The writer, a Los Angeles freelancer, is a former Detroit News business reporter who blogs at Starkman Approved.
By Eric Starkman
Perhaps I’m flattering myself here, but I think Michigan Attorney General Dana Nessel is referring to me in her column Wednesday for Crain’s Detroit Business.
“Much has been said — and even more has been speculated — about the possibility of Beaumont Health joining forces with nonprofit health care system Advocate Aurora Health,” Nessel says. “What appears to be less clear to those outside my office is the actual role the Department of Attorney General has when it comes to reviewing such a transaction.”
Nessel’s column came in the wake of my commentary Monday urging people who oppose the Beaumont/Advocate merger to write Nessel with an admonition that if her office approves the deal, they’d support an effort to recall her. On Tuesday, I reached out to Nessel’s flacks asking for an interview with Joseph Potchen, the assistant attorney general for consumer protection enforcement and charitable trusts. Potchen’s title suggests that he’s the point person overseeing the merger file.
I was candid with Nessel’s chief flack, Kelly Rossman-McKinney, that I believe the attorney general doesn’t care about the implosion of Beaumont and how patient care at Michigan’s biggest hospital network has been compromised. I was hoping that Potchen, who rails that he’s passionate about ethics and teaches the subject at Michigan State, would prove me wrong.
Given that Potchen’s father, brother, and sister are doctors, I expected he’d have issues with many of Beaumont’s business practices, such as pressuring surgeons to use medical devices they consider inferior because the hospital network gets a substantial rebate if it meets certain usage quotas. It’s my understanding that Beaumont patients don’t benefit from the rebates, a detail of possible interest to someone empowered with consumer protection.
Nessel’s flacks denied my interview and made no attempt to set me straight as to why my dim view of her is mistaken. Instead, they ran to Crain’s and posted her shameful missive.
Maybe Crain’s readers swallowed Nessel’s “there’s not much I can do” claims, but I don’t. In fact, reading Nessel’s column reaffirmed my belief that she’s no Frank Kelley, the legendary Michigan AG who occupied her office for 37 years and was nationally respected for his consumer advocacy.
If Kelley was still in office, Fox likely would have already returned to his home in Atlanta or his country house in North Carolina, no longer able to wreak havoc on Beaumont and its dedicated doctors, nurses, and administrative employees who collectively comprise one of Michigan’s biggest workforces.
“Michigan will not tolerate this,” or something to that effect, was Kelley’s signature line in news releases announcing the big and powerful companies he was going after because he didn’t like their treatment of Michigan consumers.
Nessel’s commentary in Crain’s betrays that she’s clueless about the terms of the Beaumont deal. More alarmingly, she makes no mention of patient care being at risk because of extensive cost-cutting by Fox and his deputies. I’ve reported extensively about Beaumont’s implosion (see links below) and a prominent attorney and former Beaumont director last week sent her a passionate five-page letter warning Nessel that Beaumont’s aggressive cuts put patients at risk and urged her to "suggest" the firing of CEO Fox, COO Carolyn Wilson and chief medical officer David Wood.
Levers of Nessel's Power
Given the attorney’s prominence, and the fact he’s sat on boards of publicly traded companies, he knows a thing or two about what levers Nessel could potentially pull.
One of those levers is a simple phone call.
Among the great benefits of being an attorney general is that you can get anyone on the phone in an instant. The other benefit is that few people want to mess with someone who has the power to prosecute them.
Beaumont’s board is divided, but chair John Lewis, a longtime Comerica executive, is standing by Fox and supporting his Advocate merger. Lewis, who I’m told is a really nice guy, doesn’t get paid to serve on the board. The only renumeration is prestige. That’s not enough of an incentive to call an attorney general’s bluff.
All it would likely take for Nessel to remove Fox and his deputies and stop the Advocate deal would be a simple call to Lewis that would go something like this: “John, I’ve been reading the considerable press on Beaumont and my office is deeply concerned about the hospital network’s management and the board’s oversight of John Fox and his business practices. I’d also be remiss if I didn’t advise you that I’m committed to leveraging all the resources in my power to block the Advocate deal. Michigan will not tolerate this."
Bye-bye Fox, Wilson and Wood.
What’s especially shameful about Nessel’s commentary is her referring to the Beaumont/Advocate merger as a “partnership.” That’s how Fox refers to the deal, but in fact it’s a straight-out giveaway.
Under the terms of the transaction, Advocate Aurora isn’t paying a penny for Beaumont or its $2 billion cash reserves. When the deal closes, Beaumont will be the Michigan outpost of a Chicago-based company with aggressive growth ambitions. Beaumont initially will have a one-third interest in the merged company, but that will likely get whittled down as Advocate acquires more hospital networks.
