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Former Beaumont trustee wants CEO, COO and CMO fired through AG intervention

Beaumont's board is split on AdvocateAurora deal and has agreed to delay vote until members have further talks with physicians, former trustee says.

Susan Morse, Managing Editor

A former trustee for Beaumont Health wants the Michigan Attorney General to intervene in hospital operations and direct the board of directors to fire the CEO and other top hospital executives and also to stop the hospital's planned merger with AdvocateAurora Health.

In the letter former trustee Mark Shaevsky singles out CEO John Fox, COO Carolyn Wilson and CMO Dr. David Wood. The AG's office should require or suggest that the board of directors terminate the employment status of the top executives, Shaevsky said, suggesting the CEO, COO and CMO be given appropriate severance arrangements consistent with their employment contracts.

Shaevsky said he has two concerns. The first is that if Beaumont, based just outside of Detroit, is taken over by the Chicago-based AdvocateAurora, it would be trading $5 billion in annual revenue for AdvocateAurora's promise of $1 billion in capital improvement funds. Beaumont is in a strong enough cash position and has an excellent credit rating, so it could borrow any necessary funds, he said. 

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Beaumont is among Michigan's largest healthcare systems.

In the five-page letter, Shaevsky addresses what he calls the "disingenuous" characterization of the deal as being a partnership, and not as a sale to Advocate.

"However, under the 'partnership,' Beaumont would give up its 100% independence as a community hospital in Michigan to become a minority partner – one-third (33⅓%) – in a corporation to be dominated by the other two parties, especially the Advocate system in Chicago (and whose CEO is planned to be the CEO of the 'partnership')," Shaevsky wrote.

"The other reason espoused by management for the transfer to Advocate is that hospitals have to get bigger in order to deal with the challenges facing the healthcare industry," he said, adding that bigger is not necessarily better for patients.

His second concern is that Beaumont executives are putting the system's 4% margin goal over the hospital's mission and that top physicians are being let go and are leaving on their own. 

"In order to achieve the 4% operating margin goal, the top executive team has fired outstanding physicians," he said adding they have terminated relationships with anesthesiologists, have replaced them with technicians of lesser quality and have reduced day-to-day staff.

"It has reached the point of open rebellion," he said. "Physicians and nurses have circulated petitions alleging a complete lack of confidence in corporate leadership – something that has never happened before at Beaumont. Many prominent physicians have left the Beaumont system. Surgeries are postponed because of lack of qualified staff. Nurses have too many patients to cover adequately. Sanitation is not being maintained properly, endangering patient health."

Shaevsky, a senior partner in a Michigan law firm and a hospital donor, wrote to Attorney General Dana Nessel on September 4, as a "concerned citizen." For an estimated 17 years, ending in 2014, he was a trustee of Beaumont, serving at various times as vice chair of the board, chair of the Finance and Audit committees and as a member of the Investment Committee.

The current Board of Trustees is divided over its support for the CEO and other executives, Shaevsky said when reached on Friday.

"What I've been told, that they are split," he said. "The board has already agreed to delay the vote on the merger until they have further discussions with physicians." 

Shaevsky said he has not had a response from the AG's office. 

The AG's office is currently reviewing the planned partnership between Beaumont and AdvocateAurora, but had no other comment, according to a spokesman there.

No one from Beaumont immediately returned a request for comment.

Shaevsky asked the AG to intervene before people's lives are endangered further, as happened in the Flint water crisis, when government action was delayed, he said.

WHY THIS MATTERS

Partnership discussions between Beaumont and AdvocateAurora have been ongoing since the end of 2019. Talks were paused to allow both organizations to focus on the COVID-19 pandemic.

It's unknown how much sway the state's AG will give to Shaevsky's concerns, which, according to Shaevsky, are shared by at least some of the current board members.

But the partnership deal needs AG approval to move forward.

Also, in the letter, Shaevsky speculates that change-of-control provisions in the executives' contracts would allow them to collect millions of dollars after the deal goes through.

Later he calls the top executive team "well-intentioned people of high intelligence and dedication," but said there is a huge disconnect between top executive goals and what professionals see as their mission.

THE LARGER TREND

In June, AdvocateAurora and Beaumont Health said they were exploring a potential partnership that would create a dominant health system across Michigan, Wisconsin and Illinois.

In July, the two systems signed a nonbinding letter of intent to combine, which would result in a healthcare system with $17 billion in annual revenues.

Beaumont would keep its name. The systems said the deal under exploration would allow both not-for-profit health providers to strengthen and align their purposes of serving the needs of individuals, families and communities throughout the Upper Midwest.

In 2018, Advocate Health Care and Aurora Health Care merged to create AdvocateAurora Health, the 10th largest integrated system in the country, with 27 hospitals.

ON THE RECORD

Shaevsky opened his letter with the statement: "It is not hyperbole to say that there are two life and death issues currently facing Beaumont Health that require your intervention and should be addressed by your office as part of your inherent responsibility to ensure that non-profit organizations in Michigan are carrying out their missions. The first is the proposed transaction to turn over control of Beaumont Health to AdvocateAuroraHealth, headquartered in Chicago. The second is that Beaumont Health operations have become dysfunctional, as reflected in complete discord between top administrative executives and Beaumont professionals (physicians, nurses and staff) where the professionals have lost all confidence in management's actions, resulting in the jeopardizing of patient health and safety."

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com