Business

Starkman: Beaumont's bonuses and the sorry state of Michigan's political leadership

October 24, 2020, 5:59 AM

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

By Eric Starkman

Writing about the implosion of Beaumont Health these past six months, I already came to regard Reps. Debbie Dingell and Rashida Tlaib, who frequently issue joint statements, as grandstanders focused on generating tweets and talking to the media, rather than accomplishing anything of note. But given his family pedigree and a Harvard law degree, I mistakenly perceived Rep. Andy Levin as one of Michigan’s leadership hopes.

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Beaumont has a $2 billion rainy day fund. Why cry over their bonuses when Congress, where Andy Levin serves, could do something about it? (File photo)

Levin, Dingell, and Tlaib are featured in a Detroit Free Press “investigation” revealing that Beaumont and Henry Ford Health System paid out bonuses in March just before they laid off thousands of employees and demanded a federal bailout because of the Covid pandemic.

“It’s just reprehensible,” Levin, whose district includes Beaumont’s flagship Royal Oak hospital, railed to the Freep about the timing of the bonuses.

Dingell told the Freep that she cautioned Beaumont CEO John Fox the bonuses would be a “political problem” for him.

“It’s very obvious decisions are not made in the best interest of patients who need their care,” Tlaib told the Freep.

I’m not sufficiently familiar with Henry Ford, except that employees at Beaumont have repeatedly told me the hospital network treats its employees “like royalty” and pay them better wages. But I know quite a bit about Beaumont and John Fox, and the Freep badly missed the mark solely focusing on the timing of Beaumont’s bonuses this year.

Admittedly, the timing has bad optics. If Fox and his top deputies were truly committed to the well-being of Beaumont and its employees, they would have deferred their bonuses. But Fox and his deputies are carpetbaggers with no ties to southeastern Michigan; they’ve shown not one iota of selflessness for Beaumont. They’re just passing through, raking in millions to endure some Michigan winters while they financially skinny up Beaumont for a potential sale. 

The Freep’s discovery that Fox is more concerned with his personal enrichment is akin to sending a reporter to Las Vegas and publishing an “investigation” that gambling is rampant in Sin City.

The Freep buried the comment of veteran Detroit attorney and former Beaumont board member Mark Shaevsky, saying he wasn’t troubled that Beaumont paid bonuses in March because it was for work performed in 2019.

Shaevsky, who has previously served on the boards of publicly traded companies, forgot more about corporate governance than Levin, Dingell and Tlaib will ever know. That’s why the Freep buried Shaevsky’s comment at the bottom – it undermined their entire storyline.

What’s outrageous about Beaumont’s bonuses is the size of them. Fox earned nearly $6 million in 2017 and 2018, so it seems quite likely he was paid at least that much last year, if not more. Details of Fox’s 2019 largesse won’t be known until Beaumont files its required Form 990 with the IRS, where nonprofits disclose their financials. (Yes, Beaumont qualifies as a “nonprofit,” even though all Fox ever talks about is the network’s margins.)

Layers of shamelessness

As I noted earlier this week, Marc Miller -- president of Universal Health Services, one of the biggest for-profit hospital networks in the country with about 400 facilities in the U.S. and the United Kingdom -- last year earned $4.3 million. Beaumont has a mere eight hospitals, all within Southeaste Michigan.

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CEO John Fox and COO Carolyn Wilson (File photo)

Admittedly, Miller’s CEO father made considerably more, but he founded the company. If you want a near apples-to-apples comparison, Beaumont COO Carolyn Wilson earned about $2 million in 2018. Beaumont’s top executives are obscenely overpaid, particularly since the system has imploded under their watch.

What’s even more obscene is that Beaumont got taxpayer money to compensate for lost business because of the pandemic, which in Beaumont’s case proved to be very short-term. The Free Press is unaware, or neglected to mention, that Beaumont has a $2 billion reserve. Presumably, that reserve was intended for business disruptions; Beaumont could have taken the $377 million in CARES money it received from its reserve fund and still had oodles left over.

