healthy4u: Mercy Health System

No Blues, but Lots of Green for St Louis Hospital System CEOs

A recent<a href="http://www.stltoday.com/business/local/hospital-ceos-see-double-digit-pay-hikes/article_431263e2-81c9-5367-b0bd-f48885169adb.html"> article</a> in the St Louis Post Dispatch provided the latest examples of how hospital <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">executive compensation</a> continues to defy gravity.  In summary,<br /><br /><blockquote class="tr_bq">In recent years, executives at St. Louis-area nonprofit health  organizations have seen<i> annual double-digit increases of as much as 40  percent in their total compensation packages,</i> which typically include  salaries, bonuses, pensions and health benefits.<br /><br />Such pay hikes occurred as these nonprofit organizations enjoyed their largest operating margins in years,...</blockquote><br />The examples include...<br /><br /><b>BJC Healthcare</b><br /><br /><blockquote class="tr_bq">Steven Lipstein, president and chief executive of St. Louis-based BJC  Healthcare, received a <i>total compensation package of about <b>$3.3 million</b></i>  in 2011, the latest year currently available per BJC’s tax filings.  That’s a 40 percent hike over his compensation of $2.3 million in 2010. A  year earlier, he received a 4 percent increase.</blockquote><br />In particular,<br /><br /><blockquote class="tr_bq"> According to BJC’s 990 tax filing, Lipstein’s 2011 compensation of  $3,279,956 included a base salary of $920,576; bonuses and incentive pay  of $2,213,555; other compensation of $15,733; deferred compensation of  $99,651; and $30,441 in 'nontaxable benefits.' </blockquote><br />Also,<br /><br /><blockquote class="tr_bq">Five BJC executives received total compensation packages in 2011 <i>exceeding <b>$1 million.</b></i></blockquote><br />For comparison, note that<br /><br /><blockquote class="tr_bq">The health system paid about $1.7 billion in salaries and benefits in  2011 to its 28,559 employees — <i>an overall increase of nearly 5 percent</i>  over its labor costs in 2010, when it had about 250 fewer employees.</blockquote><br />So Mr Lipstein's compensation rose much faster than the system's total labor costs.  Also,<br /><br /><blockquote class="tr_bq"> BJC employees — which include a spectrum of jobs from administrators,  physicians and nurses to medical technicians, office workers and supply  clerks — earn annual salaries and benefits on average totaling about  $58,343. Lipstein’s pay package of $3.3 million for 2011 was <i>56 times  greater than the average BJC employee’s compensation.</i></blockquote><br />So the CEOs compensation was much larger than that of the average employee, and seems to have risen much faster.<br /><br /><b>SSM Health Care</b><br /><br /><blockquote class="tr_bq">William Thompson... [is] chief executive of Creve Coeur-based SSM Health Care,  which operates 18 hospitals in four states. He received <i>total  compensation of <b>$2.3 million</b></i><b> </b>in 2011 — a 26 percent increase over 2010.<br /><br />Some of that pay hike was attributable to a change in jobs. Thompson,  SSM’s former chief operating officer, assumed the role of chief  executive in August 2011. In 2010, his pay increased 95 percent from  $918,229 to $1.8 million.</blockquote><br /><b>Ascension Health Alliance</b><br /><br /><blockquote class="tr_bq"> Anthony Tersigni, chief executive of Ascension Health Alliance, received<i> total compensation in fiscal year 2012 of<b> $4 million</b></i> — a 12 percent  increase over the previous year. A year earlier, he received a 6.5  percent increase over the previous year in his former role as chief  executive of Ascension Health. </blockquote><br />In addition,<br /><br /><blockquote class="tr_bq"> Nine executives at Ascension’s headquarters received total compensation in fiscal year 2012 <i>exceeding <b>$1 million</b>.</i></blockquote><br /><b>Mercy Health</b><br /><br /><blockquote class="tr_bq">Lynn Britton, chief executive of Mercy, received <i><b>$2.2 million </b>in total  compensation</i> in fiscal year 2012 —<i> a 15 percent increase</i> over 2011. A  year earlier, he received an 18 percent increase.  </blockquote><br />And,<br /><br /><blockquote class="tr_bq">Five current and former Mercy executives received<i> total compensation in fiscal year 2012 exceeding $1 million.