The head of Middlesex Hospital earned $1.9 million last year, making him the highest-paid hospital administrator in the state. In just three years, CEO Robert Kiely's compensation nearly tripled, part of a trend in soaring compensation packages for hospital leaders.
Last year, Kiely and seven other Connecticut hospital administrators - three of them top managers in the Yale-New Haven Hospital Health System - made more than $1 million.
The Courant ranked the highest-paid hospital CEOs in Connecticut using data recently filed with the state Office of Health Care Access.
Yet, a close look at the numbers shows how arbitrary compensation can be. In Middletown, Kiely heads a community hospital that has expanded its ER but is not a state-approved trauma center. In New Haven, [Marna] Borgstrom oversees a teaching hospital [Yale-New Haven Hospital] and two smaller hospitals that together bring in three times the revenue. Though both executives made roughly the same in salary, Kiely received an extra $395,000 in benefits-most of it retirement money.
At Stamford Hospital, [Brina] Grissler made $376,000 more last year than Hartford Hospital President John Meehan, who oversees a health system with three times more revenue. A spokesman said Grissler's compensation takes into account his long tenure and the cost of living in Fairfield County.
The article provided some rationalizations for how much hospital executives now make.
The hospitals say they need to offer competitive pay to keep talented managers. The job of running a hospital has grown more complex, they argue, amid falling government reimbursement rates for services and rising demand for charity care.
'We can't do excellence on the cheap,' said James Matschulat, head of the compensation committee at Middlesex and a retired insurance executive. 'We compete with every hospital in the nation for top talent.'
Strong leadership is needed for hospitals to succeed financially, and therefore serve the public good, the hospitals contend. 'These are very complicated and difficult businesses,' said Robert Ritz, CEO at St. Mary's, a Catholic hospital in Waterbury. 'We have a charitable, social and healing mission.'
On the other hand, such lavish compensation of managers of not-for-profit organizations often considered charities makes some people uncomfortable. Although excellence may not come cheap, it is not clear that all hospital executives are excellent. And some of the explanations proposed for the phenomenon are not so rational as those above.
'Think about how many uninsured people that would cover,' said Ellen Andrews, head of the Connecticut Health Policy Project in New Haven.
Compensation at nonprofits is exploding because board members often come from the corporate world, where lavish CEO salaries are accepted, said Pablo Eisenberg, a senior fellow at Georgetown University's Public Policy Institute. Compensation consultants are also driving up pay by referencing corporate salaries in their surveys. As the salary gap widens between top managers and their staff, teamwork and collegiality suffers, he argues.
'Boards are not exercising their fiduciary duty,' he said. 'No one is questioning these excessive compensations.'
Note that we previously posted about arguments that hospital board members see their job mainly as a networking opportunity and a chance to go to fancy social events, at least in Massachusetts, Connecticut's northern neighbor.
As briefly mentioned in the Courant article, Senator Charles Grassley, (R-Iowa) also views lavish pay of hospital administrators with a jaundiced eye, and the scope of his concern is not restricted to the states of Connecticut or Massachusetts. As noted in the Chronicle of Higher Education,
A powerful Republican senator has asked the Government Accountability Office, Congress's investigative arm, to examine how much free care and other services nonprofit hospitals provide to the regions in which they are located.
Sen. Charles E. Grassley of Iowa said he is concerned that hospitals may not be providing enough services to their local areas to justify the tax breaks they receive. Mr. Grassley, the top Republican on the Senate Finance Committee, also said that some hospital executives and board members may be overpaid.
'There have been alarming reports about the lavish lifestyle that some of these individuals lead courtesy of the nonprofit hospital as well as the business ventures that enrich these individuals to the detriment of the nonprofit hospital,' he said.
In my humble opinion, there are some hospital executives who certainly earn every dollar they make.
But it seems that
- hospital executives' total compensation is often well concealed
- the relationships among such compensation and hospital size, hospital performance, and CEO performance are not obvious
- many anecdotes, most muttered quietly in hallways, suggest very well-paid CEOs live lavish life-styles disproportionate to their hospitals' size, charitable mission, and struggling financial status
- such disproportionate pay and life-style of some hospital CEOs may demoralize their employees and health care professionals, even while delighting their golf-playing buddies among the local gentry
- I would believe the sincerity of those who espouse pay for performance (P4P) for physicians if they were equally enthused about applying some measure of rationality to the compensation of health care executives.