By Buddy Nevins and Dan Christensen, FloridaBulldog.org
Broward Health’s plan to award a no-bid advertising contract worth as much as $71.4 million over six years to a politically connected advertising firm was interrupted last month after hospital district chief executive Dr. Nabil El Sanadi killed himself.
The deal, negotiated in secret by El Sanadi and Broward Health’s board of commissioners without considering any firm but one run by a major Republican fundraiser, is so large that records say other planned projects might have to be delayed.
The records also show that El Sanadi pushed the deal despite a warning in December from Broward Health’s chief financial officer, Robert K. Martin, that the proposed agreement with Fort Lauderdale’s Zimmerman Advertising was based on phony statistics.
Within weeks of his warning, however, Martin was out of the job he’d held since 2010. A knowledgeable source told FloridaBulldog.org that Martin was fired because El Sanadi lost confidence in him, and that Martin was given a separation agreement with a substantial payout and a requirement that he keep his mouth shut.
Martin’s sudden departure caught some Broward Health commissioners off guard.
“It was very quick. I thought he was doing a good job,” said Joel Gustafson, one of seven commissioners appointed by Republican Gov. Rick Scott to oversee the public health system.
Broward Health interim chief executive Kevin Fusco declined to be interviewed about Martin’s departure following last week’s board meeting. He also did not respond to written questions sent to him via a spokeswoman on Thursday. Likewise, Broward Health’s lawyers did not respond to a Feb. 4 public records request for a copy of Martin’s separation agreement.
Martin could not be reached for comment.
The proposed Zimmerman contract is for the production and placement of Broward Health ads and promotions at an annual cost not to exceed $10 million for three years, with annual renewals for up to three more years. In addition, taxpayer-supported Broward Health would pay Zimmerman an annual agency retainer fee of $1.9 million, to be adjusted based on volume growth results.
The goal: “increasing in-patient and out-patient volume,” the minutes from the December board meeting say. The proposed contract itself, as well as details of the advertising plan, has not been made public.
In December, the commission approved spending an initial $5 million with Zimmerman from December thru next July, but the rest of the deal was postponed.
Commissioners were to vote Jan. 27 on authorizing El Sanadi to sign the full contract, but the vote was canceled after El Sanadi’s suicide four days earlier.
Contract on hold
Now the matter has been put on hold until a permanent new chief executive can be chosen, said board chairman David Di Pietro.
“I do support this. I think we have horrible branding issues. We need image control,” said Di Pietro. “What has gotten lost in all this is what is actually being done at our medical facilities.”
Zimmerman Advertising is a nationally known firm that’s part of Omnicon Group. Martin’s warning that the proposed contract with Zimmerman was badly flawed came at Broward Health’s regular board meeting Dec. 16 – the first time the matter surfaced publicly following months of private board planning meetings.
According to minutes of that meeting, Zimmerman previously pitched the advertising campaign based on substantial projected benefits that Broward Health Chief Financial Officer Martin said relied on erroneous figures.
Sources said company founder Jordan Zimmerman made the presentation at the “shade” meeting the public was not allowed to attend. Accompanying Zimmerman at that time was Broward County Commissioner Chip LaMarca, a Zimmerman employee and former chair of the Republican Party of Broward County.
The minutes say Broward Health’s leadership agreed to the multi-million-dollar deal “based on a presentation by Zimmerman showing an ROI [return on investment] of 290 percent or an expected contribution margin of approximately $58 million by the end of year three for a $30 million spend.”
Martin, however, told commissioners that Zimmerman’s numbers were based on “hitting 74 percent occupancy level with no reasoning behind it just because that was the national occupancy level for hospitals with greater than 500 beds.”
While Zimmerman estimated its multi-million-dollar ad campaign would generate revenue as much as $4 for every dollar spent, Martin said the real figure was a loss of 10 cents on a dollar spent.
Martin explained that Zimmerman’s calculations were based on a profit of $800 per patient night instead of Broward Health’s actual profit of $400 per patient night. Likewise, Zimmerman used 1,750 Broward Health beds to calculate the 74 percent occupancy, but Broward Health actually operates 1,360 beds, Martin said.
Using Broward Health’s actual figures lowers the projected return on investment “from 290 percent to seven percent,” Martin said. “After factoring in the $1.9 million annual retainer fee, the actual ROI for BH (Broward Health) is a negative 10 percent after spending $35 million.”
