An Orange County executive has resigned after an internal investigation into his employment background and other activities, threatening new turmoil in the management of four major regional hospitals.
Bruce Mogel, the president and chief executive of Santa Ana-based Integrated Healthcare Holdings Inc., tendered his resignation Tuesday, the company said Friday. The resignation will be effective Dec. 31, although Mogel may stay on for up to four months more to assist with the transition to a new CEO.
Mogel's departure may signal an expanded role in the company for Dr. Kali P. Chaudhuri, a controversial Hemet entrepreneur whose earlier efforts to take a majority stake in IHHI led to protests from the company's medical staff.
Their concerns stemmed from Chaudhuri's takeover and closure in 2000 of 38 struggling California medical clinics. The shutdowns left more than 250,000 patients suddenly without access to their doctors or medical care. After the protests, Chaudhuri agreed to temporarily reduce his stake in IHHI to a minority holding.
He currently holds options that would allow him to raise his ownership to 63%.
IHHI did not explicitly say that its internal probe, which was conducted by law firm Paul, Hastings, Janofsky & Walker, had confirmed allegations made against Mogel in a lawsuit by Orange County Physicians Investment Network, a major investor in the company.
The investor group alleged, among other things, that Mogel had admitted to an IHHI executive that he had taken kickbacks from suppliers when he was an executive at another healthcare company. The group also alleged that he had tried to frame an IHHI employee who had criticized management by planting a gun in the employee's car. Mogel denied the allegations.
The firm said Mogel's resignation should not be "construed as a finding . . . of wrongdoing of any sort" or as "an admission of such wrongdoing" by Mogel.
But it did say that with the completion of the investigation, the IHHI board's legal committee "believes it now has sufficient information" to recommend that the board accept his resignation.
Mogel said in a statement that he had resigned "in the best interests of my family and the company I have come to respect and love so much." He pledged to make the transition to a new CEO "as seamless as possible."
IHHI's four Orange County hospitals account for more than 12% of the county's hospital beds and a quarter of its emergency-room visits. The largest is the 282-bed Western Medical Center-Santa Ana, one of the county's oldest hospitals and one of its only three trauma centers. Western Med is also the linchpin of medical care for many of the county's neediest residents -- "a critical part of its safety net," in the words of a longtime expert on healthcare in the region.
The other hospitals are Western Medical Center-Anaheim, Coastal Communities Hospital in Santa Ana and Chapman Medical Center in Orange.
IHHI acquired the hospitals in 2005 from Tenet Healthcare Corp., a money-losing Santa Barbara chain that had been accused of letting the hospitals run down. Since then the company has recorded more than $100 million in losses in part because it is saddled with $140.7 million in debt carrying interest rates as high as a stratospheric 24% a year. The hospitals are dependent on Medicare and Medicaid for two-thirds of their operating income, according to IHHI financial statements.
IHHI has also been racked with management dissension. The principal adversaries have been Mogel and Anil V. Shah, a Santa Ana cardiologist who heads the physician investor group.
In a lawsuit set to go to trial in late January, IHHI alleges that Shah blocked attempts led by Mogel to refinance its high-priced credit lines. Shah's goal, the company contended, was to exacerbate IHHI's financial problems to drive Mogel out so he could take over.
In response, Shah contended that Mogel colluded with the company's creditor to keep those high-interest lending facilities in place.
Shah on Friday hailed Mogel's departure. "If the company was to move forward, Bruce Mogel had to go," he said in an interview.
But by some accounts, the real shadow hanging over IHHI is that of Dr. Chaudhuri.
Chaudhuri blamed the clinic shutdowns in 2000 on HMOs that had withheld reimbursements to his medical chain. But lawyers for creditors also accused him of making preferential payments to companies affiliated with himself. Some health plans said they withheld payments because of questions over the quality of care by the clinics.
Chaudhuri was said to be out of the country Friday and unavailable for comment. His longtime attorney and co-investor, William E. Thomas, said he was still "considering" whether to exercise his options for a majority stake in IHHI, which expire in mid-January. In any event, Thomas said, Chaudhuri had no plans to play a management role at IHHI.