Starkman: Beaumont Health's Merger Partner Reveals its Disingenuous, Deceptive and Disrespectful Nature

This columnist, a Los Angeles freelancer, is a former Detroit News business reporter who blogs at Starkman Approved.

By Eric Starkman

It’s already apparent that Spectrum Health of Grand Rapids and Southfield-based Beaumont Health are two corporate peas in a pod. That is reason enough why the two hospital networks should never be allowed to merge.

The inaction of Michigan’s political leaders to express even an iota of concern about the union underscores the state’s weak and ineffective oversight. It also makes clear that Gov. Gretchen Whitmer is all talk claiming health care equity is one of her major priorities.

PR Blather

The joint news release that Spectrum and Beaumont issued last Thursday speaks volumes about the two health systems and the low regard they have for the intelligence of the communities they serve. It’s chock full of PR blather and the information disclosed is so meaningless that Spectrum could announce a merger with Henry Ford Hospital and issue the same release simply by substituting Henry Ford for Beaumont. 

The release articulates no vision, a reasonable expectation given that combining Spectrum with Beaumont will create a health care powerhouse of unrivaled market clout in Michigan’s two biggest metropolitan areas. Instead, we get this pablum: “(The merger will) allow for the development of and investment in innovative solutions that improve health care and coverage for all Michiganders.”

WTF does that mean?

What’s disrespectful to southeastern Michiganders is the release doesn’t disclose the tentative terms of the deal, likely because it could provoke outrage. Beaumont CEO John Fox last year negotiated what he termed a “partnership” with Illinois-based Advocate Aurora. Under the terms of that deal, Advocate Aurora would have consumed Beaumont and its $2.5 billion reserve without having to pay a penny.

Beaumont COO Carolyn Wilson

Beaumont now has a $3.5 billion reserve -- yes, the hospital network increased its reserve by $1 billion during the pandemic -- and it wouldn’t surprise me if Spectrum is gaining control of Beaumont in a non-cash transaction. Southeastern Michiganders paid a price so Beaumont could accumulate its reserve: Thousands of employees lost their jobs and the quality of care at Beaumont’s hospitals declined, except at Troy where that hospital’s management somehow managed to withstand the aggressive cost cutting of Fox and COO Carolyn Wilson.

Seems to me, Beaumont could attract a significantly better merger partner than Spectrum given the pot of gold it brings to the table. I imagine that if I walked into the lobby of the Cleveland Clinic and said I had $3.5 billion to give away, I could get someone to at least talk to me about taking over a hospital serving a major metropolitan area that only a year ago ranked as one of the best regionals in the country.

If Beaumont is going to be merged into another institution, why not aim high and seek out what consistently ranks among the very top hospitals in the country? I’m normally against government handouts, but a compelling argument could be made to offer Cleveland Clinic financial incentives to expand to southeast Michigan in exchange for quantifiable guarantees that area residents would enjoy the same quality of superior care as their Cleveland area counterparts.

A stumbling block would be that Cleveland’s responsible and cohesive business community would never allow the low-caliber directors that sit on Beaumont’s board to sit on the board of their gem of a hospital. Check out the board of the Cleveland Clinic, and compare it to Beaumont’s board.

Spectrum’s board has credible directors, but I’d respect them more if they insisted that Spectrum acknowledge they were taking over Beaumont for free and not allow Beaumont directors to sully Spectrum’s board representation with seven spots.

Falsehoods and Duplicity

What’s alarming is that even speaking in meaningless generalities, the joint Spectrum and Beaumont release contains untruths and deceptions.

Tina Freese Decker would lead the merged colossus

The release says the shared goals of Spectrum and Beaumont include “providing exceptional, equitable care and service to all patients and health plan members.” The goal seems consistent with the objective of Spectrum CEO Tina Freese Decker, whose bio states that her biggest priority is “building a health system that celebrates and reinforces diversity and inclusion for employees, patients, families and members.”

Freese Decker is delusional if she thinks Spectrum is anywhere close to achieving her mission. As I reported on Monday, Spectrum’s Black employees are exploring whether they have sufficient grounds to file a class action lawsuit alleging systemic racism. A source familiar with Spectrum’s diversity efforts described them as “check the box” initiatives that are ineffective and likely causing more harm than good given the known conservatism of the Grand Rapids area. There’s evidence showing that forcing employees to undergo simplistic diversity training only alienates them and breeds resentment.

