click to enlarge

• Courtesy Memorial Health System
• Memorial Health System has funneled profits into many upgrades and additions, changing the face of the main hospital east of downtown.

It came at the end of the May 27 informal City Council meeting: a glimpse into the undercurrent of tension between Council and Memorial Health System.

On the heels of what some Council members consider the latest in a string of bad financial decisions by Memorial the hiring of a new CEO for $550,000 a year Councilman Jerry Heimlicher suggested appointing Council members to Memorial's independent board of trustees. Councilman Darryl Glenn said Council ought to set up a threshold expenditure amount, ensuring Memorial gets prior approval from Council before spending large sums.

Vice Mayor Larry Small went a step farther, asking Council to look into selling the hospital, and pocketing the money for use on city services.

"I have no confidence in the fiscal responsibility of that hospital," Small said at the meeting. "Absolutely none."

Dissed?

Council is responsible for Memorial, but the hospital is led by its own administration and trustees. The board only needs Council's approval of its budget, a lot of freedom compared with other enterprises. At Colorado Springs Utilities, for instance, Council serves as the board.

But some councilors say Memorial overstepped when its board hired Larry McEvoy as CEO on May 17.

McEvoy came to Memorial last year to serve as chief medical officer after a career as an emergency-room doctor. He was appointed interim CEO in January. Now McEvoy, who has never before led a hospital (though his history includes "executive leadership roles" at the Billings Clinic in Montana), will collect an annual salary more than $100,000 richer than that of his predecessor, Dick Eitel, who spent decades in the Memorial ranks.

With all due respect to McEvoy as a doctor, Heimlicher says, "Are you telling me the most qualified person for the job was a doctor that didn't have any experience besides running a clinic?"

Small is no more generous: "It appears to me that we're running the hospital like a social club."

Underlying the anger is that Memorial did not seek Council approval before setting the salary. Council members received a Saturday e-mail which didn't include salary information notifying them of the hire. But many Council members say they don't check e-mail regularly on the weekend, and they found out by reading the Gazette on Sunday, May 18.

Councilman Scott Hente says Memorial was doing a good job at one point of keeping Council informed of its CEO search. Mayor Lionel Rivera sat on the selection committee, and Council members were invited to finalists' interviews. Hente and colleague Jan Martin attended. But Hente was taken aback when he heard of the final selection in the media.

"I made a comment on the day of the interviews that the one thing we hate is surprises," Hente says. "Would a little communication have gone a long way? Definitely."

Hente adds that Memorial should have discussed the salary with Council, but declines to say whether the amount was too high. Others are more vocal.

Councilman Randy Purvis: "I have a lot of questions about whether the salary offered was appropriate."

Martin, noting that the problem extends to Memorial's financial handling in general: "I think all of Council is a little uncomfortable right now."

Council expressed anger before approving a November request to increase the hospital's 2007 appropriation by $23.5 million to pay for costs associated with opening Memorial Hospital North, bad debt and uncompensated care. (The money came from Memorial funds; no city resources were used.) The hospital had recently committed $250,000 to support the U.S. Senior Open. (It should be noted the golf tournament is a receiving a significant in-kind contribution from the city, too.)

Council has also had concerns about the steadily increasing bill for uncompensated care, projected to reach $68.7 million this year, or more than 10 percent of the hospital's 2008 appropriation of $646.6 million. Uncompensated care costs were $55.4 million in 2006, and $65.6 million in 2007.

Council is assembling a committee to look at the costs.

click to enlarge

• Courtesy Memorial Health System
• Dr. Larry McEvoy, new Memorial CEO, will make $550,000 annually.

The other side

Memorial's trustees aren't taking the criticism sitting down. Board member Curtis Brown chaired the committee that selected McEvoy. He says that out of nearly 100 rsums received, McEvoy's stood out.

"Larry McEvoy is a talented leader who is very familiar with the health care industry," Brown asserts.

As for that $550,000 salary, Brown says it's below the median for Front Range hospital CEOs. Memorial, he says, was hoping to bring Eitel into the same range, but he retired too soon.

"Memorial Hospital is owned by the city, but it does compete in the private sector," Brown says. "We have to pay competitive wages."

Perhaps, he says, better communication with Council about the hire would have helped. But he doesn't think there's anything extraordinary about Memorial's financial situation.

"I keep hearing "Memorial's in terrible shape,' and I think, "Where are you getting these numbers from?'" he says.

In 2007, according to Memorial, the hospital recorded profits of $18.5 million.

Looking at uncompensated care, board vice chair Arlene Patterson Stein notes that such costs are rising nationwide. Unique to Memorial, she says, is a Council directive that the hospital treat patients in need regardless of ability to pay a step beyond federal law, which only mandates emergency care for patients who can't pay. And Memorial, she says, does try to collect on its debts.

"We have a lot of different payment plans that are offered for people who don't have insurance," she says.

McEvoy, just a few days into the job, says he's ready for the challenges ahead. He says handling Memorial's budget will mean balancing financial sense with quality care, helping those in need, and committing to personal values. In an ideal world, he says, hospitals would provide more preventive care to offset expensive life-saving procedures.

"If you're going to mitigate those costs going forward," he says, "you do it by making people healthier and helping them make good decisions about their health."

Not a sacred cow

Council has been brainstorming ways to take further control. The mayor has said Council will consider appointing its own members to Memorial's board in the fall, which wouldn't be welcomed by everyone.

"I don't see them appropriately serving on the board of trustees," Stein says.

But that may be the least-radical proposition. At least two councilors have said they'd like to consider selling the hospital.

Small says McEvoy's salary is a sign Memorial isn't fiscally responsible, adding, "If that's the best we can do, we probably should put it on the block and sell it."

Heimlicher feels similarly: "Let's go down the 10 reasons we bought the hospital in [1943]. If we were asked to buy a hospital today, would we make the same decision?"

There are pros and cons. Benefits include investment potential purchased 65 years ago for $76,500, it's now worth hundreds of millions. Memorial is also able to provide high-quality care without obsessing on profit margins. And since Memorial's profits go to improve the hospital, it can stay on the cutting edge. Recently, Memorial was named No. 1 in Colorado for cardiac care by HealthGrades.

But Memorial does nothing to boost city coffers. And with profits shrinking, some on Council wonder if Memorial can sustain itself in the long run.

stanley@csindy.com