Community Health Systems, Inc. on Friday said it would back a full slate of 10 nominees for the Tenet Healthcare Corp. board of directors at the rival hospital company’s annual meeting this fall in an attempt to oust the current board, which in December rejected CHS’s $3.3 billion unsolicited takeover offer.
CHS Chairman/CEO/President Wayne T. Smith said the action was necessary because the current Tenet board refuses to discuss what he has called a generous acquisition offer that would benefit Tenet shareholders.
“By just saying no to our 40% premium offer, installing a poison pill with a 4.9% trigger, and delaying the 2011 Annual Meeting for six months -- instead of entering good-faith discussions with us -- Tenet’s highly paid board has clearly demonstrated its entrenchment,” Smith said. “Tenet shareholders deserve better. Accordingly, we have today taken the first step in running a full slate of 10 highly qualified independent directors to replace the existing Tenet board. If elected, these directors will act in the best interest of Tenet’s shareholders and carefully evaluate the value-creation opportunity represented by the CHS offer.”
On Nov. 12, 2010, CHS made an unsolicited offer to buy Tenet for $6 per share, including $5 per share in cash and $1 per share in CHS common stock. CHS said at the time that the offer was a premium of 40% over Tenet’s unaffected stock price. The offer was rejected by Tenet’s board on Dec. 6, and CHS made public the details of the offer on Dec. 9.
Tenet issued a statement Friday defending its rejection of the CHS offer, and noting that the company’s board had “delivered strong growth for more than five years.”
“We believe that Community Health has nominated its slate of director candidates only to advance its goal of acquiring Tenet at an inadequate price. We are confident that the continued execution of our strategic plan will deliver significantly more value to our stockholders than Community Health’s inadequate proposal,” Tenet said in a written statement.
“We firmly believe that Tenet’s stockholders – not Community Health – deserve to benefit from this growth. Tenet’s Board and management team will continue to act in the best interests of all its stockholders, and remain focused on executing our core business plan and capitalizing on Tenet’s leading position in healthcare services,” Tenet said.
Tenet delayed its 2011 annual meeting for six months, until Nov. 3, and its entire board is up for reelection.
CHS said its nominees are:
Thomas Boudreau, 59, who most recently was executive vice president, law and strategy of Express Scripts, Inc. and previously served as senior vice president and general counsel of Express Scripts.
Duke K. Bristow, 53, an economist at the Marshall School of Business at the University of Southern California, and a specialist in corporate governance and finance.
John E. Hornbeak, 63, is an executive in residence in the Department of Healthcare Administration at Trinity University, and was president/CEO of the Methodist Healthcare System of San Antonio, TX.
Curtis S. Lane, 53, a healthcare mergers and acquisitions banker, and senior managing director of MTS Health Partners, LP, a merchant bank providing advisory and investment services to healthcare organizations.
Doug E. Linton, 63, a self-employed consultant through DEL International, LLC, a pharmaceutical channel management consulting company.
Peter H. Rothschild, 55, managing member of Daroth Capital LLC.
John A. Sedor, 66, is president, director/CEO of CPEX Pharmaceuticals, Inc.
Steven J. Shulman, 59, a senior advisor to Warburg Pincus and is an operating partner at Water Street Healthcare Partners and Tower Three Partners. Previously, he was chairman/CEO of Magellan Health Services.
Daniel S. Van Riper, 70, CPA, an independent financial consultant.
David J. Wenstrup, 46, a consultant with Clinton Climate Initiative.
Alternate candidates are:
James O. Egan, 62, non-executive chair of PHH Corp. Previously, he was managing director, Global Private Equity at Investcorp International, Inc.
Jon Rotenstreich, 67, managing partner of RF Partners, a financial advisory and investment firm, and a founding principal of Bayer Properties Inc., a real estate development company.
Gary M. Stein, 60, a principal at the Stein Consultancy, LLC. He served as president/CEO and director of Touro Infirmary Health System, and chairman of the Metropolitan Hospital Council of Greater New Orleans.
Larry Yost, 72, former chairman/CEO of ArvinMeritor, Inc., an automotive supplier.
