Let me start chronologically.
The Stratospheric Compensation of the CEO, and Its Justification
In 2009, the compensation given to the CEO of the Palomar Pomerado Health, a public health system in the vicinity of San Diego, California, provided some headlines. As reported then by the San Diego Times-Union,
Palomar Pomerado Health CEO Michael Covert has received a 26 percent — or $154,000 — pay raise.
The increase, approved by the hospital district’s board of directors last month, is retroactive to July 1, the beginning of the fiscal year, board Chairman Bruce Krider said.
The increase brought Covert’s pay from $582,000 a year to $736,000 a year.
Not unexpectedly, the hospital system board chair had an explanation:
Krider said Covert has done a 'phenomenal job' of improving the quality of care and charting the district’s future, but is underpaid compared with five California hospitals that generate gross revenues of $357 million to $457 million a year.
By 2010, it was apparent that Mr Covert's compensation was even larger than it appeared above. As reported then by the San Diego Times-Union:
The top official at Palomar Pomerado Health, a public agency serving health-care needs in Poway and Escondido, receives in excess of $1 million in compensation per year.
Michael Covert, who has run the North County hospital district since 2003, receives a base salary of $736,000 a year. Retirement, bonuses and other benefits push Covert’s total pay past $1.1 million.
The compensation package is in the median range of his private and nonprofit counterparts and places Covert among the elite among public employees.
At that point, the system's board chairman gave a similar justification:
Bruce Krider, the health-care district chairman, said Covert does an excellent job managing a complex enterprise that includes two major hospitals. Covert juggles the interests of staff, physicians, patients, volunteers, board members and other stakeholders, he said.
'A million dollars sounds pretty good to anybody, but my view is, pay a lot and expect a lot,' said Krider, a management consultant who also is a former hospital executive. 'You can’t have some mediocre public servant. You need somebody that has got vision, that can see the issues that are most important and put it all together.'
Later in 2010, when it turned out that Mr Covert was the second most highly paid government official in California (and the most highly paid official was facing criminal charges), the Times-Union reported:
'We have to compete for talent with all of the for-profit and nonprofit health systems,' said Theodore Kleiter, a former hospital administrator who is now chairman of the Palomar Pomerado Health board of directors. 'If you want the top management, that’s what you have to pay.'
Kleiter said Covert is one of the nation’s leading health care administrators and noted only 3 percent of the district’s $480 million budget comes from taxpayers.
'The people in our area expect the best and we’re trying to provide that,' Kleiter said
Also, per the Los Angelest Times a few weeks later:
Officials at the hospital strongly defended his pay.
"There's this notion that because you're a public agency you should hire less-talented people than private companies, and if we followed that idea, PPH would not be where it is today," hospital spokesman Andy Hoang said. "We must compete for the best physicians, nurses and executives to provide the highest level of care. The community deserves that."
So, do we see a pattern here? According to one board chairman, Mr Covert had "vision," was doing an "excellent job," a "phenomenal job." Furthermore, the chairman gave Mr Covert credit, apparently sole credit, for improving quality of care within the system, and noted how he was responsible apparently for all that was done by everyone who worked in or was associated with the hospital. That board chairman was a "management consultant", and "former hospital executive." The next chairman thought Mr Covert was "top management." and one of "the nation's health care administrators." That chairman was "a former hospital administrator." Finally, a paid hospital spokesman insisted Mr Covert is one of the "best executives."
Celebrity Endorsements and Fines for Medical Errors
On the other hand, once more reported by the Times-Union, some community residents, including hospital nurses, were not convinced that Mr Covert's performance was so unequivocally brilliant:
More than 200 community residents signed petitions raising questions about the salary paid to the chief executive at Palomar Pomerado Health and other business practices at the medical organization.
'Your highest priorities should be improving the health of our residents ... Out of control executive pay, costly celebrity spokespeople endorsements and out-of-district clinics (are) a waste of public funds,' the petition states.
The signatures were collected by nurses concerned about the compensation package and other issues over the past months.
By the way, concerning the issue of celebrity endorsements:
The district signed former San Diego Chargers running back LaDainian Tomlinson to a $2 million promotional contract before he signed with the New York Jets, a marketing plan that was criticized by some employees.
And this week, there was more reason to think that all is not so "phenomenal" at Palomar Pomerado.
The San Diego Union-Tribune just reported about California hospitals fined by the state for serious errors affecting patient care.
Five San Diego County hospitals were fined a total of $300,000 for errors that caused serious injury or death to patients, state regulators announced Thursday.Note that the previous citations came in 2010, the year in which Mr Covert's compensation exceeded $1 million.
The penalties were levied for leaving a retractor inside one patient and a 28-inch guide wire inside another after surgery, giving two deadly drug overdoses, and leaving a patient unattended who fell and then died from a fractured skull.
Palomar Medical Center in Escondido, Pomerado Hospital in Poway and Scripps Memorial Hospital in La Jolla were each fined $75,000, the highest fines among 12 California hospitals penalized by the state on Thursday. All three had been cited at least twice before, prompting the higher penalty.
Of course, medical errors are unfortunately not rare. I suspect that while we may be able to reduce them, they cannot always be avoided. I do not mean to condemn these hospitals, nor the people who work there.
In one sense, it would be silly to expect Palomar Pomerado Health to be perfect, for errors and mistakes never to be made there. It also would be silly to blame the system's CEO for everything that went wrong there. It would be silly, except that the justifications given for the comparatively stratospheric compensation given to the CEO of this government funded health care organization implied that he was nearly perfect, and he was responsible for all the good that went on within the organization.
So here again we see an example of a health care leader who is nearly god-like, is responsible for all the wonderful things that his organization does, and is therefore worthy of pay sufficient to make him rich, at least according to the board of directors to whom he is supposed to report. On the other hand, there seems to be no real evidence of the CEO's near divinity, and if he is supposed to be responsible for all the wonderful things his organization does, he also ought to be responsible for its errors and mistakes.
In fact, comparatively high executive compensation justified by hyperbole seems more likely to indicate a board that is not sufficiently independent to exert stewardship than an executive who is truly exceptionally brilliant. Lack of such stewardship, in turn, may lead to lack of executive accountability and hence poor rather than brilliant outcomes for the health care organization.
So here is the latest example of CEO disease. As it becomes more prevalent, health care leadership becomes more disconnected, unaccountable, and self-interested. The increasing prevalence of CEO disease in health care may explain why costs keep increasing, access keeps declining, and quality and safety are stagnant.
As I have said before,.... 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.
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.
We need to launch a crash program to prevent CEO disease and cure existing cases, before it kills off our health care system.