Press-Republican

February 10, 2013

Salaries of hospital CEOs detailed

Board members say theytry to balance pay, need

By DENISE A. RAYMO
Press-Republican

---- — MALONE — Job cuts and layoffs invariably lead to questions and criticism of the salaries paid to top management professionals.

And it’s no different in this region.

Numerous jobs were cut in 2012 at the area’s five hospitals, some the first substantial layoffs in decades. One hospital recorded an operating deficit, and at some, programs and services were reduced.

Adirondack Health, parent company of Adirondack Medical Center in Saranac Lake, and CVPH Medical Center in Plattsburgh, each laid off 17 employees last fall and eliminated vacant positions.

Alice Hyde Medical Center in Malone let 12 people go in September and had closed down more than a dozen vacancies.

The shaky financial picture last year prompted questions from employees and community members, who wondered what the chief executives were paid, as those figures are not readily available.

 IRS RECORDS REVIEWED

The Press-Republican reviewed the salaries paid to CEOs and other financial information for the region’s hospitals: CVPH Medical Center, Adirondack Medical Center, Alice Hyde Medical Center, Moses-Ludington Hospital in Ticonderoga and Elizabethtown Community Hospital (ECH) in Elizabethtown.

The examination also included Fletcher Allen Health Care in Burlington because of its affiliations with Moses-Ludington and Alice Hyde and its partnerships with ECH  and CVPH.

The information was gleaned from reports that nonprofit hospitals are required to file with the Internal Revenue Service.

SALARY AVERAGES

Nationwide, the average hospital CEO salary is $500,000, according to the Internal Revenue Service.

The State Department of Labor does not keep specific statistics on hospital CEO pay, but the median base

salary for chief executives in all industries in the North Country is $127,380, not including bonuses and other compensation.

The pay of chief executive officers at North Country hospitals ranged between $127,000 and $750,000 a year in 2010, according to the information reviewed by the Press-Republican. That is the latest year for which figures are available.

Fletcher Allen paid its CEO $1.4 million in 2010.

RESPONSIBILITY

CEOs are in charge of managing hundreds of employees while adhering to stringent federal and state regulations, providing overall health care to a community and managing budgets that range from $13 million to $280 million locally.

“The responsibilities of a CEO have exploded in the last four years,” said William Van Slyke of the Homecare Association of New York State, an organization that represents hospitals and health-care systems across the state.

“Until the last several years, the CEO of a hospital did the best they could to provide quality care for the best value. But that’s changed now with the reimbursement system, where the hospital is responsible for the health of everyone in their community, and they are penalized if their health service falls off,” he said.

LINK TO REIMBURSEMENTS

Van Slyke explained that new regulations require hospitals to conduct patient surveys about the care received and observations on topics such as communicating with doctors and nurses, learning about medications, the staff’s responsiveness to their needs, the cleanliness and noise level of the hospital and more.

The results of Hospital Care Quality Information from the Consumer Perspective surveys determine a facility’s Medicaid and Medicare reimbursements.

“If someone doesn’t like the food or doesn’t like the drapes, the hospital can lose reimbursements,” Van Slyke said.

“If the CEOs don’t do a good job, they lose money, so there has been a change of focus that adds to the responsibility of the CEO position.”

‘COMPLEX, DEMANDING’

Van Slyke said compensation for these professionals may become even more competitive and lucrative because fewer and fewer people are qualified for the position.

“Being a hospital CEO, especially in the state of New York, is complex and demanding job. There is an extraordinarily limited pool of candidates, and that increases their value.

“I can’t speak for the hospitals in your area,” he told the Press-Republican, “but a qualified and successful CEO can go anywhere in the country and make equal or higher salaries.

“Being a hospital CEO, you are ‘all in,’ all the time, every hour. It’s a tremendous responsibility.

“We are seeing some turnover across the state the last few years as CEOs age out,” Van Slyke said, which is why hospital boards are willing to pay higher salaries and bonuses to retain their management people.

“You’ll find that where a hospital or health system has a CEO and he or she is the right fit and it’s the right mix, they do all they can to hold on to them because it’s so important to the hospital’s mission.”

