Beaumont reports loss of nearly $100 million during first half of 2022

Only months after it merged with Spectrum Health, Beaumont Health is decimating the financials of its West Michigan partner.

Between Feb. 1 and June 30, Beaumont lost $96.3 million, or a negative 5 percent margin, well below the $20.2 million operating margin projected by the organization, according to the first consolidated financial statement published by the merged BHSH System.

"The organization has seen deterioration in its operating results through the first six months of the year," the system wrote in the report. "This is the result of lower volumes and higher agency and critical staffing costs in our care delivery divisions. In addition, we have experienced higher than normal medical and pharmacy trends in the health plan."

Beaumont's metrics plummeted following COVID-19 surges throughout the pandemic. Its admissions rate, patient days (the billable days patients are in beds) and per patient revenue all dropped after the merger, compared to the same time frame before the merger.

BHSH attributes much of the losses to labor costs, which are higher in Southeast Michigan due to far more competition than the west side of the state.

"... unfavorable results were primarily due to increased salaries and wages expense, significant spend in agency and critical staffing and continued higher levels of premium and incentive compensation for clinical team members," the health system wrote in its report. "In the second quarter we began to see signs of improvement in agency and critical staffing levels, however, we have a considerable amount of work to do to get back to target."

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Beaumont, and its eight hospitals, had higher expenses than Spectrum's 11 West Michigan hospitals. Between Feb. 1 and June 30, Beaumont spent $1.21 billion on wages and benefits, compared to $980 million for Spectrum West Michigan during the first six months of the year.

But Beaumont's losses were offset by the strong financial performance of BHSH's Southwest Michigan operations and its integrated insurance arm Priority Health. Spectrum Southwest Michigan reported an operating income of $139.7 million on revenue of $1.92 billion and Priority reported income of $91.4 million on revenue of $3.11 billion during the first six months of the year, respectively.

BHSH Spectrum Health Lakeland operates three hospitals and reported income of $3.3 million on revenue of $323 million for the first six months of 2022.

The entire system's investments also dropped during the first half of the year, with Beaumont losing $252.8 million, Spectrum West Michigan losing $2.9 million and Priority losing $139.9 million.

Systemwide, BHSH reported an income of $119.7 million on revenue of $6.56 billion during the first half of the year, compared to income of $265.8 million on revenue of just $4.5 billion during the first half of 2021 prior to its merger with Beaumont.

This story first appeared in our sister publication, Crain's Detroit Business.