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The former CEO of Haywood Regional Medical Center will get $150,000 from the hospital after settling a lawsuit claiming he was wrongfully fired.

David Rice was at the helm during a near meltdown of the hospital in 2008. At the time, Rice publicly said he resigned, but in a lawsuit filed two years later he claims he was forced out.

Settling the suit was a business decision, according to the current CEO Mike Poore.

“We felt that it was best not to spend any more money on attorneys and complete that chapter,” Poore said.

In his suit, Rice demanded 20 months of his salary, back pay for accrued vacation and sick time, bonuses he had been promised and lost benefits. While Rice’s salary was $199,000, benefits included a car and health insurance, extra bonuses and other perks.

Although Rice left in the spring of 2008, he claims the hospital board verbally promised him his salary and benefits through the end of 2009 when his contract expired. In exchange, they asked him to publicly announce that he resigned instead of labeling it a termination.

Rice claims he was tricked, however, and that the hospital board had no intention of keeping its verbal promise. Rice had been the CEO for 15 years.

Many in the community blamed Rice for the hospital crisis back in 2008. The hospital failed federal inspections causing it to lose its Medicare and Medicaid status, triggering an exodus of private insurers as well. The hospital essentially shut its doors for five months except for the most essential services.

Rice kept the brewing crisis a secret, attempting to quietly fix the underlying issues, but it eventually imploded. Observers believe that Rice’s failure to address the citations early on led inspectors to make an example out of Haywood, pointing to other hospitals with more egregious problems that didn’t get shut down.

Regardless, hospital board members and community leaders said they were blindsided and condemned Rice for failing to keep them in the loop.

The hospital leveled a countersuit against Rice. Even though the hospital maintained that Rice resigned, the countersuit claimed there was good cause to fire Rice had that not been the case.

The countersuit claims Rice failed to “communicate with the board, medical staff and administration in an effective and timely manner, or otherwise concealing and distorting material facts and circumstances concerning the operation and affairs of HRMC.”

In the countersuit, the hospital claimed Rice’s actions leading to decertification caused “significant loss of HRMCs patients and revenue placing the future operation of the hospital in jeopardy.”

The hospital shutdown had major economic consequences for the community. For starters, the hospital burned through more than $10 million in reserves it had built up over the years.

Doctors lost business when patients went elsewhere. Many of the nurses and staff were put on temporary unemployment. The county saw a substantial increase in ambulance costs for ferrying patients to hospitals in Asheville or Sylva. Patient numbers still have not fully returned to normal.

Last month, a group of emergency room doctors was awarded $1.6 million in a lawsuit against the hospital dating back to Rice’s reign. Haywood Emergency Physicians were wrongfully ousted by the hospital in 2006 and replaced with a corporate physician staffing company. Rice helped orchestrate HEP’s replacement because he saw them as a threat to his insular power structure, according to the doctors involved.

Settling the suit with Rice marks the final chapter in the saga, allowing the hospital to move forward with its mission, Poore said.

“We are moving forward and focusing on our hospital’s mission of providing compassionate, quality and cost-effective healthcare,” Poore said.

The two sides went to mediation in November. The only ones present were Poore, Rice and his wife, and their respective attorneys.

While out-of-court settlements are not publicly filed in the court record, Poore elected to share the information in the interest of transparency.

A group of emergency room doctors has been awarded $1.6 million in a lawsuit against Haywood Regional Medical Center.

Haywood Emergency Physicians was ousted by the hospital in 2006 and replaced with a corporate physician staffing outfit before the group’s contract had expired. The group sued for breech of contract, unfair and deceptive trade practices and conspiracy in restraint of trade.

The case was heard before a three-member panel of arbitrators in mid-January. Much like a judge’s ruling in court case, the decision was binding, meaning neither side had the option of accepting or rejecting the amount of the award.

At the hearing, the hospital failed to produce any evidence that it had a good reason for ousting the ER doctors. As a result, the hospital owed the ER doctors for 18-months of lost income, the arbitrators ruled. The award will come out of the hospital’s bottom line.

Attorney Bill Cannon, who represented the group of doctors, said they were pleased with the amount. The hospital offered to settle out of court two days before the arbitration hearing, but the physicians rejected the offer as too low.

Mark Jaben, one of the ER doctors with Haywood Emergency Physicians, said the reasons given by the hospital leadership for ousting the emergency doctors at the time were “smokescreens.”

“Why did he want us out? It is a really good question I think a lot of people would say it boiled down to wanting power and control,” Jaben said. “We were in the whistle blower position.”

The lawsuit dates back to 2006 when the hospital was under different leadership. The hospital has undergone a massive transition since then, including a nearly clean sweep of top leaders and the governing hospital board.

The hospital failed federal inspections in 2007, causing it to lose its Medicare and Medicaid status and triggering an exodus of private insurers as well. The hospital essentially shut its doors for five months except for the most basic services.

As a result, the hospital leaders who had ousted the ER doctors the previous year got ousted themselves. It became clear that many of the issues raised by the ousted ER doctors — issues hospital leadership tried to silence — were in fact true.

The ER physicians enjoyed an outpouring of community support as well from those urging hospital administration not to get rid of them. But a few who believed the accusations against the group espoused by Rice apologized after the unraveling of his administration.

“People said ‘You were telling the truth and we are sorry we didn’t listen to you,’” Jaben said.

Jaben said it is a shame the community had to go through such a cataclysmic event to realize there were problems at the top.

“The full cost is enormous, well more than just the amount of the award in this one case. We trust that this final action will free the hospital of any remaining vestiges of the old guard and conclude this sad tale,” Jaben wrote in a group statement from the doctors.

