Tuesday, June 28, 2011

More Revelations About How Top Managers Prosper While Care-Giving Employees are Laid Off This Time Leads to Labor Strife

Last month, we discussed the contrast between executive compensation at Salinas Valley Memorial Healthcare System (SVMH), a small California public hospital system, and the treatment of employees in the trenches. While the hospital had laid off workers ostensibly because of the poor economic climate, the local newspaper revealed that its CEO was leaving with a multi-million dollar retirement package, and that some of his supposed severance pay had been given him before he was severed.

This month, amidst growing labor unrest partially driven by the disparate treatment of the hired top manager and the more lowly employees who actually take care of patients, a new report revealed further contrasts between how hired executives and "regular" employees are treated.

Let me give a blow by blow summary in chronological order.

The Employees Strike

This month, the hospital system suffered its first strike ever, partially in response to the discrepancy between executive compensation and how lesser employees were treated.  According to the Los Angeles Times:
About 850 workers at a Salinas public hospital went on strike Tuesday, about two months after revelations of a multimillion-dollar pension awarded to the hospital's CEO.

Caregivers at Salinas Valley Memorial Hospital walked off their jobs at 6 a.m., according to representatives of the National Union of Healthcare Workers. The workers are protesting proposed layoffs and cuts to their retirement benefits as well as pay given to hospital executives and consultants.

The Times reported in April on the retirement package granted the hospital's outgoing chief executive, Samuel Downing, which included about $5 million in supplemental payments along with a $150,000 annual benefit. Hospital officials and board members have defended the package, saying that Downing was a successful leader throughout his 27 years as CEO.

The hospital workers' union has been negotiating with administrators since January and indicated its plan to strike earlier this month, according to union vice president John Borsos.

'There's a sense of disbelief here that the hospital can come up with millions of dollars for Downing's retirement and millions for their consultants, but when it comes to caregivers by the bedside, they say they can't find the money,' he said.

The Management's Lock-Out

Then, hospital managers' responses to the strike provoked more anger from union members, and one state agency affirmed their complaints, according to The Californian:
The California Public Employment Relations Board issued a five-page complaint against Salinas Valley Memorial Healthcare Systems, alleging that the public hospital district violated several sections of state labor law when it barred striking workers from returning to their posts Wednesday.

Prompted by charges brought by the National Union of Healthcare Workers, PERB Regional Attorney Katharine Nyman charged SVMH with committing unfair labor practices and with violating PERB regulations in the way it blocked workers from going back to work after Tuesday's one-day labor walk-out.
Strikers Picket a Board Member

Then, the union escalated its protest by picketing the house of the hospital board treasurer, according to television station KION:
Thursday morning, some union members took their demonstration from the front entrance of SVMH directly to the home of Harry Wardwell, Treasurer of the SVMH Board of Directors and President of Rabobank. 129 employees were still unable to go back on the job, replaced by temporary workers for one more day.

Wardwell is one of five publicly elected members of Salinas Valley Memorial Healthcare System's Board of Directors.

'We have to draw the Salinas community and everybody in the hospital district. Every resident in this neighborhood votes and they need to know that Harry Wardwell is making these cuts,' said Marilyn Benson, an NUHW member.

How Executive Pay Rose Faster than Inflation While Employees Were Laid Off

Just after that protest ended, The California published a new article about executive compensation:
At the same time it laid off hundreds of rank and file employees, the Salinas Valley Memorial Healthcare System steadily provided generous increases to the salary and benefits packages of its senior executive team, records show.

SVMH vice presidents Bev Ranzenberger, John Fletcher, Dr. David Perrott, Elizabeth Lorenzi, Irene Neumeister and James Griffith all received double-digit increases in their total compensation packages during the years of 2005 through 2010 according to an SVMH document obtained by The Californian on Thursday.

And while not all of the vice presidents received salary increases every year during that time period, they all received percentageincreases in total salary and benefits of 29.4 percent to 153.8 percent, which translates to annual average increases of between 5.9 percent and 30.8 percent. By comparison, for the12 months that ended in May, the national rate of inflation rose just 3.6 percent, based on the Consumer Price Index.