Community Health is located in Franklin, TN, and is the largest publicly traded hospital company in the U.S., with 126 hospitals in 29 states and 19,400 licensed beds. It also says it is a leading operator of non-urban and mid-size market general acute care hospitals.
Based in Dallas, Tenet owns 49 acute care hospitals in 11 states, 64 outpatient centers and has 57,000 employees.
Healthcare is a complicated business, and it won't get any simpler with the advent of sweeping federal healthcare reforms that include complicated new standards for care, quality and reimbursement.
And, however much electronic medical recordsmay improve care and efficiency, there is a steep learning curve for these complex systems. Most of these adjustments are done on the job, under duress, while dealing with anxious patients, creating no small amount of stress for healthcare workers. Physicians' staff at off-site offices are particularly vulnerable to these stresses because they perceive that they don't enjoy the same support or access to help that is available for staff inside hospital walls.
With that in mind Broward General Medical Center in Fort Lauderdale, FL, created "Broward General University." The free program of eight, once-a-month, midday classes for up to 40 office managers of affiliated physicians at the hospital was started last year and designed to enhance their knowledge of healthcare reforms and provide a variety of strategies for other daily issues.
Maybe they should call it Reform U.
"We wanted to have a program to reach out to our physicians' office staff," says Anthea Greaves, Physician Services and Medical Staff Coordinator at North Broward Hospital District. "The healthcare reforms and the medical records becoming electronic, those are some huge changes happening in the healthcare industry that are going to impact physician practices We wanted to give back to our physicians on staff by allowing their office managers and staff to be trained on various issues, whether it be claims and collections or learning how to motivate staff."
Topics for the 2011 Physician Office Staff Education Series, which runs from March through October, include managing stress in the office, difficult patients, patient access, insurance verification, hospital scheduling, claims and collections, motivating staff, marketing and advertising, negotiating contracts with insurance carriers, and case management.
There are also hands-on training and networking opportunities, and a chance to speak with guest instructors. "We are offering practices strategies on how to deal with claims and collections, negotiating contracts with different insurance carriers," Greaves says.
"We did a survey of the last participants of the first series and one of the popular topics that came up was stress and difficult patients, along with patient access and marketing ideas for the practice," she says. "The industry has changed where physicians are left on their own in a private practice where they don't necessarily have the tools to market the practice and bring in the business."
This is a great idea, and a remarkable and cost-effective way to promote engagement with physicians and their staff. With so much going on inside the hospital walls, it would be easy to forget about the critical role that physicians' office managers and staff play in coordinating care. Courses such as these not only provide practical solutions-based training on specific issues, they also provide a valuable outlet for office managers to build professional relationships and socialize with colleagues. Perhaps most importantly, these classes send a strong message that BGMC values its physician partners and their staff.
Nine months after pleading guilty, Guidant LLC was formally convicted and sentenced this week in St. Paul, MN, for failing to report to the federal government life-threatening defects in the medical device maker's implantable cadrioverter defibrillators.
U.S. District Judge Donovan W. Frank ordered Guidant, a wholly-owned subsidiary of Boston Scientific Corp., to pay more than $296 million in criminal fines and forfeiture, and to submit to three-years of supervised probation.
The Justice Department brought criminal charges against Guidant for failing to notify the Food and Drug Administration about short-circuiting failures in three models of its implantable cardioverter defibrillators: the Ventak Prizm 2 DR (Model 1861) and the Contak Renewal (Models H135 and H155). Guidant's Cardiac Rhythm Management division, which produced the defibrillators, is headquartered in Arden Hills, MN.
Guidant was charged in federal court last February, and pleaded guilty in April.
The surgically implanted defibrillators monitor electrical activity in a patient's heart for deadly arrhythmias, and deliver an electric shock to the heart to return the heartbeat to normal rhythm. If they fail, a person can die within minutes.
"FDA always works closely with companies to support compliance with standards that prevent serious safety problems from occurring," said Margaret Hamburg, MD, commissioner of Food and Drugs. "However, as today's sentence demonstrates, when companies fail to comply, we will use our enforcement tools to ensure the safety and efficacy of the medical products that Americans rely on every day."
