On average, the 20 highest paid hospital executives in the Dayton area take home more than $700,000 in annual salary and incentives, with the Top 5 earning well over $1 million a year, based on the nonprofit hospitals’ most recent tax returns.
Fred Manchur, CEO of Dayton-based Kettering Health Network — with eight hospitals and $1.5 billion in annual revenue — topped the list with base pay and incentive payments totaling $1.65 million in fiscal 2015, according to 990 tax forms required from all tax-exempt organizations by the IRS.
Manchur was followed closely by James Pancoast, former president and chief executive of Dayton-based rival, Premier Health, who earned $1.42 million in salary and incentive payments in 2015, not including compensation from other items like retirement accounts and health insurance.
Terri Day, former president of Kettering Health Network, was the highest paid woman on the list, collecting $1.23 million in pay and incentives.
Rounding out the Top 5 were Roy Chew — who succeeded Day as Kettering president and earned $1.07 million in 2015 — and Mary Boosalis, Premier’s current president and CEO who pulled in $867,424 in 2015 as executive vice president and chief operating officer of the largest hospital network in southwest Ohio with $2 billion in annual revenue.
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.
“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.”
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.
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
“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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