Ballooning bonuses boost pay for hospital CEOs

Credit: DaytonDailyNews

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Nearly a third of the total pay and incentives for the five highest paid hospital executives in the Dayton area in 2015 was merit based.

Credit: DaytonDailyNews

The Dayton-area hospital executives who took home the largest paychecks in 2015 benefited from incentive-laden contracts that are increasingly based on how well their health systems perform in keeping their patients healthy and out of the hospital.

Overall, the 20 highest-paid executives and administrators saw single-digit percent increases in base pay, on average, from 2014 to 2015, based on the nonprofit hospitals’ 990 tax forms filed with the IRS.

At the same time, however, many hospital and hospital system leaders saw double-digit percent increases in incentive pay, commonly referred to as “pay at risk” because their organizations hold back part of their pay if they don’t meet certain financial goals and quality measures.

Former Premier Health President and CEO James Pancoast scored the biggest incentive package of any of the area’s highest-paid hospital executives in 2015, pulling down merit pay totaling $395,850 — a whopping 69 percent increase from 2014. At the same time, Pancoast’s base pay increased 5.6 percent, bringing his base pay and incentive package to $1.42 million, ranking second on the Top 20 list.

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Current President and CEO Mary Boosalis earned $228,258 in incentives in 2015 when she was Premier’s executive vice president and chief operating officer. Her incentive pay increased 32.6 percent from 2014, while her base pay rose 5.6 percent to $639,166.

Still, there’s no guarantee, even at the highest levels, that incentive payments will continue to increase as such a robust pace, said Barb Johnson, chief human resources officer at Premier.

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“When we started with our quality initiatives, we wanted to be in the Top 25 in the nation. People’s pay was at risk until we could get our organization up to that next level,” Johnson said. “Now, we want to be in the best 10 percent in the nation. You still have fiduciary responsibility. But more and more focus is on quality and safety in health care, as it should be.”

Kettering Health Network CEO Fred Manchur, the highest-paid hospital executive in the Dayton area, earned $1.65 million in base pay and incentives in 2015, up 2.3 percent from the previous year. But his incentive payments slipped 2.8 percent from 2014 to $390,258.

2015 bonuses paid to area health executives

First LastTitleHospital/Hospital Network BONUS & INCENTIVES
FredManchurCEOKHN $390,258
James Pancoastformer President and CEO; retired Premier Health Partners $395,850
TerriDayformer PresidentKHN $262,893
RoyChewPresidentKHN $210,661
MaryBoosalisPresident and CEO Premier Health, former Executive VP and COOPremier Health Partners $228,258
ThomasDuncanSenior vice president and chief financial officerPremier Health Partners $227,183
MarkShakerPresident & CEOMiami Valley Hospital $153,918
RussWetherellPresident GVMSGVMS $140,426
DeborahFeldmanPresident and CEODayton Children's Hospital $168,000
TammyLundstromChief Medical Officer Premier Health Partners $131,441

“We use the term yearly incentive, because we set goals each and every year without exception,” said Phil Parker, president of the Dayton Area Chamber of Commerce and a member of the Kettering board’s compensation committee. “If they’re able to achieve an incentive, it’s based on those goals.”

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While the hospital network’s most important measures are the quality of care and and safety of the patient, Parker said, meeting revenue goals still plays a key role.

“Let’s not kid each other, that has to be in play because we have to know that we are going to be able to sustain ourselves,” he said. “We don’t want to be a network of health care providers that literally has financial troubles and is not able to continue the quality of care in our communities.”

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But hospitals continue to shift a larger share of incentive payments toward accomplishing such goals as reducing hospital-acquired infections and readmission rates. The trend is a direct result of the way hospitals are reimbursed through Medicare and Medicaid under the Affordable Care Act, which rewards hospitals for delivering better quality care at lower costs, and penalizes them for falling short of those measures.

That’s in stark contrast to the way bonus incentives were handed out to hospital executives years ago, according to Bill Dixon, co-leader of the health care executive pay and governance practice at the Los Angeles-based global consultant firm, Korn Ferry Hay Group.

“It used to be that you did a nice job, so we’ll give you a bonus, but it wasn’t really based on any specific criteria,” Dixon said. “The trend now has been to tie bonuses to criteria that are indicative of performance; mortality, admissions rates, hospital acquired infections, patient satisfaction.

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“Medicare actually cuts a hospital’s pay the worse they do in those areas,” he said. “If you’re going to get a pay cut, more and more health care systems see that as “we gotta do good to do good” (financially). I think that’s a good thing for the consumer.”

Not everyone on the Top 20 list got a pay raise last year, underscoring just how much compensation is tied to incentive pay.

For example, Paul Hiltz, former president and CEO of Springfield Regional Medical Center, saw a nearly 4 percent pay cut in 2015 despite an 89 percent increase in incentive pay from $55,164 in 2014 to $104,239 in 2015. Hiltz, who was succeeded by President and CEO Matthew Caldwell in December last year, saw his base pay cut 15.2 percent to $379,152 in 2015 from $447,193 in 2014.

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How we got the story

This media outlet obtained hundreds of public IRS records for local nonprofit hospitals to report on the salaries and incentives awarded to hospital CEOs and executives.

All nonprofits are required to disclose financial and salary information to the IRS, in exchange for their tax-exempt status.

Count on us to continue our in-depth coverage of health issues that impact your pocket book.

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