The writer, a Los Angeles freelancer, is a former Detroit News business reporter who blogs at Starkman Approved.
By Eric Starkman
Imagine the furor if University of Michigan president Mark Schlissel unexpectedly announced one morning that it was merging with the University of Illinois and the combined operations and management would be located in the Land of Lincoln.
If that deal would make your Wolverine blood boil, then pay attention: John Fox, the accountant overseeing Beaumont Health, wants to literally give away Michigan’s biggest hospital company to Advocate Aurora, a decidedly inferior Chicago-based health care chain.
Despite five years of Fox’s bean-counting management, Beaumont’s doctors, nurses, and supporting staff are still recognized nationally for the quality of medical care they provide. That’s the assessment of U.S. News and World Report, whose annual “Best Hospitals" rankings are a closely followed and coveted industry benchmark.
Beaumont hospitals have 19 adult specialties, including 11 at the flagship Royal Oak facility, ranked among the top 50 in the country. The only Michigan hospital to best Beaumont in overall ranking of medical care is U-M’s University Hospital.
Guess how many nationally ranked adult specialties Advocate Aurora has, given that it’s one of the 10 largest “not-for-profit” hospital companies in America and has extensive health care facilities throughout Illinois, Wisconsin, and the Upper Peninsula.
You’re getting warmer.
Try zero. Nada. Zilch. Not one nationally ranked adult specialty.
That’s why this statement from Fox when he announced the deal June 17 is laughable: “We are excited to explore this [merger] option with an organization as highly regarded as Advocate Aurora Health known for their track record in health outcomes, population health and consumer experience.”
Fox didn’t provide sources for his Advocate Aurora “highly regarded” claims, and Mark Geary, Beaumont’s taciturn spokesman, wouldn’t produce any. Just as well, given Beaumont’s habit of playing loosey-goosey with details so the media and public are blinded as to what’s really going on.
Here’s an example: Beaumont’s news release announcing the deal said it was “exploring a potential partnership” with Advocate Aurora. In fact, Beaumont would be ceding control to the merged company on whose board it would only have minority representation. It’s a straight merger of assets, meaning no money is changing hands.
Fox was disingenuous in saying organizational and management details of the merged company still have to be worked out. You can be damn certain that Advocate Aurora CEO Jim Skogsbergh will be running the show and the headquarters will be in Chicago.
Beaumont will be allowed to retain its name and have its own CEO, but it’s unlikely Fox plans to stick around. Fox is close or at retirement age, and he’s been trying to unload his Bloomfield Hills estate since September. (Geary won’t confirm Fox is 72, based on a previously published reference, or the term of Fox’s current contract.) BTW: Fox recently cut his estate asking price by eight percent if you happen to be in the market for a $2.7-million spread.
It doesn’t take a Beaumont brain surgeon to understand why Advocate Aurora wants to do the merger. Skogsbergh has big ambitions; he’s on record as saying he wants to double Advocate Aurora’s revenues to $27 billion within five years. Bigger for bigness’ sake. He’s made no mention of wanting to transform Advocate Aurora into a world-class institution like Boston’s Massachusetts General, Baltimore’s Johns Hopkins, Minnesota’s Mayo Clinic, or the Cleveland Clinic.
Skogsbergh strikes me as a John Fox on steroids. In addition to his ambitious wheeling and dealing, he chairs the American Hospital Association’s political action committee. The AHA is the trade group aggressively fighting President Trump’s plan to force hospitals and health insurers to publish their pricing schedules. The plan, which a judge upheld last week, is a great boon for consumers as it likely will result in significantly lower health care costs, which will make hospitals less profitable.
Hospitals like Advocate Aurora and Beaumont fashion themselves as “not-for-profits” when it comes to paying doctors and nurses, but every day is Christmas for their respective CEOs. Skogsbergh made $12 million in 2017, the most recent compensation figures I can find. That was more than double the next-highest-paid hospital company CEO in Chicago.
