Evergreen CEO stands his ground in the eye of the storm
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Andy Fallat was on top of his world last fall. He was in love, he was fit at age 53, and he was at the peak of his profession - making more than $600,000 a year to run the second-biggest hospital on the Eastside.
He could walk the halls at Evergreen Hospital Medical Center in Kirkland and see the fruition of two decades of work to transform a tiny rural afterthought into a sparkling health-care empire.
That's all true months later, but now Fallat is fighting for his job.
Pressure at Evergreen, as at many hospitals, is coming from all sides. Health-maintenance organizations (HMOs) and insurance companies are seizing more control of health care. Medicare and Medicaid money has dwindled. And, although once known for solid finances, Evergreen is projecting a $6 million operating loss this year.
But Fallat has an even bigger problem: a physician-led mutiny. Like their counterparts around the country, doctors at Evergreen say they feel shortchanged and powerless over many of the larger shifts in health-care policy, and they feel shoved around by hospital administrators. The burgeoning frustration has hospital administrators everywhere feeling the heat, said Leo Greenawalt, president and chief executive officer of the Washington State Hospital Association, which represents 100 hospitals.
"They all feel very vulnerable," he said. "Physicians are upset, nurses are upset, and the administrator is really the only one they can deal with about it."
In Fallat's case, he has infuriated many doctors by pushing to build a $40.5 million surgery center in the midst of the budget predicament.
Their morale has sunk over what they consider Fallat's dictatorial decision-making, the announced departures of two young executives well-liked by doctors and what they see as Fallat's history of disingenuous attempts at listening to their issues. Many are envious of how he's grown wealthy while they make less and complain that he's frozen them out of money-making partnerships over the years.
Now doctors are fighting back. In January, a doctors group gave Fallat an 8-1 vote of no confidence, citing a "legacy of anger and mistrust," and demanded his resignation. When he refused, some doctors began recruiting candidates to run against Fallat's political supporters on the five-member hospital board in November elections.
They've also considered undercutting the hospital by referring patients elsewhere, saying the hospital's technology is falling behind and hinting that patient care may be slipping. The hard-nosed tactics have created misgivings among some doctors, but others say the wounds could heal if Fallat leaves.
CEO 'surprised and disappointed'
Fallat said he was "surprised and disappointed" by the no-confidence vote and conceded he could have done a better job of listening to doctors. But his responsibilities are to the hospital overall, he said, and the stalemated feud is threatening to undermine Evergreen's progress.
"When we find ourselves debating leadership or ownership of a surgery center, or responsibilities of the board, you're not paying attention to the most important thing - quality of patient care," Fallat said. "That's a loss to the institution. The question is how much time the doctors or the CEO want to spend squabbling."
The doctors and Fallat are both careful to say patient care hasn't deteriorated, but there are rumblings among doctors that it could. Besides the doctors-vs.-administrators battles, many hospitals are worried about a nationwide nurses shortage that might threaten patient care.
In Evergreen's case, patients might not notice much of the behind-the-scenes battle of egos and policy pressure, but they can't miss the hospital's 20 years of expansion.
In his tenure, Fallat has led efforts to construct centers for surgery, maternity, Parkinson's disease, and other health services and offices that have made it the biggest employer in Kirkland. In that time, patient revenue has risen from $9.8 million in 1980 to $235.8 million last year. Last year, Evergreen took in $10.7 million from North King County property taxpayers in Public Hospital District No. 2.
Evergreen has clearly grown up with its surroundings, becoming known for its sophisticated preventive programs, health education, quality care and a blend of body-and-mind wellness. Much of it bears Fallat's fingerprints.
Fallat is proud of that. Those efforts have helped him cultivate loyalists on the board who are now defending him against the doctors. Through the battle, Fallat has publicly exuded a tranquil, philosophical confidence.
Still, tensions remain. Doctors say Fallat has surrounded himself with yes men through the years, marginalized and intimidated critics, and built an overwhelming power base of admirers on the board.
"This is why we have term limits for president of the United States," said Dr. Dave Asmussen, an obstetrician and gynecologist at Evergreen since it was founded in 1972. "We don't want people to become so powerful that opposing views aren't considered."
In the months since the no-confidence vote, neither side has budged.
Dabbled in Eastern culture
Fallat is 6 feet 2 and thin, and has roundish, tortoise-shell glasses with trifocal lenses. He has a warm smile, a soothing manner of speech and the upright posture of an Eagle Scout.
His office is on the ground floor, next to the hospital's neatly landscaped main entrance. He has Japanese rice-paper sliding blinds that let in the afternoon sun and a model temple that's a reminder of his dabblings in Eastern culture and Buddhism.
