The Bloat Continues: More Tales of Non-Profit Hospital Executive Compensation

While unemployment remains high, and mortgage foreclosures continue in the US, nothing seems to stop the rise of health care costs, lead by compensation for top health care leaders. So, it is time once again for a round-up of inflated executive compensation at non-profit and government hospital systems.  We will describe the bloat in order of the appearance of the information in public.

Cincinnati

The December, 2011, the Cincinnati Business Courier tabulated the pay of the best compensated hospital employees, and discussed the results in an accompanying article.  By my count, 19 local hospital employees made more than $1 million in 2010.  These included 6 system CEO, 4 division CEOs, 5 chief level executives or vice presidents, 1 clinical department chair, and 3 doctors.  The top compensation went to Kenneth Hanover, CEO of Health Alliance/ UC Health, $2,799,338. Three others made more than $2 million.

Western New York

In January, 2012, Buffalo Business First reported:

The top hospital administrators in Western New York took home more than $53 million in compensation during 2010, with four executives earning $1 million-plus paydays.

Hospital presidents and chief executives at the region’s two largest health systems were among the top earners, with James Kaskie, president and CEO of Kaleida Health , earning $2.36 million; and Joseph McDonald, president and CEO at Catholic Health , earning nearly $1.1 million.

Kaskie’s compensation, as well as Kaleida executives Connie Vari, Robert Nolan and Margaret Paroski, included a deferred retirement plan payout. All four were among the top five earners for 2010, the most recent year for which complete data is available.

The life of a top hospital executive near Buffalo was not quite as plush as in Cincinnati. Only 4 made more than $1 million, including the CEO, Chief Medical Officer/ Executive Vice President, and Chief Operating Officer of Kaleida Health, and the CEO of Catholic Health System. Eleven more executives got more than $500,000.

North Carolina

It was a very good year for executives from some of the state's biggest health care systems, per a February, 2012 article in the Charlotte Observer.

Carolinas HealthCare System paid its CEO $4.2 million in 2011, $523,000 more than the year before, as the system celebrated a profitable year and met all of its systemwide goals, according to hospital officials.

Chief Executive Officer Michael Tarwater, 58, who has led the $6 billion public hospital system for 10 years, received a base salary of about $1 million, two bonuses totaling $2.5 million, and other compensation, including retirement and health benefits, of about $700,000.

That represents a 9 percent increase in base salary and a 14 percent overall increase compared to 2010, when Tarwater's salary was $986,172 and total compensation was $3.7 million.

Meanwhile, at Novant Health,

The most recent compensation figures for Novant executives are from 2010. In that year, Novant's CEO Paul Wiles, 64, received total compensation of $3.2 million, including his salary of $1 million, a bonus of about $837,000, and $1.37 million in other income, including retirement and health benefits.

Wiles retired at the end of 2011 and was succeeded by Carl Armato, who was previously chief operating officer for Novant.

A data table within the article showed that there were 10 employees, all executives, at Carolinas Healthcare System in 2011, and 6, again all executives, at Novant Health in 2010, who got more than $1 million in compensation.

Why did the Carolinas CEO warrant a multi-million dollar pay package? One of his employees endeavored to explain,

'We've had extremely good performance,' said Debra Plousha Moore, the system's chief of human resources. 'All performance goals this year were either met or exceeded.'

Why the credit for that performance should not be spread amongst more hospital employees, especially those who actually took care of patients, she did not explain.
Northern New York City Suburbs

In February, 2012, LoHud.com reported:

Eight executives from 15 Lower Hudson Valley hospitals received more than $1 million in salary, bonuses, benefits and other pay in 2010 at a time when the state struggled to control health-care costs.

The details included:

Three executives received more in total compensation than Westchester Medical Center CEO Michael Israel, who earned $1.3 million and oversees a hospital that’s more than twice the size of other facilities in the region.

Also,

The highest-paid hospital employees include White Plains Hospital CEO Jon Schandler with $1.6 million in total compensation, Dr. Edward Lundy at Good Samaritan Hospital in Suffern with $1.48 million and Edward Dinan, CEO of Lawrence Hospital in Bronxville, with $1.41 million.

Others in the million-dollar range include John Federspiel, president of Hudson Valley Hospital Center in Cortlandt; Joel Seligman, CEO of Northern Westchester Hospital in Mount Kisco; and Keith Safian, CEO of Phelps Memorial Hospital Center in Sleepy Hollow. A year earlier, Federspiel received a compensation package of nearly $2 million due partly to an $800,000 deferred compensation payout.

The average CEO compensation rose 13 percent from 2009, to $939,751.

Ten hospitals paid $7.7 million in bonuses to top executives, an increase of 15 percent over 2009. White Plains Hospital alone distributed $2.1 million in bonuses, including $650,000 to Dr. Jesus Jaile-Marti, chief of neonatology, and $575,000 to Schandler.

This article highlighted the contrast between compensation for executives and for employees who provide front line care:

The high salaries also come as hospitals pressure many employees for wage freezes, rising insurance costs and watered-down pensions, said Deborah Elliott, a nurse and deputy executive officer of the New York State Nurses Association, a statewide union representing nurses at Sound Shore, Mount Vernon, St. John’s Riverside, St. Joseph’s and Nyack hospitals as well as Westchester Medical Center.

'It never ceases to amaze me that we sit at the bargaining table with these executives who are making $1 million and they give us such a hard time about a half-percent increase for a nurse who is making $63,000,' Elliott said. 'It’s galling.'

Again, contrast that one half percent with the average chief executive increase of 13%.

While it is a rare hospital that would disparage the performance of its dedicated nurses and physicians, somehow executive talent seems to matter more. For example, here is how Hudson Valley Hospital Center president John Federspiel's compensation was justified by his board chair:

Edward B. MacDonald Jr., chairman of Hudson Valley Hospital Center’s board of directors, said Federspiel deserves his paycheck. The hospital has earned a profit for 22 of the 25 years that Federspiel has been at the helm and has expanded both its services and payroll in that time, he said.

'He’s the best administrator, planner and motivator I have ever had the privilege to work with,' MacDonald said. 'I wish I could pay him more.'

Again, why the CEO, but not the nurses and doctors deserves the credit for the hospital's performance was not stated.
Summary

It all gets so tedious, doesn't it? CEOs of all but the smallest non-profit hospitals now seem entitled to at least $1 million a year. At larger systems, multiple executives per system seem entitled to that level of compensation, and CEOs may get multiple millions a year. Yet these are ostensibly non-profit organizations dedicated or providing care to their communities, and often to serving the poor. Thus the health care bubble continues to inflate, and executives are ever more distracted by money, and seem less focused on mission.

Note that reporting of this ever rising compensation seems to be becoming more perfunctory as the results seem more routine (and tedious). Two of the four articles noted above did not provide any justifications for the high pay, while two only trotted out brief versions of the "our CEO is so brilliant" meme.

As I said in December, in a health care system with ever rising costs, declining access, and stagnant quality, we no longer can tolerate the perverse incentives generated by unaccountably high compensation to top executives. As long as top executives continue their sense of "self-entitlement," and can continue their current management practices reinforced by ever rising pay checks, expect poor leadership to undermine any attempts to improve health care. Tired repetitions of the usual rationales, that the CEOs are brilliant and hard-working, and that their compensation is mandated by the market do not make these rationales true.

We need health care leadership that has compassion for the increasing hardships that their patients have to endure, and that puts doing the right thing for patients' and the public's health ahead of self-interest.