The writer, a Los Angeles freelancer and former Detroit News business reporter, blogs at Starkman Approved.
By Eric Starkman
If there was an annual award for the healthcare industry’s biggest chump, I defy anyone to propose a more worthy recipient than Tina Freese Decker, CEO of Grand Rapids-based Spectrum Health.
Six months into Freese Decker’s acquisition of Beaumont Health from former controversial CEO John Fox, metro Detroit’s biggest hospital system is suffering from a pandemic of red ink. Spectrum reported that Beaumont’s operations already have racked up nearly $100 million in losses. Spectrum was projecting a loss of $57.1 million, which also is an eye-opening surprise.
For years, former Beaumont CEO John Fox was paid more than $6 million annually because of his supposedly deft fiscal management. Funny we only now are learning just how badly Fox ran Beaumont into the ground.
Spectrum also reported that Beaumont lost $253 million on its investments. “Nonprofit” hospitals are supposed to manage their investments conservatively, opting for boring short-term duration bonds and other low risk investments.
Turns out Beaumont’s reported $4 billion reserve also dwindled by the time Fox turned over the keys to Freese Decker. Spectrum’s financial statements indicate that cash and investments from the “acquisition” was $3.2 billion.
That’s right, CFO Matthew Cox referred to Beaumont as an “acquisition,” not a merger as Freese Decker and Fox led the media to believe. The promised “dual headquarters” was also BS. All of Spectrum’s top executives are based in Grand Rapids, which is understandable since none of Fox’s top lieutenants remained with the company.
I imagine Fox is luxuriating at one of his Atlanta or North Carolina manors laughing hysterically at the Michigan executive yahoo who took Beaumont off his hands and no doubt paid him millions as part of the deal.
Fox previously disclosed he talked to more than 100 hospital systems hoping to find a corporate bride for Beaumont. Freese Decker grabbed the brass ring, but it was badly tarnished.
Fortunately, Freese Decker’s western Michigan businesses were healthy enough to allow Spectrum to eke out an operating profit of $119.7 million despite Beaumont’s losses. Spectrum was targeting a $156 million operating profit.
Still, Beaumont is clearly going to be a financial albatross on Spectrum’s operations for quite some time.
Spectrum’s takeover of Beaumont was a deal that should never have been allowed. If Michigan had a competent attorney general or a governor with a healthcare interest beyond abortion rights, the deal would have been derailed.
AG Dana Nessel was personally warned by Beaumont donor and former director Mark Shaevsky two years ago that Fox and his board cronies needed to be removed, but she allowed the hospital system to deteriorate, as did Michigan Gov. Gretchen Whitmer.
Instead, they allowed Spectrum to acquire Beaumont, creating Michigan’s biggest hospital system, as well as the state’s biggest employer.
As often happens when you meld two organizations, the weaker one brings the stronger one down.
That’s how Beaumont ended up in the sorry state that it did. The once proud and respected hospital system merged with two lesser ones in 2015, paving the way for Fox, who was determined to sell Beaumont from the moment he arrived.
Spectrum’s PR spin
Spectrum issued a statement to MiBiz about the disastrous financials reminiscent of the spin Fox served up during his seven-year tenure.
“Beaumont Health was significantly impacted by these financial and workforce headwinds that were particularly strong in Southeast Michigan (in the second quarter). Despite these challenges, our team members continued to provide nationally recognized health care and we were able to make new investments in the market and bring on new talent,” Spectrum said. “Although we are facing these current financial headwinds, we are confident we will continue to deliver effectively and successfully on our mission in the communities we serve in Michigan.”
Those “workforce headwinds” should have been known to Freese Decker well before she took over Beaumont. Maybe they don’t teach this at the University of Iowa from where Freese Decker received her Master of Health Administration, but when a hospital spends nearly $2 million as John Fox did to intimidate nurses at his flagship Royal Oak hospital and derailed a unionizing attempt, it creates bad blood.
Working at Beaumont under Fox and his former COO Carolyn Wilson was a hellacious HR experience, and the pandemic worsened the situation. Beaumont nurses and nurse anesthetists quit in droves, joining staffing agencies that paid them more money and ensured them better working conditions.
That resulted in Beaumont staff nurses working alongside nurses getting paid considerably more money doing the same job, prompting more staff nurses to leave. It’s a vicious cycle, one that I doubt Spectrum has figured out how to solve.
Why would Beaumont nurses want to remain on staff when they can make more money working at a staffing agency? There’s no prestige working at Beaumont anymore.
Ignored public warning
Freese Decker can’t say she wasn’t warned.
After she announced the deal, former Spectrum CFO Michael Freed publicly alerted Spectrum's then board the deal could result in a “massive financial loss.”
“When you sign the documents that will permanently change this region, your signature will forever hold you accountable for the repercussions,” Freed said in a letter he posted on LinkedIn.
It should give Grand Rapids residents cold shivers that the chair of Spectrum is Julie Fream, who was vice chair of Beaumont when Fox destroyed the hospital system's once nationally vaunted reputation. About a half dozen of Fream’s former board cronies also serve on the Spectrum board, once entirely controlled by Grand Rapids and western Michigan-based residents.
In another example of how Freese Decker is just like John Fox in looking to deceive and distract, Spectrum announced it will provide Oakland University with $20 million over the next five years for a Beaumont Health Nurse Scholar Program.
“The nursing shortage in our state is a critical and complex challenge that must be solved with bold and collaborative solutions,” the Detroit Free Press quoted Freese Decker as saying. “We are incredibly excited about the impact the BHSH Beaumont Health Nurse Scholar program will have in health care and for our communities.”
BHSH is what Spectrum calls its combined Beaumont and Spectrum operations. The nursing scholarship won’t alleviate Spectrum’s immediate nurse staffing issues.
A traditional Bachelor of Science degree in nursing is typically four years. The Freep quoted Oakland University dean of nursing Judy Didion as saying it will take about a year to build the infrastructure until the school can begin to admit additional students.
That would mean it will take at least five years for Spectrum’s nurse program to bear fruit, so it won’t do anything to alleviate the current nursing shortage.
Moreover, rookie nurses still have a lot to learn. Beaumont was once mostly staffed by highly skilled veterans, among the best in healthcare.
Speaking of Oakland University, when Fox announced his ill-fated attempt to merge Beaumont into Chicago-based Advocate Aurora, one of the few benefits he touted was that Advocate Aurora had agreed to move Oakland University’s William Beaumont School of Medicine to Beaumont’s Royal Oak campus.
Why isn’t Freese Decker following through on that supposedly great initiative?
Fox in January also disclosed that Beaumont planned to spend “significant dollars” to embark on a three to five-year plan to expand the health system’s private bed capacity.
Is that still on track given Beaumont’s oceans of red ink?
Freese Decker should be fired. In addition to her Beaumont debacle, there’s been considerable turnover in Spectrum’s senior ranks, mostly women. Spectrum also experienced considerable turnover of Black employees, some of whom considered filing a class action lawsuit .
Not a situation one would expect given that Freese Decker said her biggest priority was building a health system that “celebrates and reinforces diversity and inclusion.”
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