</i><br /><br /></blockquote><blockquote>Myra Aubuchon, a former Mercy senior vice president who left the health  system in 2010, received<i> a payout in fiscal year 2011 of <b>$3.4 million</b></i>  for retirement benefits, severance and other compensation. In fiscal  year 2012, she received an additional $405,339 in compensation.<br /><br />Mercy  executives are provided additional perquisites, including<i> first class  and charter travel on Mercy’s aircraft</i> and the opportunity at times for  their <i>spouses to accompany them</i> to business and other events. Executives  and staff fly to and from some business meetings in <i>Mercy’s midsize  corporate jet, a Rockwell Sabreliner. </i></blockquote><i></i><br /><b>The Usual Talking Points</b><br /><br />So all CEOs of the St Louis area's bigger non-profit health care systems made more than $1 million, often several  times that.  Most of the systems had multiple other hired executives who made at least $1 million.  Often executives received other perks far beyond anything received by other employees, such as travel on corporate jet aircraft.   <br /><br />We have noted that nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same 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> <a href="http://hcrenewal.blogspot.com/2012/12/health-care-hired-managers-not-playing.html">here,</a> and <a href="http://hcrenewal.blogspot.com/2013/05/executive-compensation-as-legal.html">here</a>.   They are:<br />- We have to pay competitive rates<br />-  We have to pay enough to retain at least competent executives, given how hard it is to be an executive<br />-  Our executives are not merely competitive, but brilliant.<br /><br />The Post-Dispatch article provided more examples of these stereotypical justifications.<br /><br /><u>Competitive Rates</u><br /><br /> The SSM CEO actually seemed to make such an argument to justify his own pay,<br /><br /><br /><blockquote class="tr_bq">'I’ve been (at SSM) for 33 years, and for a lot of those years I wasn’t  paid nearly the salary I’m paid now,' Thompson said. 'If you look at the  revenue, I don’t think I’m over- or underpaid.'</blockquote><br />He provided no data to support is argument. <br /><br />And again,<br /><br /><br /><blockquote class="tr_bq">Salaries and benefits for nonprofit health executives 'need to be  competitive if we are going to be able to attract the talent needed to  run these very complex organizations,' he said.</blockquote><br />How that talent was defined was not apparent. <br /><br />The chief of  public relations of Ascension Health Alliance added,<br /><br /><blockquote class="tr_bq"> [Chief advocacy and communications officer Jon] Glaudemans said that Ascension is seeking “to remain competitive in a  market that is increasingly complex and characterized by challenging  regulatory circumstances, including implementation of the Affordable  Care Act.”</blockquote><br />From the senior vice president for human resources for Mercy Health, Cynthia Mercer, we had this contribution,<br /><br /><blockquote class="tr_bq">'We’re competing for the same pool for talent,' Mercer said. 'It’s difficult to secure talent. ...'</blockquote><br />She did not provide a definition of talent either.   Note that she also said,<br /><br /><blockquote class="tr_bq"><span class="print_trim">We feel that it’s very important as a ministry  to be just in our approach, respecting the dignity of each of our  co-workers regardless of their position.  </span></blockquote><br /><span class="print_trim">She did not explain the justice provided by the top executives' use of private corporate aircraft and the free travel provided to their spouses.</span><br /><br /><u>Retention</u><br /><br />An example came from the chief PR flack from Ascension,<br /><br /><br /><blockquote class="tr_bq">'We are required to be competitive, but we also have a mission to care  for those who are poor and vulnerable. Candidly, many of our executives  could do better for themselves working in other environments.'</blockquote>He did not give evidence that his or any other local executives were in great demand in such other environments.  He certainly did not try to reconcile how an organization with a mission to care for "the poor and vulnerable" was making a multimillionaire out of its CEO.