By Ron Shinkman
Jan 24, 2013
More than one in five non-profit hospital chief executive officers in California received compensation totaling $1 million or more in 2010, according to a new pay survey by Payers & Providers.
Altogether, 32 CEOs of the 154 surveyed received pay packages that ventured into the seven figures. That compares to 19 CEOs who received seven-figure pay packages in the only prior survey Payers & Providers conducted. That survey was published in June 2010, and relied primarily on data from 2007 and 2008.
The rise of these large pay packages for non-profit hospital CEOs occurred for a variety of reasons: The latest survey includes compensation data for district hospital CEOs, as well as the top executives for the five hospitals run by the University of California, which had not been included in the prior survey. And while some hospital system CEOs had been included in the prior survey, the new survey created a new category and broke them out separately. However, while the number of CEOs in this latest survey expanded by slightly less than 30%, the numbers earning more than $1 million annually rose by 40%.
The rise in top-end pay packages came despite the battering hospital CEO compensation received in the wake of the Great Recession, which began in late 2007 but hit particularly hard after the financial crisis in the autumn of 2008. According to Claudia Wyatt-Johnson, co-founder of the Chicago-based compensation consulting firm Partners in Performance, as many as a third of hospital CEOs nationwide received no pay adjustments at all in 2009.
However, Wyatt-Johnson observed that in the intervening years, “there has definitely been a recovery.” She added that CEOs of academic medical centers and in urban areas tend to be better-compensated than the average, while the CEOs of rural hospitals tend not to fare as well. Moreover, California receives another pay differential due to the higher cost of living, she noted.
The survey does not include data from California's for-profit hospitals and hospital systems, as their tax returns are not publicly available. However, compensation experts uniformly agree that CEOs in the for-profit hospital sector generally receive even higher compensation packages – suggesting that dozens of other hospital CEOs in California are also pulling down seven-figure pay.
Kaiser Permanente's George Halvorson is the most highly-compensated hospital system executive in California, receiving $7.74 million in 2010. That included more than $6 million in additional compensation. Halvorson is retiring as Kaiser's CEO in June.
Thomas Priselac, the chief executive officer of Cedars-Sinai Medical Center in Los Angeles, was the highest-paid standalone hospital CEO, earning $2.77 million in 2010. That included additional compensation of $1.6 million.
According to an email response from Cedars-Sinai spokesperson Duke Helfand, Priselac's compensation “reflects the top-tier clinical, research and educational performance the medical center consistently has delivered in his 19 years of leadership.” Helfand added that during the last decade, the hospital's services and programs have grown 2.6 times in size.
And despite his high-flying compensation, Priselac earned substantially more in 2009: nearly $3.9 million, including $2.7 million in compensation above his base salary.
Indeed, additional compensation drove most of the standalone hospital CEOs into seven figures. Only six earned more than $1 million in base salary; with the additional compensation, 14 more entered the seven-figure club. Among those who earned more than $1 million in total compensation, their additional compensation averaged $478,760. For the entire group of standalone hospital CEOs, the additional compensation averaged only $171,316.
Michael Covert, the CEO of the two hospital Palomar-Pomerado Health system in San Diego County, was the highest-paid district hospital CEO, earning $1.09 million in 2010. He was among two district hospital CEOs to earn seven-figure compensation. However, district hospital compensation on average is almost half of what it is for standalone hospital CEOs.
David T. Feinberg, M.D., is by far the highest-paid CEO among those who oversee the five research hospitals operated by the University of California. Feinberg, who runs Ronald Reagan UCLA Medical Center, earned $1.33 million in 2010 – the only seven-figure pay package among that cohort of CEOs, and nearly $450,000 more than the second-highest earner in that group, Mark Laret of UC San Francisco Medical Center.
According to the September 2010 minutes of the UC Board of Regents's compensation committee, Feinberg received a 20% base pay increase and a $250,000 annual retention bonus after he was a candidate to be hired by another hospital. The pay bumps came amidst tens of millions of dollars of budget cuts and tuition and fee hikes the UC system had recently enacted. Although all the UC hospital CEOs qualify to receive incentive bonuses of up to 30% of their base salary linked to a variety of performance and quality metrics, Feinberg will continue to receive the additional $250,000 a year so long as he remains in his current job.
To obtain Payers & Providers's full analysis of the compensation data and the raw numbers themselves, click here.