Paul F. Levy, the CEO of Beth Israel Deaconess Medical Center who announced that he would resign his position last week, will receive up to $1.6 million in severance pay over the next two years. The payout, which can be lowered if Levy takes a new job, is equivalent to two years of his annual base salary of $800,000.

Levy’s resignation comes in the wake of a $50,000 fine from the Medical Center’s board last May for hiring and promoting a female employee with whom he had an allegedly inappropriate relationship. At the time, the board called the situation a “serious lapse in judgment,” and concluded that it “created an improper appearance and became a distraction within the hospital.”

Massachusetts Attorney General Martha Coakley’s office released a report in September about the incident, stating that the relationship endangered the hospital’s reputation and management. Coakley herself told the hospital board to do “some soul-searching” regarding keeping Levy on as the head of its management.

Stephen B. Kay ’56, Chairman of the Medical Center’s Board of Directors wrote in an e-mail announcing Levy’s resignation that it was part of a “negotiated settlement” the board had reached with Levy.

Levy took the helm at the Medical Center at a time of financial trouble in 2002, and has been credited with improving its financial situation.

“While I remain strongly committed to the fight for patient quality and safety, worker-led process improvement, and transparency, our organization needs a fresh perspective to reach new heights in these arenas.” Levy wrote in an e-mail message to the Medical Center community last week. “Likewise, for me personally, while it has been nine great years working with outstanding people, that is longer than I have spent in any one job, and I need some new challenges.”

Both Levy and the Medical Center board deny that Levy’s relationship had anything to do with his resignation.

Women’s groups hailed Levy’s departure as something a long time in the making. “The fact is, stepping down is the least he could do, but it comes very late in the game,” women’s rights lawyer Wendy J. Murphy told the Boston Herald.

While women’s groups have praised Levy’s departure, the severance pay decision has come under fire from unions, according to an article published today by the Boston Herald.

“The board should immediately rescind this agreement and return the money to the public charity,” Veronica Turner, executive vice president of Service Employees International Union Local 1199, said in a statement. According to the Herald, the union, which is the largest healthcare worker’s union in the state, is attempting to unionize some Medical Center workers.

After resigning his position at the hospital, Levy has changed the name of his personal blog to “Not Running a Hospital.” It used to be called “Running a Hospital.”

—Staff writer Benjamin M. Scuderi can be reached at bscuderi@college.harvard.edu.