<br /><br /><u>Brilliance</u><br /><br />The chief public relations flack at Ascension Health Alliance provided this example,<br /><br /><blockquote class="tr_bq">'When we look for leadership of our ministry, we need to draw from the  best and brightest to serve those who are poor and vulnerable,' said Jon  Glaudemans,...</blockquote><br />Whether his use of the term "best and brightest" was meant to be an ironic allusion to the leaders who lead the US into the controversial and bloody Viet-Nam War was not clear. <br /><br />In response to the first Post Dispatch article, a physician, self-described as "  a 40-year veteran of Washington University Medical School and BJC hospitals," wrote a<a href="http://www.stltoday.com/news/opinion/mailbag/letters-to-the-editor/bjc-s-chief-executive-lipstein-is-worth-his-compensation/article_3c5d00e5-8867-50d6-8a28-825765db8929.html"> letter</a> in Mr Lipstein's defense.  To prove the CEO's brilliance, Dr Robert G Levitt gave him personal credit for a number of accomplishments, such as addressing readmissions for congestive heart failure patients, and avoiding outbreaks of multidrug resistant bacteria in intensive care units, that seem to be more likely to have resulted from diligent work by health professionals.  He praised Lipstein for actually "respond[ing] to emails from physicians and staff," which hardly seems brilliant.  Finally, he noted "BJC has not laid off workers as other St. Louis hospital systems have done to save costs."<br /><br />It only took three days for that point to be proven wrong, as the St Louis Post-Dispatch then<a href="http://www.stltoday.com/business/local/bjc-healthcare-lays-off-employees/article_7faa2efb-5380-5cdb-91ae-0bf3280c13cd.html"> reported</a>, "BJC Healthcare began on Wednesday laying off 160 employees, the first layoffs in the company’s 20-year history."  <a href="http://www.bizjournals.com/stlouis/blog/health-care/2013/06/bjc-cuts-administrative-staff-some.html">Per the St Louis Business Journal</a>, these layoffs may include at least some "direct patient care staff," that is, e.g., nurses, and were due to declining revenue.  <br /><br /><b>Summary</b><br /><br />The St Louis Post Dispatch main article on CEO pay opened thus,<br /><br /><blockquote class="tr_bq">Trimming medical costs is the latest mantra among hospital  executives, government bureaucrats, insurers and benefit managers as  they grapple for ways to contain U.S. health care spending.But executive compensation in the health care industry shows few signs of hitting a ceiling. </blockquote><br />It included comments by Professor Harold Miller of the Center for Healthcare Quality Payment and Reform and Carnegie-Mellon University,<br /><br /><blockquote class="tr_bq">'But if a health care executive’s pay is based on the amount of revenue  they generate, the problem is in the incentive,” he said. “Basically,  hospitals get rewarded by putting more heads in beds. It works against  the goal of affordable health care. We need to start paying these  executives to keep people healthy.'</blockquote><br />And he noted the danger is,<br /><br /><blockquote class="tr_bq">when executives start chasing their own compensation rather than the  good of the company. We’ve seen that in banking, and that can happen in  health care</blockquote><br />I would argue that this is already what is going on. Non-profit organizations whose missions include taking care of poor people pay their top executives millions of dollars. We have yet to see any logical, evidence-based justifications for such generous and ever rising compensation.  This compensation is increasingly out of proportion to what other employees are paid   Their compensation may rise even when their organizations' finances are challenged (see the example of the BJC layoffs above).  Nearly all rationalizations of their compensation are made by people whose jobs depend on the executives they are defending (as above), or by other hired executives who may be eager to defend their brethren.  <br /><br />As long as hired executives chase compensation rather than uphold the health care mission, expect their personal fortunes to increase, and the mission to wither.<br /><br />We await  true health care reform which would ensure health care organizational  leadership that puts upholding the health care mission ahead of lining their pockets.  .

