April 30, 2012
Memorial Health System’s board of trustees voted Monday to uphold the $1.15 million severance package for outgoing CEO Dr. Larry McEvoy, rejecting calls from the mayor and some City Council members to scale back the deal.
The next move will be the City Council’s, as it considers whether to remove the city-owned hospital’s board and attempt to revoke the contract at a special meeting set for 4 p.m. Tuesday.
In a special meeting Monday afternoon, the hospital board voted 8-1 to reaffirm the pay package announced last week, which includes 18 months’ severance pay, $20,000 for job placement assistance and the title to his company car, a 2007 Toyota Camry Hybrid.
Board chairman James Moore said that, despite community outcry, the package was conservative by industry standards and that Memorial has to pay its executives on par with competing hospitals if it wants to attract talent.
“We spent a lot of time talking about what’s fair,” Moore said. “We recognized that this would be disproportionate in the public arena in Colorado Springs. Clearly, we knew that it was going to cause some reaction —we just didn’t realize that it would be so virulent.”
Dr. Karen Anthony, Memorial’s chief of staff and the lone “no” vote on the board, said that, given the controversy the departure package has caused, going forward with it was the wrong decision. As chief of staff, Anthony is an ex-officio member of the board, but votes on decisions with the regular members.
“I think that there are a number of employees and physicians who feel this is somewhat of a betrayal of what Dr. McEvoy has presented as his position in the health system and his goals and vision and values,” she said.
City Council members say that Memorial’s board has the authority to negotiate contracts, even though it reports to the council, and that their only recourse would be to remove the board. Councilwoman Angela Dougan has called for the board to be ousted. Before Monday’s meeting, she said she wasn’t sure she would have enough votes on council to do so. After the meeting, Dougan said she’s more hopeful.
“I’ll be working lots of phone calls tonight,” she said, calling the board “blinded” and “jaded.” “They’re good people, they just don’t understand.”
The severance cash comes from hospital revenue. Memorial receives no direct taxpayer support.
Even if the board is dismissed, though, throwing out the contract may not be easy. Moore said that while the final contract has not been signed yet, an agreement on the principles was signed and that it is legally binding.
“I have had attorneys tell me that if we do not go forward with this contract, we would be in default of the contract,” he said.
Moore said he will be at Tuesday’s council meeting.
“I’m trying to decide whether to wear my funeral suit or not,” he said.
McEvoy, the object of all of the controversy, was traveling and not at the meeting. Reached by phone Monday night, he said that his departure package was in line with the board’s philosophy of paying employees at the median of hospitals nationwide, and, in fact, it was a little below that median.
“Because my position as the (CEO), the market comparison for my position is a lot of dollars, there’s no doubt about that,” McEvoy said. “The board was paying more attention to the methods and philosophies that it set for the organization than to horse-trading with me.”
Although he didn’t say what he would do if the council removed the board, McEvoy said that he and the board had reached a fair agreement.
“Do you reverse a board’s decision simply because some people don’t like the decision?” McEvoy said. “That’s an interesting philosophical question.”
Marijane Axtell Paulsen resigned from the board at the meeting. Paulsen left the meeting before the vote and could not immediately be reached for comment. Board member Vic Andrews said that resignation was not related to the controversy.
A statement from Memorial's board on their decision:
"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."