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Executive compensation and transparency controversial issues at Valley Medical Center

A compensation package for Valley Medical Center's chief executive officer and transparency of government issues concerning the board of commissioners have become hot topics for the public hospital district.

The state Auditor's Office hired the Seattle firm Ernst & Young to complete a performance audit of three public hospital districts, including Valley, Public Hospital District No. 1.

A draft document of the audit has been sent to the Valley Medical Center's board and administrators.

The draft audit addressed Valley CEO Rich Roodman's compensation along with transparency and accountability.

Commissioner Anthony Hemstad raised the issue of Roodman's compensation at the Sept. 21 board meeting when he attempted to place a three-page document into the minutes.

According to Hemstad he was blocked from entering the document by board President Don Jacobson.

Hemstad's document is posted below.

His complaint focuses on a $1.7 million retirement payment made to Roodman in February 2009.

"This stinks to high heaven," Hemstad said during a phone interview.

According to Hemstad the payment was passed by the board in 2007 prior to the new commissioners, Hemstad and Sue Bowman, taking office.

"It was rushed through at the last minute," Hemstad said.

Given Roodman's total compensation, Hemstad believes the CEO is the "highest paid public employee in the state."

Don Jacobson, president of the board, disputes Hemstad's contention Roodman is paid too much.

"This guy (Roodman) does a good job," Jacobson said. "We have a (emergency services) tower we are building and he has a plan and I want to see him there to put it in place."

Jacobson said Roodman's salary has been an issue, "since the day he came."

Roodman was hired in 1983. Jacobson said although he was not a commissioner then, Roodman's compensation has been often been an issue before the board.

Jacobson pointed out Roodman has a two-year non-compete clause in his contract.

"The auditor was quite impressed with that," Jacobson said.

Jacobson said he believes Valley is, "doing really good. We have come a long way. Quality of care is great."

The audit report stated Valley, which is the largest public hospital district in the state, was a "regional resource with recognized Centers of Excellence in Birth, Sleep, Joint and Stroke care and provides specialized treatment in cardiology, oncology, high-risk obstetrics, orthopedics, neonatal, cancer and neurology. Total patient revenue in 2007 was approximately $745 million."

Jacobson said he believes Hemstad's motivations are political.

"He wants to get someone else elected to the board," Jacobson said.

Hemstad, who was elected in November 2007 and describes himself as a reformer, said the election was not his reason for raising the issue at this time. He said the auditors contacted him about a week ago about Roodman's compensation package.

"I'm bringing this up (Roodman's compensation) because it was brought to my attention by the auditor," Hemstad said. "I'm livid about it. This is coming out during an election, but it should have been brought out earlier. They brought this upon themselves."

State Senator Pam Roach, R-31st District, has been following the issues surrounding Valley since the controversial 2006 annexation ballot measure when the hospital district attempted to annex areas on its east and southeast borders, including Maple Valley, Black Diamond and part of Enumclaw. Covington is already part of the hospital district.

The measure failed by nearly 95 percent and Roodman was fined in May 2007 by the Public Disclosure Commission for campaign violations in the 2006 annexation election and the 2005 property tax increase election, which passed.

The PDC case stated Roodman used public money to pay for political consultants and vendors during the campaigns.

In the PDC documents Roodman stated he believed he was not in violation of state law.

Roodman agreed to pay a civil penalty of $120,000, which according to the PDC order was to be paid for using "nonpublic funds."

Roach said, "in fact an insurance company for the hospital paid the $120,000 and at the same time his salary was raised.... This is not an organization that understands open government and transparency."

David Smith, legal counsel for the board, stated by phone, "We settled a disputed claim. Like any institution we have directors and officers and we have liability insurance coverage for them."

According to Smith the, "PDC knew full well how this was happening (how the penalty was being paid) and they had no issue."

The performance audit looked at Valley, King County District No. 2, Evergreen Healthcare and Snohomish County Public Hospital District No. 2, which includes Stevens Hospital.

According to the draft audit document, the objectives of the audit were to look for improvements in transparency and citizen outreach, process and procedures used in negotiating and determining Chief Executive Officer compensation and severance, nursing and administrative staffing levels, procurement and inventory management related to medical supplies and construction monitoring and reporting.

In the area of transparency and accountability, the audit stated Valley and Evergreen do not, "provide easily accessible financial, quality and operation information to citizens."

The draft document noted, "Management at both Valley and Evergreen stated they would provide this kind of information to anyone upon request, but they are cautious about posting it to a website because they believe the reports would be misunderstood or misinterpreted."

The audit report stated the hospital districts should develop "easy-to-understand financial and quality of care information, such as medication errors and patient falls, to post on their websites (instead of developing financial statistics, they could choose to post their financial statements)."

The document also noted Valley and Stevens should improve ties with the community.

In the area of CEO compensation, the audit report noted Roodman is paid a base salary of $587,800. Evergreen's CEO is paid $559,600 and Stevens CEO receives $383,900.

The audit document stated, "Due to the CEO’s (Roodman) long tenure, it is expected that he would be paid above competitive market median levels. Valley’s compensation philosophy is to target the 75th to 90th percentile (highest paid 10 to 25 percent) of the market for base salary, where performance warrants."

The audit report took issue with the retention benefits and retirement benefit paid to Roodman.

Under the retention payments, the audit document stated the board approved annual payments of 40 percent of Roodman's annual salary to be paid each year.

The report described the retention payment as "not a typical practice" and under recommendations stated Valley should, "Reevaluated the need for annual and recurring payment of retention benefits."

The report also pointed out the "Payment of the retirement benefit (1.7 million) while the CEO is still actively employed is not a typical practice."

The audit report pointed out areas where Valley was doing well including under the nursing and administrative staffing heading.

Valley was given good marks for the "daily managing of staffing and productivity."

The medical center was also commended for "established measures to determine how well and how productively the hospital is run."

The board and administrators will meet with the auditors and provide their comments before a final audit document is released.

Final 21 Sept Hemstad Remarks - Roodman $1 7 Million Payment-1

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