The problem of ever rising, amazingly generous pay for top health care managers is a frequent topic for Health Care Renewal. We have suggested that the ability of top managers to command ever increasing pay uncorrelated with their organizations' contributions to patients' or the public's health, and often despite major organizational shortcomings indicates fundamental structural problems with US health, and provides perverse incentives for these managers to defend the current system, no matter how bad its dysfunction.
In particular, we have written a series of posts about the lack of logical justification for huge executive compensation by non-profit hospitals and hospital systems. When journalists inquire why the pay of a particular leader is so high, the leader, his or her public relations spokespeople, or hospital trustees can be relied on to cite the same now hackneyed talking points.
As I wrote last year, and last month,
It seems nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same arguments, thus suggesting they are talking points, possibly crafted as a public relations ploy. We first listed the talking points here, and then provided additional examples of their use. here, here here, here, here, and here, here and here.
They are:
- We have to pay competitive rates
- We have to pay enough to retain at least competent executives, given how hard it is to be an executive
- Our executives are not merely competitive, but brilliant (and have to be to do such a difficult job).
Yet as we discussed recently, these talking points are easily debunked. Additionally, rarely do those who mouth the talking points in support of a particular leader provide any evidence to support their applicability to that leader.
Bit at least most journalists who inquire into hospital executive compensation used to make an attempt to be "fair and balanced" by also quoting experts who question the talking points.
But not so much lately,...
Million Dollar Plus Hospital CEOs in New York
The Journal News, based in the northern New York City suburbs, ran a series of articles about executive pay and perks at NY hospitals and hospital systems. The main aricle in the series is here. A listing of the five highest paid hospital officials is here. A listing of executive perks, and conflicts of interests affecting the hospitals' and hospital systems' board members is here. The main article began,
New York's nonprofit hospitals paid millions in bonuses to executives and doctors despite a high-stakes battle to reduce health care spending.
As patients struggled to afford rising medical bills, incentive packages for top hospital executives reached seven figures and approached payouts at Wall Street banks, The Journal News/lohud has found.
Perks at the nonprofit hospitals included first-class plane tickets, chauffeurs and country club memberships. Severance and retirement payments mirrored golden parachutes awarded to for-profit corporate executives.
The article noted that 112 people who worked for non-profit hospitals in the Lower Hudson valley earned more than $1 million. The biggest pay went to the top executives of the biggest systems:
Bonuses and payments spiked the highest among executives at the helm of major hospital consolidations, data show.
North Shore University Hospital’s President/Chief Executive Officer Michael Dowling topped the list in 2014. He was paid $10.1 million in salary, bonuses and other pay. That is compared to $3 million in 2010.
Dowling’s payments came as the Long Island hospital and its affiliated organization, then North Shore-LIJ, began its ongoing expansion.
The health system, now Northwell Health, has pushed into the Lower Hudson Valley, partnering with Northern Westchester Hospital in Mount Kisco and other regional providers.
Also,
Dr. Steven Safyer, president and CEO of Montefiore Medical Center in the Bronx, was paid nearly $4.9 million in 2014, including a bonus of $1.3 million.
That's an $800,000 increase from the $4.1 million he was paid in 2010. It came as Montefiore bought bankrupt hospitals in Mount Vernon and New Rochelle, and pushed its expansion northward into Westchester County, which now includes a partnership with White Plains Hospital.
Note that Dr Sayfer also was given a hospital-paid car and driver.
An accompanying article noted the three other highly paid CEOs in New York state, Warren Hern, CEO of Unity Health Systems in Rochester, $7,490,213; Mark Clement, CEO of Rochester General Hospital, $5,323,856; and Dr Steven Crowin, CEO, New York Presbyterian Hospital, $4,591,728 [who also benefited from a policy allowing first-class or business airfare for flights over 6 hours, and some form of housing allowance.)
Other million dollar plus CEOs in the Lower Hudson valley included John Federspeil, president, Hudson Valley Hospital Center, $2,055,377; Joel Seligman, CEO, Northern Westchester Hospital, $2,043,289; Dr Cary Hirsch, CEO, Bon Secours Charity Health System (Good Samaritan Hospital in Suffern), $1,170,575; Keith Safian, CEO, Phelps Memorial Hospital Center, Sleepy Hollow, $1,494,760; Lawrence Levine, CEO, Blythedale Children's Hospital, $1,701,471, Edward Dinan, CEO, Lawrence Hospital Center, $1,707,780; Dr Craig Thompson, CEO, Memorial Sloan-Kettering Cancer Center, $2,944,926 (who also got first-class or coach airfare for flights over 6 hours, and some form of housing allowance); and Jon Schandler, CEO, White Plains Hospital, $1.799,952.
