Beaumont Health’s sheer walk rides to the top


It didn’t take long to start a scream.

A month after announcing the letter of intent with attorney Aurora, a “no-confidence” petition began circulating among Beaumont’s doctors, asking Fox’s licensing system counsel and medical director David Wood Jr. to dismiss.

“Over the past five years, we, the medical staff at Beaumont Health, have seen a rapid and progressive deterioration in every aspect of patient care at Beaumont Health. We no longer have confidence in the administration’s ability to provide a safe place for us to care for our patients, ”the petition said.

The petition also looked at the Aurora merger, fearing it would remove local control from Michigan hospitals. Beaumont’s council soon responded that Michigan hospitals would remain under local control.

But the damage had been done. In August, Beaumont and Aurora announced that merger negotiations had been delayed and that negotiations would finally end in October.

The explosion of doctors ’agitation in Beaumont is the culmination of years of cost reductions amid merger discussions.

Fox has spent much of his time looking to bolster Beaumont’s profit margins, largely as a means to be valuable to potential partners, but also to build Beaumont’s investment portfolio in preparation for unforeseen financial tensions that the industry may face in the future and to reinvest in technology.

“Yes, we are fighting for a 4 percent margin to have the resources to continue to advance the care of our patients,” Fox told Crain’s in an email. “A 4 percent margin is adequate, but not excessive to internally generate a portion of the capital needed to replace used equipment, get new medical technology, etc. Our margin has given us the opportunity to achieve more. patients through new outpatient campuses in Macomb and Wayne counties, opening 28 emergency care facilities to provide more convenient access to patients and to better address the mental health crisis by opening a new behavioral health hospital (in Dearborn) and a residency program later this year. ”

At the end of the first quarter of 2021, Beaumont Health had $ 3.06 billion in cash on hand – or twice as much as Southfield-based Lear Corp., the fourth-largest public company in southeast Michigan. .

The council member said more hospital boards are putting importance on the money in hand, which is more stable and predictable than political and health operations.

“Beaumont, like many large hospital systems, is in two separate businesses – providing health care and managing the money,” the board member said. “Systems can earn significant amounts of money on their investments. That’s a huge part of the revenue for Beaumont.”

Comparatively, Spectrum had $ 5.3 billion in cash and investments by the end of 2020.

Meanwhile, Beaumont continues to reduce costs. For example, a year ago, Beaumont transferred its anesthesiology services to a contract, NorthStar Anesthesia in Texas, which led to NorthStar offering Beaumont anesthesia nurses $ 12,000 less in benefits and pay to stay in Beaumont.


Beaumont has also suffered from high-level doctors leaving in the midst of this concern, according to a letter 20 powerful and high-level donors sent to Beaumont’s council last year.

“The loss of (medical) staff and even recent investigations, including those by doctors and nurses, show that something is not going seriously,” says the letter, which sources the former Crain’s was handed to board members on 18 September.

“This situation needs to be addressed and improved immediately and with a sense of urgency. This should be your primary focus. Among other things, we believe this requires that the proposed transaction with Attorney Aurora Health should not divert your attention or also be considered unless and until the current crisis in Beaumont is fully addressed. ”

Despite the money, investments and cost reduction measures, Beaumont Royal Oak remains one of the most reimbursed health systems in the region.

Health plans have paid just 143 percent over Medicare for inpatient and outpatient services in Beaumont Royal Oak, according to the Hospital’s Price Transparency Study published by RAND Corp. It is only more expensive than Henry Ford Macomb Hospital and Henry Ford Wyandotte Hospital in the region.

The board member said Beaumont has never been able to successfully raise its reimbursement from big insurers like Blue Cross Blue Shield Michigan to align with its competitors because Royal Oak Hospital started out as a community hospital instead of an academic like Michigan Medicine or a “critical community-hospital” like Detroit Medical Center.

“Beaumont Royal Oak has always had a lot of patients and attracted good doctors because it was in a good situation, but it was not a primarily academic and educational hospital,” said the former board member. “These things are integrated into the system. DMC was always paid even more because it was considered a safety net hospital. The point is that other private insurers pay different amounts per procedure for different hospital systems. it doesn’t make sense, but Beaumont has suffered because of it and it’s part of why you’ve seen this commitment to become bigger. ”

Fox acknowledged the lower reimbursements and said the merger with Spectrum said that access to its internal insurance provider Priority Health will offer advantages over costs.

“Yes, some insurance payments are lower for Beaumont because of a variety of reasons and circumstances,” Fox said. “Beaumont works with all payers, including the Blue Cross, and we recognize the importance of those ongoing relationships. One of our goals in working with Spectrum Health is to make health care more accessible, accessible and equitable for patients. When Beaumont works more closely with Priority Health, a division of Spectrum Health, we believe it will help mitigate the rising costs of health care and provide patients and employers with greater overall value. ”

Presumably, the merged companies will have greater bargaining power with Blue Cross, the region’s largest health insurer, particularly with the threat of a competitive priority.

Shehata said that’s what all these mergers are really about – leverage.

“Hospitals are becoming multiprong companies,” Shehata said. “Systems that have grown to a certain scale in size have more power. They can make more long-term agreements with health plans and medical networks. They can better control the market. Those with more cash reserves and infrastructure have been. able to recover more quickly during crises.But who wins is the question left unanswered.The consumer can be the winner if these entities implement new advances in technology, making patient care more available to the community “But now the power is with the consolidators, and it’s not clear who will help.”

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