It’s difficult for me to fathom that Nessel can’t find some statute under which to block the giveaway of a not-for-profit hospital network, particularly given her responsibility for consumer protection. Protecting Michiganders’ health care costs should be Nessel’s highest priority, particularly since the state's health care costs are among America's lowest.
Studies show that hospital mergers result in hospital services increasing on average six to eighteen percent. Moreover, there is substantial evidence that mergers also lead to lower-quality patient care.
Nessel concedes she’s authorized to “protect the donations, endowments, etc., made to Beaumont to make sure the money is used appropriately.” Max and Debra Ernst donated $5 million to fund Beaumont’s outpatient heart center on its Royal Oak campus. The donation was made to support the efforts of Marc Sakwa, Beaumont’s former chief of cardiac surgery and other renowned surgeons. Sakwa bolted from Beaumont last December because he was fed up with Fox’s management. Beaumont’s vaunted cardiac team has sustained more significant losses since Sakwa’s departure.
The Ernsts presumably donated with the assumption that Beaumont would maintain remain a world-class hospital. It no longer is. Beaumont’s major donors are known to be displeased with Fox’s leadership and want him fired.
There’s evidence that Nessel is so inept she can’t even readily determine what charitable assets her office is responsible for. In a July 23 news release, Nessel said she was reviewing Fox’s plans to sell its Community EMS ambulance service to Chicago-based Superior Air Ground Ambulance Inc.
“This deal appears to involve the sale of certain nonprofit assets to a for-profit entity,” she mused.
Appears? Community EMS is most definitely a nonprofit company. WDIV’s "Help Me Hank" Winchester recently provided insight into Superior’s pricing practices. It charged a Metro Detroit family more than $5,000 to take their child from Henry Ford Hospital in West Bloomfield to Children’s Hospital in downtown Detroit. Community EMS would have charged about $500.
If Nessel was doing her job, she’d look into the sale of Community EMS’s partnership interests in other ambulance companies. My understanding is the proceeds went to Beaumont, not Community EMS, thereby weakening its financial condition.
Other Attorneys General
Attorneys general in other big states put Nessel to shame. Pennsylvania’s AG sued to block two state hospitals from merging, arguing it will lead to higher prices. California’s attorney general last December negotiated a landmark $575 million settlement with Sutter Heath after filing a lawsuit alleging that Sutter’s merger activities resulted in anticompetitive practices that unfairly drove up patient pricing.
When the University of Toledo announced plans that it was exploring the possible sale of its teaching hospital, Ohio’s attorney general immediately leaked to the media that he would investigate the transaction. The university quickly dropped its plans amid additional opposition from other elected officials. (Michigan’s elected officials shamelessly have voiced virtually no opposition to the Beaumont/Advocate merger.)
What’s Nessel been up to? Earlier this month Nessel announced she was seeking to dissolve companies that consumers mistakenly were confusing with charities. In July, Nessel warned about the surge in puppy adoption scams, but didn’t announce any actions. Nessel posed for pictures holding her adorable Shi Tzu.
By comparison, former AG Kelley spearheaded the tobacco industry settlement that resulted in most states receiving tens of millions of dollars to compensate them for the health care costs of tobacco-related illnesses. I’d wager that "Help Me Hank" Winchester accomplishes more on the Michigan consumer protection front than Nessel’s office.
I stand behind my suggestion that supporters of Beaumont Health put Nessel on notice that if Fox pulls off his Beaumont giveaway to Advocate Aurora, they will support a recall effort. If Nessel can’t find a creative way to stop the deal, Michigan desperately needs an attorney general who can.
Reach Eric Starkman at email@example.com. Beaumont employees and vendors are encouraged to reach out, with confidentiality assured.
Columns by this writer:
- Beaumont CFO John Kerndl and Top CEO Aide Say No! To Michigan
- Prominent Beaumont Donor Calls for Firing of CEO John Fox and His Key Executives
- Advocate Aurora CEO Jim Skogsbergh on Beaumont Merger – Yeah, Whatever
- Beaumont Gloats After Successful $1.8-Million Anti-Union Drive Involving Ex-Trump Exec’s Firm
- Beaumont Health and the Potential $40 Million-Plus Enrichment oOf CEO John Fox
- Dingell and Tlaib Feign Concern over Beaumont Merger with CEO Pen Pal John Fox
- The Dangerous Hell of Employees on the Sinking S.S. Beaumont
- Beaumont Doctors Overwhelmingly Lack Confidence In Hospital System's Leadership, Survey Confirms
- Beaumont Does Putin Proud and Denies Comrades Results of Damning Survey
- How Beaumont COO Carolyn Wilson Sparked a Game of Legal Chicken, Putting Patients at Risk