DETROIT -- The Detroit Medical Center says it's signed an agreement that paves the way to be bought by a private Nashville, Tenn.-based health system.

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The nonprofit Detroit health system said in a statement it signed the purchase agreement Friday morning with Vanguard Health Systems.

If the sale goes through, it will be the single largest investment in Detroit's history.

"We have the human capital here at the DMC and what we need is the capital, and I think the private sector here can offer that," Businessman and DMC Board member Roger Penske.

The terms of the deal include Vanguard agreeing to make $850 million in capital improvements for DMC’s eight-hospital system over the next five years.

Mike Duggan, the DMC's president and chief executive, said the deal will allow the hospitals to maintain their commitments to charitable care and medical education while boosting investment in the company's facilities.

Vanguard will buy Detroit Medical Center's assets for a price that includes $417 million to retire all outstanding DMC bonds and other long-term debts. Vanguard also assumes all other DMC liabilities.

Five hundred million dollars will go towards improvements including a new Children’s Hospital Tower; new modern patient units at Receiving; doubling space in the Sinai Grace emergency room; a major renovation of or space at Harper and new physician offices at Harper and Sinai Grace. The other $350 million will go toward repairs and capital and equipment needs.

The hospital group will continue to be managed locally as a subsidiary of Vanguard, which is known as VHS. It will be run by a new board with four members appointed by the parent company and three members appointed by DMC.

DMC officials said they have visited hospitals with similar set-ups in Texas and it seems to work very well.

Vanguard will continue to operate the hospitals under the DMC brand. The final purchase price has not been disclosed.

Duggan, who has been credited with turning around the system’s finances, said despite six years of profitability, the DMC was unable to get investment from the Wall Street bond market as a nonprofit, he said.

"The nonprofit hospital model is killing health care in the city of Detroit," Duggan said at a news conference at the Children's Hospital of Michigan.

Trip Pilgrim, Vanguard's chief development officer and senior vice president, said the company was impressed by the DMC's profitability, given the difficult economic climate in the Detroit area.

Vanguard said it will also spend more than $800 million in the city of Detroit, and employ 5,000 new construction jobs.

Detroit Mayor Dave Bing, Wayne County Executive Robert Ficano and DMC leaders attended seemed to be elated at the announcement.

"This is a great for us and the city of Detroit," said Penske. "This is going to touch all of us for many years – beyond my lifetime."

"This is going to be the medical universe," said Ficano, who added that Wayne County was going to work very hard to help Vanguard ease into the city.

The letter of intent is contingent upon the approval of a low-tax or tax-free "renaissance zone" approved by the city, county and state for DMC's central campus.

Members of the Detroit City Council have expressed concern that Vanguard has said it will honor DMC's commitment to charitable care for only 10 years.

"That's a good start, but we want to make sure there are some assurances," said Detroit City Council President Charles Pugh.

The agreement also must be approved by the two health systems' boards and the state attorney general. Vanguard has said it would like to have the deal approved by June.

The DMC operates eight hospitals and is affiliated with the Wayne State University School of Medicine and the Barbara Ann Karmanos Cancer Institute. Vanguard operates 15 hospitals in Illinois, Arizona, Texas and Massachusetts.

The deal still requires approval by Michigan Attorney General Mike Cox, a necessary step before a nonprofit hospital can be acquired by a for-profit company. The agreement also needs to conform to state and federal antitrust laws. The deal is expected to close by Nov. 1.