African Reserves

Deadline Detroit | Starkman: Spectrum takeover of Ailing Beaumont underscores power of US hospitals and weakness of President Biden

The writer, a freelancer from Los Angeles, is a former Detroit News business reporter who blogs at Starkman Approved.

By Eric Starkman

John Fox, the Atlanta porter who washed up on the shores of southeastern Michigan seven years ago to shore up Beaumont Health’s profits and bloat Metro Detroit’s largest hospital network so he could sell it, seems to have succeeded in what he set out to do.

Spectrum and Beaumont today announced that they are “moving forward” with the takeover of Spectrum, having “provided the relevant regulators with all requested information”. The deadline has apparently passed for the Federal Trade Commission to challenge the deal.

Beaumont CEO John Fox walks out the door on Friday.

The combined Spectrum and Beaumont operations will temporarily be called BHSH System. BHSH will be Michigan’s largest hospital system and the state’s largest employer.

The FTC’s decision to implicitly approve the Spectrum takeover underscores President Biden’s weak leadership and the little respect he commands, even among his own appointees. Biden last July issued an executive order directing the FTC to be more critical of hospital mergers because studies show they invariably lead to higher patient costs and lower quality of care.

The FTC is led by Lina Khan, a Democrat nominated by Biden and sworn in on June 15 for a three-year term.

Lina Khan of the Federal Trade Commission

Hospital prices in Southeast Michigan are among the lowest in the country, so one would have to be incredibly naive to believe Spectrum’s claim that its takeover will lead to more affordable care. The proof is overwhelming that when hospitals merge, prices go up. Various studies, including one published in 2019 by Harvard researchers, also show that hospital mergers lead to worse patient experience.

Spectrum’s prices are higher than Beaumont’s because the hospital network has much less competition in West Michigan. Naturally, Spectrum is a more profitable hospital system, but its profits are also bolstered by its lucrative Priority Health Insurance branch.

It’s no surprise that the Spectrum takeover was given the green light. The American Hospital Association (AHA), the trade group focused on advancing the financial interests of “nonprofit” hospitals and their executives, is a major lobbying force in Washington. As an example of their power and influence, they successfully derailed enforcement of rules issued by the Trump administration requiring hospitals to be transparent about their pricing.

Wright Lassiter III, president and CEO of Henry Ford Health System, is president of the AHA. Tina Freese Decker, president and CEO of Spectrum, is president of the Michigan Health & Hospital Association.

Michigan Attorney General Dana Nessel could also have blocked the Spectrum deal or demanded certain concessions, but she has proven to be a regulatory lightweight, especially on health care issues.

Spectrum and Beaumont are technically merging as the combined companies’ board of directors will have nearly equal representation and Beaumont president Julie Fream will chair the BHSH.

Full Spectrum

But Spectrum management 100% runs the show.

In what will likely be his last FU in Metro Detroit, Fox leaves on Friday. Typically, when deals of this type are announced, the CEO of the acquired company declares that they are committed to ensuring a smooth transition and promises to stay and provide full support. Fox, who owns homes in Atlanta and North Carolina, doesn’t even care about creating the appearance that he cares about Beaumont’s future.

Based on what was paid to the CEO of one of Beaumont’s predecessor companies, Fox should perhaps receive upwards of $30 million to sail to sunset in Georgia. Freese Decker is likely guaranteed a big raise and bonus.

BHSH’s leadership team is made up entirely of Spectrum executives, with the exception of Beaumont Royal Oak president Nancy Susick, who has been named interim president of what is called BHSH Beaumont Health. Under Susick’s leadership, Beaumont Royal Oak declined precipitously, and internally she was considered a Fox sycophant.

Susick has fired Royal Oak’s much-loved and much-loved head of pediatrics after protesting budget cuts he said would hurt patient care. To the disgust of the chief pediatrician’s colleagues, Susick released him from the hospital in front of his staff.

Pamela Ries and Ovell Barbee

Royal Oak’s budget cuts were made in 2020, when Beaumont increased its reserves to $3.5 billion from $2.5 billion and Fox earlier in the year warned that US hospitals could s collapsing because of the pandemic.