TOP PAID EMPLOYEES

Key personnel on a hospital’s staff are also paid salaries that can exceed $100,000.

In addition to the CEOs, North Country hospitals had 230 total employees making $100,000 or more a year in 2010. In many cases, that was not simply administrators but included doctors who are employed by the hospitals.

Adirondack Medical Center had 37 people in the $100,000-and-more salary range; Alice Hyde, 27; CVPH, 146; Elizabethtown Community Hospital, 10; and Moses-Ludington Hospital, 10.

Fletcher Allen had 410 employees who were paid $100,000 or more in 2010.

ADIRONDACK MEDICAL CENTER

The Press-Republican talked with representatives from each area hospital about the salaries of its chief executives. 

Chandler Ralph, president and chief executive officer for 16 years, is not employed by the hospital or its umbrella organization, Adirondack Health.

She is paid through a contract with a management company, Health Tech Management Services, said Joe Riccio, AMC communications director.

Her salary is a confidential employment contract, “just like any other vendor that does business” with the hospital, he said.

Because of that, her salary was not available through IRS records. The Press-Republican pressed Ralph to release her salary, noting that it was publishing the pay of all other area hospital CEOs, but she refused, citing confidentiality.

Health Tech bundles Ralph’s salary with other services it provides, such as group purchasing power, consulting service and general-efficiency measures. The agreement is negotiated between the hospital’s Board of Directors and Ralph.

Board President Stanley Urban said Health Tech was paid $635,000 in 2010, but he does not know how much of it went for Ralph’s salary because that firm pays her directly.

Urban said Adirondack Health has used Health Tech services for 18 years but recently sent out requests for proposals as the time approached to renew the three-year agreement, to make sure the facility and community was getting the best management package possible.

He said another national firm “even bigger than Health Tech” conducted an appraisal of its needs before drawing up a proposal. But when the board compared the bids, it renewed its agreement with Health Tech, Urban said.

“There is no question” that Adirondack Health is getting its money’s worth with Ralph, he said.

“The board wasn’t going to rubber stamp it,” he said of the contract. “We told them, ‘We’re going to send out RFPs and told them the other company was bringing in a team.

“We ended up renewing with Health Tech because we were satisfied at the end of the process with the price we were paying,” Urban said.

ALICE HYDE MEDICAL CENTER

John Johnson, president and chief executive officer, was paid $339,539 in 2010. He retired in the fall of 2012.

He was replaced by Douglas DiVello, who is paid $246,682 in salary and benefits.

DiVello is not eligible for a bonus until January 2014, according to Cathlyn Lamitie, director of communications and philanthropy at Alice Hyde. The bonus will be tied to the hospital’s performance and is at the discretion of the Board of Trustees, Lamitie said.

“When we look to recruit, we contract with a recruiting firm to find a pool of candidates because it’s difficult to find a pool of people on your own,” said Dean Johnston, president of the Board of Trustees and a member of the hospital’s Compensation Committee.

“And as far as compensation, the Compensation Committee looks at the CEO’s job performance, as well as the salaries of other CEOs around the state,” he said.

“It’s important that the salary is competitive with other institutions because it’s difficult to attract professional leaders who will improve the quality of care.

“It’s difficult being CEO,” Johnston continued, “because you’re the head of a complex and multi-faceted institution.”

And being a rural hospital plays a role in CEO recruitment as well, since not everyone may want to live in a less metropolitan setting.

“The recruiter has been very helpful with that because they match people to the opportunity you have,” he said. “But it can create a smaller (talent) pool.”

Johnston said Alice Hyde tries to keep its compensation in the 50th percentile — “not too high or low but what we feel is appropriate and necessary to attract a candidate who will make the hospital better.”

CVPH MEDICAL CENTER

Hospital President Stephens Mundy has been at CVPH for 10 years and was paid $749,563 in salary, bonuses and other compensation in 2010.

His base salary for 2013 is $478,421, said Paul Sands, chair of Community Providers Inc., the facility’s parent company.

