part of a $40 million investment in women’s and children’s services in northern Michigan.

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All this construction is supporting the rapid growth of health care employment in Michigan.  

A new report from the Michigan Health & Hospital Association said Michigan hospitals hired 58,000 workers last year and are looking to bring 23,000 more on board. 

Michigan hospital payrolls hit $51.4 billion last year, more than two and a half times the $19.4 billion spent by state automakers on wages, according to the hospital association. 

Industry leaders cite a variety of reasons for the explosion of hospital spending. The delivery of health care services has changed radically over the past several decades, requiring hospitals to increasingly invest in outpatient centers. 

One example: joint replacements, which not so long ago required a several-day hospital stay, are now routinely performed in outpatient surgical centers. 

Hospitals also need larger patient rooms to accommodate new technologies and ensure the safety of health care workers, industry leaders say. 

Hospitals are catching up on capital spending following the Covid “tsunami,” said Rex Burgdorfer, who has advised Michigan hospitals in merger talks. 

The one exception is rural hospitals that are struggling with reduced patient volumes and revenues. 

Not everyone thinks the new tsunami of hospital construction is healthy for patients and the state’s economy. 

“Hospitals are not competing on price and quality. They’re just trying to grab market share,” said Bret Jackson, president and CEO of the Economic for Michigan. 

He cited one example in which three major health care systems have ambulatory care centers at a single street intersection in Livonia. 

Employers, workers and their insurers in other industries are mostly paying for hospital construction growth, Jackson contends. 

“They’re doing it at the cost of every other industry,” he said. 

The Economic Alliance was founded in 1982 as a coalition of major corporations and labor unions that worked on issues like unemployment insurance and workers compensation. 

But the cost of healthcare has become such a big issue, it’s now the alliance’s sole focus, Jackson said.  

 Employers and individuals say spiraling health care costs are among their biggest worries. Affordability of health care and other living costs is a major issue in this year’s midterm elections. 

Burgdorfer lays the blame primarily at the feet of the managed care system, which he says largely determines what prices hospitals and other health care providers can charge. 

“Hospitals are price takers,” not price setters, he told me. 

Regardless, reigning in health care costs as Michigan’s population rapidly ages will be as difficult as performing a multiorgan transplant. 

State government population estimates show there will be nearly 400,000 more people 65 years and older living in Michigan by 2035. Many of them likely will be replacing their hips faster than their cars.