By Kristen Jordan Shamus and Jennifer Dixon, Detroit Free Press, and Robin Erb, Bridge Magazine

Editor's note: This story has been updated.

Beaumont Health announced Tuesday morning it is laying off about 2,475 workers and will permanently cut about 450 positions because of the financial effects of the COVID-19 pandemic.

Most of the temporary layoffs involve hospital administrative staff and others who are not directly caring for patients with or without COVID-19. Of the 450 permanent job cuts, most are part of the corporate staff or are serving in other administrative roles.

This story was co-published with Bridge Magazine

The cuts come as the state's largest hospital system with eight hospitals and 38,000 employees is "hemorrhaging" money as it operates through the coronavirus crisis, said Beaumont CEO John Fox.

“Unfortunately it's a tale of two cities if you will in that (we have an) 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 morning call with reporters.

With surgical teams mostly idled, the system has lost millions in the 39 days that have passed since it admitted its first COVID-19 patient, Fox said.

“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.”

Beaumont scrambled to boost its intensive care unit capacity in the weeks leading up to southeast Michigan's surge in coronavirus patients, while elective procedures, nonemergency surgeries, screenings and other medical care were frozen in mid-March to brace for the pandemic.

"The biggest single thing is ... that a lot of our surgical revenue and other revenue streams have dried up," Fox said. "They're gone. And so we've eliminated 85%-90% of our surgeries during this period, and frankly, a lot of other procedures."

Feeding the health system's financial losses is the fact that Beaumont is now paying more for personal protective equipment, such as gowns, masks and face shields as its workers are confronted with more patients who have an infectious disease.

"The price of PPE has gone up dramatically," Fox said, explaining that a gown that cost $1 six weeks ago now may cost as much as $6. "We're trying to get it from all different sources. So the supply chain definitely was not ready for a pandemic, and that's impacted us significantly."

Compounding those issues, Fox said, is the fact that the number of emergency room visits have plummeted as people are trying to avoid going to hospitals at all costs because they're afraid of contracting COVID-19.

"This is a national issue," he said. "It's coast-to-coast."

He said he is lobbying for the creation of a $400 billion-$600 billion federal super fund "to frankly bail out Americans hospitals and avoid the calamity of a lot of them having to close because of the hemorrhaging of cash."

Fox takes pay cut

While he announced layoffs and job terminations Tuesday, Fox also said he's taking a 70% cut to his base pay and is forgoing any bonuses. Other executives at the health system also are taking 45% salary cuts.

He declined to specify exactly what his earnings are or detail his current base pay or specifically how much money he would lose from the pay cut. He also declined to provide a dollar amount for the average pay cut of Beaumont executives.

"I'm not going to go down the rabbit hole," he said. "I don't really have an average calculated for all of them. My situation is very simple. If I made $1,000 this week, it's cut to $300 for next week. It's 70%. And the math is that simple."I’m not going to go down to all the details," he said. "Frankly, you know, those are all in our 990," referring to financial returns that tax-exempt organizations file with the Internal Revenue Service.

According to Beaumont's most recent filings with the IRS, Fox's base pay in 2017 was just under $1.77 million. He also received a bonus of $2.1 million and retirement and other deferred compensation of $1.73 million.

When asked how his base pay in 2020 compares with 2017, he said, "It's close. I'll let it go at that. Again, I'm not going to go into details. I don't have any bonuses coming in nor does any other executive.

"I'm not going to 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’s pay cut appears to be the largest among southeast Michigan hospital executives so far.

Dr. Marschall Runge, CEO of Michigan Medicine and dean of the University of Michigan Medical School, is taking a cut of 5% to his $1.4 million base salary, said spokeswoman Mary Masson. The university's president, President Mark Schlissel is cutting his monthly base salary by 10% starting May 1 through the end of this calendar year.

The Detroit Medical Center's CEO, Audrey Gregory, said Monday her pay was being cut by 10% for the next three months, April through June.

However the hospital system declined to provide details of her compensation package or what that cut would mean.

"We don’t provide information related to compensation," DMC spokesman Brian Taylor said.

Henry Ford Health System declined to answer questions about whether its executive team was taking pay cuts.

“We are exploring a number of options to stabilize our financial performance and position ourselves to continue serving our community, including pursuing federal assistance programs and identifying ways to reduce expenses,” said Brenda Craig, a spokeswoman for Henry Ford Health System. “We are committed to transparency and will share more details when we finalize our plans.”

Roughly 80 executives at the levels of vice president and above at Mercy Health and Saint Joseph Mercy Health System are taking compensation reductions up to 25%, and will not get performance-based incentives during this time, said Laura Blodgett, a spokeswoman for Mercy Health and Saint Joseph Mercy Health System, which comprise the Michigan region of Trinity Health.

