It took on the heaviest load of Michigan's hospitalized COVID-19 cases — treating 53,574 total daily patients — but Beaumont Health said it's slowly rebounding from the financial hits it took during the initial surge of the pandemic. The Southfield-based health system on Thursday reported a $146.7 million second-quarter net loss as of June 30, which is $355.6 million less than the same period in 2019. Operating revenues fell to $2.10 billion — a $220.4 million drop from the $2.32 billion reported for the second quarter of 2019. "It was multiple factors coming together that put a real hammer on revenue," said John Fox, CEO of the eight-hospital health system that prior to the pandemic employed about 38,000 people in southeastern Michigan. The losses stemmed from a dramatic drop in patients undergoing elective surgeries and seeking medical care as the novel coronavirus swept the state and all non-emergency procedures and doctor's visits were shut down. That was compounded by a worldwide shortage of personal protective equipment such as masks, gowns and face shields, which drove up prices. "Our supply costs shot up like a rocket ship," Fox said. In the first six months of 2019, Beaumont had a 3.3% operating margin, and reported a net operating income of $76.2 million. But in the midst of the pandemic, it reported a negative 2.3% operating margin and net operating losses, before non-recurring expenses, of $48.4 million. Non-operating losses through the second quarter were $79.8 million, compared to a non-operating gain of $142.7 million in the same period last year. Fox told the Free Press Thursday that though Beaumont saw more COVID-19 patients than other hospital systems, it still lost money because the insurance reimbursement to hospitals for procedures like hip and knee replacement surgeries are higher than for those hospitalized with COVID-19. "I think the biggest negative financial impact for Beaumont and for everybody else was the cancellation of all elective procedures . We did that quickly, and that resulted in about a 40% drop in revenue," he said. "The COVID patients displaced a lot of the surgical patients, where the reimbursement is stronger. You get more revenue from doing a joint replacement than you do for handling a COVID patient." The health system quickly converted its operating rooms, surgical recovery rooms and other spaces to intensive-care units during the surge because "our normal base of ICUs were overwhelmed very quickly," he said. It grew its ICU capacity by 40%. Yet, he said, it wasn't enough to offset losses. "The other thing that happened was there was lower volume in total because a lot of patients were avoiding health care. ... Probably 65% of our volume was COVID. Our total utilization of the facility has dropped from say 90% occupancy down overall to about 75%." But since then, the health system has resumed elective procedures and is bringing back some of the 2,475 workers who were furloughed in April. "We have already brought more than half of them back," Fox said. "And we are planning to bring more of them back. We obviously want them all back and volume continues to recover. We think we're on a good path to do that." So far, the health system confirmed it has returned more than 1,500 furloughed employees to work. He doesn't expect there to be layoffs or further job cuts in the months ahead. "We're recovering faster than we thought," Fox said. "We believe our third and fourth quarter will be stronger. The wild card out there is, will we have another surge in southeast Michigan in the fall. Those are points of uncertainty. But right now, our volumes are growing every week and we are calling furloughed employees back. "If we keep COVID under control in southeast Michigan, and that's a big if. ... We think we will be back positive by the end of this year and will we have gone through it. But again, it's all subject to how the pandemic behaves." Beaumont remains in talks to merge with Advocate Aurora Health, also a nonprofit health system with hospitals in Illinois and Wisconsin. If the deal is completed, it would result in a $17 billion company with 36 hospitals in three states, Fox said. Each would keep its own brand and would maintain nonprofit status. It would merge the assets of the hospital systems under one board of directors. "Our brands are one of our most valuable assets locally," Fox said. "And we are very committed to them. So Aurora will still be called Aurora in Wisconsin. Advocate would remain Advocate in Illinois, and certainly Beaumont here in Michigan. "You know bigger does not mean better, per se. But because of the synergies we will get as a larger organization, it will enable Beaumont to increase our capital investment here in Michigan substantially. In 2019, our capital budget for Beaumont Health was $260 million. Under the partnership we're planning, based on the savings we will generate, the target is for that to go up to $375 million at least for the first three years. So that is a $115 million increase of new capital in southeast Michigan that we need for technology, supplies, and to expand in our market." The deal is being reviewed by Michigan Attorney General Dana Nessel. The merger has been met with criticism among some doctors who are unhappy with the plan to join Advocate Aurora, and with Fox's leadership. Last week, a no-confidence petition circulated among some Beaumont doctors calling for the removal of Fox and Beaumont's Chief Medical Officer David Wood Jr. A cover letter to the petition demands the removal of Fox and Wood, and criticizes what it describes as the Beaumont leaders' recent focus on the eight-hospital system's "financial status" at the expense of "the cost on our community." As part of Beaumont's layoffs and furloughs, Fox was to take a 70% cut to his base salary this year and get no bonus. Other executives at the health system also were to take 45% salary cuts.The latest Internal Revenue Service filings show Fox received $5.9 million in total compensation in 2018; he has declined to share his 2019 compensation. Free Press staff writer J.C. Reindl contributed to this report. Contact Kristen Jordan Shamus: 313-222-5997 or firstname.lastname@example.org. Follow her on Twitter @kristenshamus.