Hospital CEOs get seven-figure salaries, country club memberships

Critics question whether nonprofits should pay so handsomely

August 28, 2010|By Andrea K. Walker, The Baltimore Sun

Baltimore-area hospital CEOs and presidents boast seven-figure salaries, club and gym memberships, and paid financial planning and tax services as part of compensation packages from their nonprofit employers.

Nearly a dozen hospitals cover country club dues for top executives. Carroll Hospital, in reporting the compensation to the IRS, disclosed that it requires its chief executive officer to be a member of the exclusive local clubs "to facilitate hospital interaction with the community" and because of the "potential for donors."

At the Greater Baltimore Medical Center, top executives were given thousands of dollars to spend on health equipment, tuition and other personal expenditures.

And when they retire, many hospital heads walk away with payouts that top $1 million.

According to a survey of Baltimore-area hospitals, the highest-ranking executives were often the recipients of financial payouts and perquisites that many private-sector companies have abandoned in the face of intense public debate about excessive CEO pay. The heads of hospital systems, which oversee many facilities, tended to make the biggest salaries and incentives. Eight top executives made more than $1 million, and the largest CEO pay package totaled $7.8 million.

The Baltimore Sun analyzed the compensation packages of the CEOs and presidents from 27 Baltimore-area hospitals and health systems using the 990 forms they must file with the Internal Revenue Service each tax season. The survey relied on forms from the fiscal year 2009, the most recent available.

Hospital executive pay has raised the ire of critics who questioned whether nonprofit hospitals, which get tax breaks and donations to help the poor, should be doling out such hefty compensation for their CEOs. Some pointed out that a number of hospitals have come under fire for aggressive debt collection tactics with patients.

"We've had CEOs get golf club memberships and trips on yachts and things like that," said Ryan O'Donnell, executive director of Common Cause Maryland. "You have hospitals in Maryland where part of their mission is to provide nonprofit care, but then they're going after people who can't pay during tough economic times. It doesn't make sense to do that when they're paying CEOs these salaries."

Compensation for hospital executives is expected to come under increasing scrutiny as more transparency is mandated.

For the fiscal year 2009, the IRS beefed up what it requires hospitals and other nonprofits to report about compensation. The changes were prompted by audits showing discrepancies in what nonprofit hospitals across the country were disclosing.

And legislation passed by the Maryland General Assembly last year requires the state to make hospital IRS filings more accessible to the public. The filings are already public but can be difficult for the average person to obtain. Now, they're posted on the website of the Maryland Health Services Cost Review Commission, the agency that sets hospital rates.

Sen. George W. Della Jr., a Baltimore City Democrat, introduced the bill in the Senate after reading reports about hospitals' debt collection practices. With the latest disclosures of pay packages, one stood out for Della — that of former University of Maryland Medical System CEO Edmond F. Notebaert, who left with the $7.8 million pay package despite resigning amid turmoil and controversy.

"Some of the salaries are over the top as evidenced by Notebaert over at University of Maryland," Della said. "That was more than over the top. Maybe that compensation to Notebaert wouldn't have happened to the extent that it did if everybody was cognizant of it."

Hospital compensation committees contend that they need to offer competitive pay packages to hire the best talent. Many hospital executives have business backgrounds and could easily be lured away by big corporations, they say.

They hire consultants to ensure that what they are paying is on par with what other hospitals of comparable size pay. They also don't want to run afoul of IRS rules that penalize hospital executives who make significantly more than executives at comparable hospitals.

St. Joseph Medical Center, a member of Catholic Health Initiatives, said in a statement that it offers a level of compensation that allows it to compete for talent. The hospital paid former CEO John K. Tolmie $846,128 in salary, bonus and other pay, the latest IRS filing shows.

"Hospital CEOs have one of the most demanding, high-pressure jobs in the nation, dealing on a daily basis with everything from ever-changing regulations to workforce shortages and lower reimbursement for services," the hospital statement said.

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