CNMI Healthcare Corporation Board Fires CEO Babauta

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CNMI Healthcare Corporation Board Fires CEO Babauta Former governor ousted after months of controversy

By Tammy Doty with Emmanuel T. Erediano

SAIPAN, CNMI (Marianas Variety, April 22, 2013) – In a highly anticipated move, the Commonwealth Healthcare Corp.’s board served chief executive officer Juan N. Babauta with his walking papers on Friday.

At a special meeting, the board voted unanimously to terminate the CEO’s contract a full 2.5 months ahead of its July expiration. Babauta did not attend the meeting.

The resolution was highly concise at only eight lines.

"BE IT HEREBY RESOLVED…to terminate the employment of Juan N. Babauta, Chief Executive Officer, Commonwealth Healthcare Corp. for cause, effective seven (7) days from the date the Governor receives and accepts the recommendation."

After the meeting adjourned board chairman Jack Torres forwarded the decision to Gov. Eloy S. Inos who was asked to immediately accept the decision so the 7-day clock would begin without delay.

According to the governor’s press secretary, Angel Demapan, the board’s decision was final.

"The law does not give the governor the power to decide on the fate of CHC’s CEO…We just have to follow the rule of [the healthcare] law."

The CEO’s demise

The corporation’s board of advisers’ decision to terminate Babauta capped 16 months of controversy.

In Oct. 2011 then-Gov. Benigno R. Fitial appointed his former rival-turned-ally Babauta as CHC’s first CEO in what many termed a "political trade."

At the time Babauta held the post of NMI’s GOP chairman that he subsequently resigned after assuming the CEO position making way for Fitial to take over party leadership in a bid to consolidate control leading up to the 2012 elections.

Babauta defeated Fitial in the 2001 elections but lost to him four years later.

The seeming quid pro quo between the two professional politicians was met with deep skepticism from the outset, as Babauta had no background or experience running a stable hospital let alone a facility in crises.

In quick succession after assuming the executive position Babauta faced vocal opposition from CHC’s medical staff and inked a sole-source illegal billing/coding contract with ICS, a hastily formed Idaho company.

The situation at CHC quickly went from bad to disastrous during February to July last year as three directors of medical affairs were appointed then stepped down in response to the CEO’s incompetence while simultaneously Babauta and the attorney general’s office skirmished over the legality and financial terms of the ICS deal.

Under Babauta’s tenure, the hospital plummeted to new lows in the spring as a perfect storm gathered; implosion of the ICS deal; a mass exodus of medical staff, the chief financial officer’s resignation and bank accounts that were effectively empty.

Electricity was cut off, vendors stopped supplying the hospital and the Marianas Public Land Trust pushed CHC for documents long-overdue related to the $3 million credit line it had already extended.

The situation deteriorated so badly that the hospital did not even have basic supplies including liquid formula to feed a paralyzed 8-year-old girl in the ICU.

Fitial, in the midst of a and contentious election, continued to declare states of emergency for the NMI’s lone hospital but failed to take decisive action by either reprogramming funds for CHC or rebuking Babauta’s decisions.

As the facility crawled into fall more disasters were on the horizon.

Concerned by reports of CHC’s collapse, the federal Centers for Medicare and Medicaid, or CMS, arrived in September for an unannounced site survey.

CMS’ survey resulted in a 215-page reprimand containing three immediate-jeopardy violations.

In an effort to avert CMS decertification, Esther Muna was brought back from the Medicaid program in October and quickly identified a short-term cash solution: switch CHC from a billing model to a certified-public-expenditure reimbursement method.

CMS agreed with the change and the corporation was able to draw down $4 million in critical funding from October to December, which paid to correct federal deficiencies and staff salaries and cover supplier billings.

Moreover, a team of 11 federal hospital technical experts were deployed at CHC from December to last month in an effort to steady the organization and rectify the CMS violations.

Although CHC staff, the community and increasingly the board, continued to lose confidence in Babauta’s performance federal officials continued to publicly back the CEO as recently as early March.

Even so, the board voted unanimously exactly one month ago not to renew Babauta’s contract.

Thereafter, a minor dust-up ensued between the board and the feds as to who would ultimately decide Babauta’s fate.

Inos laid all uncertainty to rest soon after when he publicly declared that the board had the final say on the CEO per the healthcare law.

In a last bid to save the CEO two weeks ago, Sens. Joaquin Borja, R-Tinian, and Victor Hocog, R-Rota, lobbied the board to extend Babauta’s contract for another year but this did nothing to change the course of events.

While the board had already decided Babauta’s fate his last two major actions as CHC’s executive provided added confirmation for their decision.

During the April 12 board meeting it was disclosed that Babauta had signed travel authorizations for himself and a group of lawmakers for an overnight Tinian trip paid for by the nearly broke hospital.

Board members were outraged and described the decision as a "stunning lack of judgment and common sense."

The CEO prepared and submitted that same week CHC’s FY ’14 budget to the governor without first consulting the board as mandated by the healthcare law.

Again, board response was one of fury and disbelief.

Fast forward a few days to last Friday and the meeting’s atmosphere flipped to one of conclusion and calm.

"We’re very relieved this chapter of the drama is behind us… now we can focus on our most critical issues, hospital funding and maintaining CMS certification," said chairman Torres and vice chairman Pete Dela Cruz.

Looking forward

As Muna steps into the interim CEO role and the search continues for a chief executive, the corporation must now turn its full attention to the current FY ’14 government appropriation bill.

Lawmakers publicly said last week that CHC’s appropriation would total just $1.9 million, the same as FY ’13, along with $240,000 to cover the Department of Corrections’ inmate healthcare costs.

"CHC submitted a balanced budget. CHC has many other ways of generating revenue," said lawmakers in response to why the corporation is set to receive the miniscule amount.

This news from the Legislature was very worrying to CHC’s board.

"We have to address this issue with the governor and lawmakers immediately…that amount doesn’t come close to what the NMI’s healthcare system needs," noted Chairman Torres.

In full agreement is federally funded CHC consultant, Dr. Poki Namkung who’s on island for a six-week mission.

"The federal government spends 20 percent of its budget on national healthcare…the NMI spends 1.2 percent and it has some of the poorest people and dire conditions right here on this isolated island…the local government must step up and support its only hospital."

Namkung went on to point out the vast amount of federal funding left on the table.

"The NMI is turning its back on millions of dollars of funding because it’s not coming up with local matching dollars…that’s just bad arithmetic."

Numbers aside, the corporation is forging ahead in its effort to permanently stabilize the healthcare system and Babauta’s exit was viewed as a critical major step.

"I’m happy we’re moving forward, we want to make progress and fix the problems," stated board member Roy Rios.

Sentiments from the hospital’s medical staff resonated with the same glimmer of optimism.

"It’s been a long time coming [the CEO’s termination], the board made a tough but necessary decision…we’re thankful and ready for professional leadership."

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