Payers & Providers – Issue of June 24, 2010

8/9/2019 Payers & Providers Issue of June 24, 2010

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The chief executive officers of Californiasnot-for-profit hospitals earned averageannual compensation of more than$737,000 during 2007-2008, while 16 CEOs

took home pay that topped $1 million.Payers & Providers complied the datathrough a four-month study of the taxreturns and financial data of nearly 120hospitals throughout California. The fullresults of the study including interviewswith salary experts and hospital officials will be published on June 28 as part of aspecial fee-based white paper.

The average base salary for CEOs was$517,123 during 2007-2008. The timeframewas spread out over a two-year periodbecause of the uneven availability of taxreturns for each institution.

Additional compensation whichincluded bonuses, incentive pay, deferredcompensation, retirement pay and expenseaccounts, among others averaged$212,309.

Hospital CEO compensation is often afiercely guarded secret, but the data fromthis study suggests that CEO salaries haverisen dramatically over the past decade.

According to a Hay Group surveypublished in 2001, hospital CEO basesalaries nationwide reached a median of$231,000, while the median of overallcompensation totaled $242,000.

Pay was significantly higher if the CEOran a hospital with revenue of more than$200 million: base pay reached a medianof $306,400, while the median of overall

compensation reached $316,400. Themedian in the Payers & Providers study issignificantly higher.

The highest paid hospital executive inthe survey was J. Kendall Anderson, CEOof John Muir Health, which operates twohospitals in Contra Costa County.Anderson earned $7.45 million in 2008,of which $5.3 million was a lump sumretirement benefit whose payout wasrequired under IRS regulations whenAnderson turned 65 that year. Andersonsbase salary of about $745,000 was alsosupplemented by payments from long-

term performance incentives anddeferred pay, John Muir officials said.Anderson earned about $1.5 million in

2007, his compensation also boosted byincentive payments.

Andersons 2008 pay package madehim among 11 hospital executives whosecompensation exceeded the cost of thecharity care provided by their hospitalsduring the reporting year, according todata from the Office of Statewide HealthPlanning and Development. However,

Hospital CEO Pay Averages $737KMany Heads of Non-Profit Facilities Earn Above $1M

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24 June 2010

June 25

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[email protected]

the details of your event, or call(877) 248-2360, ext. 3. It will be

published in the Calendar section,space permitting.

Continued on Next Page

NON-PROFIT HOSPITAL CEO SALARIESA PAYERS & PROVIDERS EXCLUSIVE WHITE PAPE

Publication Date: June 28, 2010

$149 (Executive Summary) $275 (Summary and Salary Data)

Call (877) 248-2360, ext. 2 to order, orCLICK HERE

California Edition
http://www.hasc.org/events.cfm?startrow=11&v=5&t=20100609&c=0&lc=0http://www.hasc.org/events.cfm?startrow=11&v=5&t=20100609&c=0&lc=0http://www.himss-socal.org/http://tcbi.org/index.php?conference=7ahu2010http://tcbi.org/index.php?conference=7ahu2010https://www.managedcarestore.com/pandp/p&pwhitepapers.htmhttps://www.managedcarestore.com/pandp/p&pwhitepapers.htmhttp://tcbi.org/index.php?conference=7ahu2010http://www.hasc.org/events.cfm?startrow=11&v=5&t=20100609&c=0&lc=0http://www.himss-socal.org/https://www.managedcarestore.com/pandp/p&pwhitepapers.htm


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In Brief

Bill Would Permit Medi-Cal Plans to Join

Exchange

A bill pending in the state Legislaturewould allow the quasi-public Medi-Cal

managed care plans and possibly evencounty-operated health plans to acceptindividual and small-group enrolleesthrough the federally-mandated healthinsurance exchange that will beginoperating in 2014.

In its current form, SB 900,authored by Sen. Elaine Alquist, D-Santa Clara, would permitparticipation in the exchanges oflocal initiative plan(s), a county-organized health system, or a jointventure of local initiative plans andcounty-organized health system(s). ASenate Health Committee hearing onAlquists bill is scheduled for nextweek.

Howard Kahn, chief executiveofcer ofL.A. Care Health Plan,supports the inclusion of the Medi-Calmanaged care insurers. We offeradditional choices, as well as strongrelationships with the providers, hesaid.

