High hospital costs? Look at executive pay

[Hannah Bell]

Kaiser Health News did yeoman work last week examining California's hospital price trends...

The Sutters and John Muirs of the world claim they have to keep their prices high in order to pay for new equipment, meet seismic mandates and other cost pressures. Such fiscal crises are a constant refrain.

I'm capable of doing some yeoman work of my own, including a report I compiled this year of the compensation of about 120 not-for-profit hospital CEOs in California. Both Sutter and John Muir's data suggest another reason prices are so high.

In 2008 (the most recent year for which available), Sutter had nine executives who were paid $1 million a year or more. There were five others whose compensation approached $1 million. With annual increases, those five have likely since joined the seven-figure club.

John Muir CEO J. Kendall Anderson was by far the highest-paid not-for-profit hospital executive in California--if not the nation--in 2008, with compensation totaling $7.45 million. John Muir officials told me about $6.5 million of Anderson's pay was a one-time payout from his retirement plan.

Legally, Anderson is entitled to every penny, even the additional $500,000 retirement payout he apparently received in 2009. However, his retirement package averages out to about $200,000 for each year of service, even though when he signed on with John Muir in the 1970s, $50,000 was considered an excellent salary.

The notion of retirement compensation is to ensure autumn years are spent without great want, not accumulating a fortune that can be handed down through the generations.

Obviously, someone has to pay for such largesse.

Patients--many of whom have high deductibles and cannot always grasp the complexity of a hospital bill--are the logical source.

However, Rau's analysis suggested that lower-cost hospitals generate similar results in quality and outcomes, which means many of those executives are patting themselves on the wallet while the communities they serve receive nothing in return.

My reporting on hospital CEO salaries has generated some grumbling and reiterations that top pay is required to attract top talent. However, I remain adamant that these are non-profit organizations with a community-oriented mission, and are, therefore, inappropriate environments for seven-figure pay packages.

By contrast, the University of California hospitals--some of the nation's largest and most sophisticated teaching facilities--pay their executives nearly half of the Sutter rates.

Moreover, in California about 60 percent of hospital revenue is derived from the Medicare and Medicaid programs.

There's a reason hospital managers go into a mad scramble anytime CMS declares their institution is in violation of program guidelines: their doors would shut for good if they lost those payers. That makes them de facto taxpayer-funded organizations.

Their leaders should operate with the kind of financial austerity being demanded of such operations these days.

http://www.fiercehealthfinance.com/story/where-theres-high-hospital-costs-look-executive-payroll/2010-10-26

[duhneece]

1. Local hospital is non-profit

But 'run' by Triad/Quorum 'health management.' Not good for our community.

[Hannah Bell]

2. they just channel the profit into exec salaries & real estate buys. in preparation for the day

when they become for profit.

it's the same scam as in ed deform. using the public purse to channel money into private pockets.

[medeak]

4. "non-profit" hospital closed in small town

and demanded county to pay to purchase back after giving it for free. Thank gawd we got the city fathers to come to our small town to testify as same company wanted our county hospital for free. Oh...and in a year they were "for profit" corp

[proud2BlibKansan]

5. Thank you Hannah

I had a conversation a few days ago with a local guy about our city contracting out inspections. He cited this as an example of the city saving money and he thought it was a great idea. I pointed out that once the money leaves the city and goes to the private contractor, the taxpayers no longer know HOW it is being used to pay the workers, how much they are being paid, if they are given benefits, etc. For all we know, they might hire 'inspectors' who have no training and pay them minimum wage. What would prevent the contractor from hiring illegals o sex offenders? At least when they are city employees, there is transparency surrounding their pay and training and we know who they are. Guy I was talking to said "Oh, so we can only trust the government to be transparent?" I said yes, and I realize that is bad news to the drown govt in a bathtub crew, but there are good reasons that is a bad idea.

[medeak]

6. love your journal proud@Blib! n/t

[SharonAnn]

12. And the same scam as "utility deregulation"

[Hannah Bell]

14. yep.

[xchrom]

3. recommend

[MountainLaurel]

7. Not just salaries

Our "nonprofit" hospital system is one of the sponsors for the NFL and NBA teams and owns several corporate boxes in both the football stadium and basketball arena (the boxes at the football stadium alone cost $500K year, and that doesn't include game tickets). Meanwhile, the president's message for December warned employees about a zero-tolerance policy on venting in the workplace, because it apparently makes patients nervous to hear about short staffing.

[Horse with no Name]

8. At one time, we had a serious nursing shortage

Patients grew accustomed to saying "I know you are short-handed, I saw it on TV".
However, there are plenty of nurses out there now. The problem is that the working conditions are atrocious.
The problem has become that in the days of HAVING to run tight shifts, the hospitals saved megabucks.
Now the battle call is "100% productivity". Well, in healthcare that is virtually impossible--it is NOT productive on paper to sit and talk to a scared patient.
If there is ONE industry that needs to be unionized nationally, it is nursing.
Hospitals claim "shortage", but I know for a fact that many directors post jobs that are budgeted but don't exist and there is never any intention of filling them.
The reason they do this is so that they can meet the tight budget restraints that are thrust upon them by upper level management.
So, when the PTB calls for budget cuts, the directors take these budgeted non-existent positions and use those as cuts by attrition.
It does save existing jobs, but those jobs were already budgeted but never filled.
More funny paperwork.
I can't tell you how many times I (as well as coworkers) have gone to work only to be sent home two hours later. Or called before your shift starts and told that you aren't needed--but need to remain "free" to drop everything and come in "if they need you".
Or, even worse, be the one who is left behind to pick up the slack of a nurse who had been sent home so the numbers can work out.
Hospital corporations are evil. The upper management though, seems to thrive very well while the lower echelons suffer through pay freezes and benefit cuts.

[Sinistrous]

11. The entire healthcare industry needs to be unionized nationally.

The wages, working conditions, capricious personnel actions, and general abuse of staff in long term care facilities are a disgrace.

[primavera]

9. Care to speculate what the CEO of Pfizer makes?

Or Bristol Meyers Squibb? Or State Farm or Prudential? I'd bet real money it's a whole bunch more.

[Hannah Bell]

15. no question. but all of a piece. however, these are "non-profit" hospitals,

while pharmacorps are for-profit.

[primavera]

16. Which is why they're a minuscule part of the problem

No argument, their actions are indefensible, but next to the problem of the for-profit sector, they're a drop in the ocean. I sometimes having a hard time following the logic of getting all hot and bothered over the salaries of government officials and non-profit orgs when, in the very same breath, we'll cheerfully shrug off for profit entities giving their executives compensation packages that are a hundred, nay, a thousand, times more obscenely excessive. It's like we're focussing our attention and concern on a hangnail while blithely ignoring the dozen or so gunshot wounds from which we're hemorrhaging to death. Okay, fine, the hangnail sucks, but, really, people, don't we have much, much, much bigger problems to worry about?

[Hannah Bell]

17. I believe most hospitals are still "non-profit". HMOs like Kaiser are "nonprofit" for example.

It's not a small part of the picture in hospital costs.

[Tuesday Afternoon]

10. K&R...How many administrative staff does it take to run a 90 bed facility?

I know of 17 on our payroll who sit behind desks, when they manage to show up late, leave early and take long lunches. Do we really Need all that?

[lonestarnot]

13. We need to publish a list to include home addresses.