Late on the afternoon of March 13, the Franciscan Missionaries of Our Lady Health System issued a statement, announcing it had fired its CEO, Michael McBride, after just a little more than year on the job.
The timing of the announcement was curious: The following day, FMOL’s flagship institution—Our Lady of the Lake Regional Medical Center, the Baton Rouge hospital market leader—was set to release the findings of a months-long audit into a scandal involving its former chief fundraiser, John Paul Funes, fired last fall for allegedly embezzling $810,000 from the OLOL Foundation.
FMOL officials said the two events were not connected, but, no doubt, the optics were bad. Especially when it became public days later that members of the FMOL board of trustees—who had given McBride a positive performance evaluation and a raise just weeks earlier on his one-year anniversary—had not only not been consulted on the firing but were also sharply divided over it. So upset was board chair James Moore, a respected businessman from north Louisiana, that he resigned.
It’s easy to simply connect the obvious dots and deduce McBride was fired because of the Funes scandal, but the reasons for his termination are more complicated than that.
In short, McBride had been brought in to make changes to the FMOL system and had determined, after a year on the job, that one of those changes had to be the removal of Scott Wester, the powerful CEO of OLOL. Yet, whether it was because of what McBride, an outsider, was trying to do—fire an ensconced and well-connected local guy—or perhaps the way he went about it—not building a coalition of support and keeping his concerns about Wester too quiet for too long)—in the end, he was the one let go.
That’s not to say the Funes scandal didn’t factor into the matter. In a pointedly candid letter to his board two days before his termination, McBride detailed why he felt Wester had to be removed as OLOL’s CEO. Among the reasons, McBride wrote, was the way Wester handled the Funes situation—taking no responsibility for the “crisis” and, instead, referring to himself as a “victim.”
McBride, however, had other concerns. According to his letter, Wester was resistant to change, withheld unfavorable information from his board, ignored problems with low employee morale and high turnover, and failed to promote an environment where “people are encouraged to bring forward concerns or problems as evidenced by unreported fraud and sexual harassment.”
“Employees have feared retaliation and the ‘good ol’ boys network,’” McBride wrote. “It is no coincidence that 7+ years of stealing went unreported until new senior leadership was in place.”
In other words, McBride believed the Funes scandal was a symptom of the problems at OLOL, not the cause.
Attempts by Business Report to reach Wester for comment were unsuccessful and OLOL officials declined to make him available for an interview for this story.
McBride also acknowledged a growing backlash within the system to a termination deal he says had been negotiated with Wester, who reluctantly agreed to step down, effective June 30, according to the letter. McBride went on to blame himself for not being “broadly inclusive” in the decision-making and related communication on the matter, noting, “In retrospect, I should have handled communication differently.”
He emailed his three-page letter to the FMOL board at 6:47 p.m. on March 11. Less than 48 hours later, he was out of a job.
“Employees have feared retaliation and the ‘good ol’ boys network.’ It is no coincidence that 7+ years of stealing went unreported until new senior leadership was in place.”
MICHAEL McBRIDE, former FMOL CEO, in a letter to the
Franciscan Missionaries of Our Lady Health System Board of Trustees
While the story behind the leadership shakeup of a hospital system is often dismissed as inside baseball, the recent events at FMOL and OLOL are significant because of the questions raised about one of Baton Rouge’s most important institutions. FMOL appears particularly vulnerable and, according to some health care experts, ill-equipped to the face the challenges of not only industry-wide cost concerns and evolving pricing models, but also the aggressive play the state’s largest health system, New Orleans-based Ochsner, is making in the Baton Rouge market (see related story).
“Health care has gotten exceptionally complex, with lots of nuances,” says Nate Kaufman, a San Diego-based healthcare consultant, who has done work in the local market. “I just hope the nuns have sophisticated business input into their decision making because you can’t trust your instincts any longer, especially against a sophisticated competitor like Ochsner.”