The Assembly version of theexchange bill, AB 1602, does notcontain such a provision, althoughKahn said a compromise bill could becrafted between the two.

Kahn, who is current president ofthe California Association of HealthPlans, said the trade group has yet totake a position on Alquists bill.

The California Hospital Association

has also yet to take a position on thebill, although some hospital industryrepresentatives are concerned the cloutwielded by some of the larger Medi-Cal managed care players could beused to leverage hospitals and providernetworks in an exchange.

The state-sponsored exchanges aremeant to focus on the subsidizedindividual market, said Jim Lott,executive vice president of theHospital Association of SouthernCalifornia. They were not intendedfor use by the Medi-Cal managed careplans.

Salaries (Continued from Page One)

NEWS

South Coast Head Was Self-DealingHe Ran Hospital; His Firm Collected Its Patient Debts

The chief executive ofcer ofLoma LindaUniversity Medical Centers new campus inRiverside County owns a company thatcollected patient debts at an Orange Countyhospital he ran until last year a situationdescribed as unique and troubling byindustry ofcials and consumer advocates.

While Bruce Christian was president ofSouth Coast Medical Center in LagunaNiguel between 2005 and 2009, his agency,Corona-based Metro-Republic CommercialServices, was paid more than $100,000 tocollect debts from the hospitals patients,according to hospital tax returns ledbetween 2005 and 2007.

Its unusual and atypical, said Jim Lott,

executive vice president of the HospitalAssociation of Southern California and amember of the Payers & Providers editorialboard. You dont see those kind of mixedinterests in the industry at all.

South Coast was sold by Adventist Healthto St. Joseph Health System in mid-2009.Christian, who had been hired in early 2005to run the hospital and nd a potential buyer,left South Coast in March 2009.

A statement issued this week by AdventistHealth acknowledged what it termed anunusual situation between Christianscompany and South Coast.

No changes were made in therelationships because his position at SouthCoast was interim and temporary while wecontinued to try to sell the facility, theAdventist statement read in part. Thehospital board was aware of the situationand South Coast was also using many other(collection) agencies at that time.

Christians rm has had a businessrelationship with Adventist since at least theearly 1990s, according to Metro-RepublicController Gina Mondello. She added that itended its debt-collecting contract with SouthCoast in early 2009. An Adventist

spokeswoman said that Metro-Republic maystill be trying to collect on behalf of the systembut it is currently not referring any newbusiness to the rm.

The Murrieta campus ofLoma LindaUniversity Medical Center is scheduled toopen in 2011. Published reports cite Christianties to the hospital as early as September 2008where he is referred to in newspaper reports athe planned hospitals general manager orexecutive liaison.

A statement issued by Loma Linda said thaChristian had disclosed his relationship withMetro-Republic and was not in violation ofeither its employment or conict-of-interestpolicies.

We are aware (sic) and full disclosures wemade of Mr. Bruce Christians tenure at SouthCoast Medical Center and at Metro RepublicCommercial Services prior to his appointmentas CEO...Mr. Christian currently works full-timfor Loma Linda University Medical Center andis not employed by or plays an active role inthe management of any other institution orcompany, the statement read in part.

However, Metro-Republic ofcials conrmethat Christian still has ties to the company, butis currently on administrative leave as he waduring his South Coast tenure. Mondello notedthat Christian does not have any say in

collections or company operations whileabsent.C. Duane Dauner, the president of the

California Hospital Association, said he couldnot recall another instance where a hospitalCEO owned a company that collected debtsfrom its hospitals patients.

Its very troubling, said Anthony Wright,executive director ofHealth Access, aSacramento-based advocacy group that haslong criticized some of the relationshipsbetween collection agencies and hospitals. Itdoes seem that there was a conict of interest

officials from John Muir and otherproviders noted that the data providedto OSHPD does not include the making

up underpayments from the Medi-Caland other community benefits.The Payers & Providers survey did not

include for-profit or investor-ownedfacilities, which are not required to

publicly disclose their tax returns. Somedistrict hospitals and other publicly-controlled institutions were also omitted.

