The problem of ever rising,
amazingly generous pay for top health care managers is a frequent topic for
Health Care Renewal. We have suggested that the ability of top managers to command ever increasing pay uncorrelated with their organizations' contributions to patients' or the public's health, and often despite major organizational shortcomings indicates fundamental structural problems with US health, and provides
perverse incentives for these managers to defend the current system, no matter how bad its dysfunction.
In particular, we have written a series of posts about the lack of logical justification for huge executive compensation by non-profit hospitals and hospital systems. When journalists inquire why the pay of a particular leader is so high, the leader, his or her public relations spokespeople, or hospital trustees can be relied on to cite the same now hackneyed talking points.
As I
wrote last year, and
last week,
It seems nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same arguments, thus suggesting they are talking points, possibly crafted as a public relations ploy. We first listed the talking points here, and then provided additional examples of their use. here, here here, here, here, and here, here and here.
They are:
- We have to pay competitive rates
- We have to pay enough to retain at least competent executives, given how hard it is to be an executive
- Our executives are not merely competitive, but brilliant (and have to be to do such a difficult job).
Yet as
we discussed recently, these talking points are easily debunked. Additionally, rarely do those who mouth the talking points in support of a particular leader provide any evidence to support their applicability to that leader.
Bit at least most journalists who inquire into hospital executive compensation make an attempt to be "fair and balanced" by also quoting experts who question the talking points.
Hospital Executive Compensation in Central Pennsylvania However, we just found an
ostensibly journalistic survey of local hospital executive compensation in the Reading (PA) Eagle which seemed designed to encourage the public to welcome their ever more highly paid corporate health overlords. This started with its title:
Nonprofit health care organizations pay for the best executives
And its opening paragraph
At first blush, the leaders of area hospitals are handsomely compensated. But a Reading Eagle analysis finds that their compensation is in line with hospital administrators in other areas.
The author was not shy about documenting the munificent pay of local hospital executives, seven of whom received more than $1 million as documented by their organizations' most recent financial reports.
Harold Paz, CEO of Hershey Medical Center (Penn State University) topped the list in 2014, at $1.57 million.
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Second was Thomas E. Beeman, former president and CEO of Lancaster General Health, at $1.5 million.
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Third was Clint Matthews, president and CEO of Reading Health System, at $1.44 million in 2014, the most recent year information was available.
Then,
Fourth place in total compensation went to Ronald W. Swinfard, trustee and CEO of the Lehigh Valley Health Network, at $1.32 million in 2014.
Fifth place in total compensation was Kevin Mosser, director and CEO, WellSpan Health at Ephrata Community Hospital, at $1.29 million.
Sixth place was Rod Erickson, former president, Hershey Medical Center, Penn State, $1.28 million.
Seventh place was Richard Seim, president, WellSpan Specialty Services, WellSpan Health, $1.01 million.
In eighth place was Michael F. O'Connor, CFO. WellSpan, Ephrata Community Hospital, $993.618.
Ninth was Charles Chodroff, president, South Central Preferred, WellSpan Health, $906,582.
Tenth was Rodney Kirsch, senior VP, development, Hershey Medical Center Penn State, $860,445.
Eleventh was John Morahan, chair, president and CEO, Bornemann Health Corp. and St. Joseph Regional Health, at $841, 246. Bornemann is an affiliate of St. Joseph Regional Health, and compensation came from Catholic Health Initiatives.
Parroting the Talking Points But the public should fear not, because, as the talking points say....
We have to pay competitive ratesThis was invoked early in the article.
The Reading Eagle review also found that leaders of hospitals in Berks County are compensated in line with their counterparts at other medical centers in Pennsylvania.
Also,
Overall, the compensation of medical nonprofit leaders in Berks County is on par with leaders of similar locations elsewhere, said Chester Mosteller, founder and president of Mosteller and Associates, a human resource professional services firm in Reading.
We have to pay enough to retain at least competitive executivesTo support both the first and this talking point, the article cited a local expert,
Nonetheless, people are sometimes surprised at high compensation levels at nonprofit hospitals, said Tish Mogan, standards for excellence director at the Pennsylvania Association of Nonprofit Organizations in Harrisburg. But, Mogan noted, if the leaders of nonprofit hospitals were not well compensated, they could be poached by for-profit medical centers.
'They have to be competitive,...
Doubling down, the article also cited "Anna Valuch, director of marketing for Reading Health System," whose CEO, her boss, pulled down $1.44 million. She said
the system's board of directors takes seriously its responsibilities in terms of creating an executive compensation plan that is fair, competitive and consistent with the system's mission to provide the highest quality health care.
Later, the reporter quoted Ms "Cindy Bergvall, co-owner of accounting firm Bee Bergvall and Co in Bucks County and its affiliate, the Catalyst Center for Nonprofit Management," as saying
nonprofit health care organizations are competing with for-profit organizations for talent, so they must offer competitive wages.
Our executives are brilliantMs Morgan immediately segued into a claim that executives
have to make sure that somebody's in charge that has the capability to make sure that, if I'm on that procedure table, things are in place to take care of me,
Mr Mosteller had a different version of the brilliance argument.
