Published in Health Care
An organizational chart of the newly created BHSH System. An organizational chart of the newly created BHSH System. COURTESY PHOTO

Future health care costs in focus as Spectrum, Beaumont finalize merger

BY Monday, January 31, 2022 04:43pm

The new health system that Spectrum Health and Beaumont Health plan to launch Tuesday will have considerable market clout in the Michigan health care market, raising concerns about the potential effect on costs.

The Novi-based Economic Alliance for Michigan, a business-labor coalition whose members employ or represent 1 million people, offered support for the deal while also noting concerns about the new health system’s size and market influence.

“Inevitably, every single merger in the United States has either had similar costs or higher costs for employers and patients, and we have no reason to believe that this would be any different,” Economic Alliance President Bret Jackson told MiBiz. “Once a hospital system gets to this type of size, inevitably they will work in their best interest to do the best for the system, and that will mean using their leverage to increase prices and market share.”

“We will be monitoring this like a hawk,” Jackson added.

However, Jackson also praised Spectrum President and CEO Tina Freese Decker’s leadership.

“We’re excited about her and her team being able to take over a once very proud health system in Beaumont and put it back to its glory,” he said.

Spectrum and Beaumont announced today that they plan to close the blockbuster merger on Tuesday after a regulatory antitrust review by the Federal Trade Commission expired. Freese Decker said the new BHSH System has a “bold” goal to transform health in Michigan.

BHSH System will become by far the largest in-state health system based in Michigan. The combined health system will have 22 hospitals with more than 5,000 licensed beds, more than 300 outpatient locations, 11,500 affiliated and employed physicians, 64,000 employees, and revenues exceeding $13 billion.

The Grand Rapids Area Chamber of Commerce trusts the merger “will build upon Spectrum’s strong reputation for providing accessible, exceptional and equitable health care.”

“Health care affordability remains a top issue for our business community and we hope the new board of directors will remain laser-focused of providing affordable, high quality care for consumers and payers across the state,” Andy Johnston, the Chamber’s vice president of government and corporate affairs, wrote in an email to MiBiz.

Blue Cross Blue Shield of Michigan — which has reasons to view the merger with concern about the potential effect on pricing and costs — publicly offered congratulations. Blue Cross Blue Shield is the largest health insurer in Michigan, holding a 68-percent statewide market share across all product lines, according to an annual report issued by the American Medical Association. The latest AMA report lists Spectrum Health-owned Priority Health as second in market share at 10 percent.

“For many decades, Blue Cross and Blue Care Network members have received quality, leading-edge medical care at nonprofit community hospitals operated today by Beaumont Health and Spectrum Health. These two health systems are among the nation’s leaders recognized for their hospital facilities, capabilities and committed staff,” Blue Cross Blue Shield of Michigan President and CEO Dan Loepp said in a statement. “Blue Cross has enjoyed strong relationships with Beaumont and Spectrum for many years. As these systems come together … Blue Cross looks forward to strengthening our relationship and advancing our common commitment to the health of the people we serve.”

‘Missed an opportunity’

The Economic Alliance would have liked the Federal Trade Commission and the state to take a deep look at the merger and require BHSH System to make certain commitments, Jackson said.

“This is a great opportunity for state and federal regulators to hold health systems, especially those that are nonprofit health systems, up to their commitments and to justify what tax benefits they get in relation to the charity care and the community benefit that they provide,” he said. “I just feel federal and state leaders missed an opportunity to use leverage and make sure the taxpayers were getting back as much as they’re giving the big non-profit health systems.”

In a Monday afternoon media briefing on their intent to proceed with the merger, executives reiterated their goals for the new health system.

“We look forward to partnering with our patients, team members and health plan members as we build a new organization designed to improve the health of the communities we serve,” said Julie Fream, chairperson of the Beaumont Health Board who will lead the 15-member board for BHSH System. “As we move forward as one new health system, we will have greater ability to invest in the future of Michigan’s health.”

Freese Decker said BHSH System aims to “provide greater value through exceptional care and coverage that is accessible, affordable and equitable,” and that the new system is “well positioned to transform health in our communities.”

“We are comfortable that our new health system is pro-competitive and will benefit the communities that we serve,” Freese Decker said. “Our focus for health care is to be affordable. We also need to make sure we are competitive and that’s how we look at our pricing.”

Executives at both systems cannot say specifically what kind of operating efficiencies a much-larger health system could generate. As they went through the review process with the Federal Trade Commission, “we identified a few synergies of what we could do together, and how this would help us benefit our communities,” Freese Decker said.

“As we have gone through the FTC process, we’ve held off on doing some of that information. We plan to do more of that once we are now able to be integrated,” Freese Decker said.

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