Tuesday, May 1, 2012

UPDATE: Memorial board affirms McEvoy severance, heads for showdown with City Council

Posted By on Tue, May 1, 2012 at 7:02 AM

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Today at 4 p.m., the Colorado Springs City Council will convene for a special meeting with one agenda item, "the governance of Memorial Health System," though that apparently means resolving two issues.

One, whether to rescind the Memorial board's $1.15 million severance agreement with departing CEO Dr. Larry McEvoy, reaffirmed Monday by the MHS trustees.

Two, but possibly being addressed first, whether to remove the MHS board effective immediately.

The meeting will take place in the Council chambers at City Hall, 107 N. Nevada Ave.

Indications are that two Council members will be absent, Bernie Herpin and Brandy Williams, meaning only four votes would constitute a majority instead of the usual five.

—————FIRST UPDATE, POSTED AT 8:41 P.M. MONDAY——————

Memorial Health System CEO Dr. Larry McEvoy spoke by phone Monday night with Indy senior reporter Pam Zubeck, who reports the following:

McEvoy says the board several years ago adopted a pay philosophy of compensating in the middle of the market. He says the severance package falls within those guidelines and is "an extension of that philosophy."

His departure, he says, is by mutual agreement, because the board had agreed "when the day comes when I can't advance the well-being of the organization" he would leave. "When everyone is looking toward this new day," he says, referring to the lease with University of Colorado Health System, "the board and I agree this organization is better without me." He also says, "Having me around was starting to be a lightning-rod issue."

"I think the conclusion we came to was my presence was no longer advancing the organization strategically," he says. "I was becoming a bit of a lightning rod, distracting from the alignment in the community" with the UCH lease, on which voters are expected to vote in August.

He called the board's earlier consideration of retention pay for executives about a month ago "due diligence" on an issue that should have been addressed years earlier. He also said his contract was "out of whack with the market," leading the board to increase his severance pay from a half year's pay, roughly $338,000, to roughly 18 months pay or $1 million.

"It's the board's job to put a separation package together for me," he says, though he adds that he did consult an attorney for help with the separation agreement's details. "The board made the decision. I realize it's a lot of money to the average wage-earner, and I respect that."

McEvoy says he has no plans for his future yet but would like to remain in the administrative end of health care, rather than return to clinical work, which brought him here nearly five years ago as an emergency room doc. He says he will "exit as gracefully as possible, take a deep breath with my family" and "let the bruises heal and get back in the game."

He wouldn't speculate about whether his departure and severance package would help or hurt the chances of voters approving the UCH lease, saying, "I supposed that depends on how people choose to act and how the community decides what's best for the community. I needed to get out of the way so people can focus on the real issues. This is a big opportunity ahead for us."

He said he still believes converting Memorial to an independent nonprofit is the best way to go, but the UCH relationship "has great potential," he says. "I think the box we're creating is better than the box we have," he says. His regret, he says, is that he didn't realize earlier that his enthusiasm for the conversion to an independent nonprofit was being construed as his idea instead of "our idea." He also regrets that he wasn't able to communicate the message more effectively.

Monday night, the Memorial board of trustees also released this statement:

The Memorial Health System Board of Trustees stands by its separation agreement with outgoing CEO Dr. Larry McEvoy, including the financial terms as originally agreed upon. We recognize the unpopularity of this action, but it is the right and responsible thing to do.

While this action has been portrayed by the media and others as outrageous, the reality is that this is a fair – and conservative – severance package for a CEO of a health system this size. By virtually any standard, the role and associated compensation agreements for the CEO of a half-billion-dollar health system cannot accurately be compared to a typical city manager’s.

The Board recognizes that City Council is considering removing Trustees from our appointed seats. While we accept these risks, we urge Council not to take such action, for it could imperil the health system at a critical time. Removing Memorial’s governing body could result in a downgraded bond rating and complicate negotiations with University of Colorado Health.

The Board’s focus must always be on the best interest of the health system. Our goal is to keep Memorial as strong and healthy as possible through the anticipated transition to UCH in the months ahead. At that time, UCH and City Council would appoint the health system board.

This commitment to a strong and healthy Memorial is one we should all share because our patients and community stand to benefit from what is to come.

——————ORIGINAL POST, 6:13 P.M. MONDAY———————

Memorial Health System's board of trustees, in a special meeting late Monday afternoon, reaffirmed its earlier vote to give outgoing CEO Dr. Larry McEvoy a $1.15 million severance package.

After nearly 90 minutes in executive session, the Memorial board voted 8-1 to move forward with what board chair James Moore called "an existing legal contract" tied to McEvoy's departure, effective Friday.

Now the matter goes to City Council, which will convene a special meeting Tuesday afternoon with Memorial as the only agenda item. One of Council's options would be to remove the board immediately, with Council either taking over governance of MHS or appointing a new board.

McEvoy did not attend Monday's meeting, because he was traveling back to Colorado Springs from a medical conference. It was not clear whether he would go to the Council meeting Tuesday.

Regardless, though, it's unclear whether Council has the authority to negate the severance agreement, which initially was negotiated on April 19 before the MHS board officially approved it last week.

Before the vote taken Monday, Moore announced that board secretary Marijane Axtell Paulsen, former president of Colorado Technical University and Pikes Peak Community College, had resigned during the meeting.

The single "no" vote came from Dr. Karen Anthony, Memorial's chief of staff, who said afterward that "the public outcry changed my mind ... I was not comfortable with the fallout."

Moore acknowledged the negative public reaction, but insisted that McEvoy's severance package was "low by industry standards." Moore added that to un-do that package would damage Memorial's chances of "attracting competent executives in the future."

As for what might happen with City Council, Moore refused to speculate. Several Council members have expressed their disgust with the McEvoy deal, but it's unclear if there would be enough votes to oust the MHS board. City Attorney Chris Melcher is expected to address legal issues with Council before any decision is made.

"I'm trying to decide whether to wear my funeral suit," Moore said, not laughing. He said he has served on Memorial's board for nearly 10 years.

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