Born in Virginia and raised in the steel town of Allentown, Pa., Fallat says he chose hospital administration after he was turned off in college by the hard sciences needed to become a doctor.
As he established himself at Evergreen, he joined boards of Redmond National Bank and A Contemporary Theatre, among others. He relaxes on long road trips on his sleek BMW motorcycle and has hiked in the Himalayas. He was divorced in 1992 and has three young-adult children.
People describe him as exceptionally bright and dedicated. He's known for speaking in long, enigmatic tangents.
But his friends' and enemies' descriptions of him are so polar that he sometimes sounds like two different people.
Anne McBride, a former chief financial officer who worked with Fallat for 13 years, describes him as honest, open, financially responsible and a visionary for improving community health, rather than just treating illness.
Examples abound. Under Fallat, the hospital developed a world-renowned maternity center that won awards for improving infant health by encouraging breast-feeding.
It passed a bond levy to build a hospice center, and it set up community outreach programs to reduce smoking among pregnant women, work with other agencies to spot signs of domestic violence and make early diagnoses of breast cancer.
Jeanette Greenfield, president of the hospital board, said Fallat is good at generating ideas from a group of people and handling conflicting ideas. She said she admires his abilities and that he's been controversial because he's a leading-edge agent of change. Ironically, what Greenfield sees as Fallat's greatest strength is what the doctors consider his greatest weakness.
"He really makes you feel important as a voice in setting the tone for the hospital," Greenfield said.
Bruce Buckles, a six-year board veteran who left last year, sees it differently. He said Fallat has a temper, listens "selectively" to ideas he likes and is more concerned with building a business empire and enriching himself than he is in serving the community's neediest.
Fallat's successful push last year to cut a $900,000 program to pay premiums for low-income people was a tragedy, he said, and he fears more cuts to the needy are coming.
Competition with Overlake
Buckles also contends Fallat's desire to compete with Overlake Hospital Medical Center in Bellevue in such areas as cardiac care torpedoed efforts to pool resources that would have lowered costs. Fallat's ill-fated effort in 1998 to merge with Swedish Medical Center was really an attempt to enrich and empower Fallat, he said, and would have diminished patient care at Evergreen.
"We as a public hospital district were supposed to serve all the people and especially the neediest," Buckles said. "But too often we duplicated services to compete with Overlake when we should have been cooperating."
But by far, the most anger comes from failed financial partnerships that crushed hopes of doctors. Bruce Macdonald, a former family-practice physician at Evergreen, said he recalls how Fallat seemed genuinely interested in working with doctors in the early 1990s in a partnership for a new office building.
Several months into the planning and financing process, when doctors were upbeat, Fallat took them to dinner at a fancy French restaurant in Bothell, an event many later called "The Last Supper."
"He told us that he was taking over, it was essentially going to be done his way, take it or leave it," Macdonald said. "Everyone was shocked. We felt double-crossed."
Physicians say Fallat handled the new surgery center in the same way last fall by dumping their financial partnership and marginalizing their control. They are also upset about how Fallat set up the Evergreen Medical Group, a hospital-financed group of primary-care physicians that competes with many of their private practices.
Others question the openness of Fallat and the board. A King County Superior Court judge found in favor of an activist group that charged that Evergreen's board violated state open-meetings laws when it met behind closed doors to deliberate about Fallat's 43 percent salary increase for 1999.
The group was angered that a public employee earned a total compensation package of more than $600,000 in the midst of a nursing shortage and increased HMO restrictions on doctors' earnings.
The compensation was based on market comparisons with other big private or nonprofit hospitals, such as Swedish, which has three times the number of employees and nine times the number of beds, explained then-board member Buckles. Still, Buckles opposed the increase because Evergreen is a public hospital that, at the time, was offering nurses a 1 percent raise.
Polarized views
Fallat explains such polarized views of his performance by using the recent presidential election as an analogy.
"We saw then that people who were Republicans saw events happening one way, and Democrats saw things a completely different way," he said.
Those divergent views color almost everything Fallat does. For example, when Asmussen, the obstetrician/gynecologist, met with Fallat last winter to explain his vote of no confidence, he told Fallat he had talked to a journalist about it.
Asmussen said Fallat responded angrily.
"He basically said he was going to get the board to treat us like it treats its enemies," he said. "And he said, `I'm gonna win.' "
Fallat gives a slightly different version. He says he doesn't remember referring to the board, but he does recall telling Asmussen to keep the dispute professional because he would defend himself in court if it turned into personal defamation.
"I did say that I intended to win," Fallat said.
Luke Timmerman can be reached at 206-515-5644 or ltimmerman@seattletimes.com.