The joint release says the merger will make health care “more affordable” for the communities Spectrum and Beaumont serve. A Rand Corp. study in September found that Spectrum’s patient fees are 250 percent above Medicare’s rates, while Beaumont’s fees are only 177 percent.  Spectrum issued a statement to Crain's Detroit Business disputing the study’s findings, arguing they were based on too small a sampling and dated information.

Lower Costs? 

Spectrum offered Crain’s no data to quantify how its merger would bring down rates, except to say it was “a top priority.” One must be awfully naïve to accept that claim at face value, particularly given that Beaumont was included in a Wall Street Journal story about some hospitals hiding their pricing data from web searches.

Attorney General Dana Nessel and Gov. Gretchen Whitmer have been silent.

It’s telling that Governor Whitmer so far has remained silent on the deal. Whitmer claims that achieving health care equity is one of her priorities. To that end, she announced earlier this month that all health care providers will be required to undergo two hours of implicit bias training to become licensed in Michigan. Whitmer seemingly believes that a two-hour seminar can solve all of America’s racial ills.

If Whitmer was serious about achieving health care equity, she’d be demanding a comprehensive plan on how the merged Beaumont-Spectrum operations will ensure health care equity, rather than relying on their good faith say-so. When hospitals are seeking to merge, the government can wring significant concessions from them.

Notably, Whitmer was silent when Fox temporary closed its hospital in Wayne at the height of the pandemic, which caters to an economically disadvantaged community, many who don’t have health insurance.

Rep. Andy Levin has tentatively blessed the Spectrum Beaumont union, despite terms of the deal not being publicly known. Levin earlier this year traveled to Alabama to support the retail union’s efforts to organize Amazon warehouse workers.

Look at New York

Let me tell you about Stuart Appelbaum, head of the retail union. After Amazon announced it planned to launch a second headquarters in New York City two years ago, Appelbaum insisted on meeting with company leaders before the deal was inked to determine how they would respond to unionizing efforts. Amazon abandoned its headquarters plans the next day.

Levin has demonstrated no concerns about Spectrum’s openness to unions. Beaumont spent nearly $2 million on union busters to derail an attempt by nurses at Beaumont Royal Oak to unionize. Levin offered no support for the successful organizing efforts of nurse anesthetists working at Beaumont Royal Oak and Troy.

As I’ve argued on my personal blog, nurses have emerged as the conscience of the health care industry and are seeking to unionize at a fast clip so they can call attention to the declining quality of patient care at U.S. hospitals. Beaumont’s nurse anesthetists warned about the dangers of Beaumont Royal Oak outsourcing anesthesia to Texas-based NorthStar, a move that hasn’t gone smoothly.

Spectrum OBGYN residents who were posting photos of themselves on social media holding surgically removed organ and tissue material and playing a game they likened to the “Price is Right” couldn’t get away with a stunt like that at Beaumont Royal Oak and Troy because the hospitals’ nurse anesthetists would have been appalled and promptly ended the practice.

Then there’s Michigan attorney general Dana Nessel, whose spokeswoman had the gall to tell a reporter that the AG’s office plays “an important role in preserving charitable assets – including nonprofit hospitals.”

This is the Dana Nessel who approved the sale of Beaumont’s nonprofit ambulance company to a for-profit company based in Illinois whose price gouging was featured in a local Detroit newscast.

There are too many powerful people involved with Spectrum and Beaumont to stop the deal, including Spectrum director and Amway co-chair Doug Devos, whose family is a major contributor to Michigan politicians. Freese Decker is so confident the deal is a sure thing she’s already touring Beaumont’s hospitals and meeting with staff. I’m told she’s quite engaging and the embodiment of “West Michigan Nice.”

The only person in town with the courage to speak out is Bret Jackson, president of the Economic Alliance for Michigan, a trade group focused on health care delivery issues. Jackson is on record expressing concern that a Spectrum-Beaumont merger will lead to higher prices, but it’s not clear whether he is posturing or that perhaps his organization can muster the membership support and mount a legal challenge to derail, or at least slow down the deal. Jackson declined to speak with me.

A responsible attorney general would hold public hearings before allowing the formation of a hospital network colossus. The research is pervasive that when hospitals merge, prices go up and quality of patient care goes down.

When the Spectrum-Beaumont merger goes through, there will be a market for a shuttle service from southeastern Michigan to the Cleveland Clinic or Michigan Medicine in Ann Arbor so that area residents can continue to get the world class medical treatment they enjoyed until Atlantan John Fox arrived more than six years ago.

Reach Eric Starkman at: eric@starkmanapproved.com. Beaumont employees and vendors are encouraged to reach out, with confidentiality assured.

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