The Usual Talking Points to Justify Executive Compensation
The Journal News article also included justifications for this munificent pay by hospital officials that used the usual talking points.
We have to pay competitive rates
We have to pay enough to retain at least competitive executives
The spokesman for Northwell Health asserted,
The fact that we're located in the New York market ... only increases the competitive pressures on compensation.
Then,
Julius Green, a partner at Baker Tilly, a New Jersey-based accounting firm advising 100 hospitals in the Northwest, attributed expansions and higher pay to growing competition nationwide.
Also, from Blythedale Children's Hospital,
As the [Affordable Care Act] mandates take effect, and the number of insured individuals rise, the need for skilled healthcare workers will surely increase as will the competition for that talent.
Our executives are brilliant
Said Michael West, senior attorney for the New York Council of Nonprofits,
If you're running an organization that has a $500 million budget, you have to have someone with the wherewithal to run it and you have to pay for that.
Said Rachael McCallen, a Montefiore spokeswoman,
Our executives navigate a complex healthcare environment making appropriate investments to ensure a forward-thinking, innovative and responsive care model that provides higher value, lower cost integrated care services.
Furthermore, the next week the Journal News publised an op-ed by William Mooney, CEO of the Westchester County Association, which was devoted to defending the pay of his fellow CEOs. It started with indignation against anyone who would question the pay of our fearless leaders,
While it is fashionable to cast aspersions on high-income earners, the arguments set forth about the compensation levels of area health-care CEOs are misguided and erroneous.
Then Mr Mooney again hit the talking points.
We have to pay competitive rates
We have to pay enough to retain at least competitive executives
Given that a hospital is a community organization, the compensation of their executives is decided by boards made up of community members who base their decisions on research, competitive market analyses and responsible financial projections.
Our executives are brilliant
Running a hospital is a business unlike any other. First and foremost, hospitals are complex organizations that are about protecting and promoting health, and saving lives.
Also,
A hospital CEO is responsible for overseeing and guiding his or her staff through a maze of financial and regulatory challenges while making sure safety and performance standards are at the highest possible levels.
Third, the technology and infrastructure enhancements that today’s hospital CEO must manage are vast and rapidly changing. The staffing required to support all of these disparate functions encompasses a wide range of skill sets and education. A hospital CEO must understand and manage all of those roles, and must keep an eye on the demands and responsibilities of maintaining new technology.
In addition, the op-ed concluded with the argument:
your readers would be better served by reporting on the qualitative and quantitative benefits our community derives from having the best health-care leaders in the nation at the helm of our local hospitals.
And these leaders to more than manage finances. The op-ed implied that hospital CEOs are personally responsible for savings lives. This can be seen in the quote above under the brilliance argument, and later:
Non-profit status is conferred upon an organization that does something for the public good. Saving lives clearly is in the public’s best interests!
This despite the fact that the majority of CEOs in the article above, and indeed the majority of top managers of hospitals and hospital systems are not health care professionals, and cannot take any direct responsibility for patient care. This also despite the assertion by Mr West, the senior attorney for the New York Council of Nonprofits, that "hospitals are run like a business,..."suggesting that the people running them might put money, not "doing something for the public good," first.
Also, note that while Mr Mooney extolled the community based boards whose members made such discerning decisions about executive pay, he did not address these members' numerous conflicts of interests. For example, re some of hospitals and hospital systems with the most highly paid CEOs,
Stephen Friedman was a board member of Memorial Sloan-Kettering in 2014 when the cancer center paid $10.5 million for architectural services from Perkins/Eastman. Friedman’s brother-in-law, identified as Mr. Perkins, is affiliated with the firm, tax filing show. Bradford Perkins is listed as the co-founder and chairman of Perkins/Eastman, according to its website.
Jamie Nicholls was a Memorial Sloan-Kettering board member in 2014. Her spouse was a co-founder of King Street Capital Management, which the hospital paid nearly $700,000 for management fees, tax filings show.
