Michigan’s Beaumont Health cancels merger with Ohio system, vague on why
Plans to merge Beaumont Health, Michigan’s largest hospital system, and Ohio-based Summa Health have ended — unrelated to financial losses from COVID-19, Beaumont said Friday morning.
Summa CEO Dr. Cliff Deveny said Beaumont surprised Summa officials last week, notifying Summa in phone calls and “official letters” that it was withdrawing from the planned merger.
“We're just very disappointed,” Deveny told Bridge Friday morning, noting “thousands of hours of work” that had been involved in planning.
“Hundreds of people at this organization have been working on the integration plan, the opportunities to grow together, to look for the synergies.… I've got a pretty disappointed board, workforce (and) community.”
Neither health system would go into specifics on why the planned merger, which was two years in the making, fell apart. Deveny, who had been credited with a financial turnaround of the Summa system since he took its reins in 2017, said he would leave that question to Beaumont officials.
According to an emailed statement from Beaumont, “this decision was only about whether Summa was the right fit for Beaumont during these extraordinary times.”
“We have been continuously evaluating the partnership and determined that proceeding with Summa was not the right decision for multiple reasons,” it read.
Beaumont spokesman Mark Geary told Bridge Friday that CEO John Fox and other Beaumont officials were making no further statements on the merger collapse beyond the email and the joint statement that Beaumont and Summa posted on web pages for both systems.
The announcement ends two years of courtship between the eight-hospital Beaumont system, which before the COVID-19 crisis had boasted $4.7 billion in net revenue and 38,000 employees, and four-hospital Summa system, which employs about 7,000 people.
Summa began a search for a partner in 2017 that could offer long-time financial stability, casting a net about 300 miles wide and courting about 30 systems, according to Deveny.
It chose Beaumont in 2019, Deveny said, and the systems signed a letter of intent last July.
In December, the two systems moved ahead with a definitive agreement that would have made Summa a Beaumont subsidiary. State and federal regulatory approvals followed, according to a joint statement from the systems.
Deveny said closing agreements were to be signed April 1, but Beaumont asked for an extension.
“At that time, the world was pretty chaotic, especially in Southeast Michigan,” he said, so Summa “accommodated their ask for the delay, and have been waiting with the green light to go forward.”
On April 21, Beaumont CEO John Fox offered public assurances that the merger was merely delayed, even as the system announced it would lay off or eliminate 2,475 positions as the hospital said it lost millions of dollars from not being able to perform elective surgeries or other revenue-generating procedures during the COVID-19 surge.
At the time, Fox said the merger was on hold, but not canceled.
“We can't turn a blind eye to the pandemic,” Fox said April 21, 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,” he said at a virtual news conference scheduled to answer questions about the job losses.
Both systems insisted Friday they remain in strong financial standing, despite the budget squeeze, as their hospitals focused on COVID-19 patients in March and April.
In April, for example, Beaumont 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. Though Summa didn’t experience the same crush of COVID-19 patients as hospitals in Southeast Michigan, it too reported losses in March and April — about $26 million, Deveny said.
He said the system remains financially stable, even as it is expected — like others — to post losses this year because of COVID-19. Beaumont, he added, needs to do “what's best for the southeast Michigan community.”
“We weren't in a desperate need to hand the keys to anybody,” he said.
Michigan Radio, Bridge Magazine, and The Detroit Free Press are teaming up to report on Michigan hospitals during the coronavirus pandemic. We will be sharing accounts of the challenges doctors, nurses and other hospital personnel face as they work to treat patients and save lives. If you work in a Michigan hospital, we would love to hear from you. You can contact reporters Robin Erb firstname.lastname@example.org at Bridge, Kristen Jordan Shamus email@example.com at the Free Press and Kate Wells firstname.lastname@example.org at Michigan Radio.