A Dayton Daily News examination of newly released nonprofit hospital tax forms found Premier Health Partners’ Jim Pancoast and Mary Boosalis topped the list in 2010, with each receiving more than $4.6 million.
Most of that compensation was a lump sum paid through a supplemental executive retirement program. That money, which is taxable, is in addition to their pensions.
The six local hospital and health network executives who broke the $1 million mark last year is up from four in 2009, three in 2008 and two in 2007.
Premier, which employs more than 14,000 people in the region, provided the supplemental executive retirement benefits to Pancoast and Boosalis as a way to retain the two executives, who were promoted at the end of 2010 to lead the network and have a combined 55 years of executive experience. Pancoast is CEO of the network, while Boosalis is executive vice president and chief operating officer.
“Supplemental Executive Retirement Plans were designed to retain highly performing, experienced leaders,” Dan Sadlier, chairman of Premier’s board of trustees, said in a prepared statement.
“The value of such plans is best viewed in relation to the total years of valuable service provided by the executive prior to retirement. Both Jim and Mary have opted to stay in our region over decades of service.”
Such perks don’t sit well with some critics.
Cathy Levine, executive director of the Universal Health Care Action Network of Ohio, said the pay packages create “obscene disparities.”
“These compensation packages help to explain why people are occupying Wall Street,” Levine said. “I’m suggesting that a $4.6 million payment in 2010 in Dayton, Ohio, crosses a fairness line. I recognize that CEOs of large nonprofit corporations command competitive salaries, but we need a balance.”
The Internal Revenue Service should consider standards for executive compensation at nonprofit hospitals, and the state attorney general should investigate whether such compensation packages are excessive, Levine said.
But Pete Luongo, who has sat on Kettering Health Network’s executive compensation committee for four years, said hospital executive pay is commensurate with the enormous responsibilities that come with the job.
“At the end of the day, leadership in any organization defines organizational success to a huge, huge degree,” Luongo said.
Pay tied to market data, performance
Besides Pancoast and Boosalis, four other Premier and KHN executives collected at least $1 million in 2010. They are:
• Frank Perez, then-CEO of KHN, who retired in May and received about $1.12 million in 2010.
• Fred Manchur, then-president of KHN, who is now CEO of KHN and received about $1.33 million in 2010.
• Tom Breitenbach, then-CEO of Premier, who retired at the end of 2010 and received about $1.15 million that year.
• Douglas McNeill, then-CEO of Premier’s Atrium Medical Center, who also retired at the end of 2010. McNeill’s compensation of $1.38 million included nearly $900,000 in retirement payments.
The Dayton Daily News reviewed compensation totals for a dozen area hospital executives, a group that between them took in a total of $17.55 million. The newspaper sought comments from each, but Premier and KHN did not make their executives available. Premier also declined to make Sadlier, its board chairman, available for comment.
The chief executives of Premier and KHN instead gave the newspaper prepared statements.
“Pay levels depend on market-based data, and are combined with a rigorous process of evaluation of performance of goals across the organization,” Pancoast said.
Manchur, KHN’s president and CEO, wrote: “Serving the health needs of individuals is a hallmark of the Seventh-day Adventist Church. Our Kettering executive team sees this work as their mission field and devote an extraordinary amount of time and personal resources to this organization and to the community.”
In addition to Luongo, KHN’s executive compensation committee includes Dave Weigley, Rob Vandeman, Dr. Stewart Adam, Raj Attiken and Tom Peebles.
Premier’s executive compensation committee consists of Sadlier, Kathleen Carlson and Anita Moore.
David Kinsaul, president and CEO of the Children’s Medical Center of Dayton, said he feels his pay — $572,819 in 2010 — was fair, and said its percentage growth has been in line with what the hospital’s staff receives. The average and across-the-board raises received by Dayton Children’s staff for fiscal years ranging from July 2007 to July 2011 were 4.52 percent, 4.24 percent, 2 percent, 1.5 percent and 3 percent.
“Money has not been my driver,” Kinsaul said. “Making a difference is what most CEOs want to do.”
Dayton Children’s bases its CEO pay on median compensation figures gleaned from comparable hospitals locally and nationally, said Charles Foley, who recently stepped down as chairman of Dayton Children’s board but served as its executive compensation committee chairman in 2010 and 2011.
“While we’re competitive, I feel we’re relatively modest” compared to other Dayton-area hospitals and other children’s hospitals, particularly in southwest Ohio, Foley said.
Shrinking pay
Levine wondered whether large compensation packages might leave hospital executives out of touch with the lower-income people that their nonprofit organizations are expected to serve.
But the nonprofit hospitals say they have been mindful of the recession in recent years in setting CEO pay.
Premier, for example, gave no workers salary increases in 2010, and asked top executives to take a 2 percent cut in base compensation. In addition, incentive pay for executives for 2010 was capped at 2009 levels.
While base compensation dropped for most executives, it increased for two of them. Pancoast’s base pay was increased as he moved into his current role as Premier’s CEO. McNeill’s increased because he cashed in on some benefits, such as unused vacation days.
The pay freeze was lifted this year, a Premier spokeswoman said.
KHN did not provide a specific example of how pay has been adjusted due to the recession. “Compensation adjustments are made with the current and future financial picture of the organization in mind,” KHN said in a prepared statement.
At least two KHN executives had their pay increased because of their additional responsibilities, a spokesman said.
Excluding other reportable compensation, Manchur’s base compensation and bonus totaled $941,212 in 2010, up 23 percent from the prior year. Roy Chew’s base compensation and bonus totaled $738,252, up 14 percent from the prior year.
Manchur became CEO in December 2010, while Chew was named executive vice president in January.
In an interview last year, KHN’s Perez said he would not have accepted $5.5 million in compensation in 2009 — more than $4.5 million of it a lump-sum, taxable retirement payment — if he felt it were inappropriate.
“It would prevent me from sleeping at night,” he said. “It’s far more important to fulfill the mission and the spirit of the law.”
Perez’s 2010 pay was $1,123,298. In comparison, the pay for the CEO of Cincinnati’s Mercy Health system, which has 9,000 employees and is slightly smaller than Kettering Health Network, was $937,068 for that year.
Setting CEO compensation
Local hospitals rely heavily on consultants to help them determine their executives’ compensation.
Both Premier and KHN have used Minneapolis-based Integrated Healthcare Strategies as a consultant. Both say they strive to tie their respective hospital leaders’ pay to the median of predetermined peer groups.
An Integrated Healthcare senior vice president told the Dayton Daily News last year that executive salaries also reflect what it would take to bring comparable talent to the region.
“Nobody’s going to move to Dayton without getting paid at median,” David Bjork said.
Brian Rothenberg, executive director of ProgressOhio, a liberal policy group advocating for national health-care reform, said executives should be given incentives to find savings in the health care industry, not generate more revenue.
“In many ways, CEO pay is tied to the opposite thing,” Rothenberg said, criticizing the duplication of services created by hospitals opening of heart and cancer centers.
Premier bases its executives’ bonuses on quality (30 percent), customer satisfaction (25 percent), financial performance (20 percent), positive work environment (15 percent), and major initiatives (10 percent). Two years ago, quality counted for 22.5 percent of bonus scores. Such a breakout wasn’t available for KHN.
Mary Yost, spokeswoman for the Ohio Hospital Association, pointed to a ModernHealthcare report that showed local nonprofit hospital executives earn far less than executives at commercial health insurance companies. Many of those health insurers, however, are much larger organizations than local hospitals.
Hospitals “are life-and-death entities,” Yost said. “They literally have people’s lives in their hands 24 hours a day, 365 days a year. It’s important that you have good people in there who can bring the best caregivers into the hospital.”
KHN acknowledged in a statement that more scrutiny of executive compensation awaits hospitals and their parent companies.
“We anticipate that executive compensation will face increased review and scrutiny as the health care industry faces increasing financial challenges,” the health network said.
Contact this reporter at (937) 225-7457 or bsutherly@DaytonDaily News.com.
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