healthy4u: Carolinas HealthCare

Carolinas Healthcare System Pays Executives Even More

In May, 2012, we <a href="http://hcrenewal.blogspot.com/2012/05/from-serving-poor-to-pay-executives.html">discussed</a> the contrast between the outsize compensation given to top executives of Carolinas Healthcare System, a large tax-exempt public hospital authority, and the apparent failure of the system to fulfill it promise to provide community care.  Now we can update that story. 2012 Executive Compensation The Charlotte Observer <a href="http://www.charlotteobserver.com/2013/02/06/3835851/charlotte-hospital-pay.html">reported </a>on the compensation given to top executives at the Carolinas Health Care System in 2012: <blockquote class="tr_bq">The top executive at Carolinas HealthCare System received $4.76 million in 2012 compensation, a 12 percent increase over 2011, as the system celebrated a profitable year and met all of its systemwide performance goals, the system announced. CEO Michael Tarwater, 59, who has led the $7.5 billion nonprofit system for more than 10 years, received a salary of $1.1 million, two bonuses totaling $2.8 million, and other compensation, including retirement and health benefits, of $795,724. The top 10 executives at Carolinas HealthCare each received more than $1 million in total compensation. Most received increases of more than 8 percent.</blockquote> A more detailed list, which included the rate of increase since 2011:: <blockquote class="tr_bq">Michael Tarwater, CEO: $4,760,026 – 12.36 percent increase Joseph Piemont, president and chief operating officer: $2,880,926 – 13.57 percent increase Greg Gombar, chief financial officer: $1,898,027 – 8.35 percent increase Laurence Hinsdale, executive vice president: $1,844,413 – 8.92 percent increase Paul Franz, executive vice president: $1,704,671 – 8.17 percent increase Dennis Phillips, executive vice president: $1,420,521 – 5.14 percent increase Dr. Roger Ray, chief medical officer: $1,315,148 – 21.76 percent increase John Knox, chief administrative officer: $1,296,185 – 8.24 percent increase Debra Plousha Moore, executive vice president: $1.145,357 – increase not available Russell Guerin, executive vice president: $1,141,171 million – 7.56 percent increase </blockquote><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.charlotteobserver.com/2013/02/06/3835851/charlotte-hospital-pay.html#storylink=cpy</div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.charlotteobserver.com/2013/02/06/3835851/charlotte-hospital-pay.html#storylink=cpy</div> Also here were the compensation figures for some leaders of individual hospitals within the system: <blockquote class="tr_bq">Others in Carolinas HealthCare System - 2012 • Spencer Lilly, president, Carolinas Medical Center: $633,326 • Robert Larrison, president, Carolinas Rehabilitation: $348,976 • Douglas Roush, president, CMC-Mercy: $262,745 • Christopher Hummer, president, CMC-Pineville: $549,616 • William Leonard, president, CMC-University: $378,369 • Phyllis Wingate-Jones, president, CMC-NorthEast: $761,160 • Peter Acker, president, CMC-Lincoln: $385,847 • Michael Lutes, president, CMC-Union: $488,427 </blockquote><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.charlotteobserver.com/2013/02/06/3835851/charlotte-hospital-pay.html#storylink=cpy</div> The Context The context is that Carolinas Healthcare is a large tax-exempt public hospital system that claims that it "works to improve and enhance the overall health and wellbeing of its communities" according to <a href="http://www.carolinashealthcare.org/about-chs">its web-site</a>.  However, there have been accusations, for example here by "Jessica Curtis, director of the Hospital Accountability Project for Community Catalyst in Boston," that is has been <blockquote class="tr_bq">'...sending very low income patients to collections and suing them as well.' The Observer and The News & Observer reported last year that during the five years ending in 2010, North Carolina hospitals filed more than 40,000 lawsuits. Most of the suits were filed by Carolinas HealthCare.</blockquote> Note that we discussed the contrast between this hospital system's public nature and aspirational statements about serving the community on one had, and its oversize executive compensation on the other hand <a href="http://hcrenewal.blogspot.com/2012/05/from-serving-poor-to-pay-executives.html">here</a>.  Since then, executive compensation has only gone up. The Usual Talking Points for Justification Of course, when asked, defenders of the hospital system gave the stock justifications.  