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High hospital costs? Look at executive pay [View All]

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Hannah Bell Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Jan-02-11 08:36 AM
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High hospital costs? Look at executive pay
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Kaiser Health News did yeoman work last week examining California's hospital price trends...

The Sutters and John Muirs of the world claim they have to keep their prices high in order to pay for new equipment, meet seismic mandates and other cost pressures. Such fiscal crises are a constant refrain.

I'm capable of doing some yeoman work of my own, including a report I compiled this year of the compensation of about 120 not-for-profit hospital CEOs in California. Both Sutter and John Muir's data suggest another reason prices are so high.

In 2008 (the most recent year for which available), Sutter had nine executives who were paid $1 million a year or more. There were five others whose compensation approached $1 million. With annual increases, those five have likely since joined the seven-figure club.

John Muir CEO J. Kendall Anderson was by far the highest-paid not-for-profit hospital executive in California--if not the nation--in 2008, with compensation totaling $7.45 million. John Muir officials told me about $6.5 million of Anderson's pay was a one-time payout from his retirement plan.

Legally, Anderson is entitled to every penny, even the additional $500,000 retirement payout he apparently received in 2009. However, his retirement package averages out to about $200,000 for each year of service, even though when he signed on with John Muir in the 1970s, $50,000 was considered an excellent salary.

The notion of retirement compensation is to ensure autumn years are spent without great want, not accumulating a fortune that can be handed down through the generations.

Obviously, someone has to pay for such largesse.

Patients--many of whom have high deductibles and cannot always grasp the complexity of a hospital bill--are the logical source.

However, Rau's analysis suggested that lower-cost hospitals generate similar results in quality and outcomes, which means many of those executives are patting themselves on the wallet while the communities they serve receive nothing in return.

My reporting on hospital CEO salaries has generated some grumbling and reiterations that top pay is required to attract top talent. However, I remain adamant that these are non-profit organizations with a community-oriented mission, and are, therefore, inappropriate environments for seven-figure pay packages.

By contrast, the University of California hospitals--some of the nation's largest and most sophisticated teaching facilities--pay their executives nearly half of the Sutter rates.

Moreover, in California about 60 percent of hospital revenue is derived from the Medicare and Medicaid programs.

There's a reason hospital managers go into a mad scramble anytime CMS declares their institution is in violation of program guidelines: their doors would shut for good if they lost those payers. That makes them de facto taxpayer-funded organizations.


Their leaders should operate with the kind of financial austerity being demanded of such operations these days.

http://www.fiercehealthfinance.com/story/where-theres-high-hospital-costs-look-executive-payroll/2010-10-26
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