Several Georgia lawmakers and Grady hospital officials expressed outrage Wednesday over a two-year, $1.2 million contract awarded interim hospital CEO Pam Stephenson, with some calling for a state investigation and her resignation from hospital leadership posts.

Stephenson's contract was sealed shortly before the Fulton-DeKalb Hospital Authority was to hand over control of the hospital to a new nonprofit corporation. On Monday, the corporation announced four finalists for the CEO position, and Stephenson was not among them.

JOHNNY CRAWFORD/jcrawford@ajc.com (ENLARGE)

Pamela Stephenson, who serves as CEO of Grady and the Fulton-DeKalb Hospital Authority chairwoman, got a $1.2 million contract for 2 years.

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Officials blasted the contract, characterizing it as a deal deliberately crafted away from public scrutiny. Some attacked what they termed the contract's lucrative offerings, including a $600,000 annual base salary and a golden parachute that could earn Stephenson a separate check for $750,000 when she is replaced.

"I think it's appalling," said Rep. Mike Jacobs (R-Atlanta). "It is a sweetheart deal done in secret."

Jacobs said he believed the contract was tainted because of what he called Stephenson's conflicts of interest at Grady. In addition to serving as interim CEO, Stephenson is chairwoman of the of the hospital Authority, which awarded her the contract, and she is vice chairwoman of the new Grady Memorial Hospital Corp.

Jacobs called on Stephenson to resign from the Authority and the new corporation, and to remain as interim CEO until she is replaced. Grady corporation officials said they expect to name the new CEO in about two weeks and bring the person on board by the end of the summer.

Stephenson released her first statement on the controversy Wednesday, saying that she is working to resolve the issue with the new Grady corporation chief, Pete Correll.

"Regarding the contract, Mr. Correll and I are working together as we have in the past. We will arrive at an agreement that is in the best interest of Grady," Stephenson said.

The hospital's public relations chief, Tish Towns, released a two-page listing of Stephenson's accomplishments at Grady, titled, "Pamela Stephenson is Good for Grady."

The statement said Stephenson has increased the cash flow from paying patients, revamped clinics to increase capacity, implemented a new call-routing system and improved employee morale.

Lynne Riley, a member of the Fulton County Board of Commissioners, criticized the Authority for executing what she said was a secret contract. Public outrage over the deal could endanger some county funding for the hospital, she said.

Riley also called for Stephenson to step down from her leadership positions at the Authority and the corporation.

"I think it would go a long way toward restoring confidence in the entire system," Riley said.

Officials were especially irked that Stephenson and the Authority agreed on such a high-stakes arrangement at a time when Grady is on its financial knees.

After years of multimillion-dollar deficits that threatened the hospital's survival, Grady has seen some relief from a lack of privately insured patients, dwindling government payments, rising costs and years of neglect of facilities and equipment.

A reprieve arrived in May, when the new nonprofit board took over and the Woodruff Foundation delivered the first $50 million of a $200 million donation intended to save the hospital from financial collapse.

Tom Lowe, a commissioner for Fulton County, which provides Grady with about $80 million a year, said he questioned the legality of contract, given that it was not approved in an open meeting of the Authority.

Lowe called for an investigation by the state Attorney General's Office into the validity of the contract.

In addition, he said the deal reflects the style of back-room dealing that has troubled Grady for years.

"That's the kind of leadership it's had," he said. "That's why it's in such sad shape."

On Wednesday, Geoffrey Heard, the Authority vice chairman who signed the contract, reiterated his belief that the Authority handled the contract properly.

Heard said he did not recall when the Stephenson contract was signed, or whether the Authority board formally approved the final document in public session. The contract was signed sometime between Jan. 28, when the board fired the prior CEO and installed Stephenson, and May 20, when the new corporation took over, he said.

Heard said the board satisfied the need to vet the contract in public when it announced publicly in January that it was hiring Stephenson for an amount of money similar to her predecessor's and that the authority would draw up a contract to that effect. No further approval was needed, he said.

On Wednesday, Authority member Carl Patton, who is also the president of Georgia State University, became the third Authority member to publicly state that he has neither seen the contract nor voted on it. Thomas Dortch and Dick Teters made similar statements Tuesday.

Patton, who joined the Authority in mid-March, said he should have been made aware of the contract.

He was particularly concerned about the stipulation that should the new hospital corporation replace Stephenson within the first year, she would be paid the remaining amount in the two-year contract.

Should she leave in September, that could mean a parting check of about $750,000 or more.

Such lucrative severance packages, he said, are usually reserved for executives with many years' experience, he said.

He said he would raise his concerns at the Authority's next meeting July 28.