For example, <blockquote class="tr_bq">Carolinas HealthCare officials said executive compensation is 'performance based' and reflects the system’s growth. </blockquote> The Observer found a health care executive compensation consultant to make the usual arguments about the need to pay market rates to prevent supposedly talented executives from being recruited elsewhere: <blockquote class="tr_bq"> Consultants who assist hospitals in setting executive compensation say they compare peers at hospital systems of comparable size, complexity and performance. 'If , he’s going to get paid higher in the range. That individual is very vulnerable to being recruited away' said Bob Erra, president of Integrated Healthcare Strategies. 'The last thing a compensation committee wants to do is to lose a leader over pay,' said Erra, whose Minneapolis-based firm works with Novant Health but not Carolinas HealthCare.</blockquote>  Just as we mentioned in our <a href="http://hcrenewal.blogspot.com/2013/02/non-profit-hospital-executive-salaries.html">most recent post</a>, whenever anyone bothers to try to justify extravagant executive compensation at hospitals, and for that matter, most other health care organizations throughout the US, they seem to repeat the same set of talking points.    We first listed the talking points <a href="http://hcrenewal.blogspot.com/2011/09/talking-points-sans-original-thought-to.html">here</a>, and then provided additional examples of their use <a href="http://hcrenewal.blogspot.com/2011/09/more-repeats-of-talking-points.html">here</a>, <a href="http://hcrenewal.blogspot.com/2012/03/example-of-how-complex-takes-control.html">here</a> and <a href="http://hcrenewal.blogspot.com/2012/12/health-care-hired-managers-not-playing.html">here</a>.   The talking points are: -  we pay what everyone else pays -  CEOs work hard and are brilliant, and so deserve high pay -  high pay is needed to attract and retain competent, if not brilliant people. Note that without specific evidence to back them up, the first two talking points at least are logical fallacies.  The first is an <a href="http://www.nizkor.org/features/fallacies/appeal-to-common-practice.html">appeal to common practice</a>.  The second is an <a href="http://www.nizkor.org/features/fallacies/appeal-to-authority.html">appeal to authority</a>. None of the examples of these talking points we have seen so far explain why these apply to CEOs and other top hired managers, but not to other kinds of employees. So it should be no surprise that the justifications for the largess to hospital executives at Carolinas follow the talking points yet again. -  We Pay What Everyone Else Pays => "they compare peers at hospital systems of comparable size, complexity and performance."  Note further that it is hard to believe the comparisons were only to other public hospital systems, that is, hospital systems run by local government - CEOs Work Hard and Are Brilliant => "(the CEO) is a high performer...."  Note further that as usual no evidence of the CEO's specific performance was offered. - High Pay Needed for Retention => "That individual is very vulnerable to being recruited away."  Note that as we wrote recently, most CEOs are recruited from within the organization, and no specific evidence that this specific CEO was particularly likely to be recruited away was offered.  So as is usual, underlying these talking points there was no evidence, nor arguments that would make them more logical. Summary: the More Things Change The more they stay the same.  Thus this seems to be yet another example of how top managers almost always now seem able to personally profit from their positions of trust.  In this particular example, however, these were managers of a public organization, so it may be possible that public pressure could make them more accountable and hold them to more reasonable pay.   So to repeat my conclusions from 2012....  The governance of this organization, like that of many others we have discussed, needs to regain accountability, transparency, integrity, and ethics. It must insist that the leaders it hires uphold the mission ahead of other concerns, particularly personal enrichment. It must provide these leaders with realistic incentives based on how well they uphold this mission, not on revenue or operating margin. Until such changes are accomplished, expect this hospital system, like many other health care organizations, to contribute only to our ever rising prices, declining access, and stagnating health care quality.

