The writer, a Los Angeles freelancer and former Detroit News business reporter. He blogs at StarkmanApproved.com.
By Eric Starkman
Wake up, Detroit!!! Hospital mergers are invariably bad for the communities they serve. Very, very, bad.
And no one should know this better than southeastern Michigan residents.
Back in 2014, some directors of Beaumont Health were snookered into believing that merging with Oakwood Healthcare and Botsford Hospital would result in an even better hospital network. At the time, Beaumont was recognized as one of the nation’s best regional hospital systems, while Oakwood paled in comparison. Botsford’s Farmington Hills hospital also wasn’t in Beaumont’s league.
By any measure, the quality of care precipitously declined at all the merged hospitals, which all took on the Beaumont name. A year ago last February, the Beaumont hospital system was taken over by Grand Rapids-based Spectrum Health and rebranded as Corewell Health. The former Beaumont hospitals have declined even further since the Spectrum takeover.
“The sentiment among the medical staff is this ship is sinking so f---ing fast,” one Corewell surgeon recently told me.
Another example of how Metro Detroit was harmed by a healthcare industry takeover was Chicago-based Superior Air-Ground Ambulance Service’s acquisition of Beaumont-owned Community Emergency Medical Service (CEMS), which Michigan attorney general Dana Nessel disgracefully approved three years ago.
CEMS was a Michigan nonprofit ambulance service whose fees were considerably less than Superior’s Michigan subsidiary. Farmington Hills-based CEMS as a matter of routine waived its charges for the economically disadvantaged.
Superior is a for-profit company that three years ago was the focus of a damning segment by WDIV consumer reporter “Help Me Hank” Winchester who revealed that Superior had charged a Detroit family more than $5,000 to ferry their child on a non-emergency basis from Henry Ford Hospital in West Bloomfield to Children’s Hospital in downtown Detroit. The family’s insurance had already paid Superior more than $1,000.
A Chicago TV station also slammed Superior for its billing practices. Yet Nessel, without public explanation, approved Superior’s takeover of CEMS. Wouldn’t you know it, Winchester recently featured another damning segment about Superior’s questionable billing practices, which appear more widespread. It was disappointing that Winchester featured Nessel saying she was concerned about Superior’s billing practices when she helped enable them.
Michigan’s sorry experience with healthcare mergers alone should make Henry Ford Health’s proposed “joint venture” with eight Ascension hospitals dead in the water. The arrogance of the two hospital systems serves as another compelling warning.
When the $10.5 billion deal was announced last month, the companies declined to make available any executives to Detroit Free Press reporter Kristan Jordan Shamus or answer some 24 questions she submitted in trying to determine how the union would impact Metro Detroit. JC Reindl, one of the Freep’s best reporters, also was given the brush off.
"Neither Henry Ford Health nor Ascension had to enter this agreement," Henry Ford told Reindl in a vacuous statement. "Instead, we viewed it as the best way to address the health needs of our region as we build a better system together."
If Henry Ford is looking for some cost savings, the health system should merge its PR department with Corewell’s because both companies spew out the same meaningless bullshit. Here’s what Spectrum CEO Tina Freese Decker, a gourmet server of word salads, said in Spectrum’s announcement that it was moving forward with its takeover of Beaumont:
“As we launch our new health system, we have a bold goal to transform health and are thrilled to unite our two great organizations. Together, we will leverage our complementary strengths to innovate and make a positive impact for our communities and their health. We look forward to working with our physicians, team members, patients, health plan members and partners across our state to provide health care and coverage that is accessible, affordable, equitable and exceptional.”
What little is known about the Henry Ford and Ascension combination has a very bad odor.
Henry Ford last year reported a net loss of $234 million, which it attributed to losses in its investment portfolio. Ascension, meanwhile, recently reported a nearly $2.7 billion net loss for its latest fiscal year ended June 30. The St. Louis-based Catholic hospital system blamed its red ink on high expenses, “sustained revenue challenges” and a one-time noncash impairment loss of almost $1.5 billion.
The financial health of the Ascension Michigan hospitals Henry Ford is taking over isn’t publicly known, nor has Henry Ford disclosed why Ascension is handing these hospitals over to its care. It’s known that the deal is a non-cash transaction, meaning no money is changing hands.
That alone is a giant warning sign.
Spectrum didn’t pay any money to take over Beaumont, save the millions of dollars it agreed to pay former CEO John Fox and some other senior management minions to immediately get lost after the deal closed. However, Beaumont reportedly had a $4 billion cash reserve that provided Spectrum with a cushion to offset any losses because of the deal. That reserve has proven quite beneficial.
The Henry Ford Ascension combination will reportedly command a nearly 44% share of the metro Detroit hospital market and 19% of the statewide market, which would result in a devastating failure if the deal became a giant bust and Henry Ford is responsible for all the losses.
Hospital mergers don’t guarantee operating savings. In fact, often the reverse is true.
Most hospitals rely on controversial Group Purchasing Organizations, which supposedly can negotiate discounts from suppliers because they buy in bulk on behalf of hundreds of hospital systems. GPOs are allowed to take rebates, or kickbacks as those of us who are less charitable like to say. Studies have shown that GPOs actually increase healthcare costs and are responsible for drug and medical equipment shortages.
The higher costs are passed on to businesses and consumers.
Mergers also have been shown to result in a lower quality of care.
“We share a deeply rooted dedication to providing world-class healthcare that everyone deserves, regardless of geographic, demographic, or socioeconomic status,” Robert Riney, Henry Ford’s president and CEO, said in statement to the Free Press.
Riney’s claim is open to debate. Henry Ford once enjoyed an “A” safety rating by Leapfrog, a nonprofit watchdog whose rankings are respected and touted by hospitals that achieve and maintain a gold safety standard, as Henry Ford once did.
Under the leadership of former CEO Wright Lassiter III, the Leapfrog ratings of Henry Ford’s flagship hospital in Detroit slipped to a “C.” While they have since rebounded to a “B” under Riney’s leadership, they still trail the “A” Leapfrog rating that Henry Ford’s satellite hospital in affluent West Bloomfield has consistently been awarded.
So much for Riney’s claim of being committed to providing world-class healthcare “regardless of geographic, demographic, or socioeconomic status.”
It’s a sad commentary on southeastern Michigan’s business community that once again Bret Jackson, president and CEO of the large employer-labor coalition Economic Alliance of Michigan, which includes the Detroit Three automakers, is the only leader willing to publicly warn about Henry Ford’s deal with Ascension. Jackson was the lone business leader willing to publicly criticize Spectrum’s takeover of Beaumont.
“I do ultimately think that it’s a merger — no matter what it’s being called — just by what we do know," Jackson told the Freep about Henry Ford’s deal with Ascension. “We’re concerned about all of the mergers and acquisitions that are taking place in Michigan’s health care market," he said. "Our prices were way more favorable just five, six years ago because we didn’t have the big mergers and acquisitions that have taken place in the last few years. And so we’re really concerned about what this means for affordability; we’re concerned about what this means for quality."
AG spokesman Danny Wimmer told the Free Press that Nessel would conduct a “rigorous antitrust review” in coordination with the Federal Trade Commission.
Talk about the blind leading the blind. The head of the FTC is Lina Khan, a 34-year-old Ivy League academic whose inexperience has caused great harm to the once respected regulator. Notably, Khan didn’t move to block Spectrum’s takeover of Beaumont, despite President Biden calling for a moratorium on big hospital mergers. I expect Nessel to rubber stamp Henry Ford’s sham “joint venture” with Ascension just as she did the Spectrum and Superior Ambulance deals, which have harmed Metro Detroit residents.
Channel 4’s “Help Me Hank” Winchester would be wise to turn his investigative cameras on Nessel and report about “Do Nothing Dana.” Unlike longtime Michigan AG Frank Kelley, who pioneered aggressive consumer protection, Nessel has distinguished herself as an ineffective regulator who routinely issues news releases warning about scams, rather than prosecuting them.
If Winchester can identify even one meaningful Nessel consumer protection accomplishment, he will be deserving of an Emmy.
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