May 12, 2007 in City

Empire Health gets new manager

By The Spokesman-Review
 

Big money, big impact

“Empire is undergoing a $40 million turnaround. The hospital system includes Deaconess Medical Center and Valley Hospital and Medical Center.

“Together, those two facilities serve about

30 percent of the region’s medical market.

Empire Health Services has hired a top manager to oversee day-to-day operations of Deaconess Medical Center and other sites, freeing Chief Executive Officer Jeff A. Nelson to focus on a search for new capital or possible sale, officials said Friday.

Philip G. Dionne, the new chief administrative officer, is a 30-year hospital restructuring expert whose recent duties have included shepherding a failing New York hospital into bankruptcy.

But officials said his role here will be to continue strengthening Empire’s position for the future.

“We’ve had the need to beef up the next level of management down for some time,” said Ron McKay, chairman of Empire’s board of directors. “We picked Phil because he suits our needs and he fits very, very well.”

Dionne, 57, who began work this week, has been a consultant for Kurron Shares of America Inc., a Long Island-based health care management firm whose clients often include distressed hospitals.

In October 2004, Dionne, working for Kurron, took over as CEO of New York United Hospital Medical Center, where he announced plans to provide competitive wages and benefits, and improve relations with staff and the community, according to news reports.

In December 2004, the hospital filed for Chapter 11 protection in federal bankruptcy court, records showed.

“I wouldn’t read too much into that,” Dionne said Friday. “There’s no question that that’s not the case here.”

McKay said Empire is moving aggressively to continue the $40 million turnaround of the hospital system that includes Deaconess Medical Center and Valley Hospital and Medical Center. Together, the two facilities serve about 30 percent of the region’s medical market.

Hiring Dionne to oversee daily operations will allow Nelson, the executive widely credited with crafting that turnaround, to focus on acquiring capital or negotiating a sale, McKay said. Hospital officials have estimated they need $100 million to stabilize and upgrade the system.

“It represents a shift for Jeff, but not to be moving on,” McKay said. “He’s our franchise player; we use him to our advantage.”

McKay declined to disclose details of Empire’s strategies, saying he was bound by confidentiality agreements. Hospital officials have invited representatives from Community Health Systems Inc., of Franklin, Tenn., to visit with local doctors.

So far, CHS, the largest for-profit hospital system in the country, has been the only potential partner identified in connection with Empire.

“There’s so much more coming that certainly will be newsworthy,” McKay said.

Dionne, who met with employees during forums this week, said his priorities will be to provide leadership to the medical staff and to look at financial priorities and opportunities for the future. He plans to hire a top executive at Valley Hospital and Medical Center soon.

He’ll also work on quelling fears he heard from staff members about changes in the system. “The biggest concern is the anxiety and uncertainty about the future,” Dionne said.

Hospital officials declined to say how much Dionne would be paid. Federal tax records indicate that Nelson earned nearly $700,000 in 2005.

Dionne also served most recently as CEO of Episcopal Health Services Inc., a struggling hospital system represented by Kurron.

He was also the former CEO of Holy Cross Hospital in Chicago, which posted deficits of $16 million in 2001, $15 million in 2002 and nearly $9 million in 2003, according to federal records.

News of the management shifts at Empire drew mixed reaction.

Dr. Brian Seppi, head of the Spokane County Medical Society, said Friday he wasn’t aware that Dionne worked so often with troubled, even bankrupt, systems.

“It would worry me, if that’s his past history,” Seppi said, adding that he thought a similar fate was unlikely at Empire. “I think what we’re looking at is a pending sale. I think they probably would have communicated that ahead of time and not dropped it on us.”

State Sen. Chris Marr, D-Spokane, former chairman of the Empire board, said shifting Nelson’s duties and hiring Dionne is a sign that officials are coping with the effects of recovery. “The organization is certainly on the way up in my view,” Marr said. He hinted that a sale to a for-profit hospital system such as CHS might be a likely outcome.

That scenario continues to worry representatives of the employees union, said Chris Barton, secretary-treasurer of SEIU 1199 NW, which represents nurses, service technicians and other workers.

“Our reaction to this change is: Is this going to be a transparent process? Are we going to have assurances that the mission will continue to be a priority?” she said. “We are and the community should be concerned about not keeping this hospital in the community.”


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