Multiple problems lead to medical group closure

Financial irregularities, debt and declining membership among younger doctors are being blamed for a decision in August to close the 90-year-old Jackson County Medical Society.

The society, which supported doctor networking, funding for impoverished patients and political action at the state level, had an annual budget of almost $200,000 and closed with a debt of $60,000 to $80,000, said President Dr. Erich Weber.

Weber said operations lacked oversight. Day-to-day expenses were not paid, and old, high-interest loans, some as high as 12.5 percent, got interest-only payments for many years.

Debra McFadden, the society's executive director for the past 24 years, was fired last spring, Weber said.

Most of the society's income came from dues, with a smaller amount from a physician's directory it published annually, Weber said. Local hospitals and doctors contributed to the society's VolPACT program, which provided several million dollars for poor and uninsured patients over the years. That program will now be administered by Community Health Center in Medford.

The society's scholarship fund for medical students, with more than $1 million on account, was put in the hands of a committee of local physicians led by retired orthopedist Earl Peterson of Medford, Weber said.

The society's money problems came to light earlier this year when McFadden paid an IRS debt of $17,000 for unpaid payroll taxes going back many years, Weber said.

"That's when I got real anxious," Weber said, "and when I told the past presidents, they were alarmed, and we started asking questions. If we didn't pay the payroll taxes, then where did the money go?"

Weber said QuickBooks records turned out to be sketchy — and he was told paper records had been destroyed by fungus.

Weber brought in a panel of past JCMS presidents and lawyers and accountants, who faulted the society's "very poor accounting practices" and the fact that it paid McFadden more than $50,000 a year and an equal amount for travel and expenses to Oregon Medical Association events, while day-to-day bills, such as utilities, often went unpaid and dues often went uncollected.

Weber said he questioned the necessity of such travel and events. "This (salary and travel) was $4,000 a month, a huge amount ... half our budget, and is that prudent when we have all these high-interest loans not being paid?"

When they reviewed the situation, the past JCMA presidents said they hadn't known about the lines of credit opened in the 1990s and questioned why they were necessary, he said.

Weber revealed the society's insolvency to its 235 member physicians, telling them, "We're in a real hole that's nearly impossible to get out of," he said. He asked for donations, which many doctors gave, but noted that he feared he might be "selling tickets for the Titanic," since the society might have to make the painful decision to go under.

McFadden, a Medford resident who says she's looking for work, said her dismissal came as a surprise to her and that she believes her spending on travel and expenses was "appropriate and related to our role."

She added that the society had gotten in financial difficulty over the last two or three years — and that the doctors are "working for larger organizations so they feel less need for a services provider like the society."

"I did the best I could," McFadden said about her bookkeeping duties, adding that the society would have leveled itself out over time.

"They were unhappy with my performance," she said. "They were wonderful people, and I did a good job. Oversight (of her work) was not put in place, and I would have liked more input from the board. They hadn't communicated with me in recent years."

Weber said he contacted area law enforcement agencies to look into the medical society's books, and they conferred with the OMA legal staff. But "because the bookkeeping was so screwed up ... they basically said there's nothing they can really grab onto," he said.

The medical society once had almost 500 members but has experienced declining membership in recent years, Weber said. Younger doctors of today are often affiliated with hospitals and medical groups and spend more time with families and personal activities and less time with medical colleagues and attending professional lectures and events. Networking through organizations such as JCMS used to be more important for increasing physicians' practices than it is today, he said, adding that the following "is stronger from age 45 on."

Local physicians will continue to send delegates to the Oregon Medical Association, he said, to handle issues at the state level. Physicians interested in being delegates should contact Weber at 541-778-2426.

The scholarship fund will remain in an endowment at US Bank and is granted to medical students in their second through fourth years who grew up in Jackson and Josephine counties. The physician directory will continue to be published under "new leadership," he said.

VolPACT can now be reached at 541-842-7766.

JCMS's physician referral service will not continue, Weber said, noting that people should contact local community clinics or physician offices to find referrals.

The Jackson County Medical Alliance, a separate organization, is not affected by the society's closure, he said.

Weber added that, if not for the financial difficulties, the society would have continued. Letters are being sent to creditors explaining that some bills may not be paid, he said. Letters are being sent to physicians seeking help paying for "debt reduction," including paying an interim bookkeeper engaged in straightening out financial affairs.

A new organization, he said, "could rise up again, after this."

John Darling is a freelance writer living in Ashland. Email him at

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