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The Detroit Medical Center named a new CEO following the departure of Joe Mullany, the health system’s for-profit owner Tenet Healthcare announced Tuesday.

The leadership change follows a combination of shifts in corporate strategy at Tenet to scandals over dirty surgical instruments and the threatened loss of a decades-long relationship with academic and medical partner Wayne State University, observers said.

“We are thankful to Joe for his significant contributions to DMC and the Metro Detroit community, and wish him all the best in his future endeavors,” Eric Evans, president of hospital operations for Tenet Healthcare, wrote in the email to employees.

Employees learned of the switch in a surprise email sent just before noon Tuesday saying Mullany was leaving to “pursue other opportunities.” He will be replaced by Dr. Anthony J. Tedeschi, who has been leading a Tenet hospital system in Chicago.

Mullany, 52, had led the eight-hospital system for four years. His departure follows a year that began in triumph and ended in controversy.

Last February, Mullany presided over the opening of the Children’s Hospital of Michigan in Troy, a $42 million facility that operates as a 24/7 emergency pediatric care facility and subspecialty clinic, joining one of the state’s largest health systems with 3,000 affiliated physicians, and treats some of the state’s poorest and sickest patients.

By year’s end, though, Mullany was juggling dual controversies.

In September, following the publication of a News series exposing a decade of complaints about improperly sterilized instruments, state and federal officials launched joint investigations of the DMC. Around the same time, talks broke down to extend a clinical services and administrative relationship with Wayne State University School of Medicine to extend its long-term clinical services and administrative relationship. The DMC had hoped for a 5- or 10-year contract, but both sides instead agreed to an 18-month services contract.

Efforts to reach Mullany were unsuccessful Tuesday. Tedeschi also was not available for comment.

State Rep. Brian Banks, D-Harper Woods, and other community leaders said they believe the controversies did Mullany in. Banks said he learned of the change shortly after noon Tuesday from a hospital administrator who did not indicate why Mullany left.

“I suspect it was because of the issues surrounding the DMC lately and it was a decision made from the top,” said Banks, the leader of the state House Democratic Caucus, who has been involved in several talks about DMC issues.

“I look forward to working with the new administration and to improvements so the hospital can provide an efficient service to patients.”

Speculation over exit

Mullany’s departure comes as Dallas-based Tenet restructures management and considers selling some of its 79 hospitals. Since July, its stock has fallen to about $19 a share today from $32.

Wall Street hospital analyst Sheryl Skolnick, head of equity research at Mizuho Securities USA Inc., said quality issues and problems with the DMC’s academic partner may have spurred Tenet’s decision to replace Mullany. The DMC has been one of Dallas-based company’s most profitable hospital systems, and Skolnick said its performance is critical to the success of Tenet’s hospital business.

“Those certainly at a very high level are a combination of factors that suggest that perhaps the repositioning of the DMC within the community might be beneficial to everyone,” Skolnick said Tuesday. “I’m intrigued that they’ve brought in a new leader who not only is a physician but has experiences running these kinds of large complex inner city health care systems.

“That may very well be an opportunity for the performance of the DMC to be enhanced by someone who not only is a business leader but also a clinical leader at the helm.”

Tedeschi most recently served as CEO of Tenet’s four-hospital Chicago Market and as the top executive at Weiss Memorial Hospital, a 236-bed urban hospital with more than 800 employees.

Before joining Tenet, he was chief operating officer of Cook County Health & Hospitals System in Chicago, one of the nation’s largest public health systems.

The DMC announcement was welcomed by Marjorie Mitchell, executive director of the Michigan Universal Health Care Access Network, a coalition of Metro Detroit health advocacy groups.

“We have been concerned for a long time about what’s been going on at the (DMC) so we welcome an opportunity to see new leadership who will put more emphasis on the people of Detroit and less emphasis on the bottom line,” she said Tuesday.

“We’ll give (the new CEO) a chance to see where he’s coming from.”

It’s the second leadership overhaul of a Metro Detroit health system this month.

Wright Lassiter III took the helm at Henry Ford Health System on Jan. 1, replacing Nancy Schlichting who retired Dec. 31 after 18 years. Lassiter has been transitioning into the role since December 2014, when he joined Henry Ford under a unique succession plan. He came to Detroit from Oakland, Calif., where he had spent nine years as CEO at the Alameda Health System.

Disconnect with workers

Mullany kept a low profile following the surgical instrument scandal, repeatedly refusing to discuss it with The Detroit News. In interviews with Crain’s Detroit Business, though, he suggested the controversy was overblown and the DMC was victimized by the articles.

He insisted the DMC was in the process of fixing the problems when the articles hit. Even so, the hospital system was cited by state and federal regulators with numerous infractions following publication of the articles.

“We suffered some reputational damage, and it put a lot of employees on the defensive who were attacked,” Crain’s quoted Mullany as saying earlier this month.

The News’ series, published in August and based on 200 internal emails, spurred investigations by the Michigan Department of Licensing and Regulatory Affairs (LARA) and the federal Centers for Medicare and Medicaid Services (CMS) that found numerous health and safety violations.

LARA closed its inspection after the health system passed an unannounced inspection on Dec. 22. Federal regulators closed their investigation after the health system passed unannounced inspections in early November.

Word of Mullany’s exit began filtering down to employees Tuesday afternoon. Union leader Marge Robinson said she wasn’t informed of the resignation until the mass email to employees from Evans, the Tenet executive. By early afternoon, the change in leadership had already been reflected on the DMC’s website.

“The workers are doing their job. We’ll see who this new guy is and are happy to work with him to continue providing our patients the top quality care,” said Robinson, president of Service Employees International Healthcare Michigan, a nurse whose union represents 14,000 health care workers in Michigan including the DMC.

“It doesn’t matter to me who the CEO is because it’s the members and the workers who do the work. People come to hospitals to see them, the surgical teams and nurses and everybody else. They don’t come to see the CEO.”

Many employees didn’t have a huge impression of Mullany or interaction with him, said Donna Stern, unit chairwoman of American Federation of State, County and Municipal Employees that represents about 250 employees at Children’s Hospital.

“I don’t think he had a lot of contact with the rank and file, usually communicating to us through email,” Stern said.

The leadership overhaul stunned the Rev. William Revely, chairman of Unify Detroit Coalition, a nonprofit group that sponsors health fairs and meets quarterly with DMC officials to discuss community concerns.

He and other community leaders met with Mullany and other DMC executives to discuss concerns about instrument sterilization following The News’ investigation.

“I thought he was a good person to be in the top spot,” Revely said. “He seemed like he was on top of the (sterilization) situation and handled it all extremely well.”

KBouffard@detroitnews.com

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