Carolinas Healthcare System Pays Executives Even More

In May, 2012, we discussed the contrast between the outsize compensation given to top executives of Carolinas Healthcare System, a large tax-exempt public hospital authority, and the apparent failure …

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14 Feb 2013

From Serving the Poor to Paying Executives Millions - Carolinas HealthCare System

A striking contrast between a large health care organization's historic mission and its current practices appeared in a series published by the Charlotte News-Observer called "<a href="http://www.newsobserver.com/prognosisprofits/">Prognosis: Profits</a>" about the Carolinas HealthCare System. A Historical Mission to Serve the Poor The system evolved from a public hospital meant to serve the poor.  In particular,(1) <blockquote>Only 30 years ago, it was a charity hospital called Charlotte Memorial – a crowded, dreary place that lost money every year because most of its patients couldn’t pay their bills.</blockquote>The hospital system is actually "a public, tax-exempt entity called a hospital authority". Because of this special status, it has the power of eminent domain, the ability to seize property albeit with compensation, and its employees have "more privacy protection that those of other public agencies." However, in the "greed is good" 1980s, the hospital began a transformation, <blockquote>The board hired [Harry] Nurkin in 1981 to revamp Charlotte Memorial’s image, attract paying patients and avoid the fate of struggling public hospitals in Atlanta and Chicago. Until then, patients with insurance mostly chose Presbyterian Hospital or Mercy Hospital, with stately buildings at the edge of Myers Park. With a vision of building one of the Southeast’s finest medical centers, Nurkin paid attention to details, such as wallpaper, plants and furniture. And he put the hospital in the black by improving collections from patients and insurers. In 1983, when Nurkin unveiled the hospital’s first long-range plan, some board members sat in wonder at a slide show that accompanied his bold outline, according to 'A Great Public Compassion,' a book by writer Jerry Shinn. The plan called for a heart institute, a doctors’ building and an 11-story, $40 million tower that would replace a 1940s wing. All of that came true – and more.</blockquote> Now a Huge Hospital System From those humble origins, Carolinas HealthCare System has now become(2) <blockquote>a juggernaut. It’s now the country’s second-largest public hospital system, behind only the nationwide system of Veterans Affairs hospitals. One of the benefits of that growth is access to quality medical care. Carolinas HealthCare offers one of five organ transplant programs in the state and operates the region’s most comprehensive trauma center, where accident victims frequently arrive via medical helicopter. Five-year-old Levine Children’s Hospital has brought new pediatric specialties to Charlotte, and Levine Cancer Institute has recruited specialists from such respected institutions as the Cleveland Clinic. With nearly $7 billion in annual revenue, Carolinas HealthCare runs about 30 hospitals and owns more than $1 billion worth of property in Mecklenburg County alone. It has more than $2 billion in investments. In the five-year period ending in 2011, it spent $1.8 billion on capital projects.</blockquote> Forgetting the Mission: Suing Poor Patients However, as the system grew, its mission seems to have been forgotten. In particular, Carolinas HealthCare seems to now have a penchant for suing poor patients who cannot pay its bills. A Charlotte Observer article documented that while the hospital does not refuse poor patients care, it may later pursue them if they cannot pay. The article noted the case of a woman who was assured that the hospital had funds to pay for patients like her, but who then faced a lawsuit for $34,000 and a lien on her house. In general(3) <blockquote>most N.C. hospitals are tax-exempt – a distinction that saves them millions each year. In exchange, these nonprofits are expected to provide financial help to those without the means to pay. But thousands of times a year, hospitals are suing patients instead, an investigation by the Charlotte Observer and The News & Observer of Raleigh found. An in-depth look at some of those cases suggests most of the patients were uninsured, and that a significant number of them should have qualified for free hospital care. Critics contend those hospitals are financially ruining people they could afford to help. Carolinas HealthCare System, the multibillion-dollar public enterprise that owns CMC-Mercy, has generated average annual profits of more than $300 million over the past three years. During the five years ending in 2010, N.C. hospitals filed more than 40,000 lawsuits to collect on bills. Most of those suits were filed by just two entities: Carolinas HealthCare and Wilkes Regional Medical Center in North Wilkesboro. Each filed more than 12,000 suits over the five-year period, according to state courts data. Wilkes Regional, which is managed by Carolinas HealthCare, appears to be the state’s most litigious individual hospital.