LOCAL HOSPITAL CEOS EARN BIG PAYCHECKS
Some question compensation packages for executives; others call Dayton area competitive market for leaders.
As many Ohioans struggle to pay their medical bills, the highest-paid hospital executives in the Dayton area continue to take home lucrative pay packages, with the
highest-paid collecting more than a million dollars a year.
Local nonprofit health networks point to a competitive market for leaders who can handle the growing complexity of the
modern health care industry as the reason compensation continues to rise for the highest-paid executives.
But as a growing share of health spending, including rising insur- ance premiums and out-of-pocket costs have been shifted onto the backs of consumers, some observers question whether nonprofit hospital CEOs are being paid too much.
“Hospitalsshould be prepared to answer questions about how they use their tax exemption, including whether their mission to serve people in need comes before executive salaries,” said U.S. Sen. Chuck Grassley of Iowa, who has
introduced legislation in Congress that would require enhanced governance when it comes to determining executive pay at nonprofits, including hospitals.
Not every hospital executive earns millions of dollars each year, but most are paid relatively well.
On average, the 20 highest-paid hospital executives in the area take home more than $700,00 in annual salary and incentives, with the Top 5 earning an average of $1.25 million a year, based on the hospitals’ most recent tax returns examined by this newspaper.
Fred Manchur, CEO of Dayton-based Kettering Health Network — with $1.5 billion in annual revenue — topped the list with base pay and incentive payments totaling $1.65 million in fiscal 2015, according to 990 tax forms required from all tax-exempt organizations by the IRS.
Manchur, who oversees eight hospitals from Montgomery to Butler counties, was followed closely by James Pancoast, former president and chief executive of Dayton-based rival, Premier Health, who earned $1.42 million in salary and incentive payments in 2015, not including compensation from other items like retirement accounts and health insurance.
Terri Day, former president of the Kettering network, was the highest paid woman on the list, collecting $1.23 million in pay and incentives in 2015.
Roy Chew, who succeeded Day as Kettering president, earned $1.07 million in 2015. Mary Boosalis, Premier’s current president and CEO, rounded out the Top 5, earning $867,424 in 2015 as executive vice president and chief operating officer of the largest hospital network in southwest Ohio with $2 billion in annual revenue.
Researchers who study compensation levels at nonprofit hospitals say executive level pay has accelerated in recent years, mimicking the pace of hospital mergers and acquisitions during the same period.
“Compensation has been going up for CEOs of health systems a lot recently, and part of that is because the health systems have been getting bigger and more complex,” said John Bowblis, a health economist at Miami University. “We went from really small systems, where you were operating maybe a hospital or two and an outpatient surgery center. Now, they’re becoming much larger and integrating multiple aspects of care.”
In addition to the sheer size of their organizations, hospital leaders are charged with navigating the intricacies of health care reform under the Affordable Care Act, which has changed dramatically the way care is delivered and reimbursed, said Barbara Johnson, chief human resources officer at Premier.
“When you look at a Jim Pancoast and some of the other system leaders, these individuals aren’t just running hospitals anymore,” Johnson said. “You’ve got one person at the top who’s trying to provide oversight, direction and strategy. At the same time, health care continues to grow in scope, complexity, regulation and compliance.”
Like many health systems, Premier’s board of trustees sets salaries for leadership with the assistance of thirdparty compensation consultants.
But the executives who took home the largest paychecks in 2015 benefited from incentive-laden contracts that were based largely on how well they met quality goals set by the hospitals themselves.
Pancoast took home the most in incentives in 2015, with merit pay totaling $395,850 — up a whopping 69 percent from 2014. Manchur was the highest-paid overall, but his incentive payments slipped 2.8 percent from 2014 to $390,258.
Even at the highest levels, incentive payments are not guaranteed, Johnson said.
“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.”
Not all of the area’s executives 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.
As hospitals tie a larger share of compensation to keeping patients healthy and out of the hospital, they’ve begun to promote more managers with medical degree’s in hopes of obtaining better clinical outcomes.
Highly skilled doctors and nurses with management skills held some of the top leadership positions at local hospitals and health systems in 2015.
Kettering’s Chew, for example, began his career as the clinical coordinator for the respiratory therapy technician program at Kettering Medical Center. And Premier’s Boosalis worked as a registered nurse for 10 years before coming to Miami Valley Hospital in 1986 as a management fellow.
Representatives of both hospital systems say mangers with clinical backgrounds bring unique benefits to their organizations and are largely responsible for improving quality measures, which directly affect their hospitals’ bottom lines.
“Our foremost important measures are quality and safety of the patient,” said Phil Parker, president of the Dayton Area Chamber of Commerce and a member of the Kettering board’s compensation committee. “We’re recruiting and promoting those with clinical experience because they have the best understanding of how to perform in terms of quality care. Over the years, they have have also learned how to make sure they manage the other goals.”