For the combined eight hospitals across Michigan, the temporary furloughs represent roughly 10% of Trinity Health's Michigan region workforce — 2,500 employees.

No timeline to re-open Beaumont, Wayne

Beaumont Health announced March 26 it would shut down the emergency center and obstetrics unit at its 185-bed hospital in Wayne to convert it into a center specifically for COVID-19 patients.

When the surge in coronavirus patients didn't last as long or rise as high as many predicted it would, the health system announced April 14 that it would temporarily shutter the hospital, and hold it in reserve in case of a resurgence in COVID-19 cases.

Although Fox stopped short of giving a timeline for when the Wayne campus would reopen, he said Tuesday that the hospital is now undergoing a deep cleaning and will likely reopen in the near future.

"There's no plan to close the Wayne hospital," he said, explaining that when the health system converted it to a dedicated COVID-19 hospital, it had to change its licensing with the state.

"We're going to go to the regulators and say, 'We want to take it back to the med-surge hospital' and we are going to start to bringing on staff to reopen the ER and other functions. And they will be open when we can do it safely.

"We are always going to be looking over our left shoulder, though, to see what is going on with the COVID-19 pandemic, and whether we're going to get another surge or not. Again, a lot of moving parts here, a lot of ... stay-in-place orders expire at the end of this month. Depending upon how that happens, that can impact the COVID-19 volumes that we were faced with."

Democratic U.S. Reps. Debbie Dingell and Rashida Tlaib sent a letter last week to Fox about the temporary closure of the Wayne campus, saying they were “alarmed” by the decision to “close a crucial health care facility during the deadliest pandemic our nation has seen in over a century.”

Merger with Summa Health on hold

Beaumont also announced it has put on hold its merger with Akron, Ohio-based Summa Health, which employs 7,000 people at four hospitals with total of 1,700 inpatient beds.

More:Beaumont Health to acquire Ohio hospital system

"Both Summa and Beaumont are all hands on deck with the COVID-19 crisis," Fox said. "So we didn't plan this, but we are deferring that until we have a little more clarity about the impact of this crisis."

He said he didn't know for how long the deal would be delayed.

"We both delayed it. We can't turn a blind eye to the pandemic," Fox said, calling the work to complete the merger at the height of the COVID-19 pandemic "an unnecessary distraction" given that both organizations are working 16-hour days, seven days a week.

"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," Fox said.

For Beaumont, the Summa deal would have been the first out-of-state foray in its ongoing expansion.

The health system merged in 2014 with Oakwood Healthcare and Botsford Hospital, and grew to include eight hospitals with 3,429 beds with almost 5,000 affiliated physicians.

Benefits for some laid off, positions eliminated

For the 450 employees whose jobs were permanently cut Tuesday, Fox said each is receiving a lump-sum severance package.

"We looked, and it was very difficult, at any position we could potentially do without," Fox said. "We provided these individuals a lump-sum severance arrangement. … We normally don't do that. We pay it out over time. The reason we did that is by doing it lump sum, they can then also take advantage of the very enhanced unemployment benefits.

"So if you're making $50,000 a year now, and you are put on unemployment, basically your employment benefits will equal a $50,000 a year pay rate. We're also pushing state and federal officials to extend those, which we think they they need to do."

Those who've been temporarily laid off, Fox said, also can apply for unemployment. Most also will be eligible to continue Beaumont's health insurance and other benefits at the employee rates during the layoff period.

"Well, unfortunately, their agreement does not allow for them to have health care coverage," he said, explaining that about 95% of the hospital system's workforce is not represented by a labor union, and therefore eligible for the benefits.

"If they would like the same arrangement the other 95% have, that means everything, I think we can look at that and probably do it," he said. "But we can't allow a situation where they start to cherry-pick with respect to 'Well, we want this or not that,' because that's just not fair.

"We're we're bound by the terms and conditions of that agreement. And that's classic in a union situation. I don't know why, in the agreement, they didn't bargain for continuation of health care benefits ... for the employees, but that's what they did so I can respond to why they did that."

The Service Employee International Union's Healthcare Michigan represents about 1,000 employees at three of Beaumont’s hospitals, including roughly 300 Beaumont cleaners, dietary staff and other support workers who were laid off when the hospital system closed its Wayne campus.

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

“This has been classic Beaumont for a long time,” Lignell said. “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.”

Beaumont takes heavier load of COVID patients

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% 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.

Bridge Magazine writer Kelly House contributed to this report.

Get involved: The Detroit Free Press and Bridge Magazine are teaming up to report on Michigan hospitals during the coronavirus pandemic. If you work in a Michigan hospital, we would love to hear from you. You can contact Kristen Jordan Shamus at kshamus@freepress.com or Robin Erb at rerb@bridgemi.com.

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