The reporting for this story is based on interviews with dozens of sources—many of whom spoke only on the condition of anonymity—and on the contents of McBride’s letter to the board, which was provided to Business Report. FMOL and OLOL officials and board members declined to comment on the letter or its specific allegations, except to say in a statement attributed to Interim FMOL CEO Dr. Richard Vath: “When there are accusations or allegations made about anyone, it is important to consider the source of those allegations and the circumstances. You cite the content of a confidential personal letter written from then health system CEO Mike McBride to the Board. He is no longer the CEO of this organization, and we are focused on moving forward with our current leadership guided by our mission to serve.”
McBride also declined to comment.
Small, but powerful
As Catholic health systems go, FMOL is relatively small, with six hospitals in Louisiana—not counting the $230 million Children’s Hospital under construction in Baton Rouge—dozens of clinics and urgent care centers in the region, and system revenues of nearly $2 billion in 2017. By comparison, the largest Catholic system, Ascension in St. Louis, has more than 140 hospitals and revenues that top $22 billion.
But FMOL is big in Louisiana, with a footprint in every major market in the state, and a long and venerable track record of providing quality care rooted in its faith-based mission. It’s especially big in Baton Rouge, where its flagship institution, OLOL, has long been the market leader, with nearly 50% of the local patient population.
“When there are accusations or allegations made about anyone, it is important to consider the source of those allegations and the circumstances. You cite the content of a confidential personal letter written from then health system CEO Mike McBride to the Board. He is no longer the CEO of this organization, and we are focused on moving forward with our current leadership guided by our mission to serve.”
Dr. Richard Vath, interim FMOL CEO, in response to allegations
in a letter to the FMOL board by ousted CEO Michael McBride
But the hospital and its system also face challenges. The aging nuns who run FMOL are dwindling in number and have yet to publicly announce a clear succession plan. The system has been slow, given its size and dominance in the local market, to embrace new business models and the technology that enable those models to take root, according to industry analysts and local insurance brokers. It has also been reluctant to integrate its various hospitals into a single system that can better compete.
What’s more, OLOL is more expensive than the competition—more than 25% on average, according to local brokers, who say it is under increasing pressure from employers to lower costs. At the same time, the hospital is still adjusting to the 2014 deal that made it the state’s safety net hospital in the Capital Region, which has created new opportunities and government revenue streams but also turned away a segment of insured patients, who seem to prefer not sitting in the OLOL emergency room with indigent patients if they can avoid it.
The FMOL board has recognized these challenges, and when longtime FMOL CEO John Finan announced his retirement in 2017 after more than two decades, a CEO search committee outlined its priorities. They included:
• Continuing to prepare for a future with an increasing focus on value-based care;
• Moving more quickly to become and act as an integrated health system;
• Instituting accountability throughout leadership;
• Evaluating the leadership structure and individual leaders and make necessary changes;
• Evolving the culture to engage team members more effectively;
• Evaluating current government and recommend changes to make government more contemporary and aligned with being an integrated health system.
The criteria was something of an admission from within the system that significant changes were needed. The person chosen to usher in that change was McBride, a veteran hospital administrator with a sterling reputation in the industry and experience running Catholic health systems, most recently CHI St. Luke’s in Houston.
The selection didn’t go unnoticed in national health care circles. McBride’s qualifications weren’t questioned, but, like so many other sectors of the local market, health care in Baton Rouge has a reputation for being closed and close-knit.
“There is no question the industry was surprised when they brought in an outsider to be in charge of Our Lady of the Lake,” says Kaufman. “The New Orleans and Baton Rouge markets have a very deeply entrenched culture. You really need to fit in in order to succeed.”
Even before McBride was hired, there was disagreement from within over replacing Finan with an outsider. Some wanted Wester for the job, who was among several candidates to interview for the position. But he was not among the two finalists, according to sources familiar with the selection process.
Once on the job, McBride, in his letter to the board, says almost immediately he got push back from Wester, writing the OLOL CEO “repeatedly made comments, even before my arrival, to undermine me and deflect support away from me.” The letter goes on to claim Wester, over the months that followed, tried to isolate McBride from anything related to OLOL whenever possible and communicated with McBride “only minimally.”
