Starkman: Why Attorney General Dana Nessel Must Investigate Beaumont Health

July 13, 2020, 6:25 PM

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

By Eric Starkman

In writing about Beaumont Health these past few months, I’ve wrestled using the word “imploding.” It’s a very strong reference, as it means headed for collapse or failure. The time has come to use that word to characterize what’s going on at Beaumont, at least with regard to the hospital company’s vaunted reputation. Beaumont possibly has already reached the point of no return.

CEO John Fox (Photo: Beaumont Health)

A petition is circulating among surgeons working at Beaumont’s nationally ranked Royal Oak, Troy, and Grosse Pointe hospitals declaring “no confidence” in Beaumont’s senior management, notably CEO John Fox and COO Carolyn Wilson. The situation has become so dire that surgeons are scrambling to gain privileges at area hospitals that are a far cry from Beaumont’s historical reputation and prestige.

“Do You Have a Beaumont Doctor?” was the hospital company’s popular slogan. Chances are increasing you may have a Beaumont doctor, but they may not be working at Beaumont. 

Disenchantment among Beaumont’s doctors, nurses, and other employees has been building for years. The final straw for the surgeons was Wilson’s recent decision to give a low-cost outsourcing provider called NorthStar a contract to supply and manage the anesthesiologists and certified registered nurse anesthetists (CRNAs) serving Beaumont’s renowned Royal Oak facility and its Troy and Grosse Pointe hospitals. These hospitals are nationally ranked and perform sophisticated surgeries like liver transplants, complicated cardiac and pediatric procedures, high-risk obstetrics, advanced neurosurgery, and a variety of other difficult cases.

That’s why the majority of anesthesiologists currently at these hospitals are fellowship-trained, meaning they underwent additional residency training to learn advanced procedures. By January, NorthStar has to recruit more than 70 anesthesiologists to replace the elite team currently serving Beaumont’s premier hospitals, plus absorb all the CRNAs currently employed at these campuses.

That’s on top of the 30 or so anesthesiologists NorthStar has to recruit by August to serve Beaumont’s Wayne, Taylor, Dearborn and Trenton hospitals. Wilson awarded NorthStar an anesthesiology contract to serve those facilities, and sources say she’s going to give NorthStar a contract to serve Beaumont Farmington Hills, blowing out about eight longtime anesthesiologists at that hospital.

Beaumont is publicly known to have been hemorrhaging as far back as December. Crain’s Detroit reported back then that Beaumont Trenton was so short-staffed of CRNAs, surgical technicians, nurses and housekeepers that it was forced to shut down three of its 11 operating rooms. The publication quoted Zachary Lewis, the hospital’s surgery department chairman, as saying, “my only conclusion is they (Beaumont management) are trying to cut costs any way they can – saving money by not hiring nurses – to increase their margins.”

Crain’s also quoted Raymond Laird, vice chair of Trenton’s surgery department, as saying that he and his surgeon wife applied for privileges at Henry Ford Wyandotte as had two other surgeons.

Big Loss

Dr. Marc Sakwa

In addition to having to curtail profitable surgeries at its downriver hospitals, Beaumont last December lost native Detroiter Marc Sakwa and Jeffrey Altshuler, two of the country’s top cardiac surgeons, who bolted to join a Southern California hospital. According to an industry trade publication, cardiovascular surgeons are far and away the biggest hospital profit generators, driving as much as $3.7 million in annual net revenues.

Sakwa also was responsible for securing considerable philanthropic gifts, including much of the funding for the $9 million Max and Debra Ernst Heart Center at the Royal Oak campus.

Fox, an accountant who was named Beaumont’s CEO five years ago, has served as the hospital industry’s poster crybaby for lost profits because the Covid pandemic forced the cancellation of lucrative surgical procedures. In fact, Beaumont was suffering a loss of surgical profits before the pandemic because of Fox’s and Wilson’s mismanagement. 

Moreover, Channel 7’s Ross Jones reported that Beaumont has received more than $323 million in federal stimulus money to make up for lost surgical business. Sources say that Beaumont surgeries are about 80 percent of capacity, suggesting that Beaumont’s lost surgical business wasn’t as bad as Fox would have the public believe. 