News of the increases incensed National Union of Healthcare Workers leaders whose members went on a one-day strike Tuesday after declaring an impasse with health care district management over wage and benefit issues and over how many more employees will be laid off as SVMH continues to struggle with reducing costs.

'How could a majority of the board approve of the outrageous salary increases while claiming that the hospital had to lay off hundreds of caregivers out of financial necessity?' asked union vice president John Borsos. 'It's not just hypocritical, but it demonstrates that the hospital has more than enough money to keep caregivers at the bedside.'

Note that the SVMH leadership's defense of the pay given top executives was typical of explanations of outsize pay given to other health care leaders:
But according to SVMH spokeswoman Adrienne Laurent, the executives' salaries are in keeping with industry standards and have been reviewed by an outside consulting agency for appropriateness.

"Compensation for our hospital executives is not taken lightly, and that's why our [Board of Directors] engaged an outside, third party to assist us in this process. An important goal set forth by our board is that all of our employees, including our executives, receive compensation that is comparable to our competitors. In order for us to successfully recruit and retain the best people, it is critical that we remain competitive with not only other public district hospitals, but also private companies," Laurent wrote in an email to The Californian.

In her email, however, Laurent did not address the seeming disparity of the institution increasing executive salaries while at the same laying-off employees.

Laurent also added that the six SVMH vice presidents do not enjoy some of the standard perquisites offered to executives at other health care institutions such as bonuses and car and cellphone allowances.
It must be tough having to pay for a cell-phone package when one's salary is only somewhat in excess of a quarter-million dollars a year.

Note that the irony of defending high pay to recruit "the best people" to executive positions while health care professionals are being laid off seemed to escape Ms Laurent.

Once again we see how the notion that "top management are different from you and me" plays out throughout the health care system. Even at a small public community hospital system, the top hired managers seem to feel entitled to be treated differently, and much better than other employees, even those who directly care for patients.  Top hired managers do not flinch at the doublethink necessary to use poor financial results as a rationale for laying-off line employees, but simultaneously for hiking the pay of top hired managers.

Again, we see how top hired managers of all sorts of health care organizations, big and small, for-profit, not-for-profit and government, delivering direct care, and manufacturing products used in care, have become accountable only to themselves. This situation, of course, produces health care done first for the benefit of its new overlords.

The case of Salinas Valley Memorial Healthcare, however, also now demonstrates that this situation is starting to produce reactions.  It now seems that the ordinary employees of health care organizations are not continuing to welcome their new overlords. SVMH endured its first strike ever mainly in response to the disparity between how top hired managers treated other employees and treated themselves. Angry employees publicly identified the board of trustees that seemed to exert no functional oversight over top management as part of the problem. I suspect that if current trends continue, we will see more labor unrest, and that unrest will be directed at hired managers and those who are supposed to oversee them.

This may eventually yield major changes in how health care is lead, but if the confrontations continue, these changes may be very messy, and continued strife may end up being bad for everyone.

Instead, we should consider real, peaceful health care reform. As I have repeated endlessly,... health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.


InformaticsMD said...

The workers are protesting proposed layoffs and cuts to their retirement benefits as well as pay given to hospital executives and consultants.

It's abut time.

The 'consultant' game is where major leaks of hospital money occur.

One might ask: why do we need consultants? Cannot we manage our own affairs? Isn't it foolish to believe someone can know our business better than ourselves? Isn't it even more foolish to believe that it's OK for someone to know our business better than ourselves?

At one hospital where I was CMIO, for the money that was spent on consultants (appx. $500,000) on IT, I could have started an entire department of true experts.

Instead, we got a big, fat, fancy consultant booklet that went on a shelf, never to be looked at again...

-- SS

Steve Lucas said...

Pounded into my head time and time again in finance classes was the effect of compounding. A small raise this year followed by a small raise next year on the new base and so on and soon this leads to a very big salary in a very short time.

People knowing this then try to pay for this card trick on the backs of those providing service is criminal. The looser, once again, is the patient, as staff try to do more with less. Staff then self destruct and burn out and the top managers complain about not being able to hire good help.

Steve Lucas