Some health care executives get bigger pay packages

Pay scrutinized as medical institutions complain about tight budgets

August 17, 2013|By Andrea K. Walker, The Baltimore Sun

Many Maryland hospital and health system CEOs received pay increases in recent years even as they complained of shrinking profit margins and warned of cutbacks unless they could increase the rates they charge.

Eleven executives earning seven-figure compensation packages including salary, bonus, retirement and other pay saw their total pay rise from as little as 0.13 percent to as much as 308 percent in the fiscal year that ended in 2012, according to tax filings. Another executive earning more than $1 million saw a pay cut.

Some of the larger compensation increases included retirement benefits earned over years of service that were reported as income under new tax rules. In those cases, the CEOs won't collect the money until they retire.

But many of these same CEOs took home tens of thousands of dollars more than the previous year because of bonuses and increases in base pay. Others got money for social clubs and gym memberships in an era when many companies have stopped offering these perks.

Hospitals defend the compensation, saying CEOs are paid fairly for the high-profile, complex duties that come with their jobs.

And at least two hospital systems — Saint Agnes Healthcare and the University of Maryland Medical System — have since instituted pay cuts or freezes for executives, given budgetary constraints.

The CEO pay question — always a hot-button issue — is generating debate again this year after a state panel spurned a push by hospitals for higher rates, instead approving smaller increases and calling on them to do more to curb expenses. Hospitals have sought rate increases in each of the past three years, and this year at least one Baltimore-area hospital responded with layoffs in an effort to trim labor costs.

Health care watchdogs and union leaders say more scrutiny should be paid to what executives earn for running nonprofit institutions, which get tax breaks and set-asides to treat the poor.

Those critics say hospital CEOs need to examine their own salaries as they face financial pressures and look to cut costs.

"If they are laying off staff and decreasing what they invest in the community and executive compensation is increasing, that is a real question," said Jessica Curtis, project director of the hospital accountability project at Community Catalyst, a national advocacy group that promotes wider access to affordable health care.

Hospitals argue that they have to offer competitive compensation to attract talent to run a complicated business.

Executives need to understand everything from the latest health technologies to regulatory changes, including health reform. Hospitals note that they compete with private sector businesses where their executives could choose to work instead.

Is value received?

"I would say no matter whose compensation you're looking at, the question is if there is value being received for that service," said Carmela Coyle, CEO of the Maryland Hospital Association, a trade group that lobbies on behalf of hospital members that operate in the state.

"Hospital executives are in charge of incredibly complex organizations," she said. "They are organizations that are open 24 hours a day and are highly regulated. These are really difficult, difficult jobs."

The Baltimore Sun analyzed the compensation packages of the CEOs and presidents from more than 40 Maryland hospitals and health systems using the 990 forms they must file with the Internal Revenue Service each tax season. The survey relied on forms for the fiscal year ending in 2012, which were posted on the website of the Health Services Cost Review Commission, the body that sets hospital rates in Maryland.

Those who operate large health systems earned the most.

The state's highest-compensated hospital executive that fiscal year was Kenneth A. Samet, the CEO of the 10-hospital MedStar Health system, who earned $6.3 million. More than half — $3.5 million — was money earned in a supplemental retirement plan during his 23 years of service. He won't get the money until he retires. His base pay was $1.2 million, and he received $1.5 million as a bonus and incentives.

The other top five highest-paid executives in Maryland are James Xinis, CEO at Calvert Memorial Hospital in Prince Frederick; Ronald A. Peterson, CEO of the Johns Hopkins Health Center Corp.; Robert A. Chrencik, CEO of the University of Maryland Medical System; and Thomas Mullen, CEO of Mercy Medical Center.

Xinis saw his compensation package jump 307.8 percent to $3.5 million, $2.8 million of which was a required distribution of vested retirement funds from a plan he begin contributing to in 2003, the hospital said in a statement. Xinis has served as CEO for 26 years and plans to retire in the next 18 months, the hospital said. His base salary in fiscal 2012 was $309,557.

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