Baptist sale called off
ANNA VELASCO
News staff writer
Baptist Health System dismissed its CEO Saturday and voted to restructure the
company instead of selling to a for-profit company or merging with another
health care organization.
Dr. Michael Drummond emerged as the new chairman in the shake-up of the state's
largest hospital system. Board chairman Bobby Keith resigned, as did four other
board members.
Baptist's chief operating officer, William Hynson,
will act as the system's senior manager while the board conducts a national
search to replace former CEO Dennis Hall, said Drummond, a vascular surgeon at
Baptist Medical Center Princeton.
Baptist had announced in mid-June that it was trying to strike a deal with
for-profit Triad Hospitals Inc. of
But Drummond made it clear Saturday that those discussions have ended.
"Today we rededicated the system to its 82-year-old mission to be a
Christ-centered provider of health care services for the people of
The board's action "reflects an honest and sincere disagreement over the
appropriate direction of Baptist Health System," he said. A majority of
the 23-member board differed with top leadership's dim view of Baptist's
financial position and believes the system can go it alone, Drummond said.
"This is a strong system," he said. "The financials are strong."
Although payments from Medicare and insurers have declined in recent years,
Drummond said Baptist has good market share and substantial liquid assets.
Baptist has significant debt that it should refinance at today's low interest
rates, but the system is in no financial peril, he said.
"We are challenged, but we are enthusiastic about the future of Baptist
Health System," Drummond said.
Baptist made only $114,000 from operations in fiscal 2002, but that audited
number includes non-cash expenses such as depreciation. The system has about
$180 million in cash and good cash flow, Hall said in previous interviews.
As part of their push for a deal with Triad, Hall and Keith had said that
although Baptist was in the black, it did not make enough to cover $60 million
to $100 million in annual renovation and equipment needs. Drummond said he felt
they overestimated the actual need.
The decision not to sell comes after months of turmoil among Baptist physicians
and its 9,000 employees. Many doctors lobbied the board not to sell, and more
than 200 doctors at Baptist's Birmingham-area hospitals called for top
management's ouster in early May.
Dr. Carol Johnson, immediate past chairman of Baptist Shelby's medical staff,
said she was ecstatic over the board's decision.
"I think we have the answer that we've all been praying for and that God
intended," she said.
Drummond would not name the other board members who resigned Saturday. He said
physicians had made up only 25 percent of the board, but he hoped eventually to
have health care professionals make up half the board.
Despite the difference of opinion and Hall's forced resignation, Drummond
praised Hall, who has worked at Baptist for 23 years, including the last nine
as CEO.
"He's a good man," Drummond said. "He's done a great job for us.
We wish him well."
Hall declined comment Saturday, directing all inquiries instead to Drummond. He
resigned with full pension benefits, but Drummond would not comment on the
severance package.
Efforts to reach Keith, a longtime Baptist board member and retired president
of F.R. Hoar & Son construction company, were
unsuccessful.
Merger was option:
Besides a sale, the Baptist board also had considered merging with UAB Health
System. As late as Friday afternoon, top UAB officials met with Hall and Keith
to discuss a merger.
Martin Nowak, chief strategy officer at the
"I think we much prefer this path versus a sales path," he said.
"We would have been very pleased to have a closer relationship with
Baptist, and our doors are open."
Although Drummond wouldn't detail Baptist's restructuring strategy, he said the
board has no plans to sell any core assets and would consider selling only
non-core assets such as professional office buildings.
With "more savvy business management," Drummond said, he expects
Baptist to be in "acquisition and growth mode" within the next two years.
"Baptist Health System is not retreating," he said.