The writer, a Los Angeles freelancer, is a former Detroit News business reporter who blogs at Starkman Approved.
By Eric Starkman
CEO John Fox of Beaumont Health
When I was in PR, I warned my clients about engaging in spin. Distorting or dancing around truths to manage out of one situation invariably provides tinder for the next corporate fire. Eventually, the PR team becomes like the proverbial little Dutch boy with his finger in the dike, plugging one hole while exposing another.
The lawyers and flacks at Beaumont Health, Michigan’s largest health care system, would be wise to heed the counsel. The company’s mismanaged efforts to justify why CEO John Fox’s compensation nearly doubled to $5.6 million created optics that don’t look so good in the wake of the surreptitious closing of Beaumont’s Wayne hospital this week and the paltry bonuses awarded to its nonunion frontline Covid-19 caregivers.
SEIU Healthcare, Michigan’s largest healthcare union, uncovered Fox’s 2017 raise in a regulatory filing and made it public last July. Beaumont’s health care workers were outraged given their battle with the company for better wages, affordable health care benefits, and improved staffing. The compensation disclosure was a PR nightmare, as hospitals like to play on the public misperception that they are struggling nonprofits run by altruistic managements doing God’s work.
Being a nonprofit often is a tax avoidance scheme that benefits from poor IRS oversight. Check out this Bloomberg story about the dubious charity that enabled the Varsity Blues scandal where rich and famous parents got their kids into college under the ruse they were star athletes. This Washington Post story about the University of Virginia Health System dispels the myth that nonprofits act more kindly than for-profit hospitals. UVA is more aggressive forcing patients into bankruptcy than Tenet Healthcare, a national, publicly traded for-profit chain.
Fox’s $5.6 million seems like a lot, but not when judged in a broader context. GM’s Mary Barra earns more than $20 million a year and it's unlikely that under her watch the company will develop a car generating the loyalty and excitement of Elon Musk’s upstart Tesla. Uber CEO Dara Khosrowshahi earned $45 million last year for running a glorified taxi dispatch service that might never make money. At least Fox is good at his job; Beaumont ranks among the top hospital networks in the country.
In defending Fox’s salary, Beaumont issued this tone-deaf statement I’d guess was drafted by a lawyer: “A large portion of executive compensation at Beaumont is at risk. This means executives earn much of their money only if we achieve organizational objectives and strategic goals.”
Beaumont didn’t outline those goals and objectives, which likely included patient satisfaction, hospital rankings, and other measurements worth touting if you’re a company in the life-and-death business. Achieving “organizational objectives” and “strategic goals” are buzzwords used by company boards to justify paying their CEOs oodles of money for generating big profits. It’s safe to assume one of Fox’s strategic goals isn’t to attract and increase uninsured patients.
Income Soars
Beaumont Hospital in Wayne
Beaumont last year saw its net income soar 165 percent to $390.2 million. The whopping increase was skewed because a year earlier Beaumont’s net income was hammered because of a $72 million payment it paid for cheating the federal government and the value of its investments declined by $64 million despite a roaring bull market. Also impeding Beaumont’s 2018 net income was a six percent uptick in expenses. Presumably Fox’s salary was slashed after the company’s dismal 2018 performance.
Beaumont’s stealth closing of its hospital in Wayne this week possibly was intended to avoid any discussion that it was financially driven. One giveaway is the company’s PR spin insisting the hospital is merely “paused” after the media got wind of the closing. Note to Beaumont’s management: When a 60-year-old local hospital empties out patients, including those on ventilators, transfers or furloughs all the staff, and locks its doors, the facility is closed.
Apparently no one at Beaumont thought to call local Congresswomen Debbie Dingell or Rashida Tlaib or even Wayne mayor John Rhaesa, who has called for a criminal investigation about the hospital closing. Channel 7’s Heather Catallo reported that 39 Beaumont patients from across their system were transferred to Veterans Affairs hospitals in Detroit and Ann Arbor despite not being “military patients.” This is pure conjecture on my part, but one possible reason for the transfer is that treating Covid patients isn’t profitable.
Beaumont said it closed the Wayne hospital because an expected Covid patient surge hasn’t occurred, but the facility will reopen if it does. The company said it is operating under “several executive orders” that restrict the kind of care Wayne can provide.
Beaumont didn’t cite the executives who have the authority to open the hospital. Beaumont Wayne has a Level III trauma center serving Metro airport and expertise in emergency management and disaster preparedness to respond to community trauma events. Some commercial planes are still flying and so are cargo planes, so it’s a wonder the hospital can close given its proximity to the airport.
Lip Service
Beaumont pays lip service to the frontline caregivers treating Covid patients. It launched a campaign to let residents to “share and demonstrate their gratitude for our health care workers.”
But talk is cheap. Fox sent an email to the frontline Covid workers on Monday saying they were eligible for non-taxable bonuses, ranging from $500 to $1,000 depending on their status.
The scuttlebutt at Beaumont is that Henry Ford is paying some frontline workers an additional $20 an hour during the pandemic. A Henry Ford spokeswoman declined to confirm that, saying the hospital doesn’t comment on compensation issues. Regardless, even a $1,000 bonus seems like a diss for people risking their lives, and the lives of their families, and working 10 to 12-hour shifts for weeks on end. Four percent of Beaumont’s employees are out sick with symptoms consistent with coronavirus.
Letter from Congress members Dingell and Tlaib
Events are fast turning ugly for Beaumont. Representatives Dingell and Tlaib sent Fox a second letter Thursday asking very detailed questions, including about Beaumont’s finances. The last thing a nonprofit with $2 billion on hand wants is having a couple of pols sniffing around its financials.
Fox would be wise to fast reach out to Dingell, Tlaib, and Mayor Rhaesa and hold a news conference to explain the Wayne closure and other actions. The experience will be akin to undergoing a colonoscopy without anesthesia at a Beaumont gastroenterology clinic, but that’s why Fox is paid the big bucks.
