Caritas replaces physicians group chief

Caritas Christi Health Care has replaced the acting chief of its physicians group following the discovery that the group overstated revenue by almost $10 million, a sign of continuing leadership turmoil in the Archdiocese of Boston's hospital network.

The move to replace acting physicians chief executive Asher Kramer , who was the group's former chief financial officer, came within the last two weeks following an audit review spanning several months, Caritas Christi said in a statement last night.

The system of six Catholic hospitals, the second-largest health network in the state, said it believes the discrepancy was an accounting problem. The 2,000-member physicians group has lost money for Caritas Christi for years, and successive leaders have undertaken a variety of cost-saving steps, many of which have been unpopular with doctors.

The discovery comes at a sensitive time for Caritas Christi. Cardinal Sean P. O'Malley and archdiocesan leaders struck a tentative deal in February to transfer ownership of the six hospitals -- including Caritas St. Elizabeth's Medical Center in Brighton -- to Ascension Health, the nation's largest Catholic hospital chain. Accountants and analysts from Ascension, which is based in St. Louis, have been poring over Caritas Christi's books in recent months, a period of due diligence that is expected to culminate in a final deal this summer.

Caritas Christi spokesman Steve Danehy would not say last night whether there was any link between Kramer's replacement and the discovery of the overstated revenue, saying it was a private, personnel matter. He also would not say whether Kramer is still employed by Caritas Christi in some other capacity.

Kramer could not be reached for comment last night. Before being promoted to the position of acting chief executive of the physicians group, called Caritas Physician Network , he served as chief financial officer of the physicians group. The new acting chief executive of the physicians group is Dr. Charles Rollinger , Danehy said.

Blaming faulty "recognition of revenue" in the physicians group, Caritas Christi's statement said its revenue was overstated by as much as $4 million for fiscal year 2006, which ended Sept. 30. Revenue was overstated by as much as $5.5 million for the first quarter of fiscal year 2007, which ended Dec. 31, the statement said.

Caritas Christi Health Care said it had reported profits of $38 million in 2006 on revenue of $1.2 billion, and profit of $6.4 million on revenue of $307 million for the first quarter of 2007. According to audited statements reflecting performance before the overstatements were discovered, Caritas Physician Network lost $21 million in fiscal year 2004, $13 million in fiscal year 2005, and $6.3 million in fiscal year 2006.

Bob Guyon , Caritas Christi's chief financial officer, in a statement released last night, said, "We view any misstatement of financial performance to be a matter of serious concern and remain focused on rapid and thorough examination and resolution of this matter. Our core health care business is sound and continues to generate an operating margin."

Turmoil has surfaced several times at Caritas Christi in recent years . Former chief executive Michael Collins was ousted by O'Malley in 2004. His replacement, Emmett C. Murphy, resigned shortly after Globe reporters asked him to explain discrepancies in his official biography. And last year, chief executive Dr. Robert Haddad, who engineered a financial turnaround by cutting costs, was forced to resign amid allegations that he inappropriately hugged female employees. Haddad's replacement and current interim chief executive of the system is Dr. John Chessare .

Two state agencies track the financial performance of the state's nonprofit hospitals, Attorney General Martha Coakley's office and the Division of Healthcare Finance and Policy. Representatives of those agencies said yesterday they had not received any revised financial statements from Caritas Christi.

In its statement last night, the system said it will "take the steps necessary to be sure such problems do not occur again."

Christopher Rowland can be reached at crowland@globe.com.