Column

Starkman: Bad News For Beaumont -- CEO John Fox Sticking Around Longer Than Expected

September 24, 2021, 3:13 PM

Eric Starkman of Los Angeles is a former Detroit News business reporter who blogs at Starkman Approved.

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Beaumont CEO John Fox

By Eric Starkman

It appears that Beaumont Health CEO John Fox won't be bundling his millions and bidding Michigan goodbye as soon as he hoped. That's bad news for Metro Detroit's biggest hospital system.  

Beaumont, consistent with its practice of putting a spin on undesirable news, notified employees that it is making “good progress" toward combining the troubled hospital system with Grand Rapids-based Spectrum Health. The company said, “pre-integration planning” is now underway, which it assured “is permissible under regulatory guidelines, and will not be implemented until closing.” As every Beaumont employee knows, the company does everything by the book.

There’s just one thing. Beaumont said the Federal Trade Commission, which must approve Spectrum’s takeover, "is experiencing a surge in filings across all industries" and will take "longer than originally anticipated” to review proposed takeover.

The agency has requested “additional information,” but no worries, “the organizations understand (this) has become increasingly common.”

Fox, whose golden parachute could be $30 million or more, already had one hand outside his Michigan mitten. The Spectrum deal, which he and his PR guy Mark Geary prefer to call a “merger” or a “partnership,” was announced in June and was slated for completion in the fall. Fox was so certain the deal was in the bag that he predicted he’d be gone by October 1.

That’s obviously not going to happen.

With Fox at the helm for an unknown period, Beaumont will continue to deteriorate. The company virtually has no senior management left to run the place. Chief Medical Officer David Wood Jr. is officially gone next week, leaving only Chief Nursing Officer Susan Grant and Chief Counsel Jane Jordan as the only remaining senior management executives. 

Fox's Priorities

Thank goodness, Jordan hasn’t yet bolted. A chief counsel is a good thing to have around when you’re trying to do a major deal. Having a chief medical officer in the midst of a pandemic would also be nice, but Fox has his priorities.

Like Fox, Grant and Jordan have their primary homes in Atlanta. I’ll bet a box of Georgia peaches they don’t stick around once the Spectrum deal is done. That’s why I call the Spectrum deal a takeover – not one Beaumont senior manager likely will remain once the deal is consummated.

In yet another development, Henry Ford Hospital CEO Wright Lassiter, Fox’s polar opposite in terms of management competence and commitment to Michigan, disclosed this week he wants to establish a research-intensive medical school in midtown Detroit. Henry Ford has a 30-year relationship with Michigan State and this week unveiled a new brand celebrating an expansion of their partnership.

The expanded partnership came as a bit of a shock to Michael Freed, Spectrum’s former CFO, who’s previously warned that Spectrum combining with Beaumont could lead to a “massive financial loss.”

“Having been the person who negotiated the original financial terms of Spectrum Health’s arrangement with Michigan State University, I’m perplexed as to how this new arrangement of joint venturing with Henry Ford, including cancer research and joint development of Medicare insurance products, is still respectful of the financial commitments made by Spectrum (owned by the West Michigan community), other providers and donors several years ago in Grand Rapids,” Freed posted on his LinkedIn page.

Freed said, “Spectrum alone committed half of the debt service to build the MSU medical school building in downtown Grand Rapids.”

Eating Its Lunch

Spectrum better get used to Henry Ford eating its lunch in southeastern Michigan. The resurging hospital system has poached some highly regarded Beaumont docs. This fall it plans to open a medical center in Royal Oak, a stone’s throw away from Beaumont’s flagship hospital.

Speaking of medical schools, Fox has yet to confirm that Spectrum will be financing the relocation of the William Beaumont School of Medicine from Oakland University to Beaumont’s Royal Oak campus. The relocation was among the biggest benefits Fox touted after announcing his ill-fated “merger” with Chicago-based Advocate Aurora.

Spectrum is likely getting Beaumont without forking out a penny, the same sweetheart deal that Advocate Aurora negotiated. Beaumont’s reserve fund increased $1 billion to $3.5 billion last year, so Spectrum has more free money to invest in southeastern Michigan.

Detroit-area residents all know that Fox has their backs and will ensure that Spectrum does right by them.

Yeah, right.

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

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