“Because last year was a difficult year, and we expect this year to be better, Stephens will be paid no bonus this year,” Sands said.

“The board also decided across that board that no one at the management level will be getting bonuses this year.”

Sands said the hospital board does not take its responsibility lightly when selecting and compensating its CEO.

He said the board appoints a Compensation Committee made up of the board chair, a second board member, the hospital’s treasurer and a member of the Executive Committee, who work with a national consulting firm to review hospitals around the country that are comparable to CVPH in size, economic status, population mix and other factors.

The committee then reviews CEO salaries for the top 25 most closely matched hospitals.

“We look at the compensation packages and see where we fit in, but it is CVPH’s practice and goal that we are in the middle level of that list, not at the top or at the bottom,” Sands said.

“We don’t want to be paying too much or offering so little that your executive will leave.”

From there, the committee compares compensation offered at similar hospitals in New York state, New England and the East Coast.

Its proposed salary offer to a candidate is based on job-performance goals, and bonuses are tied to the hospital’s overall success “because without the health of the hospital, the community dies and suffers and goes away,” Sands said. “That’s terrible for the community.

“We are extremely fortunate to have an executive and management team — especially Stephens — who love the community and do good for it,” he said.

He said that in order to succeed, “you want to keep your top-level people instead of fending off encroachment from another hospital.”

That is also why the research and hiring processes are conducted with care, Sands said.

“This is not done cavalierly. It’s a really arduous task to go through.”

ELIZABETHTOWN COMMUNITY

Rodney Boula, president and chief executive officer at ECH, was paid $229,902 in 2010.

Jane Hooper, director of community relations, said the hospital’s human-resources director works with an independent consultant to obtain a range of CEO salary information from similar facilities when a search is begun.

“The survey shows CEO salaries at other critical-access hospitals in other rural regions so that it is an appropriate comparison,” she said in an email.

“ECH does not compare against CVPH, Adirondack Health or Fletcher Allen. It simply wouldn’t make any sense, given the nature of the organization.

“This salary information is given to the Executive Committee of the hospital’s Board of Directors. The group makes an appropriate determination, based on experience, expectations, budget and specific facility requirements,” Hooper said.

The committee then makes a recommendation to the full board, and the candidate is voted upon, she said.

ECH is a full-service hospital, but it is also deemed a critical-access hospital by the federal government, Hooper said.

That designation means it cannot have more than 25 beds and must provide daily, around-the-clock emergency services and treat patients there no longer than 96 hours (four days).

“Essentially, the government realizes that having hospitals in rural areas is important,” Hooper said. “Therefore, it created the critical-access status a number of years ago to ensure that the facilities in those rural areas receive cost-based reimbursement from Medicare.”

FLETCHER ALLEN HEALTH CARE

Fletcher Allen is affiliated with Moses-Ludington Hospital and Alice Hyde and has partnerships with CVPH and ECH.

Fletcher Allen’s CEO in 2010 was Dr. Melinda Estes, who was paid $1,440,093. She left for a position in Kansas City in August 2011, which is when Dr. John Brumsted was hired as president and CEO of Fletcher Allen Partners and Fletcher Allen Health Care. His starting salary was $749,031, according to Mike Noble, communications director at the Vermont hospital.

“I’ve learned it’s important to look at the scope of responsibilities because Fletcher Allen is a complex organization,” said Don Gilbert, chair of the Compensation Committee that hires the facility’s top administrators.

“We try to compare Fletcher Allen to other similar facilities, but we are an academic medical center,” he said. “There are 130 of them across the country, but there is nothing comparable in the region, so that makes it a challenge” to research and determine a compensation package.

Fletcher Allen has a billion-dollar budget with 7,000 employees, in addition to a Level 1 trauma unit, Level 3 neo-natal intensive-care unit and the College of Medicine, as well as research facilities under the CEO’s purview.

Gilbert said the committee works with a national consultant to bring the information from those 130 sites together, “and we get a sense of the appropriate level of compensation.”

Committee members look at the CEO’s skills, experience and job performance, as well as the complexities of the position, “then we zero in on what the compensation is for a CEO at a similar organization in the region.”

