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.

One business-ethics expert also questioned the motivation for offering the golden parachutes. Bruce Barry, a professor at Vanderbilt University’s Owen School of Management, said it is “ethically on the margin” to take behind-the-scenes action that might “change the status quo once a tentative agreement has been made between two companies.”

As the negotiations grew rocky, officials at another not-for-profit hospital in Nashville—the Vanderbilt University Medical Center—may well have been smiling. Observers of Nashville’s not-for-profit hospital scene have long contended that rising costs and economies of scale will eventually necessitate a merger between two of the city’s three largest not-for-profit hospitals. St. Thomas and Vanderbilt were the first to begin negotiations, only to see them end in mid-1996. Then Vanderbilt and Baptist discussed a possible merger. Those talks broke down in late 1996, when Stringfield insisted that he be allowed to run the merged operation. Vanderbilt officials were not comfortable with Stringfield’s management style, and the talks ended.

Meanwhile, moving toward the only other possible combination that could take place, Baptist and St. Thomas announced their plans in July 1997. Under the terms of the “non-asset” merger, Baptist and St. Thomas would continue to own their respective assets, but a new parent organization would govern and manage the affairs of the new network and its facilities.

Since the talks began, however, St. Thomas officials have only seemed to become more critical of Baptist and Stringfield.

Last month, for instance, Stringfield inked a multiyear, multimillion-dollar deal to provide free health care for the Nashville Predators hockey team. St. Thomas officials quietly seethed about that decision, complaining that Stringfield had not consulted them before making the huge commitment.

Stringfield’s controversial style has also become a cause for concern among some senior St. Thomas physicians. One St. Thomas doctor told Brennan last Friday during a meeting with the Daughters of Charity executives that he did not want to be part of any network that involved Stringfield—“even if Stringfield was the janitor,” according to doctors present at the meeting.

Meanwhile, two key sources have confirmed that MissionHealth, a firm run by Nemzoff, has offered to invest $150 million to $200 million in Baptist Hospital and leave the current management and board of directors in place. Under that unconventional arrangement, MissionHealth would not privatize the hospital. Instead, Nemzoff’s firm would take an equity stake in the hospital and receive a proportionate share of excess cash flow.

Nemzoff declined to talk to the Scene about any specific offer. He only said, “MissionHealth considers Baptist Hospital an excellent hospital.... If an infusion of capital would help, we’d be happy to speak with them.”

On July 3, 1997, the Scene reported on the proposed management deal between St. Thomas and Baptist. At that time, Sister Veronica Ann Brown, chairwoman of the St. Thomas Hospital board, said she had never met Stringfield, but added, “Some people think [Stringfield] is wonderful and others are not so fond.”

Brown also warned that the deal could unravel if “Baptist Hospital has a particular style or a particular way of doing things and it’s incompatible with ours.”