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Researchers who study compensation levels — which include bonuses, deferred retirement and other incentives — at nonprofit hospitals say executive level pay has accelerated in recent years, mimicking the pace of hospital mergers and acquisitions during the same period.
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“Compensation has been going up for CEOs of health systems a lot recently, and part of that is because the health systems have been getting bigger and more complex,” said John Bowblis, a health economist at Miami University. “We went from really small systems, where you were operating maybe a hospital or two and an outpatient surgery center. Now, they’re becoming much larger and integrating multiple aspects of care.”
In addition to the sheer size of their organizations, hospital leaders are charged with navigating the intricacies of health care reform under the Affordable Care Act, which has changed dramatically the way care is delivered and reimbursed, said Barb Johnson, chief human resources officer at Premier.
“When you look at a Jim Pancoast and some of the other system leaders, these individuals aren’t just running hospitals anymore,” Johnson said. “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.”
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Like many health systems, Premier’s board of trustees sets salaries for leadership with the assistance of third-party compensation consultants who they meet with at least once a year to respond to rapidly changing market conditions. The consultants recommend salary ranges based on such factors as compensation for peers in the region, operating budget size and the number of full-time employees.
Phil Parker, president of the Dayton Area Chamber of Commerce and a member of the Kettering board’s compensation committee, said the committee uses the consultant’s guidance to ensure that total compensation for their executives is reasonable, striving to be near the 50th percentile of comparable salaries in similar-sized markets.
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But when it comes to executive compensation, “size matters,” Parker said.
“When the consultant looks at our institution and compares it to other like-sized groups, they do look at size,” he added. “And we’re a good-sized institution with over 12,000 employees…and a network made up not only of multiple hospitals, but multiple clinics, physicians’ networks and outpatient facilities.”
Each of the local hospital organizations said their leaders have difficult jobs, and markets demand good pay to keep them in their positions, even at single hospitals and smaller networks.
Top hospital CEO compensation
|First ||Last||Title||Hospital/Hospital Network|| || BASE PAY || BONUS & INCENTIVES || TOTAL (salary & incentives) |
|Fred||Manchur||CEO||KHN||Jan. 1, 2015 to Dec. 31, 2015|| $1,261,849 || $390,258 || $1,652,107 |
|James ||Pancoast||former President and CEO; retired ||Premier Health Partners||Jan. 1, 2015 to Dec. 31, 2015|| $1,019,394 || $395,850 || $1,415,244 |
|Terri||Day||former President||KHN||Jan. 1, 2015 to Dec. 31, 2015|| $968,409 || $262,893 || $1,231,302 |
|Roy||Chew||President||KHN||Jan. 1, 2015 to Dec. 31, 2015|| $863,380 || $210,661 || $1,074,041 |
|Mary||Boosalis||President and CEO Premier Health, former Executive VP and COO||Premier Health Partners||Jan. 1, 2015 to Dec. 31, 2015|| $639,166 || $228,258 || $867,424 |
“In order to recruit and retain qualified and talented people, compensation must be adequate,” said Matt Graybill, vice president for human resources at Dayton Children’s. The hospital’s President and CEO Deborah Feldman earned $654,703 in base pay and incentives in 2015.
But as a growing share of the burden of health spending has been shifted onto the backs of taxpayers and workers with employer-based health insurance, some observers question whether nonprofit hospital CEOs are being paid too much. And proposals to limit how much nonprofit executives can make are emerging in different parts of the country.
U.S. Sen. Chuck Grassley of Iowa has introduced legislation in Congress that would require enhanced governance when it comes to determining executive pay at nonprofits, including hospitals.
“Hospitals should be prepared to answer questions about how they use their tax exemption, including whether their mission to serve people in need comes before executive salaries,” Grassley said. “The requirements to increase assessments of how these hospitals meet their community needs improve transparency and accountability for their tax benefits.”
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How we got the story
This media outlet obtained hundreds of public IRS records for local nonprofit hospitals to report on the salaries and incentives awarded to hospital CEOs and executives.
All nonprofits are required to disclose financial and salary information to the IRS, in exchange for their tax-exempt status.
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