To order the CEO salaries white paper ansalary data, call 877-248-2360, ext. 2, orvisit https://www.managedcarestore.com/pandp/p&pwhitepapers.htm.
https://www.managedcarestore.com/pandp/p&pwhitepapers.htmhttps://www.managedcarestore.com/pandp/p&pwhitepapers.htmhttps://www.managedcarestore.com/pandp/p&pwhitepapers.htmhttps://www.managedcarestore.com/pandp/p&pwhitepapers.htm


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Page 3Payers & Providers OPINION

How much is too much?!This question ariseswhen the topic turns to executive

compensation.! Salaries must be consideredin the context of responsibility, importanceand value to society.!!

Hospitals are on the front lines ofhealthcare.! They are open 24 hours a day,seven days a week, providing access to high-quality health care services to all patients,regardless of their ability to pay.! Hospitalsare where lifes greatest joys and deepestsorrows play out every hour of every day. !

The late Peter Drucker, one of the mostrenowned management consultants of the

second half of the 20th Century, stated that,hospitals are the most complex form ofhuman organizations we have everattempted to manage.! Today, thecomplexities and challenges facing hospitalCEOs are far greater than in the 1990swhen Peter Drucker made that comment.!!

Being a hospital CEO doesnt mean theindividual is simply managing a facility andemployees.! A hospital CEO is responsiblefor overseeing the work of a vast array ofclinical and administrative professionals doctors, nurses, pharmacists, laboratoryscientists, radiology technicians, health

information technology experts and foodservice and housekeeping personnel, toname just a few.! Hospital CEOs also bearthe responsibility of managing a nancialstructure in which the actual cost ofproviding care is often underpaid especially from Medicare and Medi-Cal,the two largest payers for many hospitals.And, hospital CEOs must navigate aplethora of complex and, sometimescontradictory, state and federal regulationsthat make the timely delivery of high-quality,affordable care nearly impossible.!

Hospitals are often among the largest

employers in their communities, supportinghundreds or thousands of employees.!However, a hospital CEOs job typically doesnot end when he or she walks out the doorof the hospital.! CEOs often are involved incommunity efforts to address the health andwell-being of all residents.! Hospital CEOsare key leaders who are directly responsiblefor their communitys most precious resource acute care when people are in greatestneed for life-saving health care services.!

The process of establishing a CEOscompensation is rigorous, and involves

outside independent compensationexperts and impartial members of thehospital governing board.! The governingboard is typically comprised of local orregional leaders.! They are required by lawto ensure that the hospital meets itsmission and remains nancially healthy.!Recruiting, retaining and rewarding themost able executive leader is part of thehospital boards obligation.! Often,executive compensation is linked tospecic measures including patient safety,quality, efciency, patient satisfaction,employee morale and nancial

performance.!Hospital CEO searches are conducted

nationally, even for smaller hospitals.! Themarketplace for executive talent hasevolved into a national arena.! Today, mosthospital organizations consider candidatesfrom across the country when seeking aCEO.! The results are better-qualiedcandidates and more competitivecompensation than in the past.! Aneffective CEO saves his or her organizationfar more than he/she earns.! A CEOs talentand abilities determine how well thehospital is managed, how productively

and prudently it uses resources andwhether the hospital is improvingaccess, quality and patient safety.Hospital CEOs earn far less thanprofessional athletes but who is morevaluable to society?!!

Hospital CEO salaries are not asignicant factor in the cost ofhealthcare.! The average annual totalcompensation for a hospital CEO is lessthan one-tenth of one percent of ahospitals budget.!!

Not-for-prot hospitals have fewoptions to adequately compensate

CEOs.!All money paid to these CEOs istransparent and must be reported

annually in compliance with federalregulations.! Retirement programs forCEOs take two forms:! basic pensionplans and supplemental pensionprograms.! Many supplemental pensionplans must be paid, or reported ascompensation, at the time suchpension amount is vested.! Thus, in agiven year, a retirement payment maybe reported as a lump sum amount.!This number may, on the surface,appear high, but when taken in the

context of decades of successfulexecutive leadership by a CEO, theone-time retirement payment isnegligible and reasonable.! Usually, thepension payment is accrued over manyyears.!How much is too much?! Its easy to

ask the question, but when thediscussion involves leaders in charge of

organizations where life and deathdecisions are made every day, we needthe best talent available to managehospitals.! We and our loved onesdepend on them. !

