In a stinging rebuke of governance at his former employer, the chief spokesman for struggling two-hospital Episcopal Health Services, Northport, N.Y., recently called on state and federal officials to act immediately to protect public monies under the system's control.
Stephen Villano, vice president of corporate affairs for the system since Feb. 1, resigned July 7 over what he called "unethical and potentially illegal actions" by Episcopal's 21-member board of managers.
Villano said that during the past decade board members were warned repeatedly of the system's worsening financial condition yet failed to take decisive remedial action, relying instead on "nonrecurring, stop-gap measures." Such measures, according to financial reports supplied by Villano, included obtaining nearly $40 million in financing from Banque Paribas and Daiwa Securities America (See related story, p. 30).
Villano also is asking authorities to probe what he called a conflict of interest arising from the dual roles of the Rev. Orris Walker Jr., who is bishop of Episcopal Diocese of Long Island, and Episcopal Health's newly appointed Chief Executive Officer Corbett Price.
Walker chairs the boards of both Episcopal Health and another long-struggling institution, Interfaith Medical Center in Brooklyn, N.Y. Price, first hired to turn around Interfaith and now Episcopal Health, holds the top post at both institutions, which are not linked financially or operationally.
Villano's allegations and call to action are detailed in a four-page letter addressed to officials in the state attorney general's office, the state health department and the Kings County district attorney. Copies were also forwarded to HHS Secretary Donna Shalala, HCFA Administrator Nancy-Ann Min DeParle and key state lawmakers.
The health department hasn't decided whether to investigate, but Villano said the attorney general and district attorney are investigating.
Price, Episcopal Health's CEO since July 1, is just beginning to sort out the financial morass and take appropriate action, sources said. Last week, for example, after protracted negotiations, he signed a memorandum of understanding and standstill agreement for the sale of Episcopal's Smithtown, N.Y., campus to Catholic Health Services of Long Island, Melville, N.Y. The deal, said to be worth almost $100 million, includes a nursing home, a home health agency, senior housing, a medical office building and 366-bed St. John's Episcopal Hospital, Smithtown. A purchase agreement is expected by Sept. 15.
A spokeswoman for Price said allegations of a conflict of interest are "absurd at best." Price, she said, is "going to do what's best for both institutions."
Villano rigorously defends former CEO Lorna McBarnette and a $43 million turnaround plan she had begun to implement before the board ousted her in June and hired Price.
At deadline Walker could not be reached for comment.
Arnold Katz, Price's newly named chief financial officer, said the hospital was profitable until 1997. Last year, he said, Episcopal lost approximately $33 million on operations and $77 million overall. "The financial disarray that they're in now-and it's really terrible-is the result of poor management."