Beaumont to lay off 2,475, eliminate 450 Michigan jobs due to coronavirus

Beaumont Health blamed huge first-quarter financial losses on a flood of COVID-19 cases and an inability to continue with other procedures and surgeries that produce more revenue. (Shutterstock)

Beaumont Health’s CEO John Fox is blaming the system’s pivot to coronavirus care, which canceled surgeries and skyrocketed equipment costs, for the layoffs of 2,475 employees and elimination of 450 jobs.

“Unfortunately it's a tale of two cities if you will in that [we have] absolutely outstanding performance by our clinical teams, whom I cannot be more proud of … But the other piece of that — by doing the most, we're also hemorrhaging the most in terms of cash,” Fox said during a Tuesday morning call with reporters.

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The Southfield-based health system is the largest in Michigan, with 38,000 employees. Last week, it reported $54 million in losses in the first quarter, in large part because of canceled surgeries and office visits and the shift to COVID-19 care.

“We can't sustain it by keeping this large group on the payroll the way we have been up to this point. So we have to make some tough decisions,” Fox said.

Fox presented charts showing Beaumont cared for more COVID-19 patients than other hospitals in southeast Michigan, a discrepancy that he called a “lesson learned.” 

He said other, unnamed hospitals didn’t want to take on patients, echoing his earlier criticisms of the state and other health systems for not sharing data on bed availability during the peak of the crisis.

“In another pandemic, it's gotta be all hands on deck. Everybody's got to be willing to help,” he said.

How long the cuts will last, and whether they’re enough, is unclear. 

“We're still walking around in a dark room of a pandemic with unprecedented size and proportion,” Fox said.

“This virus only exists to go from human to human, and we don't know how that will behave. So, the uncertainty of the future for us is significant.”

Beaumont CEO John Fox said he will take a temporary 70 percent pay cut as the system makes deep staff cuts.

In announcing the layoffs, Beaumont announced Fox will take a 70 percent temporary pay cut and other executives will take pay cuts up to 45 percent. Fox’s total compensation was about $5.7 million in 2017, according to the Detroit Free Press.

Speaking to reporters, Fox repeatedly declined to release his base salary.

“I don't have any bonuses coming in nor does any other executive. … I'm not gonna go down the rabbit hole of individual salaries, including mine. I think we've been clear on the percentage and it's quite real,” Fox said.

LIke other hospitals and health systems, Beaumont canceled money-making, non-emergency procedures as the pandemic swept toward Michigan. Some “time-sensitive” surgeries have begun, such as cancer surgeries, Fox said.

At the same time, though, emergency visits have dried up as patients avoid health care settings for fear of COVID-19. And even as cash flow dwindled, costs have skyrocketed as health providers scrambled for scarce personal protective equipment.

“While we used to pay $1 for a gown maybe six weeks ago, it is now $6 a gown, and we're trying to get it from all different sources. The supply chain definitely was not ready for a pandemic, and that has impacted us significantly,” Fox said.

“Varied” help from other hospitals

Fox also presented a chart indicating Beaumont provided COVID-19 care and testing for more than 25,000 patients, while some other providers had fewer than 3,000.

During the first weekend in April, two Beaumont hospitals — Farmington Hills and Grosse Pointe — were suddenly “90 percent COVID-19,” he said.

Farmington “just got slammed with COVID-19 patients in the ER. The ER waiting room was jammed. There was a line going out the building and went across the street. The patients were waiting in their cars in the first level of a parking garage,” Fox said.

Some patients were taken to other Beaumont hospitals, a process called “load balancing.” 

“But we also asked a lot of others to do that,” Fox said. “We had different reactions. Some were trying to preserve PPE; others didn't want any potential COVID-19 patients,” he said, declining to name the hospitals. 

However, Michigan Medicine at the University of Michigan “stepped up and helped us with a number of patients,” Fox said.

The reluctance by some hospitals to take patients wasn’t driven by economics, but concerns that infected patients could create a “disease vector” that would overwhelm staffs and supplies, said Brian Peters, CEO of the Michigan Health & Hospital Association. 