In the nal analysis, the lifetimecompensation of a hospital CEO mustreect his or her contribution to society.!

For Hospital CEOs,Highly-Paid Is A Relative TermThey Earn a Lot, But it Reflects The Challenges of Job And Their Expertise

By C. Duane Dauner

C. Duane Dauner is the presidentof the California HospitalAssociation, which represents

most of the states not-for-profitand investor-owned hospitals and

hospital systems.


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Payers & Providers Page

Most hospital chief executive officers loglong hours maintaining a delicateequilibrium between improving marginsand outcomes and staying out of thecrosshairs of the medical staff, whom theycannot fire but can certainly get themshoved to the pavement. Almost all do sowithout the chest-thumping hubris thathas come to define the American CEO inrecent decades.Their jobs are often thankless, but

certainly not underpaid.As I began tallying four months of

searching through the tax returns andfinancial data of more than 100 hospitalsthroughout California, I was taken abackby the final numbers. The average non-profit hospital CEO earned more than$500,000 in base salary, and more than$700,000 in overall compensation.More than a dozen CEOs took homeseven-figure incomes.However, I was not terribly

surprised. There has been a huge payinflation among top executives in theU.S. in recent years. There is simply noreason why this should not permeate

hospitals as well.Of course, that old saw about executivepay always gets trotted out to explain suchtrends. Good pay is required to attract andretain the top talent, the boards determinecompensation using what other CEOsearn, etc.The prevailing healthcare paradigmrenders puts many dents in thosearguments.Hospital CEOs have historically been atthe top of the food chain among non-profit executives when it comes to pay.However, a high six-figure and even

seven-figure pay package is on the highend for any non-profit, no matter itsinstitutional complexity.Moreover, 60% of non-profit hospital

revenue is derived f rom taxpayer-fundedprograms such as Medicare and Medi-Cal.Given the Obama Administrations moveto cap the salaries of executives who tookfederal bailout money, hospital CEOsshould consider their somewhat similarcircumstances.Medicare and Medi-Cal revenue streams

also help cover the salaries of hospitalexecutives. While there is no scientific dasupport the notion that overutilization ofmedicine occurs to help cover the expandpay of hospital executives, media reports as My Fathers Broken Heart, Katy Butlerecent article in the New York Times Magaor The Cost Conundrum, Dr. AtulGawandes eye-opening 2009 article in thNew Yorkermagazine, do not put such anargument outside the realm of possibility.Since the federal healthcare reform plan wrely heavily on cost controls to be succes

it is reasonable to examine executive salaas part of the holistic picture of expendituLastly, there has been an increasingly

desperate drama unfolding the past severayears at California hospital emergency roMany brim with patients who lack healthc

insurance and finally sought mediccare because they could no longerwait. The number of uninsuredCalifornians has swelled a remarka33% during the Great Recession, tomillion. If hospitals cannot provide

appropriate levels of charity care becausethey must meet the rising tide of executiv

salaries, this becomes a moral rather thana fiscal issue.Of course, most hospital CEOs are not

going to heed my suggestions. Who am I tell them how much they should earn?

I would therefore suggest they undertakmodest experiment. For one year, they shpost their compensation figures in the ER alongside the charity care information theare required to provide for patients and thfamilies.

This would no doubt make their alreadychallenging jobs even more difficult. But fairly certain it would clarify for them a

question many of us, CEO or not, askourselves as we try and get through theworkday: Why am I here?

OPINION

Time To Reexamine Hospital CEO PaCompensation Is Out Of Line With Current Realities

By

Ron

Shinkman

Ron Shinkman is the Publisher of Payers &

Providers.

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Op-ed submissions of up to 600 words a

welcomed. Please e-mail proposals to

[email protected], or ca

(877) 248-2360, ext. 3.


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MARKETPLACE/EMPLOYMENTPayers & Providers Page 5


6/6

Payers & Providers MARKETPLACE/EMPLOYMENT Page 6

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Call (877) 248-2360, ext. 2Or e-mail: [email protected]

Or visit: www.payersandproviders.com

*New England Journal of Medicine, 2004.

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Payers & Providers – Issue of June 24, 2010

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