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Levy’s exit cushioned by $1.6 million severance deal

An e-mail suggests a more complicated scenario behind the departure of Paul Levy than described earlier. An e-mail suggests a more complicated scenario behind the departure of Paul Levy than described earlier.
By Liz Kowalczyk
Globe Staff / January 22, 2011

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The Beth Israel Deaconess Medical Center board decided this week to pay Paul Levy, outgoing chief executive, up to $1.6 million in severance, and the hospital described his leaving as a “negotiated departure’’ rather than simply a voluntary resignation, as Levy and the hospital framed it earlier this month.

The board voted on Wednesday to pay Levy as much as two years of his $800,000 base annual salary — but that amount would be reduced if he takes another job.

“The Board concluded that this agreement was in the best interest of the medical center and the people it serves,’’ Stephen Kay, the board chairman, wrote in an e-mail to the hospital community late yesterday. “Just under two years before Paul’s contract would have expired, the Board of Directors has agreed with Paul on a negotiated departure.’’

The e-mail suggests a more complicated scenario behind Levy’s departure than he and Kay described Jan. 7, the day Levy announced his resignation. At the time, Kay had said, “Paul wanted a change; there’s nothing more to it.’’

In an e-mail to the Globe yesterday, Kay elaborated on how the decision unfolded, after the board had completed Levy’s first comprehensive job evaluation. Kay said that when Levy returned from a vacation to Morocco, “I updated him on questions that had been raised about his level of engagement and I told him that recent performance reviews had been mixed.’’

He “raised the question of whether it would be better for BIDMC if he stepped down,’’ Kay continued. “Initially, his suggestion took me off guard but soon I calculated that the medical center might be better served with a leader who did not take as a burden the day to day challenges of a ‘post turn-around’ institution,’’ Kay said.

On the day Levy resigned, he said in an interview with the Globe that he started to reevaluate his career when he turned 60 in August, and reached a final decision after returning that week from a 10-day biking and camping trip in the Atlas Mountains in Morocco. He said that with the Harvard-affiliated hospital profitable and attracting more patients, he no longer felt challenged.

Kay said yesterday that the board agreed “that any leader who had lost the enthusiasm for the maintenance of things was not the best leader for the organization. Both sides concluded it was best for Paul to leave.’’

Levy did not return an e-mail and phone call seeking comment yesterday.

Kay and Levy have said Levy’s departure was unrelated to investigations into his relationship with a female employee, which the board concluded last year was a “lapse in judgment.’’ It fined Levy $50,000.

But during the review of Levy’s performance, some physicians expressed concern that Levy’s errors in judgment regarding the relationship had harmed his ability to lead effectively and raise money from wealthy donors.

Russell Conn, a Boston lawyer who has represented Boston-area hospital chiefs on employment and severance issues, said severance is generally reserved for situations when the chief executive is asked to leave, or when both sides agree that it’s best for him or her to leave.

“When there is tension, both sides will recognize it’s better for both sides to move on. Sometimes the hospital initiates the discussion, sometimes the CEO does,’’ Conn said.

He said one year to two years’ salary is standard in severance agreements.

Massachusetts Attorney General Martha Coakley in September urged the hospital board to do “some soul-searching’’ about Levy’s ability to continue leading the hospital, after her office concluded that his longtime personal relationship with the female employee — whom he hired and promoted “clearly endangered the reputation of the institution and its management.’’

Coakley’s staff, which oversees public charities including nonprofit hospitals such as Beth Israel Deaconess, would not comment on the appropriateness of the severance package yesterday.

A large health care workers’ union that has had a long-running dispute with Levy said the “board should immediately rescind this agreement and return the money to the public charity. Every year, BIDMC receives massive amounts of scarce public dollars. If the board condones this massive payout after what was initially described as a voluntary resignation, it is a slap in the face to every resident of Boston,’’ said Veronica Turner, executive vice president of 1199 SEIU, in a statement.

In Kay’s memo to hospital staff, however, he made it clear that the board felt indebted to Levy.

“When Paul arrived at BIDMC in 2002, he was charged with the Herculean task of turning around an institution that carried a huge debt and the scars from a nearly-failed merger,’’ Kay said. “During Paul’s nine-year tenure, financial stability was restored, scores of world-class surgeons and physicians joined the faculty, demand for patient services increased dramatically, and the medical center earned a well-deserved reputation as a leader in quality, accountability and patient safety.’’

Levy has earned about $800,000 a year since 2007, said hospital spokeswoman Judy Glasser. He declined a raise in 2008, and took a temporary 10 percent pay cut in 2009, she said.

The severance agreement includes a noncompete clause that runs for a maximum of two years, concurrent with the pay. It prohibits Levy from running a hospital in any geographic area where Beth Israel Deaconess and its affiliates and partners operate.

Liz Kowalczyk can be reached at kowalczyk@globe.com.