“This was not a competitive issue,” Peters said. “In our view, it was more a concern … [of Michigan] hospital and health system leaders looking at what happened in New York City, looking at what happened in Seattle, and now closer to home … in Detroit and thinking, ‘I really don't know. Next week, that could be me,’” he said.

Hospitals will recoup some of the lost money through the  Coronavirus Aid, Relief and Economic Security Act, or CARES Act. In Michigan, they will split about $468 million, but the allocations have drawn criticisms because they are based on providers’ past Medicare reimbursements rather than the extent they were impacted by COVID-19 care.

Peters said he and others through the American Hospital Association have lobbied for the next round of funds to be weighted toward hospitals that provided the most COVID-19 care.

Merger on hold

Fox was among the first to raise concerns about health care finances amid COVID-19, calling for a $300 billion to $600 billion federal Hospital System Super Fund.

Other hospitals both large and small also have announced furloughs or layoffs in recent days, including Detroit Medical Center and McLaren. 

Henry Ford Health System has declined to offer details, confirming only that it, too, faces budget woes.

"There is no question that the COVID-19 pandemic is having a major economic impact on our health system and we are continuing to assess the full effects as this crisis evolves,” spokesperson Brenda Craig wrote in an email Tuesday.

Beaumont also has put on hold, but not canceled, a merger with Akron-based hospital system Summa Health, one of Ohio’s largest hospital systems. 

The not-for-profit Summa employs about 7,000 people and includes a network of four hospitals with a total of 1,300 licensed inpatient beds.

“We can't turn a blind eye to the pandemic,” Fox said, calling the merger “an unnecessary distraction given that we are working seven days a week, 16 hours a day, to deal with the pandemic and so is Summa.”
 

“It's kind of like you had a plan to do something but the house is now on fire so we're going to deal with the fire.”

Beaumont said it also will cancel some nonessential projects.

Suddenly out of work

Non-unionized employees who are temporarily laid off can continue to participate in their Beaumont health insurance and other benefits at their current employee rates during the layoff. 

They also can apply for enhanced unemployment benefits and may be called back to work. That includes employees at Beaumont’s Wayne campus, which was recently placed on standby — its patients and staff rerouted — in case of a coronavirus resurgence.

But Fox also put unionized employees on notice, saying their contracts would not allow the system to extend to them the same health care benefits while they’re out of work.

About 5 percent of Beaumont’s staff is unionized, he said.

“If they would like the same arrangement the other 95 percent have — that means everything — I think we can look at that and probably do it,” Fox said.

“But we can't allow a situation where they start to cherry pick with respect to whether we want this or not that, because that's just not fair.”

He did not elaborate.

Those whose jobs are eliminated will receive a lump-sum severance package and are eligible to continue their benefits at current employee rates through their severance period. They also can apply for other open positions at Beaumont and be given priority, according to Beaumont.

Kevin Lignell, a spokesperson for SEIU Michigan, said he was not surprised to learn the latest round of layoffs comes with diminished benefits for unionized workers. 

“This has been classic Beaumont for a long time,” said Lignell, whose  union represents about 300 Beaumont cleaners, dietary staff and other support workers who were laid off when the hospital system closed its Wayne hospital.

“They’ve been anti-union for as long as I know and they’re going to try to divide and conquer the staff in as many ways as possible.” 

Beth Jacobs, a postpartum and gynecological nurse at Beaumont Royal Oak who has been redeployed to care for COVID-19 patients in recent weeks, had expected to spend her day off Tuesday relaxing with her family. 

Instead, the 32-year-old nurse said, “my heart is racing” as she waits by the phone.

Jacobs, who is among nurses who have been working to organize a union at Beaumont Royal Oak, said she worries her union activities will make her a target for a layoff.

She took Fox’s comments about health care coverage for non-unionized employees as a strategic comment intended to “instill fear” in nurses who have participated in the union drive.

“I think that’s a message to all of the nurses, saying that forming a union would be a disadvantage for you,” said Jacobs.

She said she worries the layoffs will force remaining staff to shoulder a greater share of the system’s COVID-19 overload, and they are already very busy.

“At the end of the day, how is this going to affect our patients?” she asked.