Federal prosecutors said Guidant hid information from the FDA and medical professionals about the device failures. In June 2005, the company finally went public with information it had known for 10 months, and only after three deaths had occurred.
The Justice Department's sentencing memorandum said Guidant continued to implant hundreds of defective Renewal devices, even after the company stopped shipping them from the factory because of the health risk.
Prosecutors said Guidant developed a strategy to mitigate the health risk while not raising FDA suspicions about the problem. This strategy included the company advising its sales reps to tell physicians that "nothing was broken" with the Renewal, and falsely telling the FDA that changes it proposed to the device to correct the electrical short-circuiting "were not being done to correct device flaws that threaten patient safety" but were rather "to improve process throughout." Under the sentence handed down Wednesday, Guidant will forfeit $42 million and pay a criminal fine of $253 million.
Guidant was sentenced to three years of probation, submit quarterly reports to the U.S. Probation Office, and allow regular, unannounced inspections of its records. The court also required Guidant to notify its employees and shareholders of its criminal conviction.
In a written statement, Guidant said, "The DOJ's investigation began prior to Boston Scientific's 2006 acquisition of Guidant, as did the alleged conduct and product sales. The Company no longer sells the products involved in the investigation."
Signature Hospital Corp. CEO Charles Miller said Wednesday he would retire on Jan. 31, as the Houston-based company announced plans to sell its three hospitals and wind down operations by the end of 2011.
"Our decision follows months of careful deliberation on the future of our hospitals and the Company," said Signature CFO Steve Peterson.
Founded in 2005, privately held Signature owns and operates: St. Joseph's Hospital in Parkersburg, WV; Pampa Regional Medical Center in Pampa, TX; and Gulf Coast Medical Center in Wharton, TX.
"Based on current economic conditions and the impending healthcare reform, we believe Signature does not have the scale to continue to ensure long-term financial stability for Pampa Regional Medical Center and Gulf Coast Medical Center," Peterson said. "We hope to have the sale of St. Joseph's completed in the 1st Quarter of this year and the sale of the two Texas hospitals finalized before the end of 2011."
FTI Consulting was hired to find a buyer for Signature's Texas hospitals, and to manage them in the interim. In September Signature announced that it would sell St. Joseph's to West Virginia United Health System.
"It's in the best interest of the hospitals and the communities that they serve that we not only find the right buyer, but that we also find the right firm to assist in the day-to-day operations of the hospitals while we are working on the sales process," Peterson said.
PRMC is a 115 bed acute-care hospital located 60 miles northeast of Amarillo and 180 miles north of Lubbock. GCMC is a 161 bed acute-care hospital located 55 miles southwest of downtown Houston and 30 miles from Sugar Land, Texas.Both hospitals will continue normal operations during the transition.
A consumer watchdog group is criticizing the Blue Cross Blue Shield Association's hiring this week of a high-profile former state insurance commissioner as a lobbyist, saying the appointment of Kim Holland raises "tremendous concerns" about the revolving door between politics and lobbying.
Holland was until November insurance commissioner for the state of Oklahoma, and treasurer-secretary of the National Association of Insurance Commissioners.
Craig Holman with Public Citizen said Holland's appointment raises "tremendous concerns" about conflict of interest. "This is the classic abuse of the revolving door. What Kim is selling is not so much expertise but her Rolodex. She is well connected with those who are in government making decisions that directly affect the insurance industry, and the industry realizes that," Holman says.
Holland was the first woman elected insurance commissioner in Oklahoma in 2006 after having been appointed by Democratic Gov. Brad Henry in January 2005 to fill an unexpired term. In November she was defeated by Republican challenger John Doak, 47, who strongly opposed federal healthcare reforms.
Holland said Holman's concerns are baseless. "I have heard that statement about revolving doors throughout my tenure as insurance commissioner," she said. "I've spent my entire career in the insurance industry. Before I was appointed insurance commissioner I was a health insurance broker and consultant. That is one of the reasons why I was tapped for insurance commissioner. Our governor, and then later the voters, wanted someone who could come into the insurance department with not only knowledge of the industry but knowledge of consumer needs."
