Chattanooga, TN -- Recent developments in a Michigan
federal lawsuit are pulling back the curtain on the hot
button issues of minority contracting, meaningful jobs in
the inner city, and race relations in the health care
industry. In July 2003, World Healthcare Systems, Inc. (WHS),
an African American owned medical supply firm filed a $50
million contract and racial discrimination lawsuit against
Henry Ford Health System (Henry Ford) in Michigan federal
court. World Healthcare Systems, Inc. v. Henry Ford Health
System, Civil Action No. 03-72659 (USDC Eastern Dist. Mich.
originally filed July 11, 2003).
According to the federal lawsuit, which was amended in
August 2004 to include additional information, Henry Ford
promised to purchase 20% of its requirements for
medical/surgical supplies (e.g., exam gloves, soft goods,
disposable pillows, protective apparel, pouches and
positioning products) from WHS in exchange for a savings of
at least 10% (i.e., $1 million plus in annual savings to the
hospital system) over prices previously offered by other
Henry Ford vendors. This supply agreement is a part of a
5-year master distribution agreement between Henry Ford and
Owens & Minor, Inc. of Richmond, Virginia. WHS filed suit
after Henry Ford allegedly reneged on the deal. Henry Ford
has denied the existence of any deal with WHS in the
Michigan federal case.
On May 7, 2004 (almost a year after the case began), Henry
Ford filed a motion to dismiss the contract claims on the on
the grounds that the hospital system did not have any
agreement with WHS. However, on June 30, 2004, WHS filed a
30-paged Response Brief claiming that WHS had a substantial
supply deal with Henry Ford that the hospital system later
breached. In addition to the June 30 Response Brief, the
attorneys for WHS, Rawle Andrews Jr., Esq. and Curtis L.
Bowe, III, Esq. of Tennessee's Andrews & Bowe, PLLP also
filed numerous Exhibits including 2002 Management Reports to
Henry Ford's Board of Trustees, as well as letters,
memoranda, and emails from Michael Whalen, Henry Ford’s
Vice-President of Purchasing and his staff indicating that
Henry Ford had and was working on a deal to obtain medical
and surgical supplies from WHS from at least October 2001 to
early 2003. The WHS Exhibits also include numerous newspaper
articles from 2002 and 2003 reporting on the deal, as well
as pictures and direct quotes from Gail Warden, Henry Ford’s
CEO at the time the deal between WHS (www.worldhealthcare.com),
Henry Ford (www.henryfordhealth.org),
and Owens & Minor (www.owens-minor.com)
was made.
In one of the more interesting Exhibits to the WHS Response
Brief, an April 8, 2002 memorandum to the Distribution Team,
Henry Ford Vice President Michael Whalen writes: "Henry Ford
Health System is moving forward with plans to achieve our
overall goals of reducing cost, increasing diversity
initiatives and standardizing products. With these goals in
mind, we are in the process of converting a number of basic
commodity products to one of our minority-owned suppliers,
WHS of Michigan. This will result in a 10% saving on these
and other items. We are excited about our partnership with
Owens and Minor and WHS of Michigan. We feel confident that
we can increase our overall volume of business with WHS of
Michigan to at least $10,000,000. We have the commitment
from O&M and WHS of Michigan to work through whatever
conversions are necessary." In a related June 4, 2002
e-mail, H. Michael Falconer, a Henry Ford contracting
coordinator reconfirms Henry Ford's business relationship
with WHS as follows: "As you may recall in April Mike Whelan
sent a e-mail announcing our new partnership with World
Healthcare. I shared an Excel file listing the OR items that
World Healthcare will be transitioning to become our
preferred/exclusive vendor."
According to the WHS Response Brief and the documents filed
with the Michigan federal court, Henry Ford's landmark
supply agreement with WHS also was presented to and approved
by Henry Ford's own Board of Trustees. Despite the fact that
Henry Ford is denying the deal in federal court, the WHS
Response Brief specifically refers to Supplier Diversity
Reports that were presented to Henry Ford's Board of
Trustees on June 19, 2002 and December 12, 2002,
respectively. In fact, the June 19th report to Henry Ford's
Board of Trustees, which is attached as part of the Exhibit
Package, estimates that Henry Ford was on pace to do $6
million worth of business with WHS during calendar year
2002.
"Our mission and vision for WHS and the future of minority
contracting in the health care sector has been devastated by
Henry Ford's willingness to take credit for the supply deal,
and its subsequent failure to honor its landmark agreement
with us," said Sylvester L. "Skip" Reeder, III, Chairman and
CEO of WHS. "Gail Warden (Henry Ford’s CEO at the time)
personally asked me to support Henry Ford's Minority
Business Initiative because WHS was the largest minority
owned healthcare vendor in the United States. WHS also was
selected as Henry Ford’s partner for medical and surgical
supplies because WHS had a master contract with Premier, a
$12 billion group purchasing organization (GPO) that is
partially owned by Henry Ford (www.premierinc.com).
