Follow the Money: Non-Profit Hospital CEOs Quietly Collect Their Millions While US Health Care Reform Battle Rages

In Washington, DC the health care policy wars continue, with a few Republican senators working behind closed doors on a bill to "repeal and replace" Obamacare, aka the Affordable Care Act, and Democrats decrying their secrecy.  Just as during the era in which Obamacare was enacted, there is constant discusison of how US health care costs continually rise, driving up insurance premiums, and how access to health insurance is continually in peril.

However, while the current Republican process to write new legislation seems strikingly opaque, in neither era has there been a frank discussion of why US health care costs are so amazingly high, and disproportionate to our mediocre health care outcomes. In particular, there has hardly been any discussion of just who benefits from the rising costs, and how their growing wealth may impede any real cost-cutting measures.

Extreme Compensation for Top Managers of Non-Profit Hospitals

An obvious example is the gravity defying pay given to top health care managers, particularly the top managers of non-profit hospital systems.

Such systems provide much of the hospital care to Americans, and most have declared their missions to be providing the best possible care to all patients, or words to that effect.  Many explicitly include care of the poor, unfortunate and vulnerable as a major part of their missions.  As non-profit organizations, their devotion of mission provides some rationale to their freedom from responsibility for federal taxes.

As we last discussed in detail in May, 2016, we have suggested that the ability of top managers to command ever increasing pay uncorrelated with their organizations' contributions to patients' or the public's health, and often despite major organizational shortcomings indicates fundamental structural problems with US health, and provides perverse incentives for these managers to defend the current system, no matter how bad its dysfunction.

In particular, we have written a series of posts about the lack of logical justification for huge executive  compensation by non-profit hospitals and hospital systems.  When journalists inquire why the pay of a particular leader is so high, the leader, his or her public relations spokespeople, or hospital trustees can be relied on to cite the same now hackneyed talking points.

As I wrote in 2015,  and in May, 2016,

It seems nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same arguments, thus suggesting they are talking points, possibly crafted as a public relations ploy. We first listed the talking points here, and then provided additional examples of their use. here, here here, here, here, and here, here and here. 

They are:
- We have to pay competitive rates
- We have to pay enough to retain at least competent executives, given how hard it is to be an executive
- Our executives are not merely competitive, but brilliant (and have to be to do such a difficult job).

Yet as we discussed recently, these talking points are easily debunked.  Additionally, rarely do those who mouth the talking points in support of a particular leader provide any evidence to support their applicability to that leader.

But since May, 2016, we have steadily accumulated more stories about million-dollar plus pay for CEOs and other top managers of non-profit hospitals and hospital systems.  The reports may be shorter than they used to be, as journalism comes under economic and other attack, and as more journalistic resources go to cover the current president.  Here are some examples, in chronologic order per the date of the published article, rather telegraphically.

Examples of High Executive Pay

Boston, Massachusetts area, August, 2016 (Per the Boston Business Journal)

Brigham and Women's Hospital CEO Dr Elizabeth Nabel, total compensation $5.5 million in 2014, 20% higher than 2013.  Talking points =  brilliant: "committed to retaining a team of top professionals," per Edward Lawrence, Chair, Partners Board of Trustees

Tufts Medical CEO Dr Michael Wagner, $1.1 million, 82% increase.

UMass Memorial Medical Center CEO Dr Eric Dickson, $1.6 million, 74% increase, Patrick Muldoon, President UMass Memorial Center's biggest hospital, $1.2 million, 67% increase

West New York State, August, 2016 (Per the Buffalo News)

Catholic Health System CEO Joseph D McDonald, $1.4 million.