Pamela Ries, senior vice president and head of human resources at Spectrum, is listed as director of integration. The ‘Chief People Officer’ job is listed as open, indicating that Ries isn’t getting the top HR job at BHSH. Another vacant position is that of “Head of Inclusion, Equity, Diversity and Social Impact”.

Freese Decker’s biography said his “highest priority” is “to build a healthcare system that celebrates and strengthens the diversity and inclusion of employees, patients, families and members.” Yet, as far as I know, the entire management team at BHSH is as white as a loaf of Wonder bread.

Black employee turnover

Under Freese Decker’s leadership, Spectrum experienced considerable turnover of its black employees, some of whom contacted an attorney to determine whether they had grounds to file a discrimination complaint.

Spectrum’s former Chief Diversity Officer was Ovell Barbee, an African American, who Spectrum proudly announced last April was named one of the top diversity leaders in the country. A longtime Michigander with an impressive track record, Barbee resigned in October to join Indiana University Health as a human resources manager.

Indiana University Health has 16 hospitals and 36,000 employees. By comparison, BHSH will have 22 hospitals and 64,000 employees. A source told me that Barbee was well-liked among black Spectrum employees, but was frustrated with his inability to effect meaningful change.

Companies often create diversity positions for facade purposes. Joseph Hill, who was hired to be chief diversity officer at Hermann Health System in Houston, was fired before he even started his job, allegedly because he had already identified racial bias at the hospital.

“Many organizations aren’t interested in real change,” Chris Metzler, former associate dean of human resources and diversity studies at Georgetown University, ” told NBC News. “They view diversity as a numbers game. Many executives ask me privately, “How many black people should I have?”

Attorney General Dana Nessel

Michigan Governor Gretchen Whitmer paid paying lip service that she is committed to so-called equity in health care, which means black people have access to the same quality of care as white people. Nessel also made this claim. Yet neither Whitmer nor Nessel demanded diversity or health equity commitments from Spectrum as a condition of its takeover.

Disparities in health care are commonly blamed on racism from American doctors and other health care professionals. Yet the Henry Ford’s flagship hospital in Detroit’s Leapfrog safety rating is a “C,” while its more affluent West Bloomfield outpatient center enjoys an “A.” HFH chief Lassiter is black and nearly half of the staff at the flagship hospital are non-white. Henry Ford in Detroit in years past has enjoyed an “A” safety rating.

Nessel’s “do nothing” stance on health issues contrasts sharply with her Massachusetts counterpart, Maura Healey, who decided to block General Brigham’s expansion of Massachusetts on the grounds that it would lead to higher health care costs in that state. Other state attorneys general have also shown their willingness to tackle the powerful interests of US hospital corporations.

historic day

Tina Freese Decker

Former California Attorney General Xavier Becerra has won a landmark $575 million settlement against Sutter Health for using the market dominance it has achieved through a series of mergers to illegally drive up prices. Ohio’s AG won a series of iconic settlements attacking healthcare companies.

the Detroit Free Press quoted Freese Decker of Spectrum: “Today is a historic day.” This is one of the few instances where she made a statement of undeniable truth.

Today is indeed a historic day. It marks the death of a once-great hospital system, and the creation of a giant Michigan hospital network, former Spectrum CFO Michael Freed has warned could lead to a “massive financial loss.

Freed vowed that he would hold Spectrum’s administrators accountable for the repercussions on his Grand Rapids community. No one from southeast Michigan has emerged promising to hold Julie Fream and other Beaumont directors who backed Fox accountable for the harm they caused the people of Metro Detroit.

This is a good time to pay tribute to former Beaumont Chairman John Lewis, who ultimately bears the greatest responsibility for the decline of the hospital system. Lewis resigned as chairman just before Fox announced the Spectrum takeover and left the board in December.

Contact the writer at [email protected] Beaumont Beaumont employees and suppliers are encouraged to contact us as confidentiality is assured.

Support our reports by becoming a member of Deadline Detroit for as little as $3 per month.

More here.