WHS accepted and prepared for this significant business
opportunity because we thought Henry Ford was really
committed to spending its dollars equitably in the community
it serves. Unfortunately, we had to file a federal lawsuit
against them to enforce the promise," Reeder added.
The WHS Response Brief also includes a compelling Timeline
(pgs. 7-14 of WHS Brief), showing the dates, times, and
places when WHS, Henry Ford, and its agent Owens & Minor
apparently met to negotiate and work on the supply deal.
THE TIMELINE
* 10/03/01: HFHS-O&M Letter of Intent (which was faxed to
WHS by Henry Ford on 10/10/01) ("We at Owens & Minor
understand the significance of Henry Ford Health System
partnering with World Healthcare and Owens & Minor");
* 10/22/01: O&M-WHS Confirmation Letter ("Our plan as the
Integrated Distributor Partner of Henry Ford Health System
includes a commitment to assisting Henry Ford Health System
in fulfilling its minority initiatives to purchase at least
ten million dollars of products from WHS of Michigan on an
annual basis.");
* 04/08/02: Whelan confirming memorandum entitled “World
Health Systems of Michigan Conversion”, which addresses,
with excitement, Henry Ford’s on-going participation in a
special requirements contract for medical and surgical
supplies to increase its overall volume of business with WHS
of Michigan to at least $10 million),
* 04/15/02: Henry Ford publishes its supply agreement with
WHS on the World Wide Web (www.hfhspurchasing.org)
in its Purchasing Points Newsletter under the heading "A
Word from Mike Whelan" Note: HFHS terminated the website
after the WHS lawsuit was filed.
* 06/04/02: Email from H. Michael Falconer (HFHS Contract
Coordinator) Henry Ford’s OR PAM Team entitled, "World
Healthcare," which reads, in pertinent part: "You will
recall in April Mike Whelan sent an e-mail announcing our
new partnership with World Healthcare. I shared an Excel
file listing the OR items that World Healthcare will be
transitioning to become our preferred/exclusive vendor,"
together with copy of Whelan's 04/08/02 Memo to Henry Ford’s
PAM Team, entitled "World Health Systems of Michigan
Conversion."
* 06/12/02: E-mail from Mary Stevens (HFHS Contract
Coordinator) and Dana Reeder (WHS Reg. Mgr.): "I had heard
from Carol that all was going well on the conversion. Thanks
for the update I knew that the change would go great."
* 06/19/02: "Supplier Diversity Report" of Henry Ford's
Board of Trustees: projects $6 million in purchases from WHS
during CY 2002; and lists the HFHS-WHS agreement as
Defendant's Number "1" Accomplishment during the first
quarter 2002 (Board Report text is virtually identical to
Whelan’s published statements during spring 2002);
* 10/10/02: Crain's Detroit Article entitled "WHS of
Michigan wins $10 million deal from Henry Ford Health
System," which recites the 20% spend for 10% discount
agreement of the parties and quotes then CEO Gail Warden.
* 10/21/02: Modern Healthcare Article entitled, "Spreading
the Wealth," which describes the parties' 20% spend for 10%
discount agreement, and features a picture of Gail Warden
(Henry Ford) and Robert Johnson (WHS) above the caption,
"Henry Ford's Gail Warden, left, and Robert Johnson,
president of WHS of Michigan, discuss their $10 million-plus
deal."
* 11/29/02: Michigan Front Page (sister paper of the
Michigan Chronicle) article entitled "WHS provides $10
million to Ford Hospital," which describes the parties'
agreement, future goals for expanded purchasing
opportunities, and includes a picture and quotes of then
Henry Ford CEO Gail Warden ("Our relationship with WHS of
Michigan is a great enhancement to our supplier diversity
program.")
* 12/09/02: Letter from Trustee Member Rev. Dr. Joseph R.
Jordan, Pastor of the Corinthian Missionary Baptist Church
of Hamtramck, MI to Marilyn Hubbard (HFHS VP of Community
Affairs), indicating: "There is still much that needs to be
accomplished to enhance diversity, particularly in supplier
diversity. There seems to be no one individual within the
organization that possesses the necessary power to render
immediate resolution to the existing problems."
* 12/12/02: "Supplier Diversity Report" of Henry Ford's
Board of Trustees (just three days after Rev. Jordan's
letter to Vice President Hubbard regarding "existing
problems" at HFHS): Paragraph 3 of the Report's
"Accomplishment Section" devotes two full paragraphs to
describing the parties' agreement, and commends WHS for its
community outreach.
* 12/15/02: E-mail from Jeanette Carney (Henry Ford) to Bob
Johnson (WHS) and other HFHS and O&M officials
congratulating WHS on a job well done, informing WHS of the
11/29/02 Michigan Front Page article and advising WHS of
Board of Trustee’s extensive discussion about Defendant’s
progress in implementing its landmark agreement with WHS.