And,
White Plains Hospital disclosed one business transaction involving an interested person. The filing has few details. It reported the name of the interested person as 'Donor #24' and the relationship with the hospital as a 'substantial contributor.' The amount of the transaction was $15,350,345, and the description is 'BUS TRANS.'
And,
New York-Presbyterian paid $440,225 for investment management fees to Coatue Management, which listed its founder and chief executive officer as Philippe Laffont, a hospital trustee, tax filings show.
And,
Kaleida Health in Buffalo paid $121,660 to the Greater New York Hospital Association for participation dues in 2014. James Kaskie, former president and chief executive officer at Kaleida, was also a board member at the association, tax filings show.
Finally, note that neither the main article nor Mr Mooney's op-ed cited any evidence, even anecdotal, that these particular leaders are so brilliant, or that their hospitals are better than average, even in terms of finance, much less actual care of patients.
No Challenges to the Talking Points
The main article did not include any dissenters who questioned expansive executive pay. An accompanying editorial in the Journal News could only muster some anemic concern. It called multi-million dollar compensation for local non-profit hospital system executives "unsettling." It did contrast ever rising executive pay with the difficulty patients have paying their bills. But it could only muster conclusions that mirror the talking points:
Hospitals are quick to defend their executives' rising compensation, and their arguments are good ones. Chief among them is that hospitals must compete for the best top officials, including with for-profit hospitals across the U.S. They say they need to attract and keep leaders who can competently oversee growing health-care systems, meet ever-changing government regulations and improve patient care and satisfaction.
So, all they called for was disclosure of compensation:
Hospital executives deserve fair pay for hard work; taxpayers deserve to know that resources are being used to attain quality care for all.
Although Mr Mooney seemed to see "aspersions" in the article, and thought "the article implies that hospital CEO compensation is somehow responsible for the continued rise in healthcare costs," and argued that "hospitals do not deserve to have nonprofit status," I could find no such challenges in the Journal News series to the notion that top non-profit hospital managers deserved every penny they got.
Conclusion
Sadly, the ever rising compensation of top health care managers seems to inspiring less, rather than more skepticism in the media. No more is it true that nearly all articles that try to delve into executive compensation at all at least quote some experts who are skeptical of current practices.
The Journal News series included no such attempts at balance. In my humble opinion, while it reported on useful facts, the opinions it contained leaned towards propaganda for managers' current privileged position in health care.
Despite all the blather about how top hospital executives deserve millions of dallars, there are real reasons to be skeptical. As we discussed here, there is a strong argument that huge executive compensation is more a function of executives' political influence within the organization than their brilliance or the likelihood they are likely to be fickle and jump ship for even bigger pay. This influence is partially generated by their control over their institutions' marketers, public relations flacks, and lawyers. It is partially generated by their control over the make up of the boards of trustees who are supposed to exert governance, especially when these boards are subject to conflicts of interest and are stacked with hired managers of other organizations.
While Mr Mooney was indignant that high executive pay may be considered a reason that hospital charges and health care costs are rising, he did not even discuss the argument that the current method of determining such pay may provide perverse incentives to grow hospital systems to achieve market domination, raise charges, and increase administrative bloat. As an op-ed in US News and World Report put it about executive pay in general,
But the executive pay decisions made inside corporate boardrooms have an enormous impact in the outside world. Outrageous pay gives top executives an incentive to behave outrageously. To hit the pay jackpot, they'll do most anything. They'll outsource and downsize and make all sorts of reckless decisions that pump up the short-term corporate bottom line at the expense of long-term prosperity and stability.
So I get to recycle my conclusions from my last post in this series....
We will not make any progress reducing current health care dysfunction if we cannot have an honest conversation about what causes it and who profits from it. In a democracy, we depend on journalists and the news media to provide the information needed to inform such a discussion. When the news media becomes an outlet for propaganda in support of the status quo, the anechoic effect is magnified, honest discussion is inhibited, and out democracy is further damaged.
True health care reform requires ending the anechoic effect, exposing the web of conflicts of interest that entangle health care, publicizing who benefits most from the current dysfunction, and how and why. But it is painfully obvious that the people who have gotten so rich from the current status quo will use every tool at their disposal, paying for them with the money they have extracted from patients and taxpayers, to defend their position. It will take grit, persistence, and courage to persevere in the cause of better health for patients and the public.
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