Council votes to oust Memorial board, revisit CEO contract



Memorial Health System Colorado Springs
  • Memorial North

Meeting in special session Tuesday afternoon, City Council voted 7-0 to ask the Memorial Health System board of trustees to voluntarily resign by 5 p.m. Wednesday or be ousted at that time.

Council also voted 7-0 to spend up to two weeks further investigating its legal options regarding a $1.15 million severance package given by the board to Memorial CEO Larry McEvoy last week.

The exit pay deal created a firestorm of opposition from citizens, which came to a head when Council convened at 4 p.m. for the special meeting. Council members, without Brandy Williams and Bernie Herpin absent, heard legal advice from City Attorney Chris Melcher in closed session for 90 minutes before reconvening and taking the two actions.

Larry McEvoy severance pay
  • McEvoy: Council wants to revisit his exit deal.

Council quickly intends to replace the board members (secretary Marijane Axtell Paulsen resigned Monday for an unrelated reason, another board member said) by appointing a new five-member group with experience in health care. No names were mentioned, but Council President Scott Hente said the Council would meet at 9 a.m. Friday to select a new board.

McEvoy, 46, came to Memorial just over four years ago with limited administrative experience and quickly rose to the top, from which he promoted the idea of converting Memorial to an independent nonprofit. That idea, though, took a backseat in a bidding process to a proposal by the University of Colorado Health System to take Memorial into its fold. A lease with UCH is being worked out in preparation for an August public vote.

McEvoy leaves the position Friday making $670,009 a year, after receiving a $120,000 raise in January, and his contract called for paying six months salary as severance. However, the board offered 18 months or just over $1 million, along with other perks such as keeping his 2007 Camry Hybrid worth $15,000, and $20,000 for "career development" in seeking new employment

Board Chair James Moore and board member Vic Andrews told the Indy after the meeting ended they hadn't decided whether they would step down voluntarily. They quickly left City Hall without further comment. Moore has said the payment was increased to $1.15 million to be in line with industry standards, because McEvoy's pay and severance were much too low.

Memorial Health System board chair
  • Moore: Unsure he'll resign.

Hente said the Council will revisit the contract in open session no later than May 16, the next normal meeting day for the Utilities Board, which is comprised of City Council. The two-week interim is designed to give the city legal staff time to determine whether the deal the Memorial board made with McEvoy, which was signed Monday night, can be undone.

Before the vote on the board ouster, Hente said, "I do this very reluctantly. We had a discussion last week about citizens who volunteer their services and expect some kind of respect. ... These are great people, and I know them. I know what's in their heart. They're trying to do what's best for this community. But I think this Council wants to do what's best for the hospital." He said his top two concerns were great patient care and having a great hospital to merge with UCH.

Several citizens spoke during the public comment time, none in favor of the Memorial board's actions.

Dr. Ron Raines from Memorial spoke about the severance deal not helping morale, which already has been low "for a very long time." He also noted the line employees have paid the price for a low census of patients by being sent home when there's not enough business to keep a full crew.

Former City Attorney Jim Colvin said to allow the severance package to stand "will harm and perhaps even destroy the citizens' trust in the legislative branch of government of the city of Colorado Springs."

Former Councilman Sean Paige said the generous payment could set a precedent with other outgoing hospital officials expecting the same treatment. And resident Walter Lawson noted that Memorial gave McEvoy, who had never served as a hospital CEO before coming to Memorial, a great opportunity to gain experience "with a four-year OJT" (on-job training) and earn more than $2 million while doing so.

Former Councilman Tom Gallagher went so far as to suggest McEvoy get nothing, because severance pay is supposed to be paid when an executive is dismissed, not when he chooses to resign. McEvoy has said his departure was by mutual agreement with the board.

The board members, according to Memorial's website, are Chairman James Moore, Vice Chair Vic Andrews, Secretary Dr. Bill Crouch, Yolanda Fennick, Dr. Donald Gazibara, Paul Johnson, G. Jeff Murrell, Arlene Patterson, and ex-officio members, Chief of Staff Dr. Karen Anthony, who voted Monday not to ratify the severance package, and Dar Larson, auxiliary president.

Ironically, after previous Memorial CEO Dick Eitel retired in early 2008 after 33 years at the hospital (making $444,412 when he left), the Memorial board gave him only $118,624 for vacation and sick time, but no other severance other than six months of health insurance.

Mike Scialdone, the Memorial chief finance officer who takes over Friday as interim CEO, issued this statement after the Council's action:

While Memorial respects City Council’s decision, this unprecedented governance change poses major risks to the health system at a critical time. We will begin work immediately to address these risks, which include a potential change in our bond rating, possible regulatory agency concerns
and keeping Memorial stable for an anticipated transition to University of Colorado Health.

Memorial’s main focus is to ensure the quality of care and operational and fiscal stability and to put Memorial in a strong position for a smooth and successful transition to University of Colorado Health. Although the public remains focused on the separation agreement between the Board and outgoing
CEO Dr. Larry McEvoy, we are focused on keeping Memorial strong and healthy in the months to come.

On behalf of Memorial, I want to thank members of the Board of Trustees for their dedication and service to our patients, staff, physicians and volunteers. I’ve worked with this Board for four years, and they’ve devoted thousands of volunteer hours and years of their lives to ensure we meet our mission to provide the highest quality health care. Their commitment, professionalism, judgment and focus under extraordinary conditions have been exemplary.

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