Mysteries surrounding massive severance could endure

DANIEL CHACÓN and ANDREW WINEKE Updated: May 26, 2012 at 12:00 am • Published: May 26, 2012

As Colorado Springs tries to reconcile how the former CEO of Memorial Health System walked away with a $1.15 million separation package that city officials tried to block amid public outrage, one of the biggest mysteries is who knew what and when.

The whole story may never come out.

But City Council President Scott Hente and President Pro Tem Jan Martin knew two or three weeks ahead of time that Dr. Larry McEvoy was on his way out and that Memorial’s Board of Trustees was considering a “mutual agreement.”

Hente and Martin didn’t ask any questions of former board Chairman James Moore at the time, assuming the board would give McEvoy six months severance pay under the terms of his original 2008 employment contract.

Weeks later, when Moore went before the full council during a closed legal session and disclosed that McEvoy was leaving and that the board planned to give him 18 months pay – or $1 million – no one said a peep.

It wasn’t until the terms of the agreement were made public and began to garner protest that city officials started to make noise.

Since then, the council has decided to honor the terms of the separation package rather than engage in a potentially costly legal battle.

But the seven-figure payout could lead to policy changes.

Some council members say they want to ensure that no other municipal board has the same kind of unchecked power as Memorial’s, and Mayor Steve Bach has called for a governance review of all city-owned institutions.

“This kind of disastrous outcome must not be repeated in the future,” Bach said.

It’s a convoluted story, but here are the steps that have emerged through interviews, public records requests and meetings that led to Colorado Springs being stuck with a pay package that every city elected official opposes.

1999-2000

• The Memorial board, which is appointed by council, used to include several voting members from City Hall. But in either 1999 or 2000, the council decided that one of its own members would no longer sit on the board.

Former Councilman Randy Purvis, who served on the Memorial board as a council representative from 1991 to 1999, said the council wanted to separate politics from the operation of the hospital and make the board more independent.

“For a time, there were two council members on the board,” he said. “If you go back to the 1980s, there was a time when the city manager sat on the Board of Trustees as an ex-officio member (and) the city finance chief was on the board as a member of the board.”

2008

• In January 2008, three months after joining Memorial as chief medical officer, McEvoy was appointed interim CEO following the retirement of former CEO Dick Eitel at a time when the hospital was facing serious financial trouble.

• In July 2008, the board picked McEvoy to take the job on a permanent basis after a national job search that drew more than 100 candidates.

“It was his first major administrative job at a hospital,” Purvis said of McEvoy’s elevation to CEO of Memorial.

McEvoy came to Memorial from the Billings Clinic in Montana where he had been an emergency room doctor and held leadership positions.

2010

• In 2010, a citizens’ commission appointed by council started to examine the governance of Memorial. The review followed a recommendation by the city’s Sustainable Funding Committee, which feared taxpayers would be on the hook if Memorial, which had lost $32 million in 2008, continued to struggle financially. That November, the commission recommended that Memorial be spun off as an independent nonprofit, an idea that McEvoy championed.

2011

• Those plans came to a screeching halt in January 2011 when the state’s employee pension system told Memorial that it would cost $246 million to buy itself out of the system and become independent. Up to that point, a council task force had been working on a potential lease.

Nevertheless, in April 2011, the outgoing council endorsed the nonprofit plan to the new council, which formed a task force to continue considering the future of Memorial.
But in August, the council decided to solicit competitive bids to lease the hospital and then formed another task force to review them.

The Memorial board submitted a bid on behalf of the independent nonprofit proposal, but in December, the task force instead unanimously endorsed a bid from University of Colorado Health.

The Memorial board asked council and the mayor to be included in the negotiation process. But the board was rebuffed.

“They created a situation in which they professionally insulted the hospital board and then left them in charge of the hospital at the same time,” Purvis said.

2012

• While negotiations with UCH were ongoing, the board said in March that it was considering retention bonuses for Memorial’s executives, igniting a firestorm of controversy both inside and outside the hospital. Moore made a case for the retention bonuses, saying that keeping the hospital’s leadership team intact was essential while the city negotiated the lease.

Council members Angela Dougan and Tim Leigh led the outcry to oppose the retention bonuses with Dougan calling for the board’s removal if the bonuses were approved.
Hente defended the board’s authority, saying the board was responsible for overseeing the hospital and that council shouldn’t interfere.

