Monday, March 31, 2014

Compensation of CEOs of Atlanta Nonprofit Hospitals

In How Atlanta’s Hospital Chiefs Earn Their Millions, the Atlanta Journal-Constitution (subscription required) reports that several nonprofit hospitals in Atlanta are paying their CEOs very well, but a question remains as to whether compensation incentives are properly designed. 

For example, Northside Hospital reportedly paid $5.3 million in salary, a bonus and cash retirement benefits to its chief executive in 2011.  His bonus of $1.2 million was attributed to his having “met every goal in his incentive plan, including targets related to quality of care and ‘stakeholder satisfaction.’”  However, the hospital’s attorney declined to identify the specific goals achieved.

The story continues:

Atlanta's nonprofit hospitals routinely dangle six- and seven-figure bonuses in front of their chief executives, but experts say it's important to know what those CEOs are being paid to do. In a system distorted by gross inefficiency and dangerous lapses in quality, are leaders being incentivized to transform health care or simply squeeze more money out of it?

 

At Gwinnett Medical Center, for example, part of the CEO's bonus in 2013 hinged on whether the hospital performed a certain number of surgeries. At DeKalb Medical Center, the main emphasis was on cutting losses by growing revenue -- even nonprofits have to make a certain amount of money to survive -- but finances received a higher priority in the CEO's incentives package than quality goals.

 

Children's Healthcare of Atlanta, which paid its CEO a $547,000 bonus and "retention" payment in 2012, said quality was part of its chief executive's incentive plan. But Children's refused to reveal its quality measures or how they influenced the bonus. At Atlanta nonprofit hospitals that did reveal details, keeping patients safe from infections and achieving higher-quality standards in general rarely account for more than 30 percent of the CEO's total incentive plan.

The article also quotes U.S. Senator Chuck Grassley with respect to his concern that nonprofit hospitals “ratchet” salaries higher by relying on consultants, who can justify one hospital’s compensating its CEO at a level slightly higher than that paid by a second hospital, leading to a third hospital’s payment of still higher compensation, and so on.   

The full story also appears on FindLaw.  

 JRB

http://lawprofessors.typepad.com/nonprofit/2014/03/compensation-of-ceos-of-atlanta-nonprofit-hospitals-.html

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