Roswell Park Cancer Institute CEO Candace S Johnson, $1 million

Kaleida Health CEO Jody L Lomeo, $1 million:

Talking points = brilliant "few executives have the required skill set and experience to fill these posts"

New Jersey, September, 2016 (Per NJ Advance Media)

Top 10 hospital CEOs received total compensation from $1.94 million to $4.7 million

New Orleans, Lousisiana, September, 2016 (Per the Times-Picayune)

Ochsner Health System former CEO and board chair Dr Patrick Quinlan, $3.3 million in 2014, current CEO and board member Warner Thomas, $1.49 million.  Talking points = competitive rates and brilliant: "we must compete nationally to recruit top talent"

Touro Infirmary CEO James Montgomery, $1.3 million

Children's Hospital Inc Chief Medical Officer Alan Robson, $1.26 million

General talking points = competitive rates: "you're looking to attract hospital executives from Californai or New York where they're paid a lot of money"

Gastonia, North Carolina, February, 2017 (Per the Gaston Gazette)

CaroMont CEO Doug Luckett, $1.03 million in 2015.  Talking points = retain and brilliant "paying what it takes to ensure they attract and retain top-level talent that can help provide premiums health care"

Dayton, Ohio, March, 2017 (Per the Dayton Daily News)

Kettering Health System CEO Fred Manchur, $1.65 million in 2015, former president Terri Day, $1.23 million, current president Roy Chew, $1.07 million

Premier Health former CEO James Pancoast, $1.42 milllion (excluding retirement payments) in 2015. Talking points = brilliant "you've got one person at the top who's trying to provide oversight, direction, and strategy.  At the same time, health care continues to grow in scope, complexity, regulation, and compliance."

York County, Pennsylvania, April, 2017 (Per the York Daily Record)

WellSpan Health president Kevin Mosser, $1.6 million in 2014.  Talking points = competitive rates Forrest Brisco, associate professor, Penn State Smeal College of Business, "nonprofit hospitals are competing with for-profit hospitals"; brilliant: "If you are at the top of a health care organization, you're going to have pay that's higher than many members of the organization. The the skill and knowledge to understand and interact with surgeons and physicians can command a high salary" [ed note: which often seems higher than those of some surgeons and physicians, though]; also brilliant: Robert Batory, senior vice-president and chief human resources officer, Wellspan, "Kevin has 24/7 responsibility for Wellspan."

Ephrata Community Hospital (WellSpan subsidiary) CEO  and WellSpan Medical Group (WellSpan subisidiary) CEO  "more than $1 million"

Winston-Salem, North Carolina, May, 2017 (Per the Winston-Salem Journal)

Novant Health Inc CEO Carl Armato, $1.31 million in 2015.  Talking points = retain and brilliant "high compensation levels are necessary to recruit and retain executive to run a 'very complex organization'"

Tri-Cities region, Tennessee and Virginia, June, 2017 (Per WJHL)

Wellmont Health System CEO Bart Hove, $1.4 million in 2015.  Talking points = competitive rates: Wellmont board of trustees chair Roger Leonard, "we have to compete on a national level and we're competing not just with other non-profits, but we're competing with other for-profits"

Mountain States Health Alliance CEO Alan Levine, $1.3 million in 2015. Talking points = competitive rates: HSHA board of trustees chair Barbara Allen, "make sure CEO pay is comparable to similarly sized facilities across the country with similar complexities"; retain and brilliant, "we want to attract the best talent ... and be able to retain him."

Connecticut, June, 2017 (Per the Connecticut Post)

Yale New Haven Health System CEO Marna Borgstrom, $3.8 million in 2015.  Nine other employees paid over $1 million, including Bridgeport Hospital CEO William Jennings, $1.5 million, Greenwich Hospital CEO Norman Roth, $1.3 million.  Talking points = brilliant: Yale senior vice president of public affairs, "Yale New Haven Health is the largest and most complex health system in the state."

Also, a total of 39 people, including the above, received over $1 million in 2016.

