The Adobe Flash Player is required to view this multimedia interactive. Get it here.

Critics question benchmarks used to set hospital CEO pay

Salary must be competitive to lure talent, health-care consultant says

Hospital CEOs face pay freezes amid recession

Is your “unlimited” data being throttled?
2:32 p.m.
Wright-Patterson relatively unscathed in Obama defense budget
1:46 p.m.
Dayton Mall shoe store moving
1:00 p.m.
Dayton Children's website ranks high in study
11:42 a.m.
Behr names new vice president
11:41 a.m.
> More headlines

By Ben Sutherly, Staff Writer 5:30 PM Saturday, January 2, 2010

Consultants for Premier Health Partners and Kettering Health Network say the executive compensation committees that set their respective hospital leaders’ pay strive for the median of predetermined peer groups.

Both Premier and KHN use Minneapolis-based Integrated Healthcare Strategies as a consultant.

“Whether people are paid too much is resolved by what you have to pay to recruit and retain people,” said David Bjork, a senior vice president at Integrated Healthcare who serves as a consultant to Premier.

It also reflects what it would take to bring comparable talent to the region, he said. “Nobody’s going to move to Dayton without getting paid at median.”

Bjork provided data from three health-care industry surveys for comparable hospitals, which showed compensation for Premier Health Partners CEO Tom Breitenbach and Miami Valley Hospital CEO Mary Boosalis ranked between the 50th and 75th percentiles among comparable nonprofit health-care systems. Looking strictly at their base salaries, Breitenbach ($662,033) and Boosalis ($386,229) were below the 50th percentile.

Compensation for Mark Shaker, CEO for Good Samaritan Hospital, ranked below the 25th percentile among comparable nonprofit health-care systems, but Shaker did not become the hospital’s CEO until June 25, 2008.

Meanwhile, Douglas McNeill, CEO of Atrium Medical Center, topped the 90th percentile in compensation among comparable health-care systems.

In McNeill’s case, however, Bjork noted that pay at independent hospital systems is typically higher than that at subsidiary hospitals. As a result, pay for the leadership at Atrium (formerly Middletown Regional Hospital), which joined Premier in 2005, is largely a legacy of its time as an independent organization, Bjork noted.

Integrated Healthcare Strategies did not have equivalent data for Upper Valley Medical Center since that hospital wasn’t a Premier member when 2008 compensation was determined.

The Ohio Hospital Association also conducts a salary survey, but declined to share the results.

Bryan Bucklew, president and CEO of the Greater Dayton Area Hospital Association, said the environment in which hospitals have operated in 2008 and 2009 has presented their leaders with extraordinary challenges.

“The people leading these organizations are leading incredibly diverse facilities in a very complex and uncertain environment,” Bucklew said. “The return on investment to our community is very positive when you look at their compensation versus quality and access to care.”

In its Internal Revenue Service Form 990 returns, Premier said incentive pay for hospital executives is based on positive work environment, quality, customer satisfaction, financials (net earnings), and major initiatives.

Some would like to see other measures used in determining CEO pay.

Brian Rothenberg, executive director of ProgressOhio, a liberal policy group advocating for national health-care reform, said the system for CEO pay should reward executives for generating savings in the health care and eliminating duplication of services.

“It’s a system that’s inefficient,” Rothenberg said. “If you want to reward a CEO, your reward should be tied to savings in the system, not to money generated.”

Hospitals have an obligation to the community by virtue of their nonprofit status and millions of dollars in tax breaks bestowed by that status, noted Cathy Levine of the Universal Health Care Action Network of Ohio, based in Columbus.

“The response that they need to attract talent with generous compensation packages comes from people who are deaf to the state and national move to transform health care so we get access for everyone, and better quality at lower cost,” she said. “We need CEOs who are talented at transforming health care.”

Under the current system, “they’re looking for CEOs to be corporate leaders to improve bottom lines of the institutions, and that’s not what nonprofit hospitals exist to do.”

But both of the region’s adult hospital networks say they fulfill their nonprofit mission. Premier says that, while it has 50 percent of the region’s market share, it provides roughly 80 percent of the indigent care. Premier reported its total cost to provide free or reduced health services to those who can’t afford to pay was $37 million in 2008.

“I think any hospital in the country that doesn’t fulfill its commitment to the charitable mission of the institution, that executive is grossly overpaid,” Breitenbach said.

Contact this reporter at (937) 225-7457 or bsutherly@Dayton DailyNews.com.

Share this article