When CEOS sue their hos­pi­tals

For some hospi­tal CEOS, the end of their em­ploy­ment is any­thing but am­i­ca­ble

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The world will never know what went through Robert Haw­ley’s mind when the hospi­tal CEO was ar­rested for driv­ing while in­tox­i­cated along the Lake Pontchar­train Cause­way in south­ern Louisiana. How­ever, one thing is now clear from court records: Haw­ley even­tu­ally came to re­al­ize that Slidell (La.) Me­mo­rial Hospi­tal’s re­ac­tion to his July 13 ar­rest for his sec­ond DWI ought to trig­ger a sev­er­ance pay­ment for two years of work he wouldn’t have to per­form.

Haw­ley, 65, sued the hospi­tal in the 22nd Ju­di­cial Dis­trict Court for St. Tam­many Parish for fir­ing him, claim­ing that his ar­rest was not one of the seven spe­cific grounds for ter­mi­na­tion spelled out in his em­ploy­ment con­tract. The hospi­tal and an ex­ec­u­tive com­pen­sa­tion firm that con­sulted on the agree­ment are fight­ing the law­suit in court.

Although in­sid­ers say such cases are un­com­mon, Mod­ern Health­care iden­ti­fied at least four cases filed be­tween 2009 and 2011 in which hospi­tal CEOS sued their for­mer em­ploy­ers al­leg­ing that the not­for-profit em­ploy­ers likely owed them each hun­dreds of thou­sands of dol­lars fol­low­ing their depar­tures.

Haw­ley’s case is one. An­other law­suit in­volved a Ver­mont bu­reau­crat or­der­ing a hospi­tal to cut off sev­er­ance pay­ments to a CEO, while a third had a Florida hospi­tal dis­put­ing a CEO’S math in cal­cu­lat­ing pay­ment amounts. A West Virginia case has the hospi­tal mak­ing harsh, public al­le­ga­tions of fraud af­ter the CEO sued for a sev­er­ance pay­ment.

Given that not-for-profit hos­pi­tals tend to be highly averse to lit­i­ga­tion, ex­perts urge ex­treme cau­tion when ad­vis­ing a hospi­tal CEO who thinks he or she may have grounds for lit­i­ga­tion.

“It can be a ca­reer-lim­it­ing move,” says John Self, founder of ex­ec­u­tive search firm John G. Self As­so­ciates, Dal­las. “If you’re 40 years old and you sue the board, you may get your $250,000 or $300,000. But my ques­tion is, is that enough to fund your re­tire­ment? You have to think about these things.”

Ex­perts say that as un­wel­come as it might seem, hospi­tal boards need to think con­cretely about ways to pro­tect them­selves to­mor­row against the ex­ec­u­tive smil­ing at them across the board­room ta­ble to­day. Such lit­i­ga­tion tends to be both costly and po­ten­tially em­bar­rass­ing for all in­volved, es­pe­cially when lo­cal me­dia get a whiff of the air­ing of dirty laun­dry about a ma­jor em­ployer in town.

“I think there’s no win­ner. I think both sides lose,” says Robert Wolff, a share­holder in the health­care prac­tice group with em­ploy­ment law firm Lit­tler Men­del­son in Cleve­land.

In one case in­volv­ing Tallahassee (Fla.) Me­mo­rial Health­care and its for­mer CEO, the law­suit was con­sid­ered front-page news lo­cally for the du­ra­tion of the lit­i­ga­tion, Wolff says.

“At the end of the day, the court seemed to pick a mid­dle ground be­tween the two sides,” he says. “And that hap­pened only af­ter an air­ing of griev­ances.”

Felici v. Ohio Val­ley Health Ser­vices

In terms of air­ing griev­ances, few Ceo-vs.-hospi­tal law­suits are ever likely to top Brian Felici’s case.

Felici worked 24 years as a health­care ex­ec­u­tive for or­ga­ni­za­tions owned by the Ohio Val­ley Health Ser­vices & Ed­u­ca­tion Corp. in Wheel­ing, W.VA., first as ad­min­is­tra­tor of East Ohio Re­gional Hospi­tal, Martins Ferry, Ohio, start­ing in 1987, then as pres­i­dent and CEO of the cor­po­rate par­ent start­ing in 2002.

His to­tal com­pen­sa­tion from Ohio Val­ley Health Ser­vices grew from $312,000 in 2003 to $430,000 in 2009, to­tal­ing $3.3 mil­lion be­tween 2003 and 2010, ac­cord­ing to the hospi­tal.

In a law­suit filed in Ohio County (W.VA.) Cir­cuit Court, Felici said he was “in­duced” by false prom­ises to re­sign from the sys­tem in April 2010 af­ter the board hired man­age­ment con­sul­tants Amer­i­can Health­care So­lu­tions in Pitts­burgh to as­sess the sys­tem’s fal­ter­ing fi­nances.

Hospi­tal of­fi­cials ini­tially said they would honor the terms of Felici’s three-year em­ploy­ment agree­ment and pay him his salary of $303,000 through Oc­to­ber 2012, which was re­quired if the sys­tem ter­mi­nated


Robert Haw­ley, for­mer CEO at Slidell (La.) Me­mo­rial Hospi­tal, sued the hospi­tal over his ter­mi­na­tion.

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