Starkman: One Down, Three to Go. Beaumont CFO John Kerndl Resigns

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

By Eric Starkman

John Kerndl and Denise Waters

Beaumont Health CFO John Kerndl, the architect of aggressive cost-cutting that bolstered the profits of Michigan’s biggest hospital network at the expense of its once world-class reputation, has resigned. He’s relocating to Boston to join Beth Israel Lahey Health System, a highly regarded hospital network.

Beaumont CEO John Fox disclosed Kerndl’s departure in an email to staff this morning. Kerndl’s resignation is effective March 16, one day after the supposed  Beaumont deadline for paying out executive bonuses for the previous year.

Kerndl’s resignation is a major blow to Fox. Despite widespread calls for his resignation from Beaumont doctors and donors, Fox has maintained the confidence of board chairman John Lewis, who holds an outsized influence over the company’s other directors.  A former top banker at Comerica before the bank relocated to Dallas, Lewis is known to be impressed with Beaumont’s financial performance under Fox.

Despite the pandemic, Beaumont recently posted stellar operating profit margins and increased its cash reserves 54 percent to $3.5 billion, albeit with mountains of cash from the federal government.

In addition to Fox, Beaumont’s medical staff is clamoring for the resignations of COO Carolyn Wilson and Chief Medical Officer David Wood Jr.

No Shock

Kerndl’s departure is hardly a surprise. He and his top aide, Denise Waters, sold their respective Detroit area homes last summer with the expectation they’d be done at Beaumont by the end of the year. Fox had arranged to give away Beaumont at no cost to Chicago-based Advocate Aurora in exchange for a minority interest in the merged operations.

The controversial deal was supposed to close by year-end, likely netting Kerndl a nice buyout package because of the change of control. Insiders tell me that Kerndl and Waters have a close working relationship, so it’s far from certain she will stick around. Waters is vice president of revenue cycle, a position responsible for keeping the cash flowing into Beaumont.

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Kerndl and Waters are unpopular with Beaumont’s administrative staff, who were forced to go into the office when most Detroit area businesses let employees work from home.

Kerndl, who joined Beaumont in 2016, is the second executive from Fox’s management team to bolt. Mark Bohen, Beaumont’s chief marketing officer, resigned last summer to become CMO of Mass General Brigham, ranked one of the top hospitals in the country.

 

Beaumont has yet to announce Bohen’s replacement. It’s not clear who’s overseeing advertising and was responsible for Beaumont’s much-ridiculed billboards around town touting that “It’s Safe” to visit the hospital.

In an interview last fall, Fox told the Detroit Free Press that Beaumont pays year-end executive bonuses by March 15, which he said was keeping with an IRS rule. As a nonprofit, Beaumont isn’t subject to IRS rules, but presumably the March 15 payout date was accurate.

Union Crisis

Fox and Wilson have another potential crisis on their hands. President Joe Biden on Sunday night tweeted a video signaling his support for Amazon warehouse workers seeking to join a union. Biden said American workers should be able to join unions without pressure from their companies.

Nurse anesthetists at Beaumont’s flagship Royal Oak hospital and those at the company’s Troy and Grosse Pointe facilities are in the midst of trying to form a union. The anesthetists were previously Beaumont employees, but Wilson pawned them off to a controversial outsourcing company called NorthStar, which on Jan. 1 began a three-year contract to handle the anesthesia services at those hospitals.

NorthStar hired a union busting firm to “educate” the anesthetists about the dangers of unions. Representatives of the union busting firm recently showed up uninvited at the anesthetists’ lounges to engage them in conversation and helped themselves out to food sent as a gift from Beaumont’s anesthesiologists. NorthStar CEO Adam Spiegel on Friday sent the anesthetists a lengthy email admonishing them about the dangers of forming a union.

Biden expressly said that workers shouldn’t be subject to the sorts of anti-union pressures Beaumont’s nurse anesthetists are facing.

Congressman Andy Levin

NorthStar is controlled by The Cranmere Group, a holding company whose previous CEO Jeffrey Zients resigned in December to co-head President Biden’s transition team and is one of Biden’s closest advisors. Beaumont Royal Oak is in the district of Rep. Andy Levin, who was rumored to be a serious candidate to become Secretary of Labor in the Biden Administration.

While Levin opposed Fox’s plans to give away Beaumont to Advocate Aurora and may have been responsible for the dealing falling through, he stopped short of calling for the resignation of Fox, Wilson, and Wood. Levin has been silent about Beaumont’s continued deterioration, including the death of a patient in January from complications relating to anesthesia intubation while undergoing a routine colonoscopy.

The tragedy happened within three weeks of NorthStar taking over anesthesia services at Royal Oak.

If Levin remains mum about NorthStar’s union busting activities in the wake of Biden’s support of American workers’ rights to organize, the silence will be deafening.

Reach Eric Starkman at: eric@starkmanapproved.com">eric@starkmanapproved.com. Beaumont employees and vendors are encouraged to reach out, with confidentiality assured.

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