Improved Patient Care?
Fox made close to $6 million in 2017 and 2018 in salary and compensation. His 2019 compensation hasn’t been disclosed, and the company claims he’s taken a salary cut in 2020. Still, Fox likely will profit handsomely for giving away Beaumont, receiving a lucrative bonus and perhaps a “consulting contract.”
Here’s the skinny on hospital mergers. There is little, if any, evidence to suggest they lead to improvements in patient care. But there’s lots of evidence documenting they lead to higher patient costs.
California’s attorney general alleged in a lawsuit that Sutter Health, which through mergers became the dominate hospital company in Northern California, was charging as much as 30 percent more for procedures than hospitals in Southern California. Sutter paid $575 million to settle the lawsuit, one that had the hospital industry trembling because it highlighted that hospital mergers lead to higher prices.
Fox is obviously pretty confident his giveaway will sail through with no opposition. He’s outlined no material benefits to Michigan that would result from the merger, other than to say it will give Beaumont more financial resources to make greater investments in patient care and technology. He said it could also result relocating Oakland University’s William Beaumont School of Medicine to Royal Oak from Auburn Hills.
A major reason for Beaumont’s stellar reputation is that it depends heavily on doctors with independent practices who can’t be pushed around when it comes to patient care. But Beaumont has been trying to exert more control and doctors are resisting.
In a major blow to Beaumont’s nationally ranked cardiology expertise, Marc Sakwa, who was chief of cardiac surgery at Royal Oak, and Jeffrey Altshuler, another renowned surgeon, bolted last fall to work at MemorialCare in Southern California. Sakwa, a Detroit native, was instrumental in raising funds for Beaumont’s various cardiovascular specialty centers. Sakwa in his farewell email to employees tellingly made no mention of thanks or support for Beaumont’s management.
Hospitals nationwide are increasingly treating doctors as hired help. Specialists have even emerged to advise hospital CEOs on how to grind doctors down and make them feel vulnerable. Private equity firms are active in the space, and this Bloomberg article makes clear the increased focus on profits is adversely impacting patient care.
Fox giving away Beaumont to an Illinois company is akin to when Comerica flipped Detroit the bird in March 2007 and relocated its headquarters to Dallas from Detroit, despite the majority of the bank’s assets being located in Michigan. It’s an apt reference because Beaumont chairman John Lewis worked at Comerica for 36 years and retired as vice chair in 2006. Lewis’s Beaumont bio says he still lives in Michigan.
Beaumont said it notified Michigan’s attorney general of its merger plans. When I asked Michigan Attorney General Dana Nessel’s office if she planned public hearings, her spokeswoman issued this statement:
The Attorney General serves an important role in protecting charitable assets in Michigan under broad common law and statutory authority. If we learn that these transactions impact charitable assets, our office will take appropriate action to ensure these assets are properly protected. And this information will be made public.
Beaumont Health is one of Michigan’s most prized charitable assets, and Fox wants to give the community property to an out-of-state company. So, if Nessel allows the Advocate Aurora deal to go through, by her own admission she’d be derelict in her duties to protect Michigan’s charitable assets.
To my knowledge no public officials, business leaders, or union representatives have expressed any public reservations about Fox’s merger plan and its impact. Health care excellence and costs are a major factor in getting out-of-state businesses to say yes to Michigan. According to a 2019 Rand study, Beaumont’s patient fees are lower than Advocate Aurora’s, but that could change if the merger is completed.
Just weeks ago, Beaumont’s health care workers were celebrated as heroes for risking their lives treating Covid-19 patients. Those pizzas and fruit baskets local residents sent to Beaumont hospitals at the height of the pandemic were a nice gesture. But if you want to really show Beaumont doctors and nurses some genuine thanks, write letters to Nessel and Governor Whitmer and put them on notice that if they allow Beaumont to merge with Advocate Aurora, you’ll vote them both out of office.
Eric Starkman can be reached at email@example.com.