</blockquote> In addition, <blockquote>Often, the lawsuits hit people who are among those paying the highest rates for hospital care: the uninsured. Bills for uninsured patients are usually higher because they don’t have insurance companies to negotiate discounts on their behalf. It’s unclear how many of the patients sued in North Carolina lacked health insurance and substantial income or assets. But in interviews with 25 of those patients, the newspapers found 17 of them were uninsured; 10 said they were never told about the hospitals’ financial assistance programs.</blockquote> An editorial summarized the contrast between Carolinas HealthCare historic mission and its current practices(4) <blockquote>Carolinas HealthCare, once a small, struggling operation, has become one of the top hospital systems in the country. Novant Health, owner of Presbyterian Hospital, has grown into a powerful and respected health care provider. Their successes have come thanks to an aggressive philosophy of accumulation and growth, which has led to patients in the Charlotte region having access to the latest in medical technology and research, as well as top doctors in a diversity of medical fields. But that accumulation has contributed to the high cost of health care in North Carolina, and that growth has caused the hospitals to stray at times from their non-profit charitable mission. A Charlotte Observer and News & Observer investigation that begins today details how a hunger for money and power has caused the two hospitals to sometimes lose their way, contributing to the region’s health care cost woes and leaving thousands of patients with financially crippling bills.</blockquote> Opaque, Unaccountable Governance While the Charlotte Observer did not provide opinions about the reasons that this large health care organization appears to have forgotten its raison d'etre, its reporting suggests some familiar elements. The governance of the organization may have been appropriate for a small, struggling public hospital, but as the system grew, lack of accountability and transparency may have become more important. It is easier to lose one's way when no one is observing one's actions.(1) <blockquote>Most hospital business gets done quietly – until there is a well-planned announcement. The system’s self-perpetuating board includes top community and business leaders whose nominations get approval from the Mecklenburg commissioners’ chairman. Quarterly hospital system board meetings, at 7 a.m., are polite and scripted. Votes are unanimous on everything from building new hospitals to borrowing millions of dollars. Questions are worked out in private discussions, closed-door committee meetings or executive sessions. Meetings aren’t widely publicized. Except for a couple of newspaper reporters, only board members and hospital officials attend. Future meeting dates are provided to those who attend board meetings or call the system’s main office. State law requires public organizations with websites to post meeting times. Carolinas HealthCare had not been doing that until last week, after an Observer reporter asked about it. The board’s agenda sets no time for public comment.</blockquote> While operating so quietly, the board appears to have become a very cozy little group, <blockquote>The 1943 hospital authority law intentionally kept elected officials and politics out of operations. The link is that the commissioners’ chairman must sign off on hospital board nominees. It has been a rubber stamp. County officials remember once in 30 years that a proposed board member was rejected. That was in 2008 when nominees included Gloria Pace King, who had been ousted as CEO of the United Way of the Central Carolinas because of public outcry over her $2 million pension package. In December 2008, the board renominated King for a new term. But hospital officials say Roberts, then commissioners’ chairwoman, objected, and King wasn’t reappointed. Over the years, the board has included city leaders, such as bank CEOs Hugh McColl and Ed Crutchfield, and Stuart Dickson, the retired head of the company that owns Harris Teeter. His father, Rush S. Dickson, was an original board member whose name is on the entrance to what is now Carolinas Medical Center.</blockquote> Lavish CEO Compensation As noted earlier, not only are the actions of the hospital system's governing body kept secret, but up to recently, compensation paid to all employees, including top executives was also secret.