Albert E. Barnett and Gloria Mayer made their reputations by growing Friendly Hills Healthcare Network into one of the West Coast's largest medical practice management companies, a plum that Caremark International eagerly snapped up two years ago.
But just three months after signing lucrative employment contracts with Caremark's acquirer MedPartners, they found themselves out of jobs and in litigation.
Barnett, a MedPartners senior vice president and Friendly Hills' chairman, and Mayer, a MedPartners group vice president for Western operations, were fired Nov. 21. The next day, Friendly Hills and MedPartners sued them in Orange County, Calif., Superior Court, alleging breach of fiduciary duty, intentional interference with business operations, fraud and violating the terms of their employment contracts.
"The defendants never intended to actively endorse, implement and participate in MedPartners . . . never intended to be team players, to actively participate in the process of integrating (Friendly Hills) into MedPartners," the suit alleged.
Also named was Mayer's husband Thomas Mayer, M.D., who worked as a consultant for Barnett at Friendly Hills.
Friendly Hills' former parent company, Northbrook, Ill.-based Caremark, was acquired by MedPartners last May in a $2.5 billion stock swap.
"It's unfortunate. These individuals accepted significant roles as officers with MedPartners, and we reached a substantial difference in philosophy," said Mark Wagar, MedPartners' president of Western operations. "We felt we acted in the interest of patients and physician groups that comprise our large L.A.-area network."
Barnett and the Mayers could not be reached for comment. Barnett's attorney, Carl Weissburg of the Los Angeles firm Weissburg & Aronson, denied the allegations in the suit.
Wagar would not comment on specific issues, citing the litigation. However, sources close to the situation indicated Barnett-who had agreed to the Caremark acquisition in exchange for greater autonomy-and the Mayers probably had a major clash with their new employer on various management and cultural issues.
"It was a classic example of two cultures that didn't fit, and the MedPartners people were worried that Dr. Barnett and the Mayers were going to create a coup or steal some of their physicians and go off and do deals on their own," said a prominent Southern California healthcare executive who asked not to be identified. "It became ugly quickly."
Indeed, sources said the terminations were unexpectedly swift and bitter. Barnett and Gloria Mayer were allegedly pulled from a business meeting in San Francisco to be fired and told to sign releases from their employment contracts, which they refused to do. Meanwhile, their secretaries were ordered not to report to work that day, giving MedPartners officials an opportunity to clean out and lock their offices.
Wagar confirmed that the terminations took place in San Francisco but would not comment further.
Observers were taken aback at the firings. They suggested the filing of the lawsuit by MedPartners may be a tactical move to pre-empt legal maneuverings by Barnett and the Mayers.
"It's a stunner," said Anthony Abbate, a vice president of the Healthcare Association of Southern California who has worked closely with Barnett. "If Dr. Barnett was having problems with MedPartners, I heard nothing of it. He's always had a reputation as a great manager."
"I have nothing but the highest regard for all of them. They're all stellar performers. I've worked with Dr. Mayer for 10 years, and he's a fantastic person," said Jacque Sokolov, M.D., a Los Angeles healthcare consultant and chairman of Durham, N.C.-based Coastal Physician Group, another physician practice management company roiled by recent changes in senior management.
Coastal Chief Executive Officer Steven M. Scott, M.D., agreed last May to take a leave of absence in the wake of management problems and poor financial performance. Other Coastal executives and members of the board have since left the company.
"In that case Dr. Scott and I had some substantial disagreements, but the board of directors at that time clearly backed my position, and in that case we were not trying to integrate different cultures," Sokolov said. "As for MedPartners, I have the highest regard for them, but it is unusual for a company that size to sue its high-level executives. When that happens, the people stop talking and the attorneys take over, and that could mean there are some larger issues at hand that have yet to be divulged."
He added that such incidents may not be isolated as physician practice management companies continue to merge.