Gilbert said that when he is asked about administrative salaries, he explains that the CEO is responsible for four main campuses, 30 patient-care centers and 100 medical clinics in Vermont and New York. The person also oversees transportation, food service and a myriad of other duties.

After that, he said, “the people understand more about the organization and the responsibilities.

“It is a challenge to make sure we are providing a fair and reasonable level of compensation to attract the talent that the community deserves.”

MOSES-LUDINGTON

In 2010, Lisa Busby was interim chief executive officer at Moses-Ludington Hospital and was paid $127,952 in salary, bonuses and other compensation as part of parent company Inter-Lakes Health.

Busby, who has since moved on to the post of director of information technology at Inter-Lakes, declined to comment for this article.

But Moses-Ludington’s current CEO, William “Chip” Holmes, who came on board in the fall of 2011, is paid $210,000, according to officials at Fletcher Allen, which is affiliated with the Ticonderoga site.

Inter-Lakes Health also operates Heritage Commons Residential Health Care skilled-nursing facility, Moses-Ludington Adult Care home, Inter-Lakes Dental and Lord Howe Estates, a housing facility for low-income elderly clients.

Like ECH, Moses Ludington is a critical-access hospital. 

The emergency care includes diagnosis, laboratory work and outpatient treatment. Severely injured, critically ill or trauma victims are initially treated there then transferred to a larger, full-service hospital.

Moses-Ludington is staffed by 12 independent doctors with a variety of medical specialties who travel to the hospital to serve patients.

Fletcher Allen supplies management services, pays the CEO’s salary and offers clinical services at Moses Ludington, Noble said.

Email Denise A. Raymo:

draymo@pressrepublican.com

HOSPITAL NUMBERS This chart contains information the Press-Republican obtained from Form 990 filings with the Internal Revenue Service. The figures given are from 2010, the latest year available. The CEO earnings listed are a total of base salary, bonuses and other compensation. All nonprofits are required to file Form 990s. The entire report of IRS information, which includes many financial details about each hospital, is available for public viewing at www.guidestar.com. ADIRONDACK MEDICAL CENTER Administrator's salary: President and CEO Chandler Ralph refused to release her salary, citing confidentiality. Because it is paid by a separate, for-profit company, the Press-Republican could not obtain her salary through Form 9902 filings. Employees: 1,053. Beds: 97. 2010 revenue: $94,870,517. 2010 expenses: $93,132,275. 2010 net assets/fund balance: $40,220,068. Employees making more than $100,000: 37. ALICE HYDE MEDICAL CENTER Administrator's salary: President and CEO John Johnson, $339,539. Employees: 766. Beds: 76. 2010 revenue: $67,754,087. 2010 expenses: $67,104,639. 2010 net assets/fund balance: $24,001,042. Employees making more than $100,000: 27. CVPH MEDICAL CENTER Administrator's salary: President Stephens Mundy, $749,563. Employees: 2,551. Beds: 341. 2010 revenue: $279,068,067. 2010 expenses: $269,536,050. 2010 net assets/fund balance: $61,776,752. Employees making more than $100,000: 146. ELIZABETHTOWN COMMUNITY HOSPITAL Administrator's salary: President and CEO Rodney Boula, $229,902. Employees: 287. Beds: 25. 2010 revenue: $17,061,512. 2010 expenses: $16,731,154. 2010 net assets/fund balance: $9,500,342. Employees making more than $100,000: 10. FLETCHER ALLEN HEALTH CARE Administrator's salary: CEO Dr. Melinda Estes, $1,440,093. Employees: 7,339. Beds: 419. 2010 revenue: $909,398,235. 2010 expenses: $861,068,861. 2010 net assets/fund balance: $378,593,244. Employees making more than $100,000: 410. MOSES-LUDINGTON HOSPITAL Administrator's salary: Interim CEO Lisa Busby, $127,952. Employees: NA. Beds: 15. 2010 revenue: $13,355,668. 2010 expenses: $12,837,804. 2010 net assets/fund balance: (-$3,263,753). Employees making more than $100,000: 10.