Former Beaumont director wants CEO, top execs fired, merger delayed
A former Beaumont Health board member and vice chair has sent a scathing five-page letter to Michigan Attorney General Dana Nessel asking her to “require or suggest” the 16-member Beaumont board of directors fire CEO John Fox and his top two lieutenants.
Mark Shaevsky, who served on the Beaumont board for 17 years until 2014, told Crain’s he has been frustrated the past several months that a majority of the Beaumont board appears to support the proposed merger with 28-hospital Advocate Aurora Health, a nonprofit health system with offices in Chicago and Milwaukee.
He also said he doesn’t believe the board has sufficiently addressed patient safety concerns expressed by doctors and nurses.
“I am very, very concerned the proposed acquisition, and I call it an acquisition, is very, very detrimental to the community,” Shaevsky said Thursday. “We have a significant community asset and if the merger is completed it will not really be controlled by the community.”
Shaevsky said Southfield-based Beaumont Health could continue to exist and thrive without being part of a larger system. “I don’t think bigger is better. I don’t see where the benefit would be to Beaumont,” he said.
In his Sept. 4 letter to Nessel — received by her office on Sept. 8 — Shaevsky detailed why he believes the proposed merger makes no sense.
“Beaumont’s annual revenues are nearly $5 billion,” wrote Shaevsky, an attorney who now heads Mark Shaevsky & Associates, LLC – Management Advisors in Farmington Hills. “If sold, the proceeds of $5 billion would go into a community foundation to support the health needs of the community. If the $5 billion would produce annual income of 5 percent, that would mean $250 million would be available for the betterment of our citizens every year indefinitely — and still have the $5 billion foundation. So, why would the citizens of Michigan transfer 100% ownership of a $5 billion community asset to another institution in return for promises of expenditures of slightly over $1 billion and a minority interest in a combined hospital system?”
Shaevsky told Crain’s he is not in favor of Beaumont selling to a for-profit company like Tenet Healthcare or HCA Healthcare, where the sale proceeds would go to create a community foundation. He said he used the example to illustrate how a nonprofit like Advocate Aurora would assume the assets and leave very limited reserved powers for local control.
“You have a valuable asset built up over the years. It is tax-exempt and belongs to the community,” Shaevsky said.
Fox has said that Advocate Aurora will make a $1.1 billion investment in Beaumont for capital, equipment and clinical program improvements over the next three years, if the merger is approved.
Shaevsky wrote the capital promise comes “without guarantees” and could be disregarded or delayed.
Advocate Aurora CEO Jim Skogsbergh has told Crain’s the system is committed to the funding, but that it could take more than three years to complete because of the COVID-19 pandemic and projected system losses of $500 million this year.
“The reality is Beaumont has the financial resources to pay for all the projects allegedly promised by Advocate,” Shaevsky wrote, adding that Beaumont has more than $2 billion in cash reserves and a top credit rating for tax-exempt bonds.
Contacted by Crain’s, Nessel’s office said she has received numerous letters about the Beaumont-Advocate proposed merger and that a preliminary review is underway. Nessel must approve the merger, a process that could take months.
Mark Geary, a Beaumont spokesman, said the system has not seen Shaevsky’s letter and could not comment at this time.
Shaevsky said Nessel’s office acknowledged his letter. He said he has no confidence in the board taking action and felt Nessel might intervene on behalf of the community.
“I have talked with some donors and board members about my concerns, but I didn’t tell anyone I was writing the letter (to Nessel),” he said.
Last week, a group of powerful donors at Beaumont Health, an eight-hospital system based in Southfield, met with board vice chair Stephen Howard to talk about problems with Beaumont, Howard confirmed to Crain’s Thursday.
Two sources, who asked for anonymity because of their connections to Beaumont, said donors are preparing a letter to ask that the board fire Fox, Wilson and Wood, replace them with an interim management team and halt the merger for at least 12 months.
The sources say the donors also want the board to immediately appoint more doctors and nurses to the board, which has three physicians, including Wood.
In two text messages to Crain’s, Howard said he wasn’t aware of any letter being composed by donors. He said the donors he met with made no demands, just wanted to talk about the problems and ask for his thoughts.
“I thought it was a productive discussion and enjoyed being with this group,” Howard wrote. “Health care is in uncharted waters at the moment, especially with post pandemic stresses of employee and physician and nurse burnout from the horrific pressure they experienced. And certainly we can expect price pressure from the government because of all the Cares Act (money) expended.”
Shaevsky said he spoke with Howard about the merger in late June, after the initial announcement of the letter of intent. He said he felt Howard was repeating Fox’s talking points about the benefits of the merger.
“He told me what he thought the board wanted,” he said. “I didn’t get the impression the board was asking hard questions.”
Over the past several weeks, physicians and nurses have expressed dissatisfaction with Fox, Wilson and Wood over a number of management decisions they say have led to low morale, inadequate staffing, lack of supplies, changes in anesthesia services and departures of top doctors and nurses.
In separate surveys, 76 percent of 1,555 physicians said they have no confidence in corporate management and 70 percent expressed opposition to the merger with Advocate. An even greater percentage of nurses expressed lack of confidence in management (96 percent) and opposition to the merger (87 percent).
Some donors appear to be concerned about a decrease in the quality of the medical staff, as more than a dozen top doctors have resigned, been fired or retired from Beaumont over the past year, said the sources.
In a statement Wednesday, Margaret Cooney Casey, Beaumont’s senior vice president and chief development officer, said Beaumont’s donors are important to the health system that appreciates their investments to support operations and clinical initiatives.
“Over the past few months, we have been working closely with our donors to keep them informed (of the proposed merger), answer their questions and address their concerns, if any, through phone calls, emails and meetings,” Cooney Casey said. “We will continue to have an open dialogue with our donors and welcome feedback, comments and questions from them.”
In response to physician complaints, the Beaumont board in early August agreed to postpone a vote on the merger until issues with the doctors can be worked out.
Howard said he is taking the physician and donor concerns seriously. He said he agreed with the decision to delay a final merger vote until the board’s late fall meeting.
“Since the physicians are our customers, it’s critical to have their concerns heard front and center,” Howard wrote. “Beaumont has been a very special place for a long time because it was a great mix of private and employed docs who worked side by side as clinicians, researchers, teachers, department bosses, system chiefs, philanthropic rainmakers.”