Saturday, February 18, 2012

A Camel Through the Eye of a Needle - at Non-Profit Health Insurers

It is time to drag out that well-worn phrase,...  sometimes you just cannot make this stuff up. 

Recently, the New York Post reported about executive compensation at some non-profit health maintenance organizations/ health insurance companies in New York.  To wit,


At one Catholic-run health insurer for the needy, charity starts in the executive suite.

Mark Lane, the CEO of the Fidelis Care/New York State Catholic Health Plan, receives a $1.1 million salary plus another $864,000 in retirement pension and other benefits, The Post has learned.

His total compensation comes to nearly $2 million.

Fidelis is a tax-exempt, not-for-profit HMO serving 750,000 patients throughout the city and state who mostly qualify for Medicaid, the public insurance program for the needy. That means nearly all of Fidelis’ revenues come from taxpayers.

Meanwhile Fidelis’ executive vice president and chief operating officer, the Rev. Patrick Frawley, an ordained Catholic priest, is paid $587,249.

Frawley received more than $900,000 in other retirement and deferred benefits — raising his total compensation to $1.54 million, according to IRS filings.

That’s a lot of pennies from heaven.

'It’s shocking to me,' said a source familiar with Catholic health charities.
Amazingly, the justification that was trotted out in this case was just of the "our CEO is brilliant" variety, but in this case, provided by a Bishop:
Fidelis defended the salaries of its top officers, who oversee a $3 billion operation.

Bishop Joseph Sullivan, a member of Fidelis’ board of trustees who formerly served as chairman, called the compensation 'generous but fair.'

He said the goal is for salaries to be at the '75th percentile' of rivals.

“Our ability to continue to grow is based on the quality of leadership. You get what you pay for. Lane and Father Frawley are worth every penny,” Sullivan said.

Fidelis also issued a statement explaining that Frawley, after serving in pastoral roles for 25 years, was granted release from his priestly assignment to pursue a career in health care.

So much for a vow of poverty, even at a non-profit providing health care mainly to the poor.


On the other hand, executives of secular, but still non-profit health insurers do even better,
Anthony Watson, CEO of EmblemHealth, gets a compensation package of $8.5 million — about half in salary and bonuses and the rest in retirement and deferred benefits, according to IRS filings.

Two other EmblemHealth executives also snagged multimillion-dollar compensation packages.

We have noted before how the "peer benchmarking process," setting executive (but not necessarily other) compensation based on a comparison with compensation at other, often highly selected organizations, coupled with the "Lake Wobegone Effect," the belief that one's own executives are always above average, will lead to inexorable rises in executive pay, regardless of performance, or whatever else is going on in the world. The Bishop's assertion that Fidelis' executive compensation should be at the seventy-fifth percentile, because of the "quality of leadership," not further described, is a perfect example of these phenomena.

It is striking to see these phenomena at a non-profit organization whose mission is:
to ensure that every resident, regardless of income, age, religion, gender, or ethnic background, has access to quality health care, provided with dignity and respect.

So, ad infinitum, I repeat.... 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.


JPB said...

Thank you again Dr. Poses for continuing to reveal these excesses. I'm not sure when the medical industry is going to wake up to the fact that things can not continue as they have been (for far too long)!

Anonymous said...

Is it the ratcheting effect? A ratchet racket?

Private Insurers said...

:) I wonder if they earn as much as the executive from the big private insurers: