By Paul Leighton
BEVERLY — The man in line to become the next CEO of Northeast Health System is leaving behind a crumbling hospital system in Ohio that has been plagued by lawsuits and controversy.
Supporters of Kenneth Hanover say he does not deserve blame for the breakup of the Health Alliance, a $1.4 billion corporation that he served as president and chief executive officer.
But in two court decisions, judges ruled that the Health Alliance and Hanover failed to live up to a legal obligation to act for the benefit of two of its hospitals, improperly used "enormous sums" of money to fight the lawsuit and gave bonuses to doctors to prevent them from working at those hospitals.
"The record is replete with evidence that the Alliance breached its fiduciary to (The Christ Hospital)," Judge Ralph Winkler wrote in his decision last year for the Ohio Court of Appeals.
Hanover, 57, is in contract negotiations to become president and CEO of Northeast Health System, which includes Beverly Hospital, Beverly Hospital at Danvers, Addison-Gilbert Hospital in Gloucester and BayRidge Hospital in Lynn.
Northeast has been without a permanent CEO since Stephen Laverty resigned under fire last November. Laverty's tenure was also marked by controversy, culminating in separate no-confidence votes by doctors and nurses.
Citing ongoing contract negotiations, Northeast Health System officials will not comment on Hanover beyond a statement released earlier this month after news leaked that Hanover is in line to come to Beverly.
"The search committee was impressed with Ken's track record and experience working in sophisticated community hospital settings in Ohio and Pennsylvania," the statement said. "His leadership tenure in both markets illustrates his creativity and discipline in operating within dynamic, sophisticated and competitive health care environments."
Hanover, through a Health Alliance spokesman, also declined to be interviewed for this story.
'Ugly set of facts'
Considering the turmoil surrounding Laverty's tenure at Northeast Health System, it might seem surprising that the organization would replace him with a man with such a controversial background of his own.
The breakup of the Health Alliance became so acrimonious that the Ohio attorney general's office stepped in. In July 2007, in the midst of the legal battle, the chairman of Christ Hospital wrote a letter calling for Hanover to be replaced.
Monica Rimai, the interim president at the University of Cincinnati and a former Health Alliance board member, acknowledged that the lawsuit and the breakup constitute "an ugly set of facts and we lost."
But she said she disagrees that Hanover and the Alliance failed in their oversight of the two hospitals that won the court case against them. She said the fault lies in the Alliance's original operating agreement, which she said encouraged hospitals to look out for their own needs rather than the organization as a whole.
"It was not a sustainable concept," Rimai said. "It never built a sense of all partners working together."
Robert Kanter, who was chairman of the board of trustees when Hanover was hired in May 2001, said Hanover deserves credit for saving the Alliance, which at the time was bleeding money and "on the verge of falling apart."
"Under his leadership we did a dramatic turnaround," Kanter said. "We stopped the losses and started earning money, and earnings have been great every year since he took over. Essentially, he took the same team the previous CEO had and turned them into a winning team. It was like changing coaches and winning with the same team that had been losing."
'One of smartest men I know'
The problems began in 2005 when, according to the Ohio Appeals Court decision, Hanover made "disturbing remarks" about the future of The Christ Hospital at an October meeting of the hospital's board of directors.
Christ Hospital, located in Mount Auburn, Ohio, generated nearly 40 percent of the Alliance's operating income. But hospital trustees believed Hanover wanted to merge the hospital with another Alliance hospital, or move it to the suburbs.
In 2006, Christ Hospital trustees submitted a notice of withdrawal from the Alliance, saying the organization was preventing the hospital from "fulfilling its charitable mission." St. Luke's Hospital, another member of the Alliance, joined in, saying it wanted to leave too.
The Health Alliance filed a lawsuit, saying the hospitals had no reason to withdraw. Hamilton County Court Judge Fred Nelson denied the Alliance's claim, and his decision was upheld by the Ohio Appeals Court.
In his decision, Judge Winkler said the Health Alliance, which had full control if its hospitals' revenue and property, had a duty to "exercise the utmost good faith and honesty."
Instead, the organization used its "superior position" to deny Christ Hospital access to its own revenue to pay its legal fees, restrict its access to doctors, and attempt to force the hospital to go along with a plan to build a new hospital.
Since that decision, two more hospitals said they also will leave the Alliance, all but ensuring the organization's dissolution.
Robert Weigel, chairman of Fort Hamilton Hospital, which is in the processing of withdrawing from the Alliance, said Hanover is "one of the smartest men I know." He also said Hanover has a forceful manner than can rub some people the wrong way.
"I have a lot of respect for his abilities and his thinking, but he can be tough to deal with," said Weigel, who owns a funeral home in Hamilton, Ohio. "When you change things around a lot you can step on a lot of toes. I probably can think of some nasty things to say about him. But by the same token he didn't cause our problems. There's plenty of blame to go around."
Kanter, the Alliance trustee, called the disintegration of the Health Alliance "really sad."
"It was a successful system," he said. "It's just that not all the partners in the system were willing to be partners."
Asked if Hanover should shoulder some of the blame, Kanter said, "I honestly don't think so. Some might argue that if he could've handled the prima donnas better, he might've placated them. I don't think he could have."
Staff writer Paul Leighton can be reached at 978-338-2675 or pleighton@gloucestertimes.com.