Holland said her "values are very much aligned" with BCBSA, particularly with respect to support for federal healthcare reform. "My role is to help provide resources at the state level to help them work with their policy makers to implement the important reform measures, to make sure we get people insured, that we improve the delivery system, and that we lower costs," she says. "That is what I worked on as commissioner and this is a wonderful opportunity for me to continue to work on the things that I think are important to the citizens of America."
Healthcare workers can expect an average base salary increase of 2.6% in 2011. That's up from the 2.3% base increase reported in 2010, but slightly below increases of 2.8% projected across all industries for 2011, according to a survey from Hay Group consultants.
"The healthcare industry did not see salary budgets fall until 2009, while other industries felt the effects of the recession much sooner, lowering salary budgets as early as 2007," said Ron Seifert, executive compensation practice leader for Hay Group's healthcare practice. "So, while healthcare is still 0.2% behind other industries, it seems to be rebounding at a faster pace after taking a deeper dip in a much shorter timeframe."
The survey found that 18% of respondents in all industries said they will maintain a salary freeze across all levels in 2011 to reduce compensation costs, while 4% of respondents in healthcare reported an across-the-board freeze on salaries.
"Healthcare providers have felt the pinch, but salary budgets are beginning to move upward, mirroring the slow ascent we are seeing in the broader economy," Seifert said. "Interestingly, healthcare salary trends are also starting to track those of other industries, which we haven't seen for at least a decade."
Fewer healthcare executives will see their salaries frozen in 2011, with 8% of organizations reporting a freeze of executive pay. That's compared to more than 20% of organizations that reported freezing executive pay in 2010.
Hay Group's survey also shows a parity of planned salary increases for healthcare employees in 2011 with both executives and all employees seeing a 2.6% increase.
"With executive salary budgets rising at the same level as staff this year, it's clear that boards are concerned about public perception of executive pay," Seifert said. "However, it's critical that compensation committees balance their concern of scrutiny with their need to attract and retain the best possible talent to lead their organizations."
Salary increases for physicians are still lagging at 2.3%, while nursing will see a 2.7% salary increase in 2011. High performers will see less than 1% more than all employees with 2.8% planned base salary increases for 2011. "With limited budgets, healthcare organizations are still resistant to differentiate pay for top and average performers," Seifert said. "However, if healthcare organizations want to retain high performers and high potentials, they need to treat them fairly – which does not always mean that everyone gets the same amount."
The survey uses data from more than 486 organizations in November 2010 in the general industry survey, and 90 hospitals and health systems of varying size, structure, and location in the healthcare survey. Respondents include compensation professionals in human resources departments. Hay Group's core compensation database represents compensation practices for almost 3,000 companies and more than 6 million employees.
Amid the volumes of stories written lately about the GOP takeover of the U.S. House, one item captured the pettiness of the political classes and special interests that claim to be working in our best interests.
The Hill reports that one of the first acts of the newly empowered House Republicans was to remove the word "Labor" from the committee formerly known as the House Education and Labor Committee. For the next two years that committee will be known as the House Education and Workforce Committee.
Labor relations remain one of the most contentious issues in healthcare, affecting the lives of millions of people who work in this nation's hospitals and other provider settings. The search for common ground is a daily battle that is critical to successful healthcare delivery. In the larger economy, there are about 15 million unemployed people in the United States – many of them jobless for several months, according to the Bureau of Labor Statistics. These people are hurting. And the first action by a key House committee that is supposed to address relations between management and labor, and the plight of the unemployed is to remove the word "labor" from the committee name. Wow! That'll fix 'em!
In what could be interpreted as just a wee bit of hyperbole, Chuck Loveless, director of legislation at the American Federation of County, State and Municipal Employees, told The Hill "this name change is symbolic of the new majority's hostility toward the rights of everyday working Americans."
No, Mr. Loveless. It's just politics — returning favors to the people who donated money to get you elected. Both sides do it.
Alexa Marrero, a spokeswoman for the House Education and the Workforce Committee, coyly feigned bewilderment at labor's objections to the name change when she told The Hill that the unions' claim that the name change reflected hostility toward workers was "bizarre" because union members are part of the workforce. She said Republicans changed the panel's name to reflect its "broad jurisdiction over polices that affect American students, workers, and retirees."
