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Beaumont to lay off nearly 2,500, eliminate 450 jobs due to COVID-19

Beaumont Health said Tuesday it must temporarily lay off about 2,475 employees and permanently eliminate about 450 positions due to the COVID-19 pandemic, while other health systems are weighing their options.

Beaumont Health, Michigan's largest hospital system with eight hospitals and 38,000 workers, also said the company's CEO will take a temporary 70% pay cut while other executives will see their salaries cut up to 45%.

The eight-hospital system is "hemorrhaging" cash because of dried up surgical revenue due to canceled elective procedures, decreased non-COVID-19 visits to the hospitals and increased costs for personal protection equipment, Beaumont Health CEO John Fox said Tuesday.

Beaumont Health has taken the largest number of patients who were COVID-19 positive or waiting to be ruled out as COVID-19 positive, with a total of 28,802 COVID-19-related patients between March 13 and April 20, according to state data the health system said it obtained.

It's the latest Metro Detroit health system to make personnel or pay cuts to keep their hospitals afloat after stopping more-profitable elective surgeries to preserve resources like personal protective equipment as COVID-19 cases surged in March. They also cut back elective surgeries in response to Gov. Gretchen Whitmer's executive order banning most of them, but not for abortions

Trinity Health system furloughed 2,500 employees at its eight Michigan hospitals about three weeks ago, and the eight-hospital Detroit Medical Center announced last week it had furloughed 480 employees. A furlough is when a company forces employees to take a work stoppage that results in a pay cut but allows staffers to return to the company at the end of the furlough period.

"We continually evaluate our staffing levels to ensure we are best positioned to provide the safest and highest quality care to our patients," DMC spokesman Brian Taylor said Tuesday. 

Detroit-based Henry Ford Health System is "exploring our options" to stabilize the five-hospital system's finances, "including pursuing federal assistance programs and identifying ways to reduce expenses," Henry Ford spokeswoman Brenda Craig said. "We are committed to transparency and will share more details when we finalize our plans."

Ascension Michigan, which owns hospitals across Southeast Michigan including St. John Hospital in Detroit and Providence hospitals in Rochester, Southfield, Novi and Livonia, said it is not planning layoffs. 

"Ascension is committed to protect the pay of associates during this time of disruption from COVID-19, including a commitment to no layoffs and a variety of pay protection programs, and will continue doing so as long as possible," the Catholic health system said in a Tuesday statement to The Detroit News. 

McLaren Health Care, which owns 14 hospital across the state including in Flint, Oakland County and Macomb County, said it has furloughed employees but did not say how many.  In a Tuesday statement, McLaren noted it has provided additional paid time off to employees caring for COVID-19 patients.

"Although we have taken measures of limited furloughs and leadership reductions in pay, we have been able to minimize the long-term negative impacts to our employees and have not laid off needed front-line healthcare workers," the health system said.

"...Our goal is to prevent permanent layoffs or reductions and return to normal levels of patient care and staffing over the next several months." 

Exterior photo of Beaumont Hospital from the 13 Mile Road entrance. March, 31, 2020, Royal Oak, Mi.

How COVID-19 drives losses

Mercy Health and Saint Joseph Mercy health systems, which comprise the Michigan region of Trinity Health, were the first Michigan health systems to take action to stem COVID-19 financial losses when they announced temporary furloughs for 2,500 non-medical employees on April 1. 

Michigan is the largest and hardest-hit region in the 22-state Trinity Health system, but the chain has suffered losses at all of its hospitals across the country, said Trinity Michigan President and CEO Rob Casalou.

"Whether it’s in Illinois or Iowa or wherever we may be, the same rules have been passed in those states where elective work and the revenues have gone way down," Casalou said Tuesday. "So we’re seeing a very similar picture across the states.

"Health care systems financially are all feeling the pain in all the same states we’re in."

Trinity Michigan's eight hospitals lost about $50 million in March, said Casalou, who added that he anticipates as much as $120 million in losses for April.

