Spectrum Health, Beaumont Health announce plans to form 22-hospital system

Two of Michigan’s largest providers are exploring a potential merger that would yield a 22-hospital nonprofit system staffing more than 64,000 employees.

Spectrum Health and Beaumont Health have signed a letter of intent that places the health systems on track to combine by the fall, the organizations announced Thursday.

In addition to the hospitals, the merged system would also operate 305 outpatient locations and Spectrum’s Priority Health, the third-largest provider-sponsored health plan in the country.

“Beaumont Health and Spectrum Health are leaders in our respective markets and by bringing together our organizations to create a new system, we have the opportunity to deliver greater value in high-quality and affordable health care to our communities,” Spectrum Health president and CEO Tina Freese Decker said in a statement. “Together, we can provide a more personalized experience that prioritizes individuals’ health while also attracting and retaining great talent to our vibrant communities.”

Terms of the deal were not disclosed. The merger plans are subject to regulatory review as well as a final all-clear from both parties.

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Decker is slated to lead the new entity, according to the announcement, while Beaumont Health President and CEO John Fox will leave the organization after leading his system through the transition.

Each company will be appointing seven seats to the group’s 16-member board, with the remaining seats filled by Decker and one additional appointee who will be chosen after the merger, the systems said in the announcement.

They said they plan to operate dual headquarters in their existing homes of Grand Rapids and Southfield. There are no immediate plans to change each system’s brandings until a collective branding plan has been adopted; the groups are referring to the combined entity as BHSH System in the meantime.

The systems wrote in a letter to their communities that the merger will create new efficiencies for the systems and that the funds saved will allow for increased capital investment into basic infrastructure needs, additional behavioral health and outpatient facilities, private rooms, digital and medical technologies and other areas of focus. The systems also said any capital business plans already approved by the systems’ boards will continue forward as planned.

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“Beaumont Health and Spectrum Health have long track records of serving our respective communities, and Priority Health, a division of Spectrum Health, continues to be a top-rated health plan,” Beaumont Health Board Chair Julie Fream and Spectrum Health System Board Chair Robert Roth wrote in the letter. “Combining these entities to create a new system will improve the value of health care for a larger number of Michiganders across the state.”

Beaumont Health operates eight hospitals and reported nearly $4.6 billion in operating revenues during 2020, a decrease from the previous year’s $4.7 billion. Net operating income in 2020 was $176.6 million, also a dip from the previous year’s report of $196.3 million.

Spectrum Health, the larger of the two systems with 14 hospitals, reported $8.3 billion in total operating revenues in 2020, a gain of more than $1 billion from the year before. Net operating income also improved year over year from $332.1 million to $412.4 million.

For Beaumont Health, the pending deal is yet another attempt to join up with another health system.

It’s been almost a year to the day since Beaumont Health and Advocate Aurora Health first announced discussions surrounding a potential merger that would have resulted in a larger, 36-hospital system. The deal was called off in October after Michigan lawmakers and Beaumont’s own doctors raised concerns about whether the merger would worsen what they described as unsafe conditions.

Shortly before, Beaumont Health had also looked to acquire Summa Health, an Akron, Ohio-based system with four hospitals. That deal was called off in May 2020.