(1) <blockquote>State law gives its employees more privacy protection than those of other public agencies. For example, salaries of all state, county and city government employees are public. That’s not true for public hospital employees. Until a 2009 change in state law, Carolinas HealthCare had for years refused to make public the total compensation for top executives. They said state law precluded them from disclosing more than basic salary. As a result, the public hospital system wasn’t disclosing as much detail as its private counterpart, Novant Health, does in publicly available reports to the IRS. At the urging of the Observer and other state newspapers, legislators broadened the law in 2009 to require disclosure of total compensation for top executives at public hospitals.</blockquote> So it should not be any surprise that an opaque, unaccountable board run by a cozy group of insiders saw fit to allow its friends in the management make some money, a lot of money. The Charlotte Observer reported that there were nine hired managers with total compensation greater than $1 million in 2011.(5) <blockquote>Michael Tarwater CEO, Carolinas HealthCare System Total 2011 compensation: $4,236,305 Percentage increase over prior year: 14.10% Joseph Piemont President/Chief Operating Officer, Carolinas HealthCare System Total 2011 compensation: $2,536,792 Percentage increase over prior year: 19.70% Greg Gombar CFO, Carolinas HealthCare System Total 2011 compensation: $1,751,798 Percentage increase over prior year: 8.90% Laurence Hinsdale Executive Vice President, Carolinas HealthCare System Total 2011 compensation: $1,693,314 Percentage increase over prior year: 44.10% Paul Franz Executive Vice President, Carolinas HealthCare System Total 2011 compensation: $1,575,927 Percentage increase over prior year: -1.30% Dennis Phillips Executive Vice President, Carolinas HealthCare System Total 2011 compensation: $1,351,138 Percentage increase over prior year: 12.20% John Knox Chief Administrative Officer, Carolinas HealthCare System Total 2011 compensation: $1,197,528 Percentage increase over prior year: 11.80% Roger Ray Chief Medical Officer, Carolinas HealthCare System Total 2011 compensation: $1,080,159 Percentage increase over prior year: No data for prior year Russ Guerin Executive Vice President, Carolinas HealthCare System Total 2011 compensation: $1,060,931 Percentage increase over prior year: 3.00%</blockquote> Should it be surprising that executives who can become so rich, and who are subject to so little oversight, are more interested in preserving the hospital system's operating margin which supports their wealth than in providing the care to poor people that was the hospital system's original reason to exist? Summary As the local NAACP pointed out, the hospital system should better uphold its mission(6) <blockquote>'The Bible says we’re not supposed to burden the poor and the sick and the afflicted. We’re supposed to lift them and help them and heal them,' NAACP President the Rev. William Barber said during the Charlotte stop of a statewide tour designed to bring attention to the struggles of low-income people. '(Carolinas HealthCare) is a group with money hounding people who are just trying to make it.'</blockquote> However, I submit that restoration of this organization's mission will require more than exhortation. The governance of this organization, like that of many others we have discussed, needs to regain accountability, transparency, integrity, and ethics. It must insist that the leaders it hires uphold the mission ahead of other concerns, particularly personal enrichment. It must provide these leaders with realistic incentives based on how well they uphold this mission, not on revenue or operating margin. Until such changes are accomplished, expect this hospital system, like many other health care organizations, to contribute only to our ever rising prices, declining access, and stagnating health care quality. References 1.  Garloch K, Alexander A. Carolinas HealthCare System's evoluation: public hospital with private attitude.  Charlotte Observer, April 21, 2012.  Link <a href="http://www.charlotteobserver.com/2012/04/21/3189730/public-hospital-with-private-attitude.html">here</a>. 2. Alexander A, Garloch K, Neff J. Nonprofit hospitals thrive on profits. Charlotte Observer, April 21, 2012. Link <a href="http://www.charlotteobserver.com/2012/04/21/3189821/nonprofit-hospitals-thrive-on.html">here</a>. 3. Alexander A, Raynor D. Hospital suits force new pain on patients. Charlotte Observer, April 23, 2012. Link <a href="http://www.charlotteobserver.com/2012/04/23/3193509/hospital-suits-force-new-pain.html">here</a>. 4. Anonymous. Money over mission at non-profit hospitals. Charlotte Observer, April 22, 2012. Link <a href="http://www.charlotteobserver.com/2012/04/22/3189118/money-over-mission-at-non-profit.html">here</a>. 5. Anonymous. Million-dollar hospital executives in North Carolina. Charlotte Observer, April 21, 2012. Link <a href="http://www.newsobserver.com/2012/04/22/2019568/million-dollar-hospital-executives.html">here</a>. 6. Alexander A. Stop suing patients, NAACP tells Carolinas HealthCare System. Charlotte Observer, May 2, 2012. Link <a href="http://www.charlotteobserver.com/2012/05/02/3211943/stop-suing-patients-naacp-tells.html">here</a>.