Jaben said the hospital board at the time was led down the wrong path by Rice.

“I think boards have a responsibility to verify their information, to verify that things are happening the way they are being told,” Jaben said. “Clearly did not do that.”

While the medical community overwhelmingly rallied to the ER doctors’ defense, the hospital board and administration summarily dismissed their impassioned pleas. The physician community came to the sinking realization of just how little they were valued by hospital administration, Jaben said.

“The physician community had been systematically cut out of the process over the course of many years,” Jaben said.

Jaben said the new CEO Mike Poore has embraced the medical community.

“If you listen to Mike Poore’s language, he understands quite well that there has to be collaboration and cooperation with the medical staff,” Jaben said.

If Jaben could go back and do anything differently, he would have worked harder to achieve that.

“Your success lies in collaboration. At the time we did as best as we could trying to help that happen, but I think there are yet other ways we could have done a better job,” Jaben said.

Yet the records show that Rice’s administration was trying to get rid of the ER doctors prior to their firing. During the course of the lawsuit, Cannon got copies of emails between the hospital and the corporate physician staffing outfit months before the hospital pulled the trigger on firing Jaben’s group. Other evidence shows Rice had the group in his sights long before that, including a phone call from him to one of the ER doctors pledging to get even after the doctors shared a report outlining areas where the hospital needed improvement.

Rice did not return a message seeking comment prior to press deadline.

Poore said the hospital is glad to have this issue behind them.

“We understand that good relationships with all of our 230 physicians are critical in providing the world-class health care our communities deserve, and we’re happy to close this chapter,” said Poore.

Haywood Regional Medical Center is now part of MedWest, an affiliation with the hospitals in Jackson and Swain counties, and has a partnership with Carolinas Medical System out of Charlotte.

Jaben said the team of 10 ER doctors had loved living and working in Haywood County.

“This has been gut wrenching for many of them,” Jaben said. Only four have remained in Western North Carolina. The rest had to move to find work. Even those who stayed are not on the permanent ER staff of a hospital, but either went into another field of medicine or travel for work.

David Rice, CEO of Haywood Regional Medical Center for 15 years, resigned Monday in the wake of a financial crisis resulting from the hospital’s loss of its Medicare and Medicaid status.

“I think the fallout is so negative, I think a shift in leadership is called for,” Rice said. “The CEO always takes the responsibility. It is what CEO’s do. You have to protect the industry.”

The hospital board unanimously accepted his resignation after an hour-long closed meeting Monday evening. Prior to the meeting, board members said they were disappointed that Rice had failed to tell them of the brewing crisis until it imploded.

Rice said stepping aside will clear the way for the hospital to move forward rather than allow questions of his leadership to fester and interfere with the more important issues at hand.

“I think it is for the good of the hospital and the good of the community if I was to retire,” Rice said. “It will get the negative focus off me personally so the hospital can move forward. It just cleans the way and gets rid of some of the negativity and clears the way for a more positive direction.”

Ironically, Rice was just elected chair of the North Carolina Hospital Association.

“I will probably set a record as the shortest term,” Rice said of that role.

Rice, 68, had been planning for retirement in a couple years anyway, something the hospital board was aware of.

“We have had succession planning for the past three years internally to make sure we had internal talent within the ranks to pull from,” Rice said.

In a speech to a countywide meeting of doctors Monday night, Rice dropped the name of Eileen Lipham, a hospital vice president.

“I hope you will not overlook her for future leadership of this hospital,” Rice said.

For now, Al Byers, the chief operation officer of the hospital, will serve as acting CEO.


From the top

When Rice came to Haywood Regional in 1993, the hospital by all accounts was in shambles. Rice is credited with turning around the hospital financially and rebuilding its reputation as a trusted, quality health care institution in the community.

“The only way I could pull this thing out was to ask you all to stand behind me and stand behind the hospital,” Rice told doctors during his speech Monday.

Along the way, Rice built up what he called a “war chest” of $20 million in reserves.

“You have a well-equipped, outstanding hospital,” Rice told doctors.”

The crisis that prompted Rice’s resignation was a series of failed Medicare inspections primarily due to nurses improperly dispensing medication. Some within the medical community say that those problems can be traced right to the top.

Rice has been accused in recent years of fostering an overbearing culture and climate at the hospital. Numerous nurses and doctors have accused the hospital administration of being dismissive and unresponsive to their needs and concerns.

That, in turn, led to a large number of nurses leaving. The high turnover in nursing could have played a role in protocols for dispensing medication to patients not being followed.

“This is a breakdown not only because of nursing turnover, but in terms of nursing leadership to provide backup support for new or inexperienced nurses,” said Dr. Mark Jaben, a former ER doctor at Haywood. “If you have a certain core of experienced nurses on the floor they can serve that function. But when there gets to be so much turn over, you don’t that kind of turn over to support it.”

Jaben is an outspoken critic of hospital administration, butting heads with Rice many times before his practice was eventually ousted.

Rice reassured the medical community that however dire things seem in the short term, the hospital will pull through.

“The hospital can turn this around,” Rice said. “It is going to take a lot of sweat and a lot of hours.”

Prior to Rice’s resignation Monday, county Commissioner Mary Ann Enloe said the county will not let the hospital close and will intervene if the hospital board is unable to fix this problem on its own.

“We will have to be involved. I will lead the charge if it becomes necessary to get this taken care of,” Enloe said. “There are things that the hospital board can do immediately to start restoring credibility to that hospital. Let’s see if they do that.”

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