Following stark reports of financial distress and mismanagement at WhidbeyHealth, the elected board of hospital commissioners fired CEO Ron Telles without cause during a meeting Thursday afternoon.
Board President Ron Wallin said the board would immediately begin looking for an interim CEO; Telles agreed to continue working until someone is found. Under his contract, Telles will receive nine months of his $430,000-a-year salary.
More staff cuts may be necessary, hospital leaders said earlier in the week, while the board may also look at other options in the future, including possible affiliations or even a buyout from another hospital system. The financial problems are so dire, officials said, that the hospital was recently turned down for a line of credit.
In addition, commissioners learned they have been making decisions based upon inaccurate financial information.
Telles spoke briefly prior to going into executive session with the board to learn his fate.
“I just ask that the board make a decision to start the healing process to continue our mission of being a community-owned source of compassion, high-quality integrated health care system,” he said. “That’s all I ask.”
Telles’ termination didn’t quell the anger of the few people who were allowed to comment at the end of the meeting. They complained about poor leadership, low wages of staff, ignored pleas for change and bullying from executives. One woman said the hospital has been “slowly driven to the grave” during years of mismanagement.
Bill McDaniel, a retired admiral and a member of the hospital’s foundation board, said the hospital commissioners took the right action. He suggested that former Chief Nursing Officer Erin Wooley, who was fired by Telles, could be the interim CEO.
Telles’ termination came at the end of a dramatic few weeks at the publicly owned hospital district. It began with the medical staff overwhelmingly voting no confidence in Telles, Chief Operating Officer Garth Miller and attorney Jake Kempton, citing concerns about constant turnover, technical problems, the work environment and other issues.
Then Telles fired Wooley and three newer members of the executive team, causing a wave of concern and questions from hospital staff and community members.
The board also went into executive session during two special meetings in the week prior to Thursday’s regular board meeting.
Telles was the hospital chief financial officer before he was hired as the CEO in 2019. He continued in both roles until a new CFO, Jim Childers, was hired at the beginning of this year.
The board meeting Thursday began with Childers and a consultant, Kevin Smith with the accounting firm EideBailly, providing details on the hospital’s serious financial and bookkeeping woes.
The hospital lost about $14 million in 2020 but came out ahead by about $1.4 million in 2021, which was about a 1% margin. The 2021 budget, however, was buoyed by millions of dollars in federal pandemic assistance and accelerated Medicare funds that the hospital isn’t going to receive this year, Childers said.
Cash on hand dropped to nine days on Feb. 3 and is currently at about 14 days; last year it dropped into negative territory at different points.
Childers said earlier that the hospital should have about 150 days to be financially healthy.
Childers explained that the hospital sought a $6.8 million bridge loan or line of credit to make payroll and other costs until May, when the levy revenues come in. The hospital was turned down by Savi Bank because bank officials questioned the ability of the hospital to repay. The hospital is also going to approach Heritage Bank and another lending institution.
At an employee meeting earlier in the week, Telles admitted that the hospital might have to look into more extreme solutions, such as working with a management company, affiliating with a different medical system or even a buyout. Those decisions, he said, are the board’s to make.
Smith, a partner at the accounting firm, described the problems he encountered while reviewing the hospital’s audits for 2019 and 2020.
The state auditor issued two findings against the hospital district last year, finding that it was two years behind in submitting complete and accurate financial reports.
Smith said he started the work about a year ago and immediately had problems.
“The information we received initially was just not good information,” he told the board. “I’ll just be direct with you.”
He repeatedly asked for accurate information from the hospital but was stymied until Childers arrived this year.
“We kept pushing that information back, saying this isn’t correct, we can’t audit this,” he said.
Also, Smith said the cost reports, which were prepared in-house, were so inaccurate that he had to recreate them from the beginning.
“There were major, major errors in the cost reports,” he said.
As a result, the board was making financial decisions based on inaccurate information.
“From a board standpoint, just to be frank with you, those would be the concerns I would have of not receiving accurate financial information on a monthly basis,” he said. “We’re making $3.5 million in adjustments that you’re making decisions on.”
In this year’s budget, a combination of cost cutting and revenue increases are planned.
The hospital will save about $1 million in 2023 from cutting the four executive positions. The savings will only be about $380,000 this year because of the cost of severance payments, Childers said during the employee forum earlier in the week.
Childers also explained that the hospital is in the midst of a productivity survey that will analyze full-time equivalents, or FTEs, by department and compare those to benchmarks.
“I think we will find ways to right-size the organization,” he said, adding that it will be an incremental process.
The hospital is increasing charges, which will mainly affect managed care companies and not co-pays or deductibles, and working with a new purchasing company; the district already renegotiated its anesthesiologist contract and discontinued a marketing contract.
The board adopted the 2022 budget during the meeting.
