City officials and local hospital staff agreed during a Sept. 7 Tahlequah City Council meeting that miscommunication is a major problem, as the mayor and Northeastern Health System employees squared off over board appointments and other issues.

Mayor Sue Catron initially asked the City Council to approve her appointment of three new members to the Tahlequah Hospital Authority.

"I was focused in on some problems we had administratively here and I think it was probably around this time two years ago, [Northeastern Health System CEO Brian Woodliff], that you and I had just met each other," said Catron.

The mayor said she told Woodliff she wanted to appoint some new trustees to replace those who had been serving for years, but Woodliff suggested instead that hospital officials give her three names and she could choose from those. Woodliff provided Catron a copy of the 2010 amendment concerning appointments, which she said is not valid, and therefore, the 1986 amendment is still in play.

Catron said she received a letter updating her on the sale of Cherokee Health Partners' shares in Northeastern Oklahoma Diagnostics, a partnership between Cherokee Nation Medical Systems and NHS. A separate letter, signed by Dr. R. Stephen Jones, then-interim executive director of Cherokee Nation Health Services, addressed the hospital board of directors regarding a controversial transaction.

Catron said that on Oct. 9, 2019, at the CHP meeting, Cherokee Nation officials questioned why the recent financial report didn't include the monthly income from NOD. CHP owns a 20 percent stake in NOD, and the monthly income was routinely reported. CN officials were supposedly told by Woodliff that he had authorized the sale of CHP's shares in NOD.

"This was a shock, as no such sale of stock had been proposed or contemplated. No such action item had ever appeared on any agenda and certainly no vote had been taken by CHP board members to approve such a sale of CHP property," Catron said the letter stated.

The letter alleged Woodliff was unable to explain under what authority he sold the CHP stake. The tribe asked for legal representation to investigate the matter and was told Woodliff didn't have transactional documents for the sale. The tribe purportedly asked for a written summary from Woodliff that would explain his actions, and never received one.

A registry for CHP was provided to show a check for $404,040 from NOD for shares. CN asked that the sale proceeds be held in escrow until the dispute could be resolved.

"CN asked whether the escrow funds were reflected on the financial report for CHP; [NHS Chief Financial Officer] Rick Wagner responded that the money had been transferred out of CHP and was now being held in escrow in a NOD account," Catron said.

Cherokee Nation is now requesting a written explanation as to how proceeds were transferred between accounts, and who directed those transfers. The letter also stated Cherokee Nation does not want Woodliff to serve as a CHP board member for NHS.

Catron said she met with Woodliff to negotiate an agreement and was told the shares were not sold, but that it was an "accounting disruption." Given those circumstances, the mayor said she thought at least one of the trustees would ensure communication and oversight for this situation and others.

Cities cannot not go into debt, which is why a third-party entity that can go into debt is created, the mayor said.

"The new hospital was built, but at the same time they did the trust, they did a lease, and ... they leased this property and all of the equipment to the new authority. That lease has terms in it that say if you go into debt using this property to acquire more property or more equipment, all that is acquired becomes a part of the lease," said Catron.

Catron said the question was, what property was under the lease, and what debt was on the property. The mayor said the lawyer she spoke with told her the format to the 2010 amended trust indenture was incorrect.

"Every trustee and everybody from the beneficiaries ... all have to sign off on it. ...They were named to take care of ... the city's assets," she said. "The question is, what property is there under the trust, and what debt is there?"

Catron said she asked for the information and didn't get any answers.

"If by chance our CEO doesn't have the authority to enter into contracts, we need to fix some things. If you'll just work with us, we can fix this ... but if those contracts that have been entered into by our CEO or signed by him and are not valid, then we've got a mess," she said.

Catron pointed out some things in the 2010 amendment run counter to the state law that pertains to municipal trusts.

The city entered into a contract with the law firm and intended to move forward. The mayor said she asked the Council to meet with the hospital trustees and explain the situation. However, Catron said city councilors went directly to Woodliff and Wagner, and they said they'd want to do a total revision of the trust indenture.

Catron explained she wasn't opposed to a full revision of the indenture.

"All I really wanted to do was replace a single [trustee]. If we're not going to even talk about replacing one trustee, how can we even begin to talk about what it might take to negotiate a new trust indenture between the city and the hospital?" said Catron.

Trustees are the city's representatives to ensure the body of the trust is well-managed.

Catron said she intended to appoint Bob Girdner to replace Judy Williams on the THA. Bobby McAlpine would be named to replace Susan Chapman Plumb, and Dr. John Galdamez would replace Dr. Charles Gosnell.

"I do think that appointing a trustee is a reasonable thing to do, because ... when someone is named as a trustee, they sign a document that says they have a fiduciary responsibility to the hospital," Catron said. "I'm not seeing that fiduciary responsibility to the community and it has me concerned."

Ward 3 Councilor Stephen Highers, who is a trustee on the hospital authority, called out Catron for her comments.

"There are six hospital trustees, myself is the seventh, that I think have nothing but heart for this community... and your implication otherwise, I think is downright slanderous to those six people," said Highers.

Chapman Plumb, who is both a trustee and a bank president, told the mayor she wanted clarification on what she meant by "lack of fiduciary responsibility."

"Part of this council's responsibility ... would first be to listen and gather information regarding the hospital authority, and I can say I've had no ... correspondence from you ... with regard to my personal thoughts about the weaknesses and the strengths of ... Northeastern Health System," said Chapman Plumb.

Wagner told Catron the trustees who she said lack fiduciary responsibility are the ones who had a vision of building a bigger and better hospital for Tahlequah.

"I'm here because of the trustees, because of the administration, because of all of the employees I get the pleasure to work with ... and I will not let politics kill it," Wagner said.

Dr. John Uzzo, a local accountant, said an audit showed NHS lost $13 million, and that's what concerns Catron. Uzzo claimed the audit also showed an indebtedness of $531,000 was "canceled," and he's been asking for information about the audit for a few years.

Wagner said the hospital didn't lose $13 million, as the accounting treatment of funds from the CARES Act is recognized as "other revenue" after operations.

"Had we not spent that money, we would've had to pay it back, so that's why those two numbers correlate: $13 million lost, $13 million given to us. We actually made over a $1 million during the COVID year last year," Wagner said.

There was a window of time during which the hospital could request a six-month payment as an advance, should they need it. Wagner said they chose to take the $20 million, knowing they'd have to pay it back as an advance and not a gift.

"Fortunately, we had done well enough ... we did not need that money, so we said, 'Let's set this money aside, they're going to start taking it back,' [and] they started taking it back in April. ... But we still didn't want to pay it all back right away and let them take back over those time periods because we're still in COVID," Wagner said.

During the meeting, hospital staffers approached the podium to explain how and why so many health services are provided in Tahlequah. They advised the Council that the status quo shouldn't be disrupted during the pandemic.

Local financial adviser Steve Worth said everything came down to accountability, and he reminded Woodliff the mayor had specifically asked for the numbers. Catron said they also asked for a list of assets and liabilities and the debt that may be secured by those assets.

A woman sitting with Woodliff argued that all financial information has been provided to Catron and City Administrator Alan Chapman. Catron disputed that.

"I do get a financial report, as is required by the trust documents each month from the hospital. But what we asked for is something very different... a list of the assets that fall under the lease," Catron said.

Highers said the trust indenture needs to be brought up to date, and that both sides need to communicate better. Ultimately, officials had decided to create a task force to work through the issues.

Sarah Brown, a hospital employee, asked Catron why the need for such a public forum when that task force has addressed the issues.

"Because I wasn't aware of the task force; [the council] chose not to share that," Catron said.

What's next

A followup to the lengthy discussion will be in the Thursday, Sept. 9, print edition. That will include comments from NHS CEO Brian Woodliff.

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