The Colorado Springs City Council will meet at 4 p.m. today to consider whether to remove the Memorial Health System Board of Trustees in an effort to undo CEO Larry McEvoy’s severance package.
At issue is whether the board had the authority to provide McEvoy with the $1.15 million package, which includes slightly more than $1 million in salary, or whether it overstepped its contractual boundaries.
“The issue seems to be that both sides are right,” said Ken Sylvester, a UCCS professor of negotiations who has more than 42 years’ experience negotiating large business deals. “And those are the hardest negotiations to make.”
Mayor Steve Bach has said the amount is excessive, and that high-level city employees only receive six months’ salary. Memorial’s board, on the other hand, says the severance is justified because it’s well below the compensation received by other health care CEOs.
“So now you have politics and logic, and they mix like oil and water,” said Sylvester, who declined to participate in the City Council-led task force last year.
“Clearly, the mayor is trying to exert his authority as a strong mayor, because he has powers we aren’t used to. He’s been doing that since he took office. And the board thinks it should be able to make its own decisions.”
At least two City Council members are ready to dissolve the board, as requested by Mayor Steve Bach, and give McEvoy only six months’ severance – about $338,000. Both Tim Leigh and Angela Dougan said their phones have been ringing off the hook with Memorial employees called to protest the high severance package.
“I’m ready to call for the board to be dismissed,” Dougan said after yesterday’s Trustees meeting, when the Memorial board upheld the severance package. “I’ve gotten phone call after phone call.”
Leigh, too, said he would “fall on his sword,” over the issue, in the event the issue ends up in court.
But the board stood firm, with a single member voting against it. In a statement, it said the severance package was not only “fair and reasonable,” but it was also conservative.
“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,” the statement said. “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.”
Karen Anthony, Memorial’s chief of staff and an ex-officio member, voted against the move. Another board member, Marijane Paulsen, resigned at last night’s meeting.
“I can assure you that it had nothing to do with this vote, with this issue,” said Board President Jim Moore. “Beyond that, I can’t say why she resigned.”
The threats to dissolve the board won’t necessarily affect the governance of the system, said Sylvester, because University of Colorado Hospital is in the midst of negotiations to lease Memorial, and would likely bring on their own board.
“So, they might say, ‘We’re going to be gone anyway, so we’re sticking to this,’” he said. “Basically, it’s a power play.”
City Council was briefed last week about McEvoy’s severance, and no questions were asked, said Trustee Vic Andrews. Only Dougan and Bernie Herpin were absent from the presentation.
But some question if that briefing occurred too late. Moore said that he and McEvoy signed the agreement April 19, with the understanding further negotiations could be forthcoming, if City Council or the full Memorial Board of Trustees had any issues.
“They raised no issues, suggested no changes,” Moore said. “The vice president and I were authorized by the board to move ahead with the negotiations.”
The city council was briefed at its informal meeting April 23 and the Memorial board voted in favor of the package April 24.
Moore wouldn’t speculate on whether the changes could have been made before the final board vote.
“There are two parties to this agreement, and I can’t speak for Dr. McEvoy,” he said.
Board members acknowledge that City Council has the authority to remove them from their volunteer positions. What isn’t known is if the Council can then sit as the board and undo McEvoy’s severance package.
“I have been through every legal document, and I can’t find anything that says we can’t,” Dougan said. “I even called (former City Council member and local attorney) Randy Purvis and he agreed, there’s nothing that says we can’t.”
Even if Council can act as the Memorial board, it’s unclear if the severance can be undone.
Andrews said the deal has been signed and is a legally binding document.
“It’s not the final agreement,” he said. “The one with all the I’s dotted and the t’s crossed. But it is legally binding under Colorado law.”
In the long run, Sylvester believes the two sides will work something out – and little will be changed at Memorial.
“This might make news for a week, maybe two weeks,” he said. “But in the long run, it won’t affect patients who are sick and the insurance companies just want to get paid. Overall, this is just a power play on both sides - the mayor wants to show he’s strong; and the board wants to be able to make its decisions.”