EDMONDS — Stevens Hospital chief executive Steve McCary will be terminated from his employment at the end of this month with a severance package totaling approximately $2.1 million.
The official decision to relieve McCary, 48, of his duties was made Jan. 29 by the three-member board that governs the publicly supported Stevens Hospital District.
“There wasn’t a single precipitating event,” said Fred Langer, the president of the board. “We just thought it would be beneficial if we brought in some new energy to implement strategic planning we had in mind.”
Stevens medical director Dr. John Todd will serve as interim CEO until a permanent hire is made. Langer said a national search for a new chief executive will start in a few weeks, “after we let the dust settle a little bit.”
McCary’s ending salary is $360,000 per year. He declined comment on his departure, said spokesperson Jolene Waggoner. He will stay on through the end of February to assist in the transition, she said.
The hospital lost money for four consecutive years, 1998 through 2001, and is projected to lose about $2 million in 2003 with final figures pending, Waggoner said (see chart). Stevens made $1 million in 2002.
Board member Jack Tawney said the board hopes to put Stevens on “a little stronger financial ground.”
“I do think Steve did a good job and I think Steve worked very hard at it,” Tawney added.
Last year, a four-story, $13.8 million medical office building named Stevens Pavilion opened, housing a new women’s health center, outpatient surgery center, sleep lab and imaging center offering mammograms, X-rays and ultrasound tests.
The board, however, felt it was time to bring in “fresh ideas, fresh energy,” Tawney said.
“It’s good to have change; I think change can be a very positive thing,” he said.
McCary, who began at the hospital in 1989 as chief operating officer, signed a 15-year contract in 1995. Hospital attorney Brad Berg said the contract contained a clause in which McCary could be terminated at any time, with or without cause. The contract also contained a clause that McCary would be entitled to two years’ severance if he is terminated.
The money paid to McCary will consist of $1.18 million in compensation and $921,049 in accrued retirement funds. The compensation portion consists of incentive money, disability premiums and a 3 percent allowance for inflation in addition to the base salary, Berg said. McCary’s biweekly paychecks will total $6,489.
The $1.18 million will be spread over seven years rather than paying it in the next two, “so the district is actually saving some money from a cash standpoint,” Berg said. The retirement funds will be payable over a five-year period beginning in 2011.
“All of this is just designed to pay what he was entitled to under his employment agreement,” Berg said. The two-year severance package is “fairly standard for CEOs of hospitals,” he said.
Langer said long-term contracts for CEOs were common in the early ’90s when hospitals were on stronger financial footing. Langer said that when the new CEO is brought on board, “we’re going to evaluate that issue very closely” to make sure the contract can be supported by the market, he said.
Langer said the economic climate is much different now, with reimbursements from insurance companies and other sources decreasing and labor costs increasing.
“We’re getting pinched on both sides of it,” Langer said.
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