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Comments

A Yooper
Tue, 04/21/2020 - 10:28am

It seems to me if Beaumont Health Systems can pay Mr. Fox $5.6 million per year as of three years ago, they should be able to reconsider all of this.
His 70% "temporary" pay cut amounts to a whopping $3.9 million leaving him with a paltry $1.7 million to live on. Poor boy. How about the rest of the systems execs?
How will he ever be able to make ends meet???

priorities
Tue, 04/21/2020 - 10:58am

So true and Beaumont is a "nonprofit". Imagine the salaries of the "for profits". Yet working people stocking shelves in grocery stores are risking their lives to feed us, everyday. Trump is fixated on artificially propping up petroleum an old dirty source of energy, instead of shutting down wet markets in China. I hope we all learn some valuable lessons from this pandemic about where we place our priorities.

A Yooper
Wed, 04/22/2020 - 10:57am

Spot on!

Out of control pay
Tue, 04/21/2020 - 11:10am

Overdue for a pay cut! If Fox made 5.7 million in 2017, he should be able to get by on about 2 million during this crisis. Disgusting.

Laurel Raisanen
Tue, 04/21/2020 - 2:47pm

Fox's comments do not ring true. For example, the makeshift morgue at Wayne Beaumont is being used for storing a very large amount of PPE masks, gowns, gloves, etc. for the past few weeks and do not appear to being used. Over all, the large salary he draws (and I am sure most of his administrators) is the main reason the U.S. needs some sort of universal health care system. I mean, the rats just shut down operations and jump ship instead of fighting it out like the rest of us. So what else is he lying about? Fact check his story, please.

Spectator
Tue, 04/21/2020 - 5:33pm

What’s the problem? Aren’t you people concerned about spreading the deadly virus? You’re fixated on one persons salary and one idiot is mumbling about oil consumption, which is down by the way, so good job there. Flatten the curve, wash your hands. If we can save just one child’s life, it’s worth shutting down the entire non-COV19 side of medicine here and laying off or firing all the staff. Your governor is on top of it, so shut up and crawl back in your holes. Oh yeah, I forgot, Orange Man bad.

Anne
Wed, 04/22/2020 - 10:05am

"The Southield-based health system is the largest in Michigan, with...."

it's Southfield.

Tom
Wed, 04/22/2020 - 10:24am

Somewhere, someone just ate a bat...
Are we doing the right thing by social distancing? Do we really think that we could be more valuable than future generations? Everyday there are new viruses and mutations of viruses. The Covid-19 virus is bad. It looks like we may be “flattening the curve”, but are we creating curves for all of the new viruses and the mutations of viruses that currently have a “flat curve”? If we lower the immunity of all people now, are we hurting all future populations?
Would our efforts be better spent on something positive like preparing for virus outbreaks rather than hiding in our houses afraid to “kill” our families and people we come on contact with? Could we educate people on how to strengthen their immune system to prepare for future outbreaks?
In this world over time people have travelled more and more. During this time, we have globally built up immunities to thousands and thousands of viruses. If I was the only person that was affected by the coronavirus I would not want the world to stop on my account. I try to be a healthy person and I hope I never die from something like this but I would like the choice. People should have the choice to self-isolate if they are in a high-risk group. These people should not be looked down upon because they may be hurting the immunity of people.
Thankfully, there are still tons of people eating bats and other weird things, not washing their hands, not social distancing, and consequently raising all of our immunities!

Jake K.
Wed, 04/22/2020 - 11:30am

I find Branden Snyder's comments to be just a bit self-serving with very limited perspective. Throwing $$ at any issue doesn't necessarily resolve the issue. To concentrate the financial assistance to the Detroit area doesn't address the underlying issues I believe to be more social than economic. There's just got to be an effort to help yourself rather than to expect others to compensate for a lack of self accountability. Hands should be busy rather than extended outward.

Ronnie L
Wed, 04/22/2020 - 1:43pm

Let me get this straight.

The "overwhelmed" hospitals are laying off thousands of people.

LOL.

You people who believe this "pandemic" hysteria are a special type of crazy person.

Audie
Sat, 05/09/2020 - 12:39am

It is not due to Corona virus. It is due to incompetent voters who elected an incompetent governor.