The federal Medicare program for seniors has added 20% to reimbursements for COVID-19 patients, and Trinity Michigan will get enough funding from the federal CARES Act to cover about one month's losses, he said. But that's "clearly not enough," he said.

"A lot of it depends on what happens over the next 60 to 90 days. If these kinds of losses continue, then yeah, we’ll be looking at other measures we have to take — but we think we’ve made the decisions we had to make now to get through the short term," Casalou said.

Caring for sick patients has never been a source of revenue for nonprofit hospitals, which historically have relied on elective procedures such as knee replacements to boost their slim profit margins, which range from about 1% to 3%, Casalou said. 

But the Trinity Michigan CEO explained that the corona virus itself is ill-suited to how health care is paid for in the United States because there is no cure.

Most patients who become seriously ill with COVID-19 are older and insured by the Medicare program, which reimburses hospitals the same amount for treating each patient regardless of how long they are hospitalized, he said. 

That policy works for diseases that follow a predictable course, where patients can be given an antibiotic with reasonable expectation that they will recover, he said. But not so for the novel coronavirus. 

"Even though Medicare did add 20% to the normal payment we would get for a medical patient, even with that we’re losing pretty close to $10,000 on every patient we’re taking care of in direct costs," Casalou said.

"They’re on ventilators, they’re in the hospital sometimes for much more than two weeks, they are in ICU care, and the cost is extremely high."

Seeking a federal 'superfund'

The Southfield-based Beaumont Health system hopes the cuts made Tuesday will be enough to right the ship, Fox said, but he said the unprecedented pandemic is a little like "walking around in a dark room."

"COVID-19 is a permanent resident in America and frankly in the world until a vaccine is in place," the Beaumont CEO said.

Fox said he hopes the federal government will consider creating a "superfund" to help the hospitals affected by the COVID-19 pandemic.

"Only the federal government has the Mastercard with no credit limit on it … that can basically help small business, keep the hospital business from collapsing,” he said.

Beaumont plans to offer a lump sum severance payment to employees whose positions were terminated and offer health care to laid-off full-time workers. The hospital system's union contract with roughly 5% of its workers does not allow the health system to give health care coverage to laid-off union workers, Fox said, but Beaumont would consider an arrangement to provide it.

No employees affected by the layoffs and cuts is needed on the front line, he said.

The health system also is delaying a planned merger with Ohio-based Summa Health, Fox said, but hopes to reopen Beaumont Wayne in Waynen soon after it is sanitized and converted back from a COVID-19 specific hospital to a medical surgical facility.

Most of the 450 positions Beaumont is eliminating are part of the corporate staff or are serving in other administrative roles, the company said. Those workers will get a lump-sum severance package and will likely be able to receive state and federal unemployment benefits. These employees will have the option to continue their benefits at current employee rates through their severance period.

The 2,475 employees being temporary laid off are mostly hospital administrative staff and others who are not directly caring for patients with or without COVID-19, Beaumont officials said.

Those employees can apply for unemployment benefits through state and federal programs, according to the company. They could be asked to return to their jobs when Beaumont brings additional medical services back online. They can also continue their Beaumont health insurance and other benefits at their current employee rates during their layoffs.

Furthermore, the employees will be eligible to apply for other open positions at Beaumont and given priority.

“We will do everything we can to assist our employees affected by these changes. We never want to have to make decisions like this, but no one could have predicted the extraordinary impact this virus would have on health care and society overall,” Fox said.

In addition, the health care system said it will delay or cancel some nonessential projects. 

Beaumont Health said it lost $278.4 million in the first quarter ending March 31, down $407.5 million from the net gain it posted a year ago. Its operating revenue fell to $1.07 billion, a $78.2 million decrease over the $1.15 billion reported in the first quarter of 2019. 

More: Beaumont Health reports big first-quarter loss as COVID-19 takes toll

The company said it expects the second quarter financials "to be challenging as well."

eleblanc@detroitnews.com

kbouffard@detroitnews.com

Twitter: @kbouffardDN