In Critical Condition

Negotiations between Baptist and St. Thomas hospitals to form a new health-care network have hit several snags, and hospital industry sources are now saying the proposed deal has, at best, a 50-50 chance of success.

Sources say the chief problem is that representatives of the two not-for-profit hospitals have been unable to agree on a chief executive officer to run the new entity. As well, bad feelings have developed between the two hospitals due to what senior St. Thomas officials describe as the “self-serving” and “manipulative” negotiating tactics of Baptist Hospital’s president and chief executive officer, C. David Stringfield.

Last July, the two hospitals signed a letter of intent to merge the operations of the two hospitals as “a new, jointly developed network.” Under the terms of that proposal, Stringfield was to become chairman of the board of the new hospital network for two years, and John Tighe, St. Thomas’ president, would become interim chief executive officer. A search committee including representatives from both hospitals has already begun a nationwide search for a permanent CEO of the new entity.

Two reliable sources close to the search say St. Thomas’ representatives on the search committee last week came out in support of Tighe as permanent CEO. According to the same sources, Baptist officials on the search committee told the St. Thomas team that Tighe was “unacceptable.”

Instead, the Baptist Hospital representatives supported health-care consultant Erie D. Chapman III, the former chief operating officer of a Florida-based physician management company. When neither hospital would support the other’s choice, negotiations ground to a standstill.

A St. Thomas official close to the negotiations told the Scene his hospital’s negotiators felt St. Thomas had a right to fill the CEO slot, since “Baptist already has the chairman.” Insiders also say the St. Thomas team wants an independent chief executive with no ties to Stringfield, whose management style, in the words of one St. Thomas official, is “abusive” and “controlling.”

Baptist’s representatives on the six-member search committee are Stringfield, Baptist Hospital board member Willie Davis, and local surgeon Bill Anderson. The representatives from St. Thomas are Ronald Mead, interim east central regional executive of the St. Louis-based Daughters of Charity National Health System, of which St. Thomas is a member; St. Thomas Hospital board member Samuel P. Braud; and local physician Clyde A. Heflin.

As the negotiations ran aground apparently last week, Daughters of Charity CEO Donald Brennan and several colleagues arrived in Nashville, hoping to negotiate a compromise agreement. Brennan returned to Nashville on Tuesday to present Stringfield with a counteroffer.

Under the terms of the new proposal, Tighe reportedly would withdraw from the CEO job search, assuming the less prestigious position of chief operating officer instead. Chapman’s name would also be removed from consideration, and the two hospitals would initiate a new search for a chief executive officer acceptable to both hospitals. Tighe would report to this as-yet-unnamed chief executive.

According to the Scene’s sources, if Tighe is not named chief operating officer of the new entity, there will be no deal. It is not known how Stringfield responded to the Daughters of Charity proposal.

Observers of the negotiations were also waiting to see if Tighe would accept the COO offer. Sources say Tighe was initially unwilling to accept the lesser position, but a source at St. Thomas said he was “warming up to the idea.” Tighe has told friends he wants to stay in Nashville.

Through their various spokespersons, Tighe, Brennan, and Stringfield all declined comment due to the ongoing negotiations.

While the choice of a CEO is perhaps the most obvious sticking point in the talks, it is not the only obstacle faced by the two sides. The proposal is currently under review by the state attorney general, who has not yet signed off on the deal. What’s more, officials from St. Thomas are angered by “golden parachute” deals that Stringfield reportedly struck with 44 senior Baptist managers after the proposal was announced.

Three sources close to the negotiations say that, in many cases, Stringfield agreed to give the Baptist officials three years of full salary, should they be fired after the two hospitals combine managements under one roof. If all 44 managers were to be fired, the total cost of their buyouts will be approximately $12.5 million, sources say.

Some St. Thomas officials say Stringfield is determined to give Baptist the greater control over the new hospital network. “It’s a clear power play to ensure that his people stick around after the merger so that he can exercise control of the new company through them,” said a St. Thomas source.

Joshua Nemzoff, president of Nemzoff & Co., a Nashville-based mergers and acquisitions services firm for nonprofit hospitals, said it is “common practice” to give golden parachutes to three or four top officials when nonprofit hospitals join forces. But Nemzoff said he had “never” heard of such deals going to as many as 40 executives.