Hospital Attorneys Go 0 for 3
When Tri-City Medical Center fired Larry Anderson three years ago they wanted to save the $650,000 in severance pay his contract required if they fired him without cause. They chose to rely on an anonymous telephone call, followed by a secret internal investigation conducted by hospital attorneys, to come up with a list of fourteen reasons to fire him for cause. He was accused of one or more of the following offenses: committing a felony, an illegal act involving moral turpitude, a willful and dishonest act, or a breach of duties and obligations.
Without telling him in advance what the charges were, the hospital offered Anderson thirty minutes to defend himself at a hastily arranged board meeting. When he refused to attend the board voted to fire him.
After Anderson was denied unemployment insurance he lodged a complaint with the California Unemployment Insurance Appeals Board. The hospital's attorney was unable to provide sufficient evidence to support any of the four charges identified by the hospital as the most heinous, so Tri-City was ordered to begin paying into his benefits.
The charge that Anderson had "improperly used district funds/resources to investigate Matt Hall, Mayor of Carlsbad," struck me as an example of how the hospital's governing board has been mired in local politics. Anderson hired Farrah Douglas, a member of the Carlsbad City Council at the time, to be executive director of the hospital's Foundation Board. Mayor Matt Hall allegedly told her she'd have to resign from the Council because her job there would create a conflict of interest. The hospital's attorney pointed out she didn't have to resign, just recuse herself from votes posing a possible conflict of interest. There was no evidence Anderson used district resources for anything other than a legal opinion. But it does raise the question of why Mayor Hall really wanted Douglas off the council.
In July 2014 Anderson filed suit in San Diego Superior Court in a complaint against attorney Larry Patterson, the hospital lawyer who conducted the secret investigation of the CEO. Two years later the jury held Patterson accountable to Anderson for $1.3 million in damages.
If Tri-City had fired its CEO because he couldn't get along with the board, (a collection of elected officials whose membership changes every two years), or because he wasn't an effective administrator, or simply because they didn't like him, they could have done so for $650,000. But the board chose instead to trump up charges stemming from an anonymous phone call.
Three court rulings have now made it clear that whatever shortcomings Larry Anderson had in the eyes of his employer did not rise to the level of a felony, an illegal act of moral turpitude, or a breach of his duties.
This year Tri-City fired Anderson's replacement, Tim Moran, after less than two years in the position and shortly after the San Diego Business Journal named him the Most Admired CEO of 2016. The hospital couldn't drum up even bogus reasons to can their new CEO this time around. They fired him without cause, rewarding him with $600,000 in severance pay, plus a year of medical and dental insurance. Unlike Anderson, he went quietly.
Before Moran's executive office chair had cooled, it was filled by Steven Dietlin, the hospital's chief financial officer, the hospital's third CEO in five years, raising the question of whether local politics, rather than job performance, is responsible for the hospital's CEO revolving door. Dietlin would be well-advised not to get too comfortable in his chair.
Two years ago, at the same time Anderson filed his malpractice lawsuit against Patterson, Tri City filed suit against the Medical Acquisition Company (MAC), the firm with whom Anderson had negotiated the hospital's purchase of a new building to be built on Tri-City's campus. The Medical Office Building (MOB) was built but remained vacant for two years, while the hospital took possession of it under eminent domain, depositing $5 million as its estimated amount of compensation to its owner, Charles Perez, President of MAC.
Tri-City wanted the deal it had signed with Perez to be nullified, claiming Anderson and Board Chair Rosemarie Reno had illegal conflicts of interest when it was signed. The judge threw out the claim against Reno. The jury found Anderson had no financial or personal conflict of interest either.
Judge Earl H. Maus's June 23 ruling in favor of Medical Acquisition Company, Inc. awarded the firm damages amounting to $20 million. The hospital was credited with the $5 million already deposited by the hospital in their eminent domain claim.
Not only did Tri-City fail to make its case against its former CEO, the ruling's financial damages do not reflect the costs of two years of litigation. Anderson estimates the amount owed Perez in attorneys' fees, as well as the hospital's two-year loss of projected revenue from rent and patient services fees adds up to at least $10 million.
Three years ago Tri-City could have purchased a new medical office building for $16.3 million. The hospital's failed lawsuit has raised that price to more than $30 million.
The only benefactors of the hospital's latest financial debacle seem to be Anderson and attorneys who get paid whether they win or lose. Maybe it's time for Tri-City to fire its General Counsel, Procopio, Cory, Hargreaves & Savitch LLP.