Beaumont, Summa Merger Deferred While COVID-19 Pandemic Rages

The merger, under which Akron, Ohio-based Summa would become a wholly owned subsidiary of Beaumont, was announced in January.

Beaumont Health and Summa Health have postponed their merger plans while the coronavirus pandemic rages, the two health systems announced.

"Both Summa and Valmont are all hands on deck with the COVID-19 crisis," Beaumont CEO John Fox told reporters Tuesday. "We didn't plan this, but we are deferring until we have a little more clarity about the impact of this crisis.

"They are doing the same things we're doing. We talk multiple times during the week as they try to navigate through their own version of the surge that they'll experience in northern Ohio," Fox said.

The merger, under which Akron, Ohio-based Summa would become a wholly owned subsidiary of Beaumont, was announced in January, about six months after the two health systems entered negotiations. Beaumont and Summa have combined revenues of $6.1 billion, operate 12 hospitals in Ohio and Michigan, and employ about 45,000 people.

Summa Health spokesman Mike Bernstein said the merger has cleared all federal and state regulatory hurdles and that Summa's board of directors "is working closely with Beaumont to finalize the path forward and the appropriate timing to combine our organizations."

"That said, the immediate priority is for both Summa and Beaumont to focus first and foremost on caring for our patients, employees, physicians and communities as we are impacted by the COVID-19 pandemic," Bernstein said.

"We must prioritize efforts to ensure the health and safety of all those we serve during this difficult time and we remain committed to finalizing all necessary details to close this transaction when appropriate."

Fox said he doesn't know how long the merger will be delayed.

"We can't turn a blind eye to the pandemic," he said. "Going through the merger process and all those activities we thought was an unnecessary distraction, given that we were working seven days a week, 16 hours a day to deal with the pandemic. And so was 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."

Fox's announcement Tuesday that the merger would be delayed followed his announcement that the health system would temporarily lay off 2,475 employees, eliminated another 450 jobs, and slashed executive pay to staunch the financial "hemorrhaging" created by the coronavirus pandemic.

In the first quarter ending March 31, Beaumont's net income was -$278.4 million, a plummet of $407.5 million over the first quarter of 2019. Operating revenue fell to $1.07 billion, a $78.2 million decrease over the $1.15 billion reported in the first quarter of 2019.

Net operating income for the first quarter of 2020 was –$54.1 million, a $91.7 million decrease compared to the same time last year.

The first-quarter losses mounted even though the virus impacted the health system for the last two weeks of March, and Beaumont officials warned the losses could be much worse in the second quarter.