Some influential physician leaders at Beaumont Health are circulating a no-confidence petition on CEO John Fox and Chief Medical Officer David Wood Jr., M.D., they plan to submit to the board of trustees this month.
Doctors' 'no confidence' petition drive targets Beaumont CEO, chief medical officer
The physician no-confidence petition — a step infrequently taken in recent years by doctors either to voice displeasure with management or with board oversight — asks the 16-member board of directors to immediately remove Fox and Wood, who also are board members.
"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 no-confidence petition says.
Fox arrived at Beaumont in March 2015 from Emory Health in Atlanta and was named the first CEO of the newly merged eight-hospital health system. It was formed in September 2014 when three-hospital Beaumont Health System merged with four-hospital Oakwood Healthcare and Botsford Hospital.
Wood, who oversees the 1,300-physician Beaumont Medical Group and is responsible for physician-hospital strategies, went to Beaumont in 2012 from the University of Michigan.
The cover letter that accompanies the petition describes "a continual erosion of the standard of patient care that we all have worked so hard to maintain" and says the "changes instituted by the current leadership have been done to increase the financial status of the organization."
It also alleges that physicians and the community "now face the imminent threat of a merger with a Chicago-based hospital system which would remove any local control of our hospitals."
In mid-June, Beaumont signed a letter of intent to merge with Advocate Aurora Health, a 28-hospital system in Illinois and Wisconsin with $12 billion in revenue. Sources, all of whom asked for anonymity, tell Crain's that the Beaumont board is nearing a decision to approve the merger. On Tuesday, the independent members of the Beaumont Health board of trustees issued a statement of support for the proposed merger and for Fox and his management team.
Besides the no-confidence petition that sources say will contain names and specialties of doctors, a Survey Monkey questionnaire was created for doctors to anonymously express their opinions. Results of the Survey Monkey questionnaire will also be presented to the board, said the Beaumont doctor and author of the survey. It asks two questions: "Are you a Beaumont doctor?" and "Do you have confidence that the leadership team of Beaumont Health provides a safe place for us to care for our patients?"
The petition and survey has become a major topic of discussion and debate in physician lounges and offices, but the physician author of the petition said many employed doctors have said they are reluctant to put their name on it out of fear of retaliation.
"I've talked with many doctors" over the last three days, said the petition author. "Lots of employed doctors are fearful of losing their jobs. I am getting a lot of support from physician leaders. It is difficult for some because doctors are generally less inclined to get involved in controversies. They want to take care of their patients first. Everyone knows how important it is to the community that the board is aware of the problems."
The physician author said most doctors are replying "no" to the second question in the anonymous survey about confidence in leadership. He said he will turn in the petition when there are at least 1,000 signatures or survey votes.
"Many big-time players, representing independent practices will likely sign it," said a top doctor who represents a major physician organization in Michigan. "Employed doctors don't know what to do. They are worried about retaliation. So many private doctors now are sending their patients elsewhere, Henry Ford, Michigan Medicine, Cleveland Clinic. The feeling is Beaumont is more concerned with profits than quality."
In an interview Monday afternoon, Fox and Wood said they are taking the physicians' complaints and concerns seriously and have been working through hospital medical staffs to address issues raised by doctors.
"We've got to understand more specifically their points of concern," said Fox, adding that he saw the petition and cover letter Saturday and observed it only addressed general concerns. "Usually there's more specificity underneath that ... We will be meeting with hospital medical staff presidents and chairs of clinical departments over the next week to learn more."
Wood said he meets with doctors on a regular basis to discuss clinical care and concerns. "We want to hear their views, their comments, and I think until we get more specificity, it's really hard to be able to make any statement," he said.
Over the past three weeks, Crain's spoke with more than 15 doctors, all of whom asked for anonymity and said they feared retribution if their names were known by Beaumont executives. They cited a number of management decisions they believe have hurt Beaumont's reputation and could impact patient care and quality if they are fully pursued.
Management decisions cited by doctors include:
- Advocated for Beaumont to complete a merger with Advocate Aurora Health in Chicago they believe would lead to a loss of local control over what is one of the strongest health systems in Michigan.
- Created a new employed doctor compensation contract plan that doctors say if they signed would drastically cut their salaries and institute one of the most restrictive noncompete clauses in the Midwest for specialists.
- Decided to hire a Texas-based anesthesiology group to replace longtime groups and outsource more than 100 Beaumont certified registered nurse anesthetists to the company.
- Refused to renew a professional services contract with Michigan Heart Group/Northpoint Heart, one of the strongest cardiology groups in Southeast Michigan that primarily serves Beaumont's Royal Oak, Troy and Grosse Pointe campuses. The group, which will continue to serve Beaumont, also is seeking other hospital partners.
- Retaliated against and fired several top doctors at Beaumont after they objected to management decisions.
- Laid off hundreds of employees, including nurses, doctors and managers, over the past 18 months in an effort to reduce costs by at least 2 percent as profit margins slumped in 2019 to 3.9 percent from 5.2 percent in 2018.
Doctors spoke with Crain's on condition of anonymity about the no-confidence petition, the new compensation plan and other objections they have with Fox's management decisions and what they say appears to be a drive to cut costs without concern for impact on quality and safety.
"They are mad. They don't like John Fox and don't feel like the mission and vision of the place is being honored," said a former Beaumont manager who interacted with physicians on a daily basis. "Being a pre-eminent Beaumont physician is irrelevant. It's how many (relative-value units) do you produce. It's all about the bottom line. Doctors and patients are secondary."
Doctors tell Crain's that the no-confidence petition originated at Beaumont Hospital in Royal Oak, the 1,109-bed flagship facility that is nationally ranked in the top 20 for quality in 11 adult specialties.
