Beaumont Health CEO John Fox said Friday morning that the mutual decision to end more than four months of negotiations to merge with 26-hospital Advocate Aurora Health of Illinois was primarily made because the two systems and other interested parties could not meet in person because of the COVID-19 pandemic.
"As you recall, in June, we had entered into a nonbinding letter of intent with Advocate Aurora that that was going to lead us to a due diligence phase and a lot of other expanded work across our organizations," Fox said in a virtual press conference with the Detroit media.
"But this is all done in the middle of a terrible pandemic that gravely injured our normal interpersonal interactions," Fox said. "(Normally) we'd have a process that are really essential for community based organizations to build relationships, and get to know each other."
Fox said meetings between boards, committees, doctors and other constituent groups were impossible to conduct. He said more than six other hospital mergers have been canceled nationally this year because of the pandemic.
"We've tried to Zoom a couple of times and other mechanisms, but it's not really been adequate," he said.
The proposed merger, which would have created a 34-hospital, three-state regional system with $17 billion in annual revenue, was put on hold in mid-August after several critical surveys of Beaumont management by doctors and nurses were submitted to the 16-member Beaumont board of directors. Donors and legislators later joined the chorus to stop the merger.
In late June, Southfield-based Beaumont and Advocate signed a nonbinding letter of intent and had hoped to complete a final agreement later this year. Any deal would have required a vote by the 16-member board of directors and signoff by Michigan Attorney General Dana Nessel.
If completed, the combined Advocate-Aurora-Beaumont system would have become the nation's seventh-largest not-for-profit health system by revenue, behind Livonia-based Trinity Health.
"We have great respect for Beaumont Health and we continue to believe scale will play a critical role in advancing quality, accelerating transformation and reducing cost in the health care world of tomorrow," said Jim Skogsbergh, president and CEO of 26-hospital Advocate Aurora, in a statement Friday.
But over the past three months, physicians, nurses and donors have expressed dissatisfaction with Fox, COO Carolyn Wilson and Chief Medical Officer David Wood over a number of management decisions they say has led to low morale, inadequate staffing, lack of supplies, changes in anesthesia services and departures of top doctors and nurses.
When asked if he would resign or retire from Beaumont when his contract ends, Fox said: "I am not going anywhere." Fox's five-year contract expired in March 2020 and there has been no word it was extended, although Fox told Crain's Friday only that his contract does not expire in 2021.
The deal with Advocate Aurora isn't the only time Beaumont merger talks ended in termination.
In May, Beaumont abruptly Beaumont Health called off a merger with four-hospital Summa Health, an Akron, Ohio-based system. The systems had already received all state and federal regulatory approvals and was nearly completed.
Beaumont officials said the delay was to allow both hospital systems to navigate the coronavirus pandemic and its financial fallout, but Summa executives said they were surprised by the announcement.
In response to Friday's announcement, three Oakland County legislators applauded Beaumont's decision to terminate the merger with Advocate Aurora.
"We commend Beaumont for acting in the best interest of its patients and employees and ending merger discussions with Advocate Aurora Health. Evidence suggests that the proposed merger of these health systems might have led to higher health care costs and, potentially, worse patient outcomes. That is a risk to our constituents we were unwilling to accept," according to a statement from Congressman Andy Levin, D-Bloomfield Twp., State Sen. Mallory McMorrow, D-Royal Oak, and State Rep. Jim Ellison, D-Royal Oak.
The three legislators earlier this week voiced opposition to the merger and urged Beaumont leadership to re-evaluate it.
"As our communities continue to grapple with this devastating pandemic, we believe every health system should remain 100 percent focused on serving patients and protecting the hardworking people who care for them and keep our hospitals running— not on maximizing revenues," the legislators said. "We stand ready to support Beaumont, its employees and other health care providers throughout Southeast Michigan as they continue the essential work of caring for Michiganders."
Oakland County Executive David Coulter said terminating the merger was the right thing to do.
"Beyond financial benefits, any partnership must demonstrate tangible community benefits and improved quality of health care for our residents not readily apparent in this proposal," Coulter said in a statement. "I look forward to Beaumont's renewed focus on local market priorities and the critical role they play in the quality of life in this region."
In a Zoom teleconference with reporters Friday morning, Fox spoke for nearly 10 minutes about the decision to terminate talks. Fox was then was asked a number of questions by the media:
Was it really a mutual decision with Advocate to terminate the merger? It seemed as if Advocate Aurora was taking cues from Beaumont on how to proceed, given the problems expressed locally.
Fox: "I don't know whether I'd say it that way. We discussed it, we agreed that it would be a mutual decision. Clearly, we had a lot of groups we needed to process with. And it was extremely cumbersome with the pandemic. So again, we stand by what we said."
How much of an impact were the doctors, nurses, major donors and others, who opposed the merger, in your final decision? They were the ones, in fact, who slowed it down?
Fox: "It's all kind of one ecosystem. It's very natural, when you start to discuss these kind of partnerships with major community assets, such as Beaumont, that there'll be some initial concerns. The pandemic gets in your way, and the ability to process that what would have happened in normal situation. I'm not saying the pandemic is the cause. But it really got in the way, if you will. The other issues are, when they are legitimate concerns, (and) addressing the concerns and processing that, you know, with all the requirements we have under the pandemic, makes it really difficult to address."
Were there other concerns besides the pandemic?
Fox: "I think that, frankly, the board and management and I endorsed the decision. (We) looked at all the issues from all the constituencies, all the processing we need to do to the issues we face going forward, that being a second surge, (and) getting ready for the vaccine phase in the first and second quarter. The collective decision was we need to discontinue these discussions, focus on that and get on the other side of this pandemic. And then see where we are at that point in time."
Could merger discussions pick up again after the pandemic?
Fox: "It's possible. Again, I am a little careful in predicting the future. Right now, when I talk to my colleagues around the country, who like us may have been in conversations in 2019, have been interrupted or distracted by their primary responsibility for their communities, which is to protect them from the effects of the pandemic and to treat those infected with the pandemic with the virus. "
Will you resign or retire in the near future?
Fox: "I am not going anywhere. Fortunately, I have a lot of support from the board."
You are quite aware that these problems expressed by doctors, nurses and donors have been bubbling up for some time. More than two years before COVID-19. Does Beaumont plan to address the number of problems raised by doctors and nurses on staffing, support, equipment and various contract issues?
Fox: "That is a compound question. I believe we're addressing all those issues. As we navigate through (COVID-19), do not underestimate the stress everyone has been under courtesy of the pandemic and it's truly been extraordinary. ... There is a lot of tumult and you know, there's a general concerns which are very valid. There's some sub-agendas with respect to other issues of decisions may have. But what we're doing is keeping the dialogue wide open. We're talking to them, and we're working it through it."