General talking points = brilliant: "there are a limited number of executives experienced enough to guide a state-of-the-art hospital and growing healthcare system in an increasingly competitive and complex industry"; competitive rates: "pay and benefits for such executives need to be comparable to what they could receive at another leading national hospital system or another industry"  
  
Summary and Conclusions

The current inflamed discussion of "Obamacare" and Republican attempts to "repeal and replace" it focuses on the costs of care and how they affect individual patients.  Examples include concerns about health insurance premiums that are or could be unaffordable for the typical person; insurance that fails to cover many costs, and thus may leave patients at risk of bankruptcy due to severe illness; poor people unable to or who might become unable to obtain any insurance, and perhaps any health care.  Yet there is little discussion of what really drives high and ever increasing health care costs (while quality of health care remains mediocre).

That may be because those who are benefiting the most from the status quo want to prevent discussion of their role.  There are many such people, but top management of non-profit hospitals provide a ready example.  Their institutions' mission is to provide care to sick patients.  Many such hospitals specifically pledge to provide care to the poor, vulnerable, and disadvantaged.  Non-profit hospitals have no owners or stockholders to whom they owe revenue.

Yet these days the top executives of non-profit hospitals receive enough money to become rich.

See the examples above. 

The justification for such compensation is pretty thin.  Consider the talking points above.  Apparently hospitals are extremely concerned about paying top management enough to recruit and retain them.  Yet there is much less evident concern about paying a lot of money to recruit and retain the health care professionals who actually take care of patients to fulfil the hospitals' mission.  Hospital CEOs are frequently proclaimed to be brilliant, visionaries, or at least incredibly hard workers with very complex jobs.  I wonder if those who make such proclamations have any idea what it takes to be a good physician or a good nurse.  Yet such health care professionals' hard work, long training, devotion to duty, and ability to deal with trying situations and make hard decisions rarely inspire hospitals to shower them with money.

Furthermore, hospital CEO compensation is almost never justified in terms of their ability to uphold and advance the fundamental hospital mission, taking care of sick people.  The articles above do not contain any justifications of generous CEO compensation based on hospitals' clinical performance or health care outcomes.  At best, hospital executive pay seems to be justified by the hospitals' financial, not clinical performance.

So why do non-profit hospital CEOs get paid enough to become rich?  Apparently, because they can.

As we discussed here, there is a strong argument that huge executive compensation is more a function of executives' political influence within the organization than their brilliance or the likelihood they are likely to be fickle and jump ship for even bigger pay.  This influence is partially generated by their control over their institutions' marketers, public relations flacks, and lawyers.  It is partially generated by their control over the make up of the boards of trustees who are supposed to exert governance, especially when these boards are subject to conflicts of interest and  are stacked with hired managers of other organizations.

Furthermore, such pay may provide perverse incentives to grow hospital systems to achieve market domination, raise charges, and increase administrative bloat.  As an op-ed in US News and World Report put it about executive pay in general,

But the executive pay decisions made inside corporate boardrooms have an enormous impact in the outside world. Outrageous pay gives top executives an incentive to behave outrageously. To hit the pay jackpot, they'll do most anything. They'll outsource and downsize and make all sorts of reckless decisions that pump up the short-term corporate bottom line at the expense of long-term prosperity and stability.

So I get to recycle my conclusions from many previous posts....

We will not make any progress reducing current health care dysfunction if we cannot have an honest conversation about what causes it and who profits from it.  In a democracy, we depend on journalists and the news media to provide the information needed to inform such a discussion.  When the news media becomes an outlet for  propaganda in support of the status quo, the anechoic effect is magnified, honest discussion is inhibited, and out democracy is further damaged.

True health care reform requires publicizing who benefits most from the current dysfunction, and how and why.  But it is painfully obvious that the people who have gotten so rich from the current status quo will use every tool at their disposal, paying for them with the money they have extracted from patients and taxpayers, to defend their position.  It will take grit, persistence, and courage to persevere in the cause of better health for patients and the public. 


And for our musical interlude, the beginning of "For the Love of Money," sung by the O'Jays, used in the official intro of season 2 of guess what show?