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Hospital CEO announces decision to retire as losses mount

Photo: Indian River Medical Center CEO Jeff Susi

Just a year and a half ago, in the fall of 2015, Indian River Medical Center’s Jeff Susi said under oath in a deposition that he expected to remain as CEO for another “seven to 10 years.”

Those plans have changed.  Susi, who turns 65 in three months, will be out by the end of this year. Both the official hospital press release and a letter from Susi to the board say he has decided to “retire.”

But the unexpected departure of one of the county’s highest paid executives is set against a landscape of financial losses that has some past and present Hospital District board members blanching.

In the first quarter of the current fiscal year, Indian River Medical Center lost $4 million, an 800-percent increase over the half-million-dollar loss projected by the hospital, and a nosedive from the same quarter last year, when the hospital, with over 250 staffed beds, lost $1.2 million.

The first-quarter numbers are from October through December, when many winter residents had already arrived, yet the hospital was operating at only half-capacity. Admissions were down 11 percent from last year, and were 7.5 percent less than the budget was banking on.

The number of surgeries declined by a similar percentage. In all, the hospital took in $500,000 less in patient revenue compared to the same quarter in the prior year. But revenue was a whopping $5.3 million less than what had been projected in this year’s budget – which may have been put together with expectations of higher insurance reimbursement rates.

Susi’s exit announcement comes on the heels of the previously undisclosed departure of Chief Financial Officer Greg Gardner, who retired just a month earlier after three years in the post. He had also served in the same post from 2002 to 2009, the hospital’s glory days when millions in donations poured in during the economic boom.

That money helped build gleaming “centers of excellence,” as the hospital board chairman Wayne Hockmeyer put it: a new heart center and a cancer treatment center, as well as upgrades for critical care and operating rooms and a radically reconfigured emergency room. The new facilities now stand as monuments to Susi, a whiz at fundraising.

Some speculate Susi and Gardner, who worked together closely, saw rocky terrain ahead, a set of financial pitfalls some are calling impassable if the hospital continues to go it alone.

With 1,700 employees, Indian River Medical Center is the county’s third largest employer, after the School District and county government. With a compensation package of more than $1 million a year, Susi is certainly one of the county’s highest paid executives, if not the highest.

Over his 19 years, Susi’s impressive fundraising skills and controversial management style have colored the lives of thousands of nurses, doctors and support staff – to say nothing of tens of thousands of patients treated under his watch.

In a small town with a disproportionately older population, those patient experiences were talked about.

Like no other, the hospital’s business was everyone’s business, particularly after documentation began to surface a couple of years ago as a result of intense press scrutiny in Vero Beach 32963.

Unfortunately, from a business standpoint, Indian River Medical Center has been and remains in trouble.

As a stand-alone, not-for-profit community hospital, IRMC is at a distinct disadvantage: There is no economy of scale in either its purchasing costs or its ability to negotiate reimbursement rates with private insurance companies – yet it competes with Sebastian River Medical Center, just 15 miles away, that is part of a large Tennessee-based hospital chain.

In some treatment areas, it also competes with Lawnwood Medical Center, owned by the vast Hospital Corporation of America. Both Sebastian and Lawnwood are for-profit; their management decisions are not subject to Government-in-the-Sunshine laws; and neither ask for taxpayer funding as Indian River does – around $7 million a year to cover treatment costs for the county’s indigent.

That is in addition to tens of millions more raised by the Indian River Medical Center Foundation – with Susi’s help.

Susi’s tenure has been fraught with angry accusations of mismanagement, with frequent conflicts between the hospital’s management and board and the Indian River County Hospital District, which is responsible for channeling public funds to IRMC.

The publicly elected board of the Hospital District is tasked with protecting the hospital as a public asset, and shepherding millions of taxpayer dollars that go to the non-profit institution. The hospital also has its own board of directors and management team, led by Susi. It leases the hospital buildings from the Hospital District.

The hospital’s financial woes were a hot topic in the recent election for a seat on the Hospital District Board. Candidate Val Zudans, an ophthalmologist appointed to the district board by Gov. Scott, was ultimately defeated by pro-hospital forces in his bid for another term.  He argued the hospital’s struggles were due to lousy reimbursement rates from commercial insurance companies (see Op-Ed column, page 46).

The rates Susi negotiated were found to be a fraction of those at nearby hospitals. If Indian River had comparable rates, it would mean $50 million to $90 million in profit, Zudans estimated.

Hospital officials say those rates are currently being renegotiated as contracts with insurance companies like Blue Cross Blue Shield and United Healthcare expire and renew. They say they cannot by law discuss how much of an increase is in the works.

