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Archive for Saturday, January 11, 2003

Stovall calls bonuses egregious

Attorney general: Health Midwest executives should forgo part of packages

January 11, 2003

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— Outgoing Kansas Atty. Gen. Carla Stovall wants Health Midwest executives to give back half of their lucrative bonus packages in exchange for approval of the hospital chain's proposed sale to HCA Inc.

The not-for-profit Health Midwest wants to sell its 14 hospitals in the Kansas City area to HCA, a for-profit health care company based in Nashville, Tenn. Proceeds of the sale, expected to total around $800 million after long-term debts are paid, would be used to create one or more charitable foundations.

Stovall told the Mid-America News Network Friday in Wichita that the size of the bonus packages promised to executives as a condition of the sale are "absolutely egregious for a nonprofit corporation having financial difficulty to the point they needed to sell out before becoming financially insolvent."

Richard Brown, Health Midwest's president and chief executive officer, will receive a $7 million package when the sale closes. That package, Stovall said, includes three times Brown's annual salary of $1.1 million, retirement benefits totaling $2.45 million, $800,000 to $875,000 as part of a retention benefits agreement and $115,000 to help him find new employment.

Also, he will receive an automobile and cell phone for three years, as well as health and hospitalization benefits for him and his wife until he becomes eligible for Medicare.

The company said the compensation package was developed before the proposed sale to HCA.

Stovall also said four executive vice presidents would receive cash payments of 150 percent of their annual salaries, 10 vice presidents would receive 100 percent of their annual salaries, and Health Midwest's general counsel will receive $660,000 when the deal closes.

"I think the right thing to do, the right expression to the public, is to donate back half of their executive compensation to the foundations on the Kansas and Missouri side," Stovall said. "That would be an expression of good faith and honoring what that money was supposed to do."

Besides pushing for executives to give back part of their compensation, Stovall said a team from her office is negotiating for a foundation that will benefit Kansans living in areas served by the hospitals. She also said she wanted experts to determine what percentage of sale proceeds should go to foundations in each state.

In November, Health Midwest sued attorneys general in Kansas and Missouri, asking courts to clarify the scope of their involvement in the sale process. Both responded with lawsuits of their own, seeking to dissolve the Health Midwest board and to have an alternative process established to oversee the disbursement of proceeds.

Scott Holste, a spokesman for Missouri Atty. Gen. Jay Nixon, said Friday only that a settlement with Health Midwest has not been ruled out.

Health Midwest officials met with the team from Stovall's office this week. Former Atty. Gen. Bob Stephan, part of incoming Atty. Gen. Phill Kline's transition team, is taking part in the talks. Kline takes office Monday, and Stovall said she doubted any agreements would be reached with Health Midwest before then.

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