No Blues, but Lots of Green for St Louis Hospital System CEOs

A recent article in the St Louis Post Dispatch provided the latest examples of how hospital executive compensation continues to defy grav...

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Guest Post: the Slow Grind of Justice

<br /> <br /><div class="MsoNormal"> <i><span style="background-color: white; color: blue; font-size: xx-small;">Health  Care Renewal presents a guest blog by Steve Lucas, a retired  businessman who formerly worked in real estate and construction who has a  long standing interest in business ethics, and has long observed the  health care scene.</span></i></div><div class="MsoNormal"><br /></div><div class="MsoNormal">The March 14, 2013 Akron Beacon Journal print edition highlights what I am sure Mercy  Medical Center hopes is the end of a long legal battle with Aultman Health Foundation. </div><div class="MsoNormal"><br /></div><div class="MsoNormal">Cheryl Powell <a href="http://www.ohio.com/business/ohio-supreme-court-throws-out-aultman-s-appeal-in-battle-with-rival-mercy-hospital-1.380889">writes</a> in <i style="mso-bidi-font-style: normal;">"High court throws out appeal by Aultman"</i> highlights the Ohio Supreme Courts dismissal of Aultman’s suit brought in regards to a 2010 court ruling that Aultman pay Mercy $6.1 million for unfair business practices.  </div><div class="MsoNormal">A review of that legal action can be found on <a href="http://hcrenewal.blogspot.com/2010/06/guest-post-hospital-passing-that-low.html">this Health Care Renewal post</a>.</div><div class="MsoNormal"><br /></div><br /><blockquote class="tr_bq"><div class="MsoNormal">The legal battle centers on 'secret ´bonuses paid to select brokers for switching employers from other insurance plans to Aultman’s insurance company, AultCare.</div><div class="MsoNormal"><br /></div><div class="MsoNormal">Aultman Hospital is AultCare’s only in-network hospital in Canton.'</div></blockquote><br /><div class="MsoNormal"><br /></div><div class="MsoNormal">It is important to remember that AultCare is an aggressive for-profit insurance company.</div><div class="MsoNormal"><br /></div><br /><blockquote class="tr_bq"><div class="MsoNormal">At the end of the two-month trial in Stark County Common Please Court, jurors decided Aultman should pay Mercy more than $6.1 million in damages for engaging n a pattern of corrupt activity by influencing brokers with money.</div><div class="MsoNormal"><br /></div><div class="MsoNormal">'Evidence during the trial showed that for a period of time, brokers weren’t allowed to disclose the payments to anyone, even the clients they represented.</div><div class="MsoNormal"><br /></div><div class="MsoNormal">Aultman officials have said the confidentiality requirement was dropped in 2004, well before Mercy filed its lawsuit.</div></blockquote><br /><div class="MsoNormal"><br /></div><div class="MsoNormal">We see an all too familiar behavior pattern: someone sensing that he or she is about to be caught drops an activity and then feigns innocence for our past transgressions. How often have we seen a drug company sign a consent agreement only then to return to court to sigh another consent agreement? How often are we told that an activity was committed by a low level sales person and that person is no longer with the company?</div><div class="MsoNormal"><br /></div><br /><blockquote class="tr_bq"><div class="MsoNormal">Aultman has continued to criticize the case Mercy filed, calling it a waste of resource for the non-profit health-care organizations.</div><div class="MsoNormal"><br /></div><div class="MsoNormal">'We have always felt that this case was not positive for our community, that resources were shifted in a way that was not beneficial to the community' [the attorney representing Aultman, Allen] Schulman said. 'I don’t think that it serves the community well.'</div><div class="MsoNormal"><br /></div><div class="MsoNormal">[ Mercy President and Chief Executive Thomas] Cecconi said Mercy felt an obligation to fight Aultman’s business practices for the community’s sake.</div></blockquote><br /><div class="MsoNormal"><br /></div><div class="MsoNormal"><b>Conclusion</b></div><div class="MsoNormal"><br /></div><div class="MsoNormal">Once again we find the use of the legal system perverted by one party in an effort to gain a business advantage over another entity.</div><div class="MsoNormal"><br /></div><div class="MsoNormal">Aultman has used its non-profit status to shield the activities of a for-profit insurance subsidiary.  Perhaps someone thought that no one would sue a large non-profit hospital for the actions of the subsidiary.</div><div class="MsoNormal"><br /></div><div class="MsoNormal">Aultman used the tired old refrain that “we don’t do that anymore” as a defense for past business practices that garnered questionable profits. This after the fact admission does not absolve them of responsibility for those actions.</div><div class="MsoNormal"><br /></div><div class="MsoNormal">When all else fails Aultman uses the appeal that it reflects badly on the community. It really does not matter that they were the ones who engaged in this activity. Additionally they make the claim this will result in a decline in resources available when they profited from the original activity.</div><div class="MsoNormal"><br /></div><div class="MsoNormal">These are old concepts to HCR readers. The use of the legal system, from law suits being filed against those who would blow the whistle, to grinding out appeals to bleed a person or organization dry, all in an effort to protect a questionable or even illegal activity. In this case there is still the issue of Mercy’s legal fees involved in Aultman’s appeal.</div><div class="MsoNormal"><br /></div><div class="MsoNormal">Smaller markets are seeing a consolidation of hospitals and medical practices. The opportunity for one party to take advantage of this is growing as patients and doctors are presented with limited opportunities to seek appropriate medical care. When the hospital owns the insurance company, and your care will be dictated by the policy available through only one company, the opportunity for abuse has to be acknowledged. </div><div class="MsoNormal"><br /></div><div class="MsoNormal">Mercy has begun to grow again by offering the community a less corporate medical experience. Interestingly, Mercy and Aultman have collaborated on securing scarce oncology drugs. It appears some doctors still feel it is about caring for the patient, and less about loyalty to a corporate logo.</div><div class="MsoNormal"><br /></div><div class="MsoNormal"></div><div class="MsoNormal">Steve Lucas</div><div class="MsoNormal"><br /></div>

Guest Post: the Slow Grind of Justice

Health Care Renewal presents a guest blog by Steve Lucas, a retired businessman who formerly worked in real estate and construction who...

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