In late November, Ann Arbor, Mich.-based University of Michigan Health opened its $920 million D. Dan and Betty Kahn Health Care Pavilion in Ann Arbor, which marked a major capacity and modernization milestone for Michigan Medicine.
The 12-story, 690,000-square-foot facility comprises 264 private inpatient rooms, 20 operating rooms and three interventional radiology suites, with an MR/OR suite set to open in early 2026. The health system moved 186 adult inpatients to the hospital Nov. 23 from University Hospital and the Frankel Cardiovascular Center, also in Ann Arbor.
Becker’s connected with Eric Strucko, PhD, CFO of Michigan Medicine, to discuss how the new hospital will strengthen the system’s long-term financial outlook through improving clinical efficiency, expanding access and supporting future renovations across older facilities.
Editor’s note: Responses have been lightly edited for clarity and length.
Question: How does the opening of the new pavilion shape the system’s long-term financial outlook?
Dr. Eric Strucko: The D. Dan and Betty Kahn Health Care Pavilion is a generational, $920 million investment for Michigan Medicine that further elevates the academic medical center’s standards with respect to patient rooms, operating rooms, procedural space and healthcare technologies. The pavilion enables Michigan Medicine to relocate patients from the older facilities, which will be renovated and refurbished. The pavilion also adds some capacity to help meet growing access demands from patients and providers. This development was supported in part by a $50 million gift from the D. Dan and Betty Kahn Foundation. This approach recognizes the need for facilities upgrades and capacity expansion.
Q: What financial or operational efficiencies do you anticipate from consolidating high-acuity services in this facility?
ES: The pavilion allows Michigan Medicine to redesign clinical workflows, particularly peri-operative services. Patient admissions, pre-operative preparation, diagnostics, surgical procedures, post-operative care and discharge can happen with minimal delays and patient relocation. New workflows can help Michigan Medicine manage the time in the operating room and immediate post-procedure space, as well as overall patient length of stay, lowering the overall costs of care.
These changes reflect our institutional commitment to strategic priorities of improving access, safety, quality and experience — to benefit all of our patients and the teams dedicated to their care.
Q: What financial performance indicators will you monitor to assess whether the pavilion is meeting its value goals?
ES: Michigan Medicine assembled a detailed business plan that valued tangible and intangible returns on investment. We needed modern space for care while maintaining the capacity to meet increasing demand. The pavilion project did not require taking beds offline during construction. Michigan Medicine can now focus on improving the older spaces over the next several years. The overall economic impacts of the pavilion will materialize over the next decade. Michigan Medicine will monitor the pavilion’s value using traditional measures of financial return and operational indicators, such as improved access, outcomes and patient satisfaction.
Q: What guidance would you offer other health systems considering similar large-scale capital investments?
ES: Our large capital investments are strategically timed to meet demand and improve access to needed care. Michigan Medicine has a strategic financial framework which seeks to align investments with available resources, including philanthropy.
These are major investments to create community benefit, shaped to meet specific outpatient and inpatient needs over the past two decades. The pavilion is the third patient care capacity investment in a three-part strategy, which included the opening of comprehensive ambulatory care facilities in West Ann Arbor and Brighton, Mich., in 2017 and 2018, respectively.