‘A fiduciary responsibility’
“Mr. Martin informed the board that he has a fiduciary responsibility and with that responsibility he must remind the board that at the strategic planning meeting it was agreed to spend the $10 million based on a 290 percent return which is not possible,” the minutes say.
“Given that BH is already $12.5 million behind budget for the year, Mr. Martin feels that for the board to spend (millions) without knowing what the expectations are and not to be able to hold Zimmerman to some benchmarks without knowing what BH is paying for, is something the board should not be doing,” the minutes say.
El Sanadi and a majority of the board shrugged off Martin’s concerns.
“It is critical and essential for Broward Health not to miss the opportunity to get its services out to the community as the (winter tourist) season begins,” El Sanadi said, according to the minutes.
The board voted 5-2 to spend $5 million with Zimmerman between Dec. 16 and July 1. A broader formal contract, to include a method of determining whether the advertising was working, would be hammered out later.
Voting no were Commissioners Gustafson and Sheela VanHoose. Gustafson called the Zimmerman deal “very expensive advertising” and said the cost was so high the board should spend more time debating it. VanHoose said, “There is no contract and that is a problem.”
Beset by competition from private and other public hospital systems, Broward Health has been struggling for years to fill its beds with patients paying for elective surgery.
El Sanadi, named CEO in December 2014, hired Zimmerman to provide marketing services for Broward Health in April 2015.
“Nabil contacted me on the recommendation of (one-time Republican U.S. Sen.) George LeMieux in November 2014. He believed Broward Health wasn’t performing like it should,” firm owner Jordan Zimmerman said in an interview last week. The contract was for $2 million, he said.
Broward Health Commissioner Gustafson remembered things differently. “I don’t recall us having a discussion of how we should promote our business … I believe Zimmerman brought the idea to us. I believe he met with every commissioner,” Gustafson said.
There is no record of Zimmerman’s lobbying. State hospital districts are not required to register lobbyists.
A generous political donor
At the December meeting, Martin told commissioners he also was concerned at Zimmerman Advertising’s “lack of experience at the hospital level.” Still, Broward Health’s Republican commissioners knew Jordan Zimmerman as a generous political contributor to Republican causes.
Zimmerman and his wife, Denise, served on Republican presidential nominee Mitt Romney’s Florida finance committee. In October 2012, the couple and other GOP heavyweights hosted a $25,000-a-plate dinner for Romney in Boca Raton.
Last July, Zimmerman co-hosted a $10,800–a-ticket lunch reception for former Gov. Jeb Bush’s presidential bid.
In June, Gov. Scott reappointed Zimmerman, 59, to a four-year term on the board of trustees of his alma mater, the University of South Florida. Zimmerman donated a record $10 million to the school last March. The university later renamed its mass communications school the Zimmerman School of Advertising and Mass Communications.
With El Sanadi’s help, the idea of hiring Zimmerman’s ad firm got quick traction at Broward Health. Secret commission meetings to discuss the advertising proposal were held under a state exemption to the Sunshine Law that permits public hospitals to hold closed-door meetings for “strategic planning.”
Some details, however, emerged in December. The proposal cost so much that other planned projects would have to be delayed until the 2016-2017 fiscal year, according to interviews and Broward Health documents. Still, despite the multi-million-dollar size of the proposal, only Zimmerman Advertising was considered for the job.
Broward Health Chief Information Officer Doris Peek was assigned to privately negotiate a deal with Zimmerman. Peek conceded at the December commission meeting that “marketing is not her specialty” and she depended on Zimmerman Advertising “to use their expertise how best to spend the money.”
Peek is quoted in the minutes as telling commissioners, “The numbers being used were generated by Zimmerman.”
Zimmerman’s research found that Broward Health badly needed to step up its advertising. According to the firm, Broward Health’s “brand awareness” in the tri-county area was 4 percent, while competitors had 96 percent “more exposure.”
El Sanadi told the board he’d “spent a lot of time with Zimmerman” and hoped the deal would begin in January.
Zimmerman said in an interview that his talks with El Sanadi about the competitive problems that Broward Health was facing convinced him to take on the advertising job.
“Even though it was a small contract, I thought this was valuable to do. “I’ve lived here 40 years. I felt an obligation to do something to help Broward Health to become top of mind. We have to build the brand so that it becomes a destination.”