The taxpayer stimulus money was intended to save hospital jobs. Beaumont in April announced it would layoff 2,475 employees and eliminate 450 jobs. 

Michigan Attorney General Dana Nessel has oversight over Michigan hospitals because their not-for-profit status makes them charitable assets. If Nessel was doing her job rather than picking Twitter fights with President Trump, she’d have already issued a public statement expressing concern about Beaumont’s direction and assuring southeastern Michigan residents her office was closely monitoring the company. 

Here’s what Nessel, who ran on a consumer protection platform, needs to investigate and provide a public accounting for:

Proposed Merger with Advocate Aurora

AG Dana Nessel

It should take Nessel all of five minutes to figure out this deal has no benefit for Michigan. Beaumont has 19 nationally ranked adult specialties; Advocate Aurora, has none. Studies show that hospital mergers lead to higher patient costs but there’s no improvement in the overall quality of patient care.

The only possible justification for the merger would be if Beaumont’s finances are considerably more dire than Fox has proclaimed. If that’s the case, Beaumont should be merged into a Michigan-controlled hospital or one with a national reputation. 

Beaumont’s NorthStar Contracts

Common sense dictates that it’s a formidable task recruiting more than 100 anesthesiologists within six months to serve a half dozen southeastern Michigan hospitals, particularly given the noncompete clauses of the doctors currently fulfilling the positions.  The terms of NorthStar’s contracts must also be examined as multiple sources told me the company was awarded contracts because it agreed to a lower ratio of anesthesiologists to CRNAs than Beaumont historically has allowed. Sources say the lower ratio could jeopardize Beaumont’s anesthesiology residency program.

NorthStar’s pedigree doesn’t foster confidence. It was founded by a private equity firm 2004 and sold last month to a holding company, putting more pressure on the outsourcing firm to further maximize revenues and profits to justify the purchase price. 

Sale of Community EMS to Superior Ambulance

Founded in 1982, Community EMS is a not-for-profit Michigan company with verifiable charitable activities. Superior Ambulance is a for-profit Chicago-based company. Nessel should view Fox’s and Wilson’s submission of this sale for her approval an insult to her intelligence. 

Transfer of 48 Covid Patients to VA, Other Hospitals

Channel 7’s Heather Catallo reported that Beaumont transferred 48 patients from its area hospitals to Veterans Affairs hospitals in Detroit and Ann Arbor. None of them were with the military. I previously reported that three critical Beaumont Covid patients were transferred to a Monroe hospital. 

Nessel should determine how and why these patients were chosen for transfer and whether their medical coverage came into play. Fox said it was because Beaumont hospitals were at capacity, but Catallo’s sources and mine said that wasn’t the case. 

According to Catallo, one of the transferred Beaumont patients was listed as “unstable” for transfer. The patient died during transport. A Beaumont source told Catallo there was “no reason” to transfer the patient. Beaumont needs to be held accountable. 

I don’t like to gratuitously suggest possible racism, but the patient deemed unfit for transport was black. Channel 7’s Rudy Harper reported last October that a black patient admitted to Beaumont Dearborn after a traffic accident remained unidentified for two days despite the hospital having his ID. The victim’s family say the patient was wearing a dialysis bracelet with personal contact information.

John Fox’s 2019 Compensation

Based on previous yearly payouts, John Fox was likely paid a multi-million bonus in the first quarter of this year. The timing of that payout is significant, as Fox in March was warning of a “looming financial implosion” that could cripple America’s hospitals. Given Fox’s dire warning, Beaumont’s board would have been irresponsible paying Fox’s bonus. If the payout was made, Nessel should claw the money back. 

It’s my hope that Beaumont’s surgeons will unite to sign the petition declaring their non confidence in Fox and Wilson and muster the courage to make it public. Nessel and Governor Whitmer would be politically remiss to ignore the Beaumont situation much longer. 

Surveys show that health care is the number one concern for voters. Beaumont has 38,000 employees and they have friends and family. Beaumont’s beleaguered staffers have more power over Nessel and Whitmer than they realize.

Reach Eric Starkman at Beaumont employees and vendors are encouraged to reach out, with confidentiality assured. 

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