Shareholders at Community Health Systems this week ignored the urging of one investor group and overwhelming re-elected three members of the board of directors – including CFO W. Larry Cash – during the company's 2011 annual meeting.
William Patterson, executive director of CtW Investment Group, in an April 21 letter to fellow shareholders, had called for the ouster of Cash, and board members James S. Ely III, and John A. Fry, "given their culpability for the growing scandal surrounding proper oversight of Medicare billing practices, which has precipitated a 25% decline in Community's market value."
Patterson was referring to Tenet Healthcare Corp.'s lawsuit filed in April claiming that Franklin, TN-based CHS overbilled Medicare by as much as $377 million using medically unnecessary admissions that improved its bottom line and appeal to investors.
A CHS filing with the Securities and Exchange Commission, however, showed that Cash easily won re-election on Tuesday by garnering 90.4% of the votes. Ely and fry each received 82.9%.
The vote appeared to be a vindication for Cash, Ely, Fry, and CEO/President/Chairman Wayne T. Smith, who vigorously campaigned for their re-election. However, it was also clear that the CtW campaign made some shareholders leery. Two other board members who were not the subject of the CtW ouster campaign, William Norris Jennings, MD, and H. Mitchell Watson, Jr., were reelected with 99.5% and 98.4% of the vote, respectively, the SEC filing showed.
CHS abandoned its hostile takeover bid for Dallas-based Tenet earlier this month, after the Tenet board unanimously rejected what CHS called its "best and final offer" of $7.25 per share cash, or about $4.1 billion. Tenet CEO Travis Fetter and Tenet board chair Edward A. Kangas said in a letter to Smith that the offer "grossly undervalues the company and is not in the best interests of Tenet or its shareholders."
John Commins is the news editor for HealthLeaders.