It didn't take long for an outcry to start.
A month after announcing the letter of intent with Advocate Aurora, a "no confidence" petition began circulating among Beaumont's physicians, calling for the system's board to fire Fox and Chief Medical Officer David Wood Jr.
"Over the last five years, we the medical staff of Beaumont Health have seen a rapid and progressive deterioration in every aspect of patient care at Beaumont Health. We no longer have confidence in the administration's ability to provide a safe place for us to care for our patients," the petition said.
The petition also took aim at the Aurora merger, fearing it would remove local control from Michigan hospitals. Beaumont's board quickly responded that the Michigan hospitals would remain under local control.
But the damage had been done. In August, Beaumont and Aurora announced merger talks had been delayed and those talks ultimately ended in October.
The explosion of physician unrest at Beaumont is the culmination of years of cost-cutting amid merger talks.
Fox has spent much of his time looking to boost Beaumont's profit margins, largely as a means to be valuable to potential partners but also to build Beaumont's investment portfolio in preparation for unforeseen financial strains the industry may face in the future and to reinvest in technology.
"Yes, we strive for a 4 percent margin so that we have the resources to continue advancing care for our patients," Fox told Crain's in an email. "A 4 percent margin is adequate, but not excessive for internally generating some of the capital needed to replace worn-out equipment, obtain new medical technology, etc. Our margin has given us the opportunity to reach more patients through new outpatient campuses in Macomb and Wayne counties, opening 28 urgent care facilities to provide more convenient access to patients and to better address the mental health crisis by opening a new behavioral health hospital (in Dearborn) and residency program later this year."
At the end of the first quarter of 2021, Beaumont Health had $3.06 billion in cash on hand — or twice as much as Southfield-based Lear Corp., the fourth-largest public company in Southeast Michigan.
The board member said more hospital boards have put importance on the cash on hand as it's more stable and predictable than policy and health care operations.
"Beaumont, like many large hospital systems, is in two separate businesses — providing heath care and managing the money," the board member said. "Systems can earn significant amounts of money on their investments. That's a huge portion of the income for Beaumont."
Spectrum, comparatively, had $5.3 billion in cash and investments at the end of 2020.
Meanwhile, Beaumont continues to cut costs. For example, a year ago, Beaumont shifted its anesthesiology services to a contractor, Texas-based NorthStar Anesthesia, which resulted in NorthStar offering the Beaumont nurse anesthetists $12,000 less in benefits and pay to stay on at Beaumont.
Beaumont has also suffered from high-profile physicians leaving amid that unrest, according to a letter 20 powerful and high-profile donors sent to Beaumont's board last year.
"The loss of (medical) staff as well as recent surveys, including those by doctors and nurses, demonstrate that something is seriously amiss," said the letter, which sources old Crain's was delivered to board members on Sept. 18.
"This situation must be addressed and improved immediately and with an immediate sense of urgency. This must be your primary focus. Among other things, we believe this requires that the proposed transaction with Advocate Aurora Health should not divert your attention or even be considered unless and until the current crisis at Beaumont is fully addressed."
Despite the cash, investments and cost-cutting measures, Beaumont Royal Oak remains one of the lowest-reimbursed health systems in the region.
Health plans paid only 143 percent above Medicare for inpatient and outpatient services at Beaumont Royal Oak, according to the Hospital Price Transparency Study released by RAND Corp. That's only more expensive than Henry Ford Macomb Hospital and Henry Ford Wyandotte Hospital in the region.
The board member said Beaumont has never been able to successfully raise its reimbursement from large insurers like Blue Cross Blue Shield Michigan to align with its competitors because the Royal Oak hospital started as a community hospital instead of an academic one like Michigan Medicine or a "community-critical" hospital like the Detroit Medical Center.
"Beaumont Royal Oak always got a lot of patients and attracted good doctors because it was in a good location, but it wasn't a primarily an academic and teaching hospital," the former board member said. "These things get built into the system. DMC was always paid more too because it was deemed a safety-net hospital. The point is and other private insurers pay different amounts per procedure for different hospital systems. It makes no sense, but Beaumont has suffered because of it and that's part of why you've seen this pledge to get bigger."
Fox acknowledged the lower reimbursements and said the merger with Spectrum and said access to its in-house insurer Priority Health will offer benefits on costs..
"Yes, some insurance payments are lower for Beaumont due to a variety of reasons and circumstances," Fox said. "Beaumont works with all payers, including Blue Cross, and we recognize the importance of those ongoing relationships. One of our goals in working with Spectrum Health is to make health care more affordable, accessible and equitable for the communities we serve. When Beaumont works more closely with Priority Health, a division of Spectrum Health, we believe it will help mitigate rising health care costs and provide patients and employers with greater overall value."
Presumably, the merged companies will have greater negotiating power with Blue Cross, the region's largest health insurer, especially with the threat of a competitive Priority.
Shehata said that's what all these mergers are really about — leverage.
"Hospitals are becoming multiprong enterprises," Shehata said. "The systems that have grown to some scale in size have more power. They can take on more long-term agreements with the health plans and physician networks. They can better control the market. Those with larger cash reserves and infrastructure have been able to rebound more rapidly during crises. But who wins is the question left unanswered. The consumer can be the winner if these entities bring out new advancements in technology, making patient care more available to the broader community. But right now the power sits with the consolidators, and it's not clear it will help."