Tom Walsh, Detroit Free Press Columnist 10:54 p.m. EST December 12, 2015
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(Photo: Regina H. Boone / Regina H.Boone)
They don’t yet have the prominence of a Dan Gilbert or the Ilitches – no sports team, no casino ownership – but the Cotton family’s Meridian Health Plan is fast emerging as Detroit’s next major high-growth, job-creating, family-run private enterprise.
Since moving their primary Medicaid HMO business from Southfield to downtown Detroit, founder David Cotton, a medical doctor, and his three sons have grown it from 112 employees and revenue of $275 million in 2008, to 1,500 employees today, generating $3 billion in revenue this year.
Jon Cotton, Meridian’s president of Michigan operations, said in a recent Free Press interview that their goal is to reach $8 billion to $10 billion in revenue during the next five years, employing 3,000 to 4,000 people, mostly in Detroit.
“We have 400 job openings right now,” he said, “and we’ve hired 880 people so far this year.”
Meridian is currently Michigan’s largest Medicaid HMO, but it also provides other government-based health plans — Medicare, Medicaid or health insurance exchanges under the Affordable Care Act – in six states altogether.
The Cottons kept an intentionally low-profile during the firm’s early growth years – “my dad said to stay under the radar,” Jon Cotton said. But as Meridian has grown, expanding into other states and into Medicare health and prescription drug plans, the Cottons and their company have become more visible locally.
A year ago, Meridian joined with Gilbert’s Bedrock Real Estate group to buy the 15-story office tower at One Campus Martius in downtown Detroit, which had been built and occupied in 2003 by Compuware. Last year, Compuware was broken up and sold to private equity group Thoma Bravo. Its remaining mainframe computer software business now occupies two floors of the building. Meridian and Gilbert’s Quicken Loans each occupy four floors there now. Cotton said the two co-owners haven’t yet decided on a new name for the building, simply usings its street address for now.
In 2013, Meridian signed on as title sponsor for the annual Winter Blast weekend of winter activities around Campus Martius in February. And a year earlier, they were early backers of the Detroit Crime Commission (DCC), a nonprofit headed by former FBI agents that’ has helped an underfunded Detroit Police Department use high-technology tools to track gang activity, test rape kits and fight scrap metal theft.
“There would not a Detroit Crime Commission without the cotton family,” said David Egner, CEO of the Hudson-Webber Foundation, which has helped to fund the DCC.
The Cottons also have invested in commercial real estate along Kercheval in Grosse Points Park, and launched a program to help college students who rent in the lower-end neighborhoods of that suburb that borders Detroit’s east side. Now at the heart of Detroit’s promising revival in the city core, the Cottons are pushing a go-go corporate culture at Meridian that sounds very Quicken-like.
“We want people who are smart, aggressive and have the right attitude. If they don’t have the experience, we almost look at that as a plus,” Jon Cotton said. “One of the reasons we get along so well with Dan (Gilbert) is that he has the same philosophy. He wants these aggressive young folks who come in and you mold them.”
Earlier this year, Meridian raised its minimum wage for hourly jobs to $17 an hour. About 30% of its workers get that; everyone else makes more.
Quicken has received national acclaim for years as a top workplace and also topped J.D. Power & Associates quality rankings for mortgage origination and service. Meridian is winning similar recognition, appearing the past four years as one of Michigan’s top workplaces, in a third-party survey commissioned by the Free Press.
Meridian has also earned high quality scores from the National Committee for Quality Assurance (NCQA), which has rated Meridian’s Medicaid HMOs in Michigan, Illinois and Iowa among the best in the nation the past two years.
“We invest in care coordination,” Jon Cotton said. “We didn’t raise pay to $17 an hour because we have to be competitive out there; nobody else is doing that. We did it because these people are my most valuable assets.”
David Cotton, 65, Jon’s father, former chief of obstetrics and gynecology at Hutzel Hospital, and wife Shery founded Health Plan of Michigan in 1997, moved it from Southfield to Detroit in 2008 and changed the name to Meridian at the start of 2012.
Their three sons all hold executive positions in the firm. Jon, 38, is president and his twin Sean is chief administrative officer. Brother Michael, 35, is chief operating officer.
No matter how big Meridian gets, Jon said, it will remain family owned.
“We’re never going to sell this company,” he said. “My dream at the end of day is that my great-grandkids are going to be running this place.”
In the future, he said, HMOs may not exist in their present form, but some business will be helping to connect patients with health care providers and payers, and Meridian intends to be a major player in that world.
Jon Cotton believes the Affordable Care Act needs to be fixed – “it’s new it’s muddled and there are lots of bugs to be worked out,” he said – but he doubts it will be repealed. And there are plenty of newly insured customers to be served, and money to be made, but working with the exchanges to improve delivery of care.
“I’m hot on those, because the exchanges do to health insurance what Expedia and Priceline did to travel. You do it all online, you take out the middlemen,” John Cotton said. Consumers can look at price, quality rankings of health plans and choose accordingly.
In Michigan, about 470,000 people became eligible under the expanded Medicaid program under ACA, which translated to 130,000 new customers for Meridian, which has a 28% are of the state’s Medicaid HMO market. “So do we like ACA? Yes, there’s lots of things I like about it. It’s brand new business … In the next 20 to 30 years I think everything will be flowing through the exchanges.”
Each segment of of complex health insurance world, however, carries its own challenges.
Reaching a Medicaid clientele of lower-income people is mainly done through clinics and doctors, while Medicare – a growing chunk of Meridian’s business – requires the insurer to do more direct marketing to senior citizens, many of whom are very savvy and analytical in choosing their plans.
As a result, Meridian is now in the planning stages for an expanded branding and marketing effort next Spring.
Contact Tom Walsh: firstname.lastname@example.org, also follow him on Twitter @TomWalsh_freep.
Detroit Free Press, December 12, 2015