The source of the alleged problem isn’t known. Neither McBride nor Wester chose to comment. Those who knew McBride during his year in Baton Rouge say he was highly professional; a numbers guy with a penchant for metrics and data. He was also known to be kind and notably devout in his Catholic faith.
But he was all business and wasn’t one of the guys, in a system where many administrators have not only known each other for years but also socialize together on the weekends. He also developed a reputation for not being inclusive and collaborative, a fact he acknowledged in his letter to the board.
Regardless of the personality dynamics, McBride had been brought in to make changes and he unequivocally felt OLOL needed a change in leadership.
“I need executive leadership team colleagues … who are well educated in the current and future healthcare environment … transparent and honest … model our mission and hold himself/herself accountable to it … embraces conflict … and acknowledge failures and works to address them,” he wrote. “My observations of (Wester) are that he regularly falls short of these fundamental attributes.”
More troubling to McBride, according to his letter, Wester resisted efforts to move toward an integrated health system, had not broadly shared the system’s strategic plan, sheltered the OLOL leadership team from the new direction in which the system was trying to go, favored the status quo, made excuses to his executive colleagues about low employee engagement scores and led an organization that has below average operating efficiency in many relevant measures.
“He gives the board and others only limited information, that which is favorable, providing no opportunity for correction or to learn from mistakes,” the letter said.
There were also allegations that, if true, speak to a corporate culture in the system, one that sought to protect the “good ol’ boys network,” as McBride called it in his letter. He went on to say employees “fear retaliation” for reporting fraud and sexual harassment, suggesting someone might have suspected something with Funes but was too afraid to speak up.
Asked specifically about the allegations, any incidents of sexual harassment or whether anyone knew about fraud, FMOL declined comment other than to provide Vath’s statement questioning “the source of those allegations and the circumstances.”
While the allegations in McBride’s letter, if true, are troubling, the FMOL board never had an opportunity to discuss the issues raised, much less take any action. The FMOL nuns alone, by their own admission, made the decision to fire McBride, after much “prayer and discernment.” McBride’s approach to his role as the leader of their system “was not in keeping with our values and culture,” they said in a statement at the time of his dismissal.
Sources familiar with the situation say McBride ultimately lost what amounted to a power struggle with Wester, who has a lot of friends and supporters within the system. After nearly 20 years with FMOL, including more than a decade at the helm of OLOL, Wester is a powerful person, with accomplishments to his name and allies in his camp, including the nuns who run the system. Whatever change McBride was brought in to make in early 2018, apparently trying to fire Wester—or perhaps the way he went about it—was taking things too far.
The system has gone on to name Vath as its interim president and CEO. The well-known OLOL pulmonologist had been serving as FMOL’s chief transformation officer. Bobby Yarborough, another well-respected Baton Rouge business leader, has replaced Moore as chair of the FMOL board.
In a written statement in response to questions not related to McBride’s letter, a FMOL spokesman says the system has a clear direction for the future and that its boards, CEOs and leadership teams are “focused on working closely together to advance the strategic priorities of our health system in order to carry out the Sisters’ mission in Louisiana and beyond.”
But some within the health care industry question whether FMOL is in a strong enough position strategically to compete with Ochsner. Does it have the vision and the leadership?
“The state needs another network to compete with Ochsner,” says Walter Lane, a health care economist at the University of New Orleans. “But they need leadership to make that happen and it doesn’t sound like they have that.”
Which raises the question: Did they have that leadership in McBride and his vision for the future of the system? It’s an unanswerable question, but his brief experience here speaks to the challenges that come when a change agent from the outside tries to implement the change he was hired to make.
“The perception was that he was viewed as an outsider, who wasn’t overly welcomed by the local community,” Kaufman says. “If you don’t have the right cultural fit, it’s not going to work but if you don’t have the right business orientation it’s not going to work either. The challenge with every system is to find the right balance. It’s a very sensitive balance and that is particularly true in markets like Baton Rouge.”