“I don’t think it’s appropriate for me to start second-guessing the board at this very critical time for the hospital,” Hente said.

However, the board backed down on the retention bonuses.

• Less than a month later, in early April, Moore and Vice Chair Vic Andrews told Hente and Martin that McEvoy was on his way out.

“I think the words they used were, ‘A mutual parting of ways,’” said Martin, who didn’t tell any of her colleagues about the discussion with Moore and Andrews.

“We didn’t talk about a separation agreement,” she added. “We knew there was a (2008 employment contract with McEvoy) and there was no reason to ask them about a separation agreement at that point. They were just informing us that there was a possibility that he would be leaving.”

Hente agreed that Moore didn’t bring up a severance package.

“As a matter of fact, I didn’t even think about it … because (McEvoy) had a contract and I just assumed – bad assumption on my part, I guess – but I just assumed they would go with the existing contract,” he said.

• On April 23, Moore attended a closed legal session of council to say that McEvoy was leaving and that the board was giving him 18 months severance pay. Council members said Moore didn’t disclose the other terms of the agreement, including a car and $20,000 to help McEvoy find a new job.

Still, nobody raised any objections about the $1 million in severance pay, Hente said.
By the time Moore made the announcement, the council had been meeting for six or seven hours, according to council members.

“By the time you get to six or seven hours into the meeting, everybody has lost interest. It’s the human condition,” Leigh said. “You can’t sit there that long and make good decisions.”

Leigh, who has been critical of McEvoy in the past, called for an investigation of Memorial in February and for the hospital’s executives to be put on administrative leave during the probe.

Leigh said he figured his colleagues wouldn’t back him up if he raised any concerns about McEvoy’s payout so he got up and left the executive session.

“The issue isn’t, do I regret staying or going,” he said. “The issue was, given my lack of support by council in general in the matter of the hospital, I knew I would have nothing to add, nobody would listen to anything I would say.”

Dougan, another McEvoy critic, left the meeting before Moore made his announcement.
Dougan, who, along with Leigh, led the fight to try to stop the separation package, said she would have stayed at the meeting had she known what was about to be discussed.

“I remember thinking, ‘We have been talking about this Memorial negotiation lease for 3 ½ hours. You’ve beat it to death,’” she said. “I raised my hand and said, ‘I have to go get my daughter.’ No one said anything so I got up and left.”

The agenda did not state that a personnel issue would be discussed, stating only that council would receive “legal advice and negotiation consultation with the City Attorney regarding Memorial Health System.”

When asked whether the City Attorney’s Office gave proper notice, Dougan said, “Probably not.”

“Legally? Yes. Totally transparent and honest? No,” she said.

• On April 27, Memorial disclosed the terms of the agreement, and Mayor Steve Bach called for the ouster of the board.

Hente said he had “serious concerns” with the agreement but that he supported the board’s decision because it had that authority. Hente said Friday that he didn’t use tougher language at that point because he didn’t want to make the situation worse.

“I thought, mistakenly, that if I could sit down and have a conversation with the leadership of the board without a lot of strong words being used, without a lot of hostility, that we would come to some better agreement,” he said.

Hente and Martin met with Moore and Andrews the next day to try to work out a compromise.

“We really wanted them to know from our perspective that it wasn’t acceptable,” Martin said.
But that Monday, April 30, the Memorial board voted 8-1 to reaffirm the separation package. That night, Moore met with McEvoy and closed the deal by signing the final agreement.

The council gave the board an ultimatum May 1: resign or be fired. The next day, only one of the Memorial trustees -- Dr. Donald Gazibara -- submitted a resignation letter, prompting the council to remove the board from office.

What appears to be the final chapter was written Monday after yet another closed-door meeting. After consulting with City Attorney Chris Melcher, the council decided to pay up.
How did it come to this?

Former Councilman Purvis has his suspicions.

“I wonder if there wasn’t a little bit of ill feelings on the board’s part,” he said.

“To borrow that old Janis Joplin line, ‘Freedom’s just another word for nothing left to lose.’ The Board of Trustees, thinking they’re out of a job in four or five months, there’s nothing left to lose so what the heck, give McEvoy a sweetheart deal on his way out the door.”


Contact Daniel Chacón: 476-1623
Twitter @danieljchacon
Facebook Daniel Chacon

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