Nonprofit hospitals are usually bulwarks of the community in terms of the services and jobs they provide. Many provide millions of dollars in charity patient care. Some create innovative programs that vastly improve the care infrastructure.
But another trend that's troubling is executive pay at these institutions. According to a survey of the Internal Revenue Service (IRS), the average compensation for a nonprofit hospital CEO was about $490,000 per year in 2006. Dozens of top nonprofit hospital executives at larger institutions take home seven-figure paychecks.
Granted, running a large teaching hospital is a monumental challenge. But there had been until the past decade or so a taboo against paying the heads of nonprofit organizations large salaries. That taboo appears to have disappeared. In California, the average nonprofit hospital CEO earns nearly $750,000 per year in total compensation.
The upward spiral of compensation is self-perpetuating, with CEOs acting much like free agents and not necessarily tied to a specific geography. "It's a national labor market for healthcare executives," said Claudia Wyatt-Johnson, a healthcare compensation consultant in Chicago. "We get the 990s (tax forms) go through them in detail, and they see what the comparables are. Then we scrape (the trustees) off the floor."
Nevertheless, those trustees still seem willing to vote for big pay packages. "It seems there is a possibility that when executive compensation firms are hired by boards and/or CEOs to provide multiple examples of comparable compensation, the firms may report out the higher end of the comparables," said Pamela Knecht, president of Accord Limited, a Chicago-based healthcare governance consulting firm.
Here is a list of seven hospital executives who earned seven-figure compensation recently, and reasons why the payouts raise eyebrows. Their pay, which includes base salary and all other compensation, is information from the 990 tax returns of their organizations or posted on state government websites. The 990s are typically of more recent vintage than what is cited by the IRS report.
For more information, scroll through the list below; click on each name to get a more in-depth profile.
- Samuel Downing - Salinas Valley Memorial Healthcare System
- Rand O'Donnell - Children's Mercy Hospitals and Clinics
- J. Kendall Anderson - John Muir Health
- Richard Umbdenstock, Neal Jesuele, Rick Pollack - AHA
- James L. Madara - University of Chicago Medical Center