This brings us back to Levin, Dingell and Tlaib. They feign outrage about the timing of Beaumont’s bonuses, rather than Congress’s negligence in allowing Beaumont to continue its farce as a nonprofit and giving it taxpayer money, which was supposed to be used to avoid widespread layoffs and firings.

That wasn’t the case with Beaumont. According to a source whose information has always proved accurate, Beaumont’s layoffs were so extensive it violated the terms of its CARES funds and will have to return a portion of the monies. I asked Levin’s press people if they might assist me confirming this information, but never got a response. I guess Levin was too busy talking to the Free Press reporter and posing for her photographer.

Beaumont spokesman Mark Geary didn’t respond to a request for comment.

Meanwhile, labor issues remain

Beaumont’s outrageous executive compensation isn’t the most pressing issue at the moment. I’m barraged with pleas from Beaumont medical staff to report on what they say are increasingly unsafe conditions at their respective hospitals. Dingell and Tlaib recently made news camping out at an Amazon warehouse and alleging unsafe conditions there, but they are blissfully ignorant of conditions at Beaumont hospitals within their districts. The difference, of course, is that taking on Amazon allows them to generate national attention for themselves.

I expected more from Levin, who weeks ago vowed to oppose Beaumont’s controversial merger with Chicago-based Advocate Aurora, a move that likely contributed to Fox calling off the deal. To his credit, Levin, along with state Sen. Mallory McMorrow, D-Royal Oak, and state Rep. Jim Ellison, D-Royal Oak, took a firm stand while Dingell and Tlaib remained on the sidelines.

But Levin has made no public statements about deteriorating conditions at Beaumont Royal Oak, where surgeries are routinely delayed and cancelled because of a shortage of sterilized surgical instruments and other issues. Why? Because Beaumont pays its cleaning staff paltry wages and can’t attract and keep maintenance employees.

Levin, whose major contributors are unions and the Honigman law firm, is supposed to be a pro-labor guy, yet he’s silent on the issue. He wasn’t aware, when I spoke to him, that Beaumont spent nearly $2 million on union busting activities at its Royal Oak hospital. Levin should be advocating for the Certified Registered Nurse Anesthetists (CRNAs) at Beaumont Royal Oak, who are getting shunted aside to a Texas-based outsourcing company. They’ve been offered an insulting contract and treated disrespectfully.

Then there’s Michigan attorney general Dana Nessel, who has remained mum while Beaumont implodes, and dozens of prominent surgeons and specialists quit and leave the state. Nessel didn’t oppose the Advocate Aurora merger, saying she couldn’t do anything until they filed for approval. The deal would have given Advocate Aurora control of Beaumont for free. Fox, of course, likely would have netted a comfy golden parachute to take back to his luxury home in Atlanta or his lakefront property in North Carolina.

Nessel is responsible for protecting charitable assets, including nonprofit hospitals.

Another Lansing lapse

Finally, there’s Gov. Gretchen Whitmer, who goes on national TV every week to criticize President Trump’s handling of the pandemic. Meanwhile, Michigan’s biggest hospital network isn’t adequately prepared to handle the second wave of the pandemic, which Whitmer says is definitely coming.

To appreciate the poor state of Michigan’s political leadership, consider what just happened in Northern California. The Alameda County Board of Supervisors removed the entire board of the local hospital network after doctors expressed no confidence in the system’s management.

A recent survey of more than 1,500 Beaumont doctors revealed the majority of them don’t have confidence in Fox, Wilson, and the rest of his overpaid management team.

Yet they all remain in place, while a once nationally renowned hospital network rapidly withers away. Michiganders should demand better representation, but at the end of the day, people get the leadership they deserve.

Reach Eric Starkman at eric@starkmanapproved.com. Beaumont employees and vendors are encouraged to reach out, with confidentiality assured. Also, if you wish to support Deadline Detroit's independent journalism please sign up for a $3 a month membership or give a one-time donation.

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