Earlier, there was a months-long dispute over indigent care costs set off when the District discovered the hospital in 2013 and 2014 had claimed an extra $400,000 a year for indigent care.  An outside healthcare accountant found the sum was partially for overhead and executive salaries, rather than treating poor people.

Meanwhile, the hospital’s bottom line was being depleted by another source: Chief Operating Office Cindy Vanek, who resigned as a supposed cost-cutting move in 2013, ended up being paid hundreds of thousands of dollars for two years – more than she made when she worked there – because of a Susi-driven agreement.

Susi himself had a windfall, ironically after announcing a pay cut. While his base salary diminished by 5.5 percent in a gesture of good will toward helping the bottom line, his bonus compensation in the same deal increased by $60,000, leaving him with the same compensation – over $1 million, and a hearty pat on the back.

The seemingly chronic shortfalls were blamed on a range of factors.

Susi blamed the “payor mix” – the blend of Medicaid, Medicare and private insurance reimbursements – for shortfalls as far back as 2013, when a $7 million deficit was projected. But others including then-CFO Dan Janicak blamed low productivity.

And then there is patient care. Absurdly long wait times in the emergency room led to repeated staff turnovers that in the span of two years saw three different teams of ER management put in place, including two outside companies. At one low point, in January 2014, the average wait time at Indian River’s ER was seven hours, far beyond the national average of four-and-a-half hours.

Through it all, a lack of transparency became a trademark of the Susi regime. After multiple instances of being kept in the dark, the District Board thought it had elicited a vow from Susi to keep the board better apprised. Then, in November 2015, the board learned that a lawsuit brought by Sebastian River Medical Center had been secretly settled.

That suit involved an action which itself earned Susi a strong rebuke when he hired away Sebastian River’s CEO Steven Salyer, to become IRMC’s COO, despite a non-compete clause in Salyer’s contract. Numerous district board members expressed their dismay over what they saw as a disregard for professional ethics and the resulting damage to the hospital’s reputation.

The District’s board chairman at the time, Tom Spackman, told 32963 that documents he reviewed after the fact appeared to raise “serious questions about competence and integrity” at the hospital.

The penchant for hidden action continued even after the District expressed outrage over the secret settlement, when hospital officials offered to discuss the suit but only if District Board members signed a nondisclosure agreement. When several trustees objected, that condition was later rescinded.

It would have amounted to a “gross violation of the Sunshine laws,” said Dr. Michael Weiss, a trustee since 2009.

At one point last fall, Weiss publicly called for Susi to resign, citing poor management, long E.R. wait times and lack of transparency.

Yet even on the District Board, Susi retains his champions; notwithstanding extensive media coverage of hospital problems, the most recent election left a board generally viewed as split four to three in Susi’s favor.

As for the hospital’s internal governing board, apart from one vocal critic who resigned in 2014, Susi continues to earn praise.

“I think he’s done a really visionary job at IRMC,” says Wayne Hockmeyer, now in his third year as chairman of the hospital’s board. “If you look at what’s been accomplished, it’s really a remarkable tenure. He’s a very hardworking and industrious guy and a person of great integrity.”

Hockmeyer also praised retired CFO Gardner, who has been replaced by George Eighmy, a CPA from a 150-bed hospital in Bristol, Connecticut. Eighmy arrived at Indian River in mid-December.

“I think things look quite good in a broader context,” says Hockmeyer. “The current position is that we’ll remain a stand-alone hospital, and there are many reasons why that would likely be the case. But it’s always useful to consider any options.

“I’m very optimistic about the future,” Hockmeyer says. “Change is sometimes good for an organization. I view this in a very positive way. This will give the board an opportunity to have a very logical process and hire a very effective CEO.”

Meanwhile, Susi recently announced an ambitious $100 million expansion program. That price tag is as much as the Hospital Foundation has delivered in his two decade-long tenure. And they won’t have Susi to work his magic on donors.

As for Susi, hospital officials declined to arrange for comment. Having just announced he had only the rest of the year as a leader, he and a number of hospital executives headed to Seattle for some leadership training at Virginia Mason Institute.

Billed as continuing education, the conference appears to have been crafted just for them: “Indian River Medical Center Lean Leadership” offering a day and a half of “the essential leadership qualities necessary for transformation: transparency, visibility and a sense of urgency.”

The Institute’s fee: $25,000 for up to 15 participants – plus, of course, the airfare, restaurants and hotels.

Staff writer Meg Laughlin contributed to this report