A top Beaumont doctor manager said the medical staff at Beaumont Hospital Royal Oak hired a New Jersey-based physician management consultant to assess physician-hospital relations and communication. But the doctor manager said few changes were implemented and dissatisfaction continued to build.
Fox said he supported the medical staff report. He said the COVID-19 pandemic slowed implementation of the planned changes. "As far as we are concerned that work needs to continue," he said.
Some leaders said they are reluctant to sign the petition.
"We've been kind of sitting on the fence about the letter. Our strategy to (the problems) has been different," said a medical staff leader at a former Oakwood hospital. "We've had some responsiveness in terms of getting more resources. Others will probably work behind the scenes to make sure the medical staff is protected and also strongly represented in any discussions about a merger."
Earlier this year, Beaumont began rolling out a new employed physician compensation plan, called CARTS 2.0. CARTS stands for Clinical, Administrative, Research, Teaching and Strategic missions for its 1,300 employed doctors in the Beaumont Medical Group.
Many academic-based medical groups have been migrating to a CARTS-type system to reward doctors based on their work production and related medical duties.
But doctors told Crain's it would drastically cut their compensation, some up to 50 percent, even though they say their production has remained high.
"Beaumont is trying to wiggle out of what I think is fair compensation," said one employed doctor. "They have all sorts of excuses to pay us at the 25th percentile instead of the 80th percentile where many of us are at based on our productivity. They are offering way below market value for us."
Many physician specialties base their income on professional association surveys that take into consideration average base pay, incentives, productivity, teaching, research and administrative duties.
For example, the American Medical Group Association 2018 survey indicates that the total compensation for a surgeon with two or more years of experience based on productivity measures in the Midwest ranges from $233,877 in the 10th percentile up to $548,209 at the 90th percentile.
Fox acknowledged that some doctors will be paid less, but he said some underpaid doctors will receive pay boosts. "We aren't saving money. We are reallocating money," he said.
But Fox said Beaumont was forced to re-evaluate physician compensation across the board as part of a settlement in alleged physician kickbacks with the U.S. Department of Justice that led to a corporate integrity agreement.
In 2018, Beaumont paid $84.5 million to settle charges by the federal government and state of Michigan over excessive compensation to induce patient referrals and procedures involved Beaumont cardiologists, oncologists and ophthalmologists from 2004 to 2012, before the merger that created the current Beaumont Health.
"The DOJ settlement led to the CARTS (compensation plan)," Fox said. "We needed a rational, consistent framework for physician compensation. Whenever that happens, it is hard to digest locally. We are saving no money with the compensation plan."
Several employed doctors said Beaumont has told them the compensation changes were due to the DOJ corporate integrity agreement, but they don't believe it. They said the dramatic drop in compensation far exceeds concerns over excessive pay that would trigger investigations.
But Wood said doctors were consulted on the CARTS compensation plan.
"We promised in our corporate integrity agreement that we would have a consistent method for all our positions," Wood said. "The CARTS compensation was developed by employed physicians. They developed the guiding principles which were fairness, transparency, understandable and financially viable."
Another component of the contract, one that some employed doctors object to even more strongly, is a noncompete clause that prevents doctors from leaving Beaumont for another hospital within 35 miles for three years.
"The 35-mile limit shuts us out of the entire Southeast Michigan region," an employed doctor said. "This is unacceptable and unfair. Why are they treating doctors, some of whom have spent their entire careers here, this way?"
Fox said the 35-mile noncompete has become a national standard for specialists. "We have set the criteria for the noncompete that's where Beaumont is providing extensive value to employed doctors for their practice," he said.
Wood said primary care doctors have a five-mile noncompete clause.
Beaumont also is reducing stipends for doctors who are in administrative roles.
"No stipend for teaching will be provided. This has been a source of contention for years," another Beaumont doctor said. "The employed clinical faculty had been told to help develop the medical school curriculum, provide teaching and serve on committees and support research with medical students — all without any additional compensation."
While the employed doctor compensation plan and anesthesia changes evoked criticism, doctors said the proposed merger between Beaumont and Advocate Aurora pushed many over the limit.
Fox has advocated for the merger on the grounds that a larger, multistate Beaumont will give the system a better credit rating for issuing tax-exempt bonds, allowing more capital spending for buildings and equipment and greater negotiating clout with payers. He also said Advocate's expertise in population health management will give it a competitive advantage in Michigan.
But at least 10 doctors interviewed by Crain's said they believe the primary reason Fox is pushing for the proposed merger is to negotiate a lucrative retirement agreement that is higher than that given to Brian Connolly, former CEO of Oakwood Healthcare Inc.
"They believe that (the merger) plan is more about a golden parachute for (Fox's) exit rather than what is best for the community," said a physician at Beaumont in Royal Oak.
Since Connolly's departure from Beaumont in mid-2015, he has received a total of $8.9 million in various compensation categories from 2015 to 2018, according to public IRS 990 forms. Connolly did not respond to a request for comment.
Fox, 68, denied that was his motivation. He said he hasn't discussed a severance package with the board for if or when he retires and hasn't considered the impact of the proposed merger on his future plans with Beaumont.
Still, over the past four years, Fox has increased his annual total compensation by 155 percent from $2.32 million in 2015 to $5.93 million in 2018, the last year IRS 990 information was available.
"We haven't figured out what is going to happen on the management team" if the merger with Advocate is completed, Fox said. "First you get the structure right, how you want to do it. Then you deal with the faces. I know a lot of people do it the other way, but I think you do (the merger) first" and work out the surviving management team and severance packages later."
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.