Tuesday, September 28, 2010

More Tales of Hospital Executive Compensation: Pay for What?

I have collected another series of stories from the wild and wacky world of health care executive compensation.  These are from three different hospitals/ hospital systems, ordered from smallest to largest.

Jefferson Healthcare

This story, from Jefferson County, Washington state, came from the Peninsula Daily News:
When Mike Glenn takes over the Jefferson Healthcare CEO office Oct. 4, he will be receiving $225,000 annually to run the 25-bed publicly funded hospital.

And he will become the highest-paid public official in Jefferson County.

Jefferson Healthcare's budget is $65 million, and it employs 360 full-time workers and about 550 part-timers.

Note that the amount above is apparently salary, not total compensation, which could well be higher.

Lakeland Regional Medical Center

This story, from Lakeland, Florida, came from the Lakeland Ledger.

The latest IRS report available on Lakeland Regional Medical Center shows, for the first time, how much LRMC officials receive in base pay and how much in 'bonus and incentive compensation' based on meeting goals assigned them.

Not-for-profit hospitals are required to release their IRS reports. Previously, those reports combined salary and bonuses, which may or may not be awarded in a given year.

Jack Stephens, president and chief executive, was paid $856,514. Of that, $644,034 was his base pay and $212,480 was bonuses.

Second-highest paid was Paul Powers, vice president and chief financial officer. He earned a total $435,581, of which $352,661 was base pay and $82,920 in bonuses.

Third was Dr. William Sadowski, psychiatrist, earning $430,117, of which $149,226 was base pay and $280,891 bonuses.

Others listed as highest compensated:

Dr. Edward Sammer, chief medical officer, $404,789 ($327,607 base pay, $77,182 bonus).

Dr. Olumide O. Sobowale, who heads trauma services, $306,792 ($227,692 base pay, $79,100 bonus).

Janet Fansler, vice president/cardiac and specialty care, $266,672 ($215,954 base, $50,718 bonus).

Mary Ford, chief information officer, $264,283 ($213,978 base, $50,305 bonus).

Carole Philipson, vice president support services and facilities, $246,530 ($199,474 base, $47,056 bonus).

Hugh Autry, vice president acute/surgical care, $245,216 ($198,408 base, $46,808 bonus).

Jeffery Payne, vice president human resources, $229,304 ($185,696 base, $43,608 bonus).

John Schliesser, vice president planning and external relations, $226,571 ($183,363 base, $43,208 bonus).

Dr. Michael A. Campanelli, neurosurgeon, $197,887, not divided into base/bonus.

Ken Menefee, executive director LRMC Foundation, $181,045 ($151,142 base, $29,953 bonus).

Dr. Joy L. Jackson, physician adviser, $164,923, not divided into base/bonus.

Dr. Rajan K. Raj, trauma surgeon, $141,344, not divided into base/bonus.

Note that LRMC is a bigger institution that Jefferson Healthcare, with operating revenue just under $650 million. However, it is now having financial woes, as reported in a separate story in the Ledger.
Lakeland Regional Medical Center's rates will increase an average 10 percent, for the third year in a row, in the fiscal year starting Friday.

These continual increases reflect the financial pressures affecting hospitals, patients and the health care system nationwide.

Costs are increasing for almost everything LRMC pays for - drugs, bad debts, charity care, write-offs to managed-care and government insurance plans, insurance and utilities among them.

The number of hospitalized patients is expected go up very little, an increase of slightly less than 2 percent, according to Vice President and Chief Financial Officer Paul Powers.

UCLA Medical Center

Our last story, from the Los Angeles Times, is about a large, prestigious academic medical center.
First, the board [of regents] approved $3.1 million in bonuses for medical center executives that are linked to efficiencies and improvements in patient health. That money, which comes from hospital revenues, will be distributed among 37 UC hospital leaders across the state.

As part of that group, Feinberg, UCLA's hospital system chief executive officer, will receive a $210,000 bonus. But in a more divisive matter, UCLA officials also received the regents' approval to give Feinberg an extra raise of about $410,000, boosting his total compensation to more than $1.3 million.