Not exactly Kumbaya. And this is just the first week.
We could go back and forth about which side started this hostility. It wouldn't settle anything. For every point or past grievance one side brings up, no doubt, the other side will have a counterpoint. This has been going on for decades and it's not going to change. President Obama used recess appointments to stack the National Labor Relations Board with union cronies, for example, but only after the board was run for years by management-friendly appointees under President Bush.
Here's the problem: The rest of us have to muddle through with the actions of these highly charged partisans whose first order of business is to destroy the middle ground. These actions fuel rancor, distrust, divisiveness — and paranoia — and set a terrible example for union-management cooperation that people in the real world have to strive for.
Many management consultants on labor issues — while obviously not enamored of unions— also understand that hard-headed, heel-digging opposition and denial on the part of management are not good strategies for keeping unions at bay. Employee engagement is far more effective. Jay Krupin, a veteran labor relations attorney, told me recently, "Employees only go to unions when they feel the employer is not listening. Unions don't organize employees, managers do."
Unions are a reality, they have a proud tradition of standing up for working people, they've indisputably improved the lives of tens of millions of people, and they are here to stay, particularly in healthcare. Deal with it.
However, unions lose public support when their top priority is perceived to be self-preservation of their members — particularly senior leaders — at the expense of raising standards and the common good. Teachers' unions have been particularly and effectively maligned for this. But healthcare unions will run the risk as well if they're not careful. Is the push for mandatory staffing ratios for nurses fueled by a genuine desire for better care, for example, or a savvy strategy to sign up more dues-paying union members? Are unions truly interested in employee engagement with management, or do they resist engagement because it weakens "them-against-us" organizing efforts?
There's nothing wrong with debating the management-labor relationship, and taking a firm stance on one side or the other. At some point, however, even capitalist stalwarts such as Henry Ford realized that compromise has to be brokered or nothing gets done. Most people outside of Congress understand this.
In Congress, however, politicians and special interest lobbyists are so intent on gridlock, turf wars, maintaining the status quo, and appealing to their hyper-partisan bases that they have no interest in compromise. In fact, they're encouraged not to compromise; praised for their resolve when they're inflexible, and scorned by true believers when they cede ground. These are the people who are supposed to lead us.
In the real world responsible people — managers and staff — work in common purpose to meet timelines, budgets and other important responsibilities. They are held accountable if they don't. They shouldn't look to Congress for leadership. They should look to themselves.
The past year saw many hospital mergers and acquisitions, with private, for-profit hospitals or capital management groups using a recovering economy to scoop up distressed public health systems.
The top 10 hospital mergers and acquisitions of 2010 were valued at about $3.8 billion, and one observer predicts that this trend will continue in 2011, as healthcare reforms kick in, the economic picks up, and sharp-eyed investors with lots of money to spend look for bargains.
"We are going to see at least as much in 2011 as we saw in 2010 year," says Sanford B. Steever, a researcher with Norwalk, CT-based Irving Levin Associates Inc.
Hospital mergers and acquisitions picked up shortly after Congress passed sweeping healthcare reforms in March. "Before that there was activity but it was sort of meager, one-hospital deals. Once healthcare reform passed and everyone had a better idea of what the landscape was going to look like we started to see an increase in merger and acquisition activity," Steever said.
The reforms are supposed to expand health insurance to 32 million people, and "some of this consolidation creates the larger delivery network and allows the hospitals to capture their fair share of these additional 32 million people coming online," he says. "The only thing that might cause a ripple in 2011 is that the new Congress is rumbling about repealing the healthcare reform act. I don't see that happening because neither party has filibuster-proof majority."
Even before the healthcare reforms passed, Steever says there were good reasons to consolidate. "In some areas, particularly in cities, there were too many hospital beds. There is going to be consolidation there to save money, capture larger market shares, and improve bargaining positions with vendors and insurance companies. Those are not going away."