* 01/01/03: WHS enters "Product Services Marketing
Agreement" with Kimberly Clark Corp. at Henry Ford's
direction: Services Agreement reconfirms Plaintiff’s
agreement with Henry Ford, and that WHS has agreed to use
Owens & Minor to distribute products to Henry Ford.
* 01/12/03: Detroit News article entitled "Medical supplier
aids others" that chronicles WHS' creation of a non-profit
Fund administered by the Community Foundation for
Southeastern Michigan to grow minority manufacturing in the
healthcare arena, which will be funded by proceeds from the
parties'agreement.
* 01/13/03: Letter from present CEO Nancy Schlichting to
George Barnes of Heritage Optical (and the MMBDC)
summarizing Henry Ford's “broad” minority contracting
efforts, including its landmark agreement with WHS for
medical and surgical supplies ("MMBDC Companies that
specialize in Healthcare, . . . that are doing business with
HFHS: World Health Care Systems (medical/surgical supplies).
The best opportunities for growth can occur in medical
supplies (e.g., World Health").
* 01/14/03: PowerPoint Presentation for meeting between Bob
Johnson (WHS) and Nancy Schlichting (Henry Ford) et al.
regarding shortfall under the agreement and proposed plan
for Henry Ford's improvement of its performance under the
deal.
According to Attorney Rawle Andrews Jr., lead counsel for
WHS, this lawsuit has consequences for society that are far
greater than who's right and who’s wrong in this case. "We
have said all along that a deal is a deal, and we mean it.
However, we simply must get past the point where our 21st
Century mindset still places a higher value on Black
athletics and entertainment over the academic achievement
and professional advancement of African Americans and other
minorities in this country. I certainly do not begrudge our
entertainers their successes, but if we were talking about a
contract dispute involving LeBron James' (NBA Rookie of the
Year and Ohio High School graduate) and his $100 million
sneaker deal, no one would bat an eyelash about the size or
length of the agreement, or what motivated a decision not to
pay," said Andrews, Chairman of Tennessee’s Andrews & Bowe,
PLLP.
Attorney Andrews also remarked: "Bill Cosby can say whatever
he wants about the plight of Urban America, but as long as
people on both sides of 8 Mile Road or whatever rail road
tracks that separate the city from the suburbs keep falling
out of their chairs every time a Skip Reeder (CEO of WHS) or
a Bob Johnson (Pres.,WHS-Michigan) starts talking about
enforcing a $10 million/year deal they made with a
non-profit, federally funded hospital system making $2
billion in yearly revenues, we are never going to solve the
riddle of race relations in America or reach some
understanding of the root causes for why Black folks are
still sitting at the back of the bus when it comes to issues
of equal access to patient care, and meaningful employment
and minority contracting opportunities in the healthcare
industry," Andrews added.
In addition to the contract claims, the WHS lawsuit also
alleges that Henry Ford's motive for reneging on the supply
deal was based on race. According to CEO Reeder, Detroit
should have been an ideal proving ground for the growth of
minority and women owned healthcare manufactures and
suppliers in the United States. "Although Detroit has the
largest base of African American owned manufacturing
companies in the world, we still have a long way to go in
the fight for economic equality in this country. Healthcare
spending is nearly $2 trillion in America but minority and
women owned businesses take in less than 1/10 of 1% of the
total health care dollars spent every year." Reeder
commented. "Henry Ford had a golden opportunity to be an
industry leader in eliminating artificial barriers and
increasing supplier diversity in the health care sector, but
they defaulted on their promises to us and now are denying
we ever had a deal in court. Our word, our Brief and the
attached Exhibits prove Henry Ford's defense is a sham,"
said Reeder. Although Henry Ford has denied the charges of
racial discrimination as well, these claims apparently are
not a part of its motion to dismiss on file with the
Michigan federal court.
WHS and Henry Ford are scheduled to be in court on Henry
Ford's motion to shield documents from the public record
before U.S. Magistrate Judge Paul J. Komives on August 6,
2004 at 10 a.m. (ET) at the Theodore Levin U.S. Courthouse
231 W. Lafayette, Room # 624 Detroit, Michigan 48226.
According to WHS, although the privacy rights of patients,
employees, and certain financial documents (e.g., tax
returns) must be protected, evidence of contract breach and
racial discrimination is not confidential.
The Michigan federal court has set a trial date of December
7, 2004 before U.S. Senior District Judge George E. Woods.
Contact Information:
Rawle Andrews Jr., Esq.
ANDREWS & BOWE, PLLP
Office: 202-349-3975
Fax: 410-510-1034
Email:
randrews@andrewsgroup.org
URL:
www.andrewsbowelaw.com