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Health & Hospitals

JAN. 6 - Memorial Ousts Schaengold as CEO; Gill Named Interim

By Lou Phelps

SBJ Staff

In a surprise announcement, the Memorial Health board of directors fired its president and CEO Philip Schaengold Wednesday night, following a two-and-a-half hour executive session. The board convened at 6 p.m. for a meeting called for on Tuesday, and returned to open session at 8:45 p.m. to announce two resolutions.

Board chairman William "Bill" Daniel read the first, three-line "resolution" of the board calling for the removal of Schaengold and then called for a vote, which was unanimous. No discussion of the resolution on the open record took place prior to the vote

The prepared resolution stated that "due to the current circumstances at the hospital," the board had decided to remove Schaengold.

Daniel then read a resolution naming Margaret "Maggie" Gill, senior vice president and chief operating officer, as the interim CEO, which also passed unanimously with no discussion.

Following the meeting, Daniel would offer no explanation for the move except to say, "We have a lot of respect for Phil, but we came to the conclusion that we differed with Phil on the direction of the hospital."

When asked if a search process had been formulated or begun, Daniels said only that that would be done in the future, when a plan was developed.

With attorney Miles Fleming of Hunter McLean, the board's legal counsel, standing closely by, Daniel would offer no further explanation.
But clearly, Daniel is the man now driving the Memorial train.

Members of other boards that are part of the total Memorial Hospital system said that tension between Schaengold and Daniel was evident at their November and December board meetings over the hospital system's financial performance.

Through October, the total hospital system has reported an operating loss of more than $22 million dollars. $17.5 million worse than the budget and $6 million worse than last year. The hospital itself is expected to show a small profit this year.

Total system non-operating income was $9.7 million through October, $3.7 million better than the budget, but $3.5 million worse than last year.
The net is a loss of $12.5 million which is $13.8 million worse than the budget, and $9.5 million worse than last year.

This fall the board sold off the hospital's helicopter company, known as MedStar, which was losing money, and announced in December that the hospital would suspend matching employee 401K contributions for 12 months. That budget cut will begin in February 2011, after the required employee notification period ends, and is projected to save $4.4 million annually.

But the big loss area is the physician contracts signed by the hospital's administration and approved by the Memorial Board which holds executive sessions to review every physicial contract renewal. There is a reported $14 million loss in that area alone, according to those close to the numbers.

Schaengold "layed downt he gauntlet with the physicians - like a bull in a china shop - and they were going to walk. Daniel had to go meet with all the practices to settle everything down, explaining the hospital's situation," according to a board member who asked not to be identified.

No employee furloughs have been announced for 2011, according to employees, but Daniel is taking aim at a number of cuts to get the budget in line, according to board members.

Both in-patient and out-patient volumes are above last year, with gross patient revenues are up more than $23 million, but revenues are $24 million under the aggressive 2010 revenue budget Schaengold had crafted.

Also, a number of expense line items appeared to be out of control, including bad debt that is exceeding the budget by $17 million, when the hospital does not collect from patients for care rendered.

Supplies are $1.8 million over last year and $1.1 million over the prior year.

Charity care was also up $14 million over last year's $ 84 million level, to $98,339,000 through October.

Through 10 months, Memorial's salaries and wages are up 2 percent over 2009, to $182 million, but under budget by $2.5 million.

Physician fees were up 3.9 percent over last year, the contracts that the hospital board agrees to annually for the 120 to 130 employee doctors. Like many hospitals in the nation, Memorial has been buying physicians' practices for years, committing to employment contracts with a group of doctors.
A hospital manager reached Wednesday night said that the announcement was a shock, and that they were not aware that Schaengold had fallen out of favor with the board. "There hasn't been any talk."

Another long-time employee interviewed, concurred. "I hadn't heard anything. This is really a surprise," she said,

Memorial Health's board members include Gus H. Bell, Ira Berman, Dr. Robert F. Brown Jr., Dr. Marilyn Buck (who attended the board meeting by phone), Helen Downing, Kay A Ford, Harry Haslam, Michael A, Kaigler, John Kane, Curtis Lewis III, Charles F, McMillian, Mark Moore, Dr. Mark E. Murphy, Dr. Christoper L. Wixon and Daniel.

The 15-member board of directors establishes operational policies for the Memorial Health system. It also ensures that the long-range strategic planning, budget, resource allocation, and that policies are consistent with the mission of Memorial Health.

New board members and officers are named annually in February, with terms beginning on March 1. At the board's Nov. 17 meeting, it was announced that Ford will step into the position as board vice chair in March, and Haslam will be named the board's treasurer, if approved at the hospital's annual meeting scheduled to be held in February.

Daniel was named vice chairman in 2007, and chairman in 2009, with Helen Downing serving as secretary of the Memorial Health board.

J. Curtis Lewis, III has served as treasurer of the board since 2007; he is an attorney with the Hunter & Lewis, LLP, and a managing member of Lewis Commercial Properties, LLC. He serves on the board of directors for several local corporate and nonprofit entities, including Savannah Health Mission, Union Mission, Inc. and The Savannah Bank.

Memorial Health is a two-state healthcare organization serving a 35-county area in southeast Georgia and southern South Carolina. The system includes its flagship, Memorial Health University Medical Center, a 530-bed tertiary medical center; CareOne, its two-state home care division; Memorial Health primary and specialty care physician networks; a major medical education program; business and industry services; and NurseOne, a 24-hour call center.

Ray Gaster, president of Gaster Lumber, sits on one of the Memorial systems' boards and would not comment today on the Schaengold firing. But, he was in full support of Bill Daniel as chairman of the sytems's board.

"He is putting his heart and soul into this, to get a handle on what is going on there," said Gaster. "He's made a commitment that is above and beyond what you normally see out of a board chair."

Editor's Note: The Savannah Business Journal was the only media covering the meeting.

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