In addition, new U.S. Census data show the nation is in the midst of a population shift. "In the Northeast, adjustments have to be made because populations are moving away and you can't maintain those hospital beds," he says. "They're consolidating in the Southwest too because people are moving there and you have to be able to provide services. It's not a perpetual motion machine but it's pretty close."
By far, the biggest domestic hospital merger of 2010 was the $1.5 billion acquisition of the Detroit Medical Center health system by private, for-profit Vanguard Health Systems, Inc.
Like many observers, Steevers says he was surprised that a private, for-profit hospital company from Nashville, TN, right-to-work state, would want to buy a unionized safety net public hospital system in a rust belt state.
"That is one that has a lot of people scratching their heads," says Steever, who offered three theories for the deal. "It may be, particularly in the rust belt, the demographics are starting to shift whereby that part of Michigan isn't losing population anymore."
"Also they are getting a system. Vanguard likes to go to urban areas. That is where they are most comfortable. If they were buying a single hospital in Detroit I would question their sanity. But they are going for a system so they have a chance of making it go," he says.
"Also, these facilities have been financially distressed coming out of the Great Recession, so they may have been able to get it at a fairly decent price," he says.
Steever says the concerns of some patients' advocates in Detroit that Vanguard would disrupt DMC's safety net operations are most likely unfounded. "Whether the management is from outside I don't think that makes a difference," he says. "There are a lot of for-profit hospitals that do a good job coming in and taking over hospitals and increasing the numbers of services and preventing health migration."
"The notion that Vanguard is going to come in and strip assets, it sounds good, but the reality is operating a hospital, especially a not-for-profits, the state would step in if they thought it would seriously threaten the delivery system in Detroit," he says. "Just because it's for-profit doesn't mean they don't do a good job running a hospital."
Steever says many for-profit hospital companies are attracted to public hospitals because they believe they can identify and implement efficiencies that will turn a profit. They're aggressively shopping for distressed properties in a recovering economy, looking for bargains, but not necessarily fire sales. "Most private companies don't want to wait to pull the trigger until a facility has gone down that path to bankruptcy," he says. "They want a facility that is maybe eking out small margins but has the potential to turn around, maybe through the use of better purchasing or IT or different management can operate more efficiently."
Also, investors are looking for new opportunities. "A lot of private equity firms and the companies they back have been sitting on the sidelines for the past two or so years. They are not going to return the capital directly to their shareholders. They want to invest and make a profit," he says.
Steever believes that's what motivated New York-based Cerberus Capital Management LP to spend $830 million for the six-hospital Caritas Christi Health Care system in Boston, in the second largest hospital acquisition of 2010. "Caritas has been stretched for several years financially and has been actively looking for partners. More finances were needed to set right what was going on there financially and operationally to bring the hospitals back to some profitability and stability," he says. "Because they were financially challenged, Cerberus got them at a lower price than they would have been able to get four years ago when they were in a financially better position."
Hospitals created 50,100 jobs in 2010, nearly double the rate of job creation from 2009, and the entire healthcare sector - everything from allergists to X-ray technicians -- created 265,800 jobs for the year, Bureau of Labor Statistics preliminary data shows.
Overall, the healthcare sector employed 13.9 million people at the end of 2010, including 4.7 million jobs at hospitals, 6 million jobs in outpatient ambulatory services, and 2.3 million jobs in physicians' offices, BLS preliminary data show.
For December, the healthcare sector recorded 35,700 payroll additions, including 8,000 hospital jobs. However, ambulatory healthcare services continues to be the major driver of healthcare job creation, with 20,600 payroll additions in December, and 160,200 payroll additions recorded in 2010, BLS preliminary data show.
BLS data from November and December is preliminary and may be considerably revised in the coming months.
After erratic hospital job growth in the first seven months of 2010, hospitals have seen five straight months of job growth, and have added 31,800 jobs since August.
Healthcare has been one of the few areas of steady job growth during the recession and slow recovery, averaging 22,150 new jobs each month in 2010, and creating 827,200 jobs since the recession began in December 2007. In 2009, healthcare created 215,300 payroll additions, including 25,700 hospital payroll additions, and 138,700 payroll additions in ambulatory healthcare services, BLS data show.
