Analysis: Opportunity is abundant for Spectrum to help Beaumont bounce back
Grand Rapids’ Spectrum Health launched its new integrated health system with Beaumont Health on Tuesday.
“Integrated” in the previous sentence is doing some heavy lifting. As of now, administrators of the new, temporarily named BHSH Health say there will be no noticeable changes for staff or patients, and the real integration work still lies ahead.
But questions remain on how exactly Spectrum plans to turn around the floundering Beaumont, which has seen its reputation suffer in recent years.
CEO John Fox’s merger attempts — three in the last two and half years — and cost-cutting measures were met with very public angst among staffers and led to an exodus of valuable physicians and high-value specialties. Beaumont’s attempt to merge with Illinois-based Advocate Aurora resulted in a vote of no confidence of leadership from physicians and nurses and, in the end, a shelving of the deal.
The merger with Spectrum wasn’t met with nearly as much animosity. Many employees privately will tell you they viewed it as an appropriate step to rid the hospital of Fox and his colleagues.
In a statement to Crain’s, BHSH President and CEO Tina Freese Decker said the relationship between staff and administrators is critical to the new leadership and she looks “forward to engaging with physicians, nurses and other clinical partners.”
There is also an open question how much value the Beaumont name still has after several years of turmoil. Some say Spectrum would be prudent to rebrand the system once synonymous with the region’s top doctors — “Do you have a Beaumont doctor?”
If one is going to remake Beaumont, however, there might not ever be a better time than now.
Hospitals across the state and nation are dealing with a patient experience that has been upended by the pandemic and will need to be rebuilt. Government orders and, later, increasing staffing issues led to canceled procedures. Patients in emergency rooms were experiencing wait times six hours and longer during pandemic peaks.
In other words, the pandemic has been an equalizer among health systems, with all suffering.
“Right now, health care nationally has been severely disrupted by the pandemic,” said Alex Calderone, president of Birmingham turnaround firm Calderone Advisory Group. “Inefficient systems became even more inefficient because of the pandemic. It created bad health care for everyone. No system across the state, maybe across the nation, has done a particularly good job of serving its patients in the COVID environment. If you’re the new Beaumont-Spectrum system, there’s never been a greater opportunity than what exists today in the history of health care.”
Calderone believes Beaumont’s name has been tarnished to a near irreparable degree and a new name is part of the healing needed between staff and administrators.
Mark Kopson, partner and leader of the health care practice for Bloomfield Hills-based law firm Plunkett Cooney, said it’s difficult to ruin a good brand name, and Beaumont’s still has value.
“Insiders may feel that way, but John Q. Public still has a very high opinion of Beaumont in Southeast Michigan,” Kopson said. “It’s a storied name locally, just like Spectrum has become in West Michigan.”
Other details on plans for Beaumont going forward are not yet clear. Freese Decker may have tipped her hand for the playbook to remake Beaumont.
She said the new entity would invest in digital health, at-home services and health equity at Beaumont.
Startups focused on digital health such as telemedicine and electronic health records raised $29.1 billion globally in 2021, more than double the raise in 2020. During the pandemic, we saw more and more at-home services with Beaumont competitor Henry Ford Health and large Detroit provider group Wayne Health sending mobile units to patients’ homes for everything from vaccinations to diabetes care.
The pandemic pushed health care trend lines five years forward, and an increased investment in these areas could propel Beaumont to the top of the lot in metro Detroit.
“Digital health and at-home services can really level the playing field,” Kopson said. “There’s a lot room for improvement in telehealth and digital record access for those with the money to spend.”
The merger not only created the state’s largest employer with 64,000 employees but also created a financial behemoth that can throw its weight around in capital markets.
Spectrum, for instance, held $1.1 billion in debt at the end of 2021. But it’s flush with cash and can sustain its operations without a single cent coming in the door for 246.3 days. Its debt-to-capitalization ratio was only 16.3 percent, well below the Moody’s median of 24.9 percent.
This, of course, translates to a system that can access a lot more cash easily to invest in Beaumont.
The reason it’s paramount for the new system to invest heavily in its operations is simple — the market isn’t growing. Growth can only occur by stealing patients from competitors or creating new business lines, because the number of patients isn’t changing.
Michigan’s population is growing at an abysmal pace, compared with other states, and in 2020 more residents died than were born. The new system has to invest in a better patient experience and market itself as such if it plans to boost patient numbers. Or it’s forced to rely exclusively on selling more services, in line with the strategy of the rest of the systems in the market.
We likely won’t know the entity’s full strategy for at least another year. Mergers of this size take longer than that to accomplish.
For now, we’re going to see if Freese Decker and company can keep Beaumont’s staff content and what steps come next to restore a reputation that has fallen into disrepair.