Memorial board votes to maintain McEvoy’s severance

Memorial’s Board of Trustees voted to maintain outgoing CEO Larry McEvoy’s compensation $1.15 million compensation package.

The board met at the request of the Colorado Springs City Council to reconsider McEvoy’s $1.15 million package , which includes a little more than $1 million in salary compensation, a company car and cash in lieu of unused vacation and retirement benefits. It also includes Memorial’s share of COBRA insurance benefits.

Only Karen Anthony, Memorial’s chief of staff and an ex-officio member, opposed the decision.

“I cannot in good conscience vote with this decision,” she said. “Not after hearing from Memorial’s employees. It’s affected morale, and I can’t agree with it. The employees are upset because it’s not in keeping with Larry McEvoy’s statements about his own mission, values and goals.”

Anthony said she originally voted in favor of the compensation package because she felt “Memorial needed to move on, and it was important to have Larry McEvoy leave as early as possible.”

Council member Angela Dougan was present at the meeting, and said she was disappointed with the outcome.

“I will move tomorrow for a different outcome,” she said. “And we’ll remove the board if we have to.”

City Council scheduled a special meeting at 4 p.m. Tuesday to discuss McEvoy’s severance package. The board works for City Council and can legally be removed it. Dougan said she found no legal precedent that said City Council can’t act as the board of trustees for Memorial. And that’s what Mayor Steve Bach wants. He has called for the board to be dissolved and for City Council to give McEvoy six months’ salary as a severance.

Whether the rest of Council agrees with the bold move, remains to be seen.

“I’m a little bit confident,” Dougan said. “But who knows? Tomorrow is another day.”

Trustee Vic Andrews stands by the board’s decision.

“For a couple of years now, the board has been moving to make sure salaries are in line with median for hospital salaries,” he said. “We started in 2010 with front line workers, and last year we moved to hospital managers.”

Andrews pointed out that most community hospitals pay bonuses each year – 15 percent to mid-level management and 25 percent to upper level executives.

“But we haven’t been able to get there in Colorado Springs,” he said.

The $1.15 million package is less than the median for outgoing, community hospital CEOs, said Board President Jim Moore. According to hospital salary experts, 18 months’ salary is in the 25th percentile. The average is 24 months.

That doesn’t matter to Council member Tim Leigh.

“It’s not the median for Colorado Springs,” he said. “And that’s what I care about. I’m interested in the employees of Memorial Health System. I have gotten so many calls from constituents. The guy tells them they can’t have raises, and then takes a $120,000 raise himself – and then walks away with $1 million? That affects morale.”

Andrews said they weren’t thinking McEvoy would leave when he was given the $120,000 salary increase in January.

“But things change quickly,” he said. “Four months ago, the negotiations weren’t where they are now, and we have to react to things as they occur.”

Part of what occurred were restrictions on what Memorial can do, decisions it can make, Moore said. The negotiations to lease the hospital to the University of Colorado Hospital meant that McEvoy hands were tied on some issues, he said.

McEvoy was neither fired nor resigned – but merely stepped down as part of a mutual agreement, Andrews said.

“We made this decision,” he said. “Th0at’s important. We made it together.”

Mike Scialdone, current CFO, will serve as the interim head of Memorial. He’ll receive a bonus of about $80,000 in addition to his $387,000 salary as compensation, Moore said.

Leigh said he was willing to “fall on his sword” for this issue, and wouldn’t back away from a lawsuit.

A lawsuit might occur – even if the board is dissolved. Andrews said there was a legally binding agreement in place between Memorial and McEvoy as to the terms of the settlement.

“It’s not the final agreement,” he said. “You know, they need an agreement with the i’s dotted and the t’s crossed. But under Colorado law, the agreement in place is legally binding.”

Both Moore and Andrews also seem prepared to stand up to Council at Tuesday’s meeting.

“I am going to ask them, when Jim presented the package to them a week ago today, not one of them said anything. No one had any questions,” he said. “Why is it a problem now, when it wasn’t then?”

Angela Dougan and Bernie Herpin were the only two Council members not at that meeting, he said.

For his part, Moore said he was debating “whether to wear my funeral suit or not.”

Leigh said no matter what the decision, the issue would likely linger.

“This is going to cast a long shadow, for a lot of people, for a long time,” he said.

To read more about hospital executive’s severance packages, click here.

To read McEvoy’s response to the controversy, click here.

The board released its own statement after the meeting.

Statement from the MHS Board of Trustees

“The Memorial Health System Board of Trustees stands by its separation agreement with outgoing CEO Dr. Larry McEvoy, including the financial terms as originally agreed upon. We recognize the unpopularity of this action, but it is the right and responsible thing to do.

“While this action has been portrayed by the media and others as outrageous, the reality is that this is a fair – and conservative – severance package for a CEO of a health system this size. By virtually any standard, the role and associated compensation agreements for the CEO of a half-billion-dollar health system cannot accurately be compared to a typical city manager’s.

“The Board recognizes that City Council is considering removing Trustees from our appointed seats. While we accept these risks, we urge Council not to take such action, for it could imperil the health system at a critical time.

“Removing Memorial’s governing body could result in a downgraded bond rating and complicate negotiations with University of Colorado Health.

“The Board’s focus must always be on the best interest of the health system.

“Our goal is to keep Memorial as strong and healthy as possible through the anticipated transition to UCH in the months ahead. At that time, UCH and City Council would appoint the health system board.

“This commitment to a strong and healthy Memorial is one we should all share because our patients and community stand to benefit from what is to come.”