'It's been extremely challenging with the Affordable Care Act and Medicare, and that all results in some very big challenges within the health care arena,' he said. 'It is by no means an easy nonprofit to run and manage. It's become increasingly complex to operate and fulfill your mission in those environments.'
Similarly, "J Andrew Weidman, chairman of the board of directors for Penn State Health St. Joseph," put all three talking points into one sentence,
'To be in the best position to recruit and retain vital and talented employees, we must pay competitive wages,' Weidman said.
So did "Brian Downs, director of media relations for Lehigh Valley Health Network," who worked for CEO Ronald W Swinfard, who pulled down $1.32 million,
'To attract and retain the highest caliber health care professionals needed to sustain the quality of care LVHN provides to our community, and to oversee the operation of a nearly $2 billion organization, we must offer compensation that is competitive with organizations we compete with for talent in the job market,' Downs said.
Note that several of these experts/ commenators worked directly for the very well compensated hospital system CEOs of interest, and the others apparently worked for firms that got financial support from these CEOs' hospital systems.
No Questions Asked While the Eagle quoted multiple proponents of high executive pay repeating all the talking points, the reporter apparently did not challenge any of them to justify any of the talking points in the context of interest. In particular, no one provided any evidence that any of the particular executives are so brilliant, or as the article implies, why ALL local executives are brilliant. How can there not be a single average one in the bunch?
In fact, a quick Google search reveals reasons to questions the brilliance of at least some of them. For example, Hershey Medical Center, whose CEO was the highest paid of the group, has proposed a controversial merger which is the subject of strong opposition by the US Federal Trade Commission (FTC). (See articles in
Modern Healthcare and
PennLive. Per Modern Healthcare, the FTC is claiming that the merger would lead to "higher prices and diminished quality [of care]." Especially given that the FTC seemingly has a high threshold to challenge a hospital system merger, its opposition certainly suggests questions about current hospital management. Also, Lancaster General Health, whose CEO was the second best paid of the group, had to pause a big expansion project because of cost overruns (see
this article in Lancaster Online), and suffered a major outage of its electronic health record (EHR) system (see
this article in Lancaster Online).
Yet the Reading Eagle reporter did not raise these incidents, nor question anyone about the supposed brilliance of the leaders at the institutions that suffered them.
Furthermore, many of the points made on behalf of high executive pay raised obvious questions that were not asked. For example, Ms Morgan was not asked whether any executives actually have been recently "poached." Ms Bergvall was not asked to name the for-profit organizations with which the hospital systems was competing for talent. Strikingly, Ms Bergvall also was not asked to justify the assertion that it is the responsibility of hospital managers, not physicians, to make sure that "when I am on the procedure table, things are in place to take care of me."
Even more strikingly, Ms Bergvall was apparently not questioned further after she suggested that CEOs may command more pay simply because they may feel entitled to a big dollop of all the money flowing throught he health care system
when nonprofit organizations bill for services, like hospitals do, they usually have the financial resources to compensate people well.
'In the health care industry, you have an income stream that allows you to pay better,' Bergvall said.
Of course, many of the media reports on high executive compensation in health care do not report any cross-examination of its supporters. Perhaps these advocates refused to respond to such questions, or the reporters felt too intimidated to challenge them.
But nearly all articles that try to delve into executive compensation at all at least quote some experts who are skeptical of current practices. And there are real reasons to be skeptical. As we discussed
here, there is a strong argument that huge executive compensation is more a function of executives' political influence within the organization than their brilliance or the likelihood they are likely to be fickle and jump ship even bigger pay. This influence is partially generated by their control over their institutions' marketers, public relations flacks, and lawyers. It is partially generated by their control over the make up of the
boards of trustees who are supposed to exert governance, especially when these boards are subject to conflicts of interest and are stacked with hired managers of other organizations.
This article included no such attempts at balance. So it ended up more like propaganda for managers' current privileged position in health care than journalistic inquiry. It is sad to see reporting about important health policy issues devolve into propaganda to support the status quo, and those who personally profit the most from it. But perhaps those who work at the Reading Eagle hesitate to offend those who are making the most from the current system. It appears that the newspaer is owned by the Reading Eagle Company, and this, in turn is owned by the Barbey family, which
according to Politico also
controls the publicly-traded lifestyle clothier VF Corporation (Nautica, Jansport, Wrangler, Timberland, Lee, Vans, etc.) and is ranked no. 48 on Forbes' list of America's richest families.
DiscussionWe will not make any progress reducing current health care dysfunction if we cannot have an honest conversation about what causes it and who profits from it. In a democracy, we depend on journalists and the news media to provide the information needed to inform such a discussion. When the news media becomes an outlet for propaganda in support of the status quo, the anechoic effect is magnified, honest discussion is inhibited, and out democracy is further damaged.
True health care reform requires ending the anechoic effect, exposing the web of conflicts of interest that entangle health care, publicizing who benefits most from the current dysfunction, and how and why. But it is painfully obvious that the people who have gotten so rich from the current status quo will use every tool at their disposal, paying for them with the money they have extracted from patients and taxpayers, to defend their position. It will take grit, persistence, and courage to persevere in the cause of better health for patients and the public.
