Healthcare: CEO pay soars at top not-for-profits

By Michael Sandler  | August 8, 2015 | published at Modern Healthcare

AR-308089988.jpg&q=40&maxw=600&maxh=600Despite mounting public concern about sky-high pay levels for top-ranked corporate officials, the highest-paid executives at not-for-profit healthcare institutions racked up massive pay increases in 2013, a Modern Healthcare review of the most recently available data from Internal Revenue Service filings shows.

The pay for 20 top-paid healthcare executives who earned both a base salary and bonus and incentive income in 2012 and 2013 soared 29.6% year over year.

An executive who saw one of the highest percentage spikes in combined base and bonus pay was Anthony Tersigni, president and CEO of St. Louis-based Ascension. He earned a total of $7.1 million in 2013, more than double the $2.8 million he earned in 2012. His total compensation, which included base, bonus, $1.3 million in other compensation, $59,024 in deferred compensation and $38,639 in nontaxable benefits, totaled $8.5 million.

Ascension compensates executives based on performance metrics, including the system’s contributions to charity care, which have increased nearly 47% since 2012 and approached $2 billion this past year, said Nick Ragone, chief communications and marketing officer at Ascension.

Further down the list, Ronald Peterson, president of Baltimore-based Johns Hopkins Health System, earned $1.7 million in 2013, up from $1.6 million in 2012. His base compensation increased 9.3%, and he received a 1% increase in bonus pay over 2012. The early reporting of Peterson’s supplemental executive retirement-plan benefit, which is distributed as a retirement annuity, boosted his total compensation to $15.4 million.

Executive compensation at Johns Hopkins must be comparable to salaries paid to those in similar positions at peer academic medical institutions, said Kim Hoppe, director of corporate communications at Johns Hopkins. The pay bump decision was aided by “highly respected national experts in compensation for large and complex academic health centers” and was monitored by the board’s compensation committee, she said.

Executives nearing retirement often see huge increases in their final-year salaries. Al Stubblefield, who retired as president and CEO of Baptist Health Care Corp. in June 2012, but remained president emeritus, saw a 101.3% uptick in his combined base and bonus in 2013. And Anthony Watson, who stepped down from his post as CEO of the Health Insurance Plan of Greater New York in May 2013, still collected enough compensation to see an 83.7% increase in his combined base salary and bonus in 2013.

Not every executive saw higher earnings in 2013. Patrick Fry, CEO of Sutter Health, took 8.3% less compensation, as his total salary fell to $3.5 million from $3.8 million in 2012. Dr. Charles Sorenson, CEO of Intermountain Healthcare in Salt Lake City, saw his $1.7 million income in 2012 decline 4.2% to $1.6 million in 2013.

Sorenson’s bonus plan is tied to multiyear goals, which can cause yearly variability in bonus amounts, said Daron Cowley, spokesman for Intermountain. The goals are set by the board of trustees, and are based on clinical outcomes, patient satisfaction and other operational goals, he said.

While clinical-measures goals are new to some health systems, Intermountain has used them for more than 15 years, Cowley said.

Not-for-profit healthcare executives possess talents and skills that aren’t easily found in the marketplace, said Sandra Miniutti, chief financial officer at Charity Navigator, a Glen Rock, N.J.-based not-for-profit that evaluates U.S. charities. Those rare talents make it possible for executives to command exorbitant salaries, she said.

Given the changing political environment—last week, the Securities and Exchange Commission finalized rules requiring publicly traded companies to disclose their ratio of CEO pay to their company’s median salary—it is becoming more difficult to justify outsized salaries and large year-over-year increases at not-for-profit institutions.

But the compensation consultants who steer the process say market forces are driving salaries higher. Running a large healthcare system is a complex job and CEO tenure is often short, said Ron Seifert, a vice president at Hay Group, a Philadelphia-based consulting firm. “At the end of the day there aren’t tons of people who can effectively lead these organizations,” he said.