Why was this divisive? It turns out that the University of California system is in deep financial trouble.
The University of California regents took steps Thursday to shore up the university's badly underfunded retirement plans by raising the amounts employees and the university will be expected to contribute to them.

In particular,
Meeting at UC San Francisco, the regents unanimously approved a plan that will raise contributions to the pension and retirement health plans over two years to 5% from the current 2% of employees' paychecks, and to 10% from 4% of payroll for the university. The change will take effect quickly for about half of UC's 115,000 employees, including its faculty, but must be negotiated with its unionized employees.

More tough choices are ahead as UC tries to fill an estimated $21-billion liability gap in its retirement plans. Until this spring, neither the university nor its employees had made any contributions to the plans for 20 years.

In December, the regents are expected to review proposals for even more extensive changes, including one that would create a less generous program for employees hired after 2013 and boost the minimum retirement age to 55 from 50.

So in times of such financial stress, why increase the compensation of the UCLA medical center CEO so much?
UCLA Chancellor Gene Block said Feinberg was doing an excellent job and was being wooed by other employers. 'Keeping this team together is essential,' he said.

Summary

So to summarize, the CEO of a tiny hospital gets $225,000 in salary, presumably more in total compensation. The CEO of a mid-size medical center with stagnant revenues and rising costs got over $850,000 in total compensation, while 11 other executives, mostly non-physicians, all got more than $180,000. The CEO of a large medical center, within a university system with a seriously underfunded pension plan which is increasing deductions from all employees' pay, and contemplating reduced retirement programs for new hires, got a $210,000 bonus and a $410,000 raise for total compensation of more than $1.3 million.

So once again we see that even in tiny, public hospitals, the CEOs are paid well, and in bigger hospitals, even those in the midst of financial problems, the CEOs are paid very well. 

There does seem to be a rough correlation with hospital size.  Executives, and their boosters like to imply that the bigger the institution, the harder the job.  Keep in mind, however, that most hospitals, like most modern corporations, are highly pyramidal.  The CEO hardly manages each and every worker.  Rather, the CEO manages a few top executives, who in turn manage a few middle-managers, etc, etc.  For example, a Bloomberg report noted that only 11 top executive report to the CEO of the huge Bank Of America. 

Another claim by CEOs and their defenders is that it is all about pay for performance.  As noted above, and in other posts about executive compensation, the criteria for performance are rarely stated, and hardly explicit.   Anecdotally, there are many examples, including one above, of financially stressed institutions cutting back in other areas, but paying top executives more.  As in the last case above, nearly every CEO seems to be doing a wonderful job, at least according to the boards of directors or trustees to whom he or she is supposed to be accountable. 

In fact, the real lesson seems to be that top managers almost always do well financially, regardless of performance, regardless of financial pressures on their organizations, and do better and better the longer they hold their jobs.  Top executives are really different from you and me.

I say again, if we do not hold health care leaders accountable, if we do not provide them with incentives that are proportional to their actual performance, why should we expect health care organizations to do any more than satisfy their leaders' self-interest?

5 comments:

Anonymous said...

Thieves! Call the criminal authorities.

Anonymous said...

You should see what the folks at Northwestern Memorial in Chicago make!

pjacob said...

Hey Dr. Roy,
That is disturbing.

Question: How come MDs don't hold executive positions in Hospitals? Why such intensive need for bureaucrats to run hospitals, aren't doctors the best to do it?

And about "Northwestern Memorial in Chicago make!" tell me about it. That place is....complicated.

Roy M. Poses MD said...

PJacob,
It seems that the take-over of most health care organizations by MBAs and their ilk, displacing doctors, nurses and other health care professionals, has something to do with the move to break the doctors' "guild" as advocated by Enthoven in the 1980s. See this post: http://hcrenewal.blogspot.com/2006/03/consequences-of-breaking-physicians.html
But like many issues discussed in this blog, there has not been a lot of scholarly activity or historical/ sociological etc research on this issue.

Roy M. Poses MD said...

By the way, if the Northwestern Memorial compensation is public, can someone provide a link or citation?