JUST COMPENSATION
By
Richard Davis

GUILFORD- Should a hospital CEO take home a weekly paycheck that equals the yearly salary of someone who cleans the floors in that institution? How does a hospital board justify a 20% salary increase for someone who already earns over $700,000? These are just a few of the questions that come to mind when one looks at a list of Vermont hospital CEO salaries.
I have compiled a spreadsheet of hospital CEO salaries from the fiscal years 2004-6 for many of the state’s hospitals. The information came from IRS 990 filings that are available at the Guide Star web site.
The average CEO compensation, including benefits and expense accounts was $285,690 in FY 2004 and it rose by 6.6% to $298,065 in FY 2005. The range is staggering- from Otis Health Care’s CEO salary of $139,349 in FY 2005 to Fletcher Allen Health Care’s CEO package of $845,491.
There are a lot of ways to spin these numbers. Hospital CEO’s around the country command hefty compensation packages. That is a fact of life. If Vermont is to recruit talented and competent hospital CEO’s they need to pay market prices. Of course, that’s a big part of the problem. All of U.S. health care is just a marketplace commodity and CEOs are competing for big bucks at the expense of the rest of the health care system.
Some of the Vermont salaries are just plain excessive. Most salaries fall within a reasonable range but the average yearly increases, for the most part, are not reasonable. How many of us received a 6.6% pay increase last year? Also consider that 6.6% of the average Vermonter’s salary is peanuts compared to 6.6% of $298,000. The 20% increase that the Fletcher Allen CEO got in FY 2005 gave her a $142,000 boost in one year. What does someone do to “earn” that kind of pay increase when the rest of us are struggling to pay for health care that is all too often inaccessible or unaffordable?
Imagine making over $16,000 a week. In one month, the Fletcher Allen CEO takes in the entire yearly income of a nurse earning $60,000 a year.
Then there is the special case of the CEO at Southwestern Vermont Medical Center, a hospital that is facing a financial crunch. He draws salary, benefits and expense accounts from four separate corporations. His total take in FY 2004 was $777,798 and he took a 22% cut in FY 2005 bringing his total income down to $609,635. I hope he can get by on the salary cut. I also wonder what went on behind the scenes to cut his income by 22%.
A February 2 story in the Rutland Herald may shed some light on this situation. According to reporter Patrick McArdle, “In order to avoid a $3.2 million deficit, Southwestern Vermont Medical Center