Beaumont Health will postpone its merger with Summa Health and initiate furloughs and permanent layoffs due to financial strains suffered due to the coronavirus pandemic. (Photo courtesy of Beaumont Health)
Beaumont and Summa merger put on hold due to coronavirus pandemic
April 23, 2020
by John R. Fischer, Senior Reporter
The upcoming merger between Beaumont Health in Michigan and Summa Health in Ohio has been put on hold amid the ongoing coronavirus pandemic.
Beaumont CEO John Fox announced the news in a briefing Tuesday, along with plans to lay off 450 staff members, cut executive pay and furlough more than 2,000 employees due to the financial strain the virus has had on the eight-hospital system.
"Both Summa and Beaumont are 'all hands on deck' during the COVID-19 pandemic," said Fox. "We didn’t plan this, but we are deferring that merger until we have a bit more clarity about this crisis."
The merger between Beaumont and Summa, a four-hospital system, was agreed upon back in January, under which Summa would become a subsidiary of the larger Beaumont. Its addition is expected to increase the number of facilities under Beaumont to 12 and raise its total revenue stream to $6.1 billion.
The end of the first quarter in March saw Beamont’s net income fall to -$278.4 million, a decrease of $407.5 million over the same period in 2019. Operating revenue dropped to $1.07 billion, and net operating income for the first three months of 2020 was -$54.1 million, a $91.7 million decrease compared to the same time last year. While much of this decline was not related to the virus, which only began impacting Beaumont during the last two weeks of March, the hospital expects the virus to play a bigger role in its second quarter financials, which are also predicted to be challenging.
The largest source of financial concern for Beaumont throughout the pandemic has been its surgical revenue, which has all but "dried up," according to Fox. The hospital eliminated 85%-90% of its surgeries, much of which was crowded out by the pandemic. Fox says the reason for this was crowding brought on by the pandemic.
“We had to increase our ICUs by 40% over our normal complement,” he said. “That meant we were converting every OR, post-anesthesia recovery unit and a whole bunch of other locations to be critical care units and ICUs with ventilators for patients suffering from COVID-19.”
Other sources of financial distress include a decrease in ER visits due to civilians avoiding the hospital and the price of PPE, which Fox says has "dramatically" risen. “[A gown] we used to pay a dollar for maybe six weeks ago is now $6 dollars. We’re trying to get it from other sources. The supply chain was definitely not prepared for a pandemic, and that’s impacted us significantly.”
The toll on the hospital’s finances has forced it to permanently eliminate 450 positions, most of which are part of the corporate staff or work in other administrative roles. Those whose positions are eliminated will receive a lump-sum severance package and will likely be able to apply for enhanced state and federal unemployment benefits. They also have the option of continuing their benefits at current employee rates through their severance period.
It also will temporarily lay off 2,475 employees, with the majority being hospital administrative staff and others who are not directly involved in the care of patients with or without COVID-19. Those employees may apply for enhanced unemployment benefits available through state and federal programs, and may be asked to return to their roles as additional medical services resume at all campuses. They can continue to participate in Beaumont’s health insurance and in its other benefits programs at their current employee rates.
Fox will take a 70% temporary pay cut in his base salary, while other members of the hospital’s executive leadership team will take temporary cuts of up to 45%.
“While many front-line employees have never been busier, other parts of our operations have drastically declined or ceased,” said Fox. “We must make difficult, quick decisions now to protect and readjust to an uncertain future. We also expect economic pressures on Beaumont and the healthcare industry to continue well after the COVID-19 initial surge subsides, which is why we made the difficult decision to eliminate 450 positions. We must adjust the way we operate our organization moving forward.
Beaumont will continue to treat patients with the virus until a vaccine is developed.
Beaumont CEO John Fox announced the news in a briefing Tuesday, along with plans to lay off 450 staff members, cut executive pay and furlough more than 2,000 employees due to the financial strain the virus has had on the eight-hospital system.
"Both Summa and Beaumont are 'all hands on deck' during the COVID-19 pandemic," said Fox. "We didn’t plan this, but we are deferring that merger until we have a bit more clarity about this crisis."
The merger between Beaumont and Summa, a four-hospital system, was agreed upon back in January, under which Summa would become a subsidiary of the larger Beaumont. Its addition is expected to increase the number of facilities under Beaumont to 12 and raise its total revenue stream to $6.1 billion.
The end of the first quarter in March saw Beamont’s net income fall to -$278.4 million, a decrease of $407.5 million over the same period in 2019. Operating revenue dropped to $1.07 billion, and net operating income for the first three months of 2020 was -$54.1 million, a $91.7 million decrease compared to the same time last year. While much of this decline was not related to the virus, which only began impacting Beaumont during the last two weeks of March, the hospital expects the virus to play a bigger role in its second quarter financials, which are also predicted to be challenging.
The largest source of financial concern for Beaumont throughout the pandemic has been its surgical revenue, which has all but "dried up," according to Fox. The hospital eliminated 85%-90% of its surgeries, much of which was crowded out by the pandemic. Fox says the reason for this was crowding brought on by the pandemic.
“We had to increase our ICUs by 40% over our normal complement,” he said. “That meant we were converting every OR, post-anesthesia recovery unit and a whole bunch of other locations to be critical care units and ICUs with ventilators for patients suffering from COVID-19.”
Other sources of financial distress include a decrease in ER visits due to civilians avoiding the hospital and the price of PPE, which Fox says has "dramatically" risen. “[A gown] we used to pay a dollar for maybe six weeks ago is now $6 dollars. We’re trying to get it from other sources. The supply chain was definitely not prepared for a pandemic, and that’s impacted us significantly.”
The toll on the hospital’s finances has forced it to permanently eliminate 450 positions, most of which are part of the corporate staff or work in other administrative roles. Those whose positions are eliminated will receive a lump-sum severance package and will likely be able to apply for enhanced state and federal unemployment benefits. They also have the option of continuing their benefits at current employee rates through their severance period.
It also will temporarily lay off 2,475 employees, with the majority being hospital administrative staff and others who are not directly involved in the care of patients with or without COVID-19. Those employees may apply for enhanced unemployment benefits available through state and federal programs, and may be asked to return to their roles as additional medical services resume at all campuses. They can continue to participate in Beaumont’s health insurance and in its other benefits programs at their current employee rates.
Fox will take a 70% temporary pay cut in his base salary, while other members of the hospital’s executive leadership team will take temporary cuts of up to 45%.
“While many front-line employees have never been busier, other parts of our operations have drastically declined or ceased,” said Fox. “We must make difficult, quick decisions now to protect and readjust to an uncertain future. We also expect economic pressures on Beaumont and the healthcare industry to continue well after the COVID-19 initial surge subsides, which is why we made the difficult decision to eliminate 450 positions. We must adjust the way we operate our organization moving forward.
Beaumont will continue to treat patients with the virus until a vaccine is developed.