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