From Serving the Poor to Paying Executives Millions - Carolinas HealthCare System

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04 May 2012

More on Hospital Executives' Disproportionate Pay

Local US news media brought some more striking examples of disproportionate pay given to health care organizational leaders.  Carolinas HealthCare System: Corporate-Style Compensation for a Public Hospital CEO Carolinas HealthCare System declares it is "the largest health care system in the Carolinas and the third largest public system in the nation" in its <a href="http://www.naph.org/Main-Menu-Category/About-NAPH/About-Our-Members/Profiles/Carolinas.aspx">membership blurb</a> for the National Association of Public Hospitals and Health Systems.  That association describes its members thus, <blockquote>Since the establishment of the first public hospital in the United States in the early 1700s, safety net hospitals and health systems have been an essential part of our nation’s health care delivery system. In the 21st century, safety net hospitals continue their long tradition of quality and service to the community. By delivering care to America’s growing number of working uninsured families, providing world-class trauma and emergency care, preparing for and responding to the threat of terrorism, epidemics, and natural disasters, and training the next generation of doctors, nurses, and dentists—safety net health systems ensure our nation’s communities are health and strong.</blockquote>The Charlotte Observer just <a href="http://www.charlotteobserver.com/2011/01/27/2012618/hospital-systems-disclose-salaries.html">noted</a> how much this "safety net hospital," which declared solidarity with "working uninsured families," pays its CEO: <blockquote>Carolinas HealthCare System paid its CEO $3.7 million in 2010, $287,000 more than the year before as the system lifted a pay freeze and paid bonuses for reaching annual and long-term goals. Chief Executive Officer Michael Tarwater, 57, who has led the $6.3 billion public hospital system for nine years, received a base salary of $986,172, two bonuses totaling $2 million, and other compensation, including retirement and health benefits, of $630,346. In 2009 his compensation package totaled $3.4 million.</blockquote> So the leader of an organization that serves the poor and uninsured gets enough compensation to make him  quite rich.     Mary Washington Healthcare: Net Income Increases, but 20% Goes to Bonuses of Top 20 Executives <a href="http://fredericksburg.com/News/FLS/2011/012011/01052011/594215">According to </a>the Fredricksburg (Virginia) Free Lance-Star, from 2008 to 2009, Mary Washington Healthcare saw its total revenues increase, but its net surplus decrease, <blockquote>The company's net income was $25 million in 2008, up from $20 million in 2007. </blockquote>Then <blockquote>The company opened its second hospital that year [2009] and recorded revenues of more than $666 million, up from $551 million in 2008. However, net income dropped to $8 million, in part because of the opening of Stafford Hospital.</blockquote> So what happened to its executive compensation? <blockquote>The top employees at Mary Washington Healthcare earned more than $1.1 million in bonuses in 2009, their reward for a successful 2008. More than two dozen key executives and employee physicians earned annual bonuses ranging from $2,000 to $246,278. The median bonus for the company was more than $28,000. Fred Rankin, president and chief executive officer, received the largest bonus among managers: $151,430. Rankin continues to be the firm's highest-paid employee, with a 2009 salary package of $955,282.</blockquote> The hospital's net income increased $5 million (25%) from 2007 to 2008.  It then dropped $17 million (66%) from 2008 to 2009.  Reflecting 2008 results, its top 20 executives received 2009 bonuses of over $1 million, an amount that exceeded 20% of the hospital's 2008 net revenue increase on which the bonuses were based.  The total compensation of these 20 people in 2009 was approximately $6.5 million (see <a href="http://fredericksburg.com/News/Web/2011/012011/mary-washington-hospital-salaries">here</a>), which exceeded the hospital's entire increase in net revenue from 2007 to 2008.  The hospital CEO's compensation in 2009 would have consumed one-eighth of the net revenue that year.  This all suggests that the top executives of this hospital consume an inordinate part of the organization's total revenue stream.     