The larger economy gained 103,000 jobs in December and the nation's jobless rate fell from 9.8% to 9.4% for the month as the number of unemployed people decreased by 556,000 to 14.5 million. However, the number of long-term unemployed - people jobless for 27 weeks or longer - was little changed at 6.4 million and accounted for 44.3% of the unemployed, BLS preliminary data shows.
Paul F. Levy, the beleaguered CEO of Beth Israel Deaconess Medical Center in Boston and an outspoken champion for healthcare transparency, announced his resignation on Friday, eight months after he admitted to "lapses in judgment" in reference to a relationship with a subordinate.
"Last night, I informed the Chair of our Board that I will be stepping down as CEO," Levy said Friday morning in an open letter to BIDMC employees, which he posted on his blog, Running a Hospital. "We will work out an appropriate transition period, and things will continue to run smoothly here. I leave confident that the Board will find many able candidates to succeed me."
Eric Buehrens, BIDMC's COO, was named interim president/CEO by the hospital's board of directors on Friday. The board will meet again on Monday January 10 to begin a national search to find Levy's replacement.
In May, the BIDMC board reprimanded Levy and fined him $50,000 for an inappropriate relationship with a female subordinate. Neither Levy nor the hospital would detail the relationship which Levy nevertheless acknowledged and apologized for.
However, the Massachusetts Attorney General's Office in September issued a report that chastised the executive leadership and the board at BIDMC for years of inaction before addressing Levy's relationship with the employee. Investigators determined that while no laws had been broken, the reputation of the prestigious Harvard-affiliated teaching hospital had suffered a blow.
The 11-page report by the AG's Non-Profit Organizations/Public Charities Division was requested by the BIDMC board, and focused on whether charitable funds were used inappropriately as a result of Levy's indiscretions, and whether the board acted appropriately in its handling of the matter.
On Friday, Levy in his letter to employees once again apologized. "Over the last nine years, I have certainly made mistakes of degree, emphasis, and judgment. I have apologized to you directly for some of those, but I do so again, in the hope that such errors will not overshadow the many accomplishments and contributions of our hospital to the community and the healthcare industry," he wrote. "On the personal level, if I have slighted any one of you in any way or given you any cause for concern about my warm regard and respect for you, I doubly apologize.
Levy said the decision to leave the hospital came to him while he was "biking through the Atlas Mountains" in Africa and contemplating his 60th birthday. "While I remain strongly committed to the fight for patient quality and safety, worker-led process improvement, and transparency, our organization needs a fresh perspective to reach new heights in these arenas," Levy said in the letter.
BICMC Board Chairman Stephen Kay said in a statement that the board accepted Levy's resignation "with deep regret."
"Paul has significantly strengthened the medical center during his tenure, including making improvements in quality and patient safety, and has led BIDMC into a new era of accountability and excellence," Kay said.
BIDMC lost $50 million in 2001, the year before Levy arrived, Kay noted. Under Levy's leadership, however, the hospital's net worth increased nearly 300%, long-term debt was reduced, volumes for inpatient and emergency department volumes grew by more than 11%, and ambulatory clinic visits nearly doubled.
"The board is profoundly grateful to Paul for bringing to our hospital qualities that are uniquely his own," Kay said. "When the situation demanded a bold vision, Paul delivered. When austerity was the order of the day, Paul answered with compassion, so much so that our employees and patients became our ambassadors."
Levy's departure was cheered in some quarters. Veronica Turner, executive vice president of Service Employees International Union, Local 1199, the largest healthcare union in Massachusetts, said in a statement issued by SEIU that Levy's resignation was overdue.
"When we called for Paul Levy's resignation, it was because under his leadership, there were serious issues of care; cuts to services; and misuse of funds entrusted to BIDMC as a public charity," Turner said. "Paul Levy also engaged in conduct that deprived workers of their fundamental rights and evidenced disrespect of women. The caregivers of BIDMC work hard to deliver quality care and they deserve a CEO who will live up to the values of this venerable institution. Levy has made the right choice to heed our call to resign and should leave without any additional compensation from BIDMC."
Some workers at BIDMC have been campaigning to join Local 1199, but do not yet have a vote scheduled.
