Hospital to hire management firm and interim CEO

Michael Layfield, who will temporarily take over, has dealt with his own controversies and financial woes.

Logo for news use featuring Whidbey Island in Island County, Washington. 220118

The WhidbeyHealth hospital board chose a management services firm to help run the hospital district, provide an interim CEO and help find a permanent CEO and CFO.

After a hospital attorney looks over the contract, the board is expected to hold another special meeting next week to approve the agreement with HealthTechS3 and name Michael Layfield of Tennessee as the interim chief executive officer for the next six to nine months or so.

Under the proposal, HealthTechS3’s management service fee will be $350,000 a year for five years, though the hospital can opt out after three years. On top of that, the hospital will pay Layfield a salary based on a rate of $375,000 a year, plus he will be compensated for travel, lodging and meals; he plans to travel home every two weeks, according to the company’s terms.

Layfield didn’t appear in person but spoke briefly at the meeting. He said he will immediately meet with all the key people of the organization after starting work.

“We will diagnose what’s happening at the hospital, what’s working and what’s not and we work together to fix it,” he said. “It’s that simple.”

Layfield has dealt with his own controversies in the past as well as financial woes. He was the CEO of a Tennessee hospital about the same size as WhidbeyHealth Medical Center from 2016-2019; near the end of his tenure, the hospital was unable to pay employees, was forced to close down the ER and lost electrical power due to financial cutbacks, according to news reports.

In 2013, Layfield resigned from a hospital in Arizona following a series of executive sessions by the board. He cited “baseless allegations” in his letter of resignation, the Monticello News reported.

Friday, WhidbeyHealth released a statement saying that the hospital fully supports the board’s selection of HealthTechS3.

“They have a proven track record of successfully supporting integrated critical access health care systems, while ensuring strategic goals and patient experience needs are met,” the statement says. “The Board, Medical Staff and Executive Leaders believe that this is the right partnership for WhidbeyHealth and the residents and visitors of Whidbey Island.”

At WhidbeyHealth, the hospital board listened to presentations from two medical services companies, HealthTechS3 and QHR Health, during a special meeting Wednesday afternoon. Dr. David Lemme, chief of the medical staff, and Curtis Shumate, the new nursing manager, were invited to participate in the discussion.

Hospital Board President Ron Wallin said Thursday that the plan is for Layfield to start work next week. He said critical access hospitals are increasingly turning to management services firms to run the complex systems because of their ability to leverage professional expertise and national relationships.

“We want to keep the hospital going and provide health care to the community,” he said. He acknowledged that mistakes have been made, but he emphasized that the board is focused on moving forward in a positive direction.

The seriousness of the hospital’s situation and the depth of the management dysfunction came to light over the past month, beginning with the medical staff taking a vote of no confidence in CEO Ron Telles and two other members of the administration. Soon afterward, Telles fired four other members of the executive team; the action surprised and angered many people in the hospital.

The board terminated Telles without cause during a special meeting at which an audit consultant described serious errors in the hospital’s financial reporting. Interim Chief Financial Officer Jim Childers, who started work at the beginning of the year, also raised alarms about the district’s severe money problems. The hospital was turned down by two banks for line of credit loans to cover costs until the hospital levy funds arrive in May, officials said.

Telles was both CEO and CFO until this year.

The agreement with HealthTechS3 comes with a sizable cost, but hospital officials hope that cost savings instituted by the company will more than offset the price tag. Wallin, for example, said the firm might be able to save the hospital as much as $1 million a year in purchasing costs.

Nevertheless, the struggling public hospital district will be paying hundreds of thousands of dollars more for administration this year, as compared to last, to fix problems related to the breakdown in management.

On top of the costs of HealthTechS3, the interim CEO and the eventual permanent CEO, the hospital has to pay nine months of Telles’ $430,000-a-year salary, plus the cost of a new CFO. The firing of the four executives will eventually save the hospital $1 million a year, according to Childers, but first the hospital must give them severance pay based on nine months of work.

During the discussions at the board meeting, officials spoke positively about both of the companies. While they agreed that QHR Health’s proposed interim CEO sounded dynamic and personable, they bemoaned the fact that he would only be able to work a few months and then a second interim CEO would have to be hired before a permanent CEO could be found.

Childers, who worked for HealthTech previously, urged the board to hire the firm. He said the company’s proposal explains specifically what its services are while QHR’s was more vague.

In addition to finding a permanent CEO and CFO, HealthTech’s proposal states that it will prioritize a system operational assessment; review staffing and productivity; enroll the hospital in the company’s group purchasing organization; and do a “deep dive” into organizational structure and labor expenses.

In addition, the company will provide expert support to the CEO, the CFO, the board, the clinical officer and more.

Layfield’s biography describes him as a “seasoned hospital CEO with over 35 years of experience in the health care industry” who worked for both for-profit and not-for-profit hospitals as CEO, CFO and regional vice president.

Layfield’s resume states that he developed innovative new hospital product lines and is skilled in “physician alignment/recruitment, revenue optimization, patient empowerment, clinical efficiency, hospital construction/modernization and team development.”

At the same time, he’s made news for leading a hospital that fell into financial trouble.

Stories in 2018 and 2019 by ABC News, NBC News and Fox News affiliates described severe financial problems at Lauderdale County Hospital in Tennessee; Layfield was CEO from 2016 to 2019. The ER was closed due to financial problems, and employees didn’t get paychecks, according to the reports. Patients were forced to relocate to another hospital because of a power outage that Layfield attributed to “funding cutbacks,” Fox News reported.

In 2013, a newspaper in Monticello, Arizona, reported that Layfield resigned from Drew Memorial Hospital following board executive sessions, one of which allegedly included numerous doctors in violation of open meetings laws. Two of the board members voted against providing him with a severance package. Although the cause of the controversy was unclear, Layfield wrote in his resignation letter that “these baseless allegations and my resulting inability to effectively manage will end my productive years of employment,” the newspaper reported.

The Monticello News reported that during Layfield’s five years as CEO the hospital went from less than $3 million in resources to an excess of $10 million in cash and expanded services. He cut 40 FTEs, or full-time equivalents, in his first year on the job.

This story originally appeared in the Whidbey News-Times, a sister publication to The Herald.

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