Hutcheson Medical Center: CEO Compensation and Deficits Rise Here is how the Rome News-Tribune <a href="http://romenews-tribune.com/view/full_story/11174752/article-Region--Hutcheson-Medical-Center%E2%80%99s-executive-salaries-rise-as-lean-years-continue?instance=home_news_lead_story">described</a> the financial status of Hutcheson Medical Center, located in Fort Oglethorpe, Georgia: <blockquote>HMC reported a profit of $766,766 in 2007 and a $7.3 million loss in 2009.</blockquote> In addition, <blockquote>In 2008 more than 80 Hutcheson employees lost their jobs when the hospital eliminated its emergency medical services. And after the profitable year of 2007, the Hutcheson administration approved major renovations for the hospital’s front lobby and entered into a $35.5 million dollar bond issue to fund further renovations and pay off debt. That bond issue is currently in default, which prohibits the next $10 million payment from being released to HMC.</blockquote> Things look worse in the future: <blockquote>At a meeting Thursday, Jan. 28, of the Hospital Authority Board, HMC chief financial officer Gerald Faircloth revealed that the hospital had losses of $3.3 million in the first quarter of budget year 2011 and projected total 2011 losses at around $9 million. Faircloth, whose compensation went down by $15,000 from 2008 to 2009, also reported that HMC has an estimated 15 days of operating cash on hand. 'So the wolf is at the door,' said Bill Cohen, a trustee who represents Catoosa County on the Hospital Authority Board. Faircloth agreed.</blockquote> Wolves notwithstanding, however, the Hutcheson CEO has done very well: <blockquote>In the face of Hutcheson Medical Center’s financial losses over the past several years, financial documents reveal that president and CEO Charles Stewart’s compensation package has increased more than 26 percent from 2007 to 2009. According to Internal Revenue Service documents for the 2007 and 2009 budget years, Stewart received $337,081 and $425,745, respectively, in total compensation. The Fort Oglethorpe hospital’s budget year runs from October through September. Stewart’s 2009 income includes a “bonus and incentive compensation” of $69,750.</blockquote>So despite a major financial loss, lay-offs and service discontinuations, and a bond default, the CEO got "bonus and incentive compensation" in 2009.   At least that drew some attention: <blockquote>'I’m really surprised that the board (Stewart) works for would give him such an increase,' said Walker County commissioner Bebe Heiskell, referring to the HMC board of directors that oversees the day-to-day operations of the hospital. 'For a failing hospital that’s exorbitant.'</blockquote> So while the hospital's financial performance continued to decline, the total compensation provided its CEO continued to increase. Summary Here were three instances in which the compensation of top non-profit hospital leaders seemed out of all proportion to the hospitals' financial results, let alone their accomplishment of their missions. In the first case, the CEO of a public hospital system meant to serve poor and uninsured patients was paid enough in one year to make him an instant multi-millionaire. In the second, the bonuses alone handed out to a handful of top executives ostensibly based on a net revenue increase would have consumed one-fifth of that increase, and when net revenue declined the next year, those executives' compensation would have almost consumed that entire year's net revenue. In the third, a CEO got increasing compensation while his hospital suffered increasing losses. As we have <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">said before</a>, far too often the leaders of not-for-profit health care institutions seem more interested in padding their own bottom lines than upholding the institutions' missions. They often seem entirely unaware of their duty to put those missions ahead of their own self-interest. Like the financial services sector in the era of "greed is good," health care too often seems run by <a href="http://hcrenewal.blogspot.com/2009/12/compensation-madness-insiders-hijacking.html">"insiders hijacking established institutions for their personal benefit."</a> True health care reform would encourage leadership of health care who understand health care and care about its mission, rather than those who see a quick way to make a small fortune.

More on Hospital Executives' Disproportionate Pay

Local US news media brought some more striking examples of disproportionate pay given to health care organizational leaders. Carolinas HealthCare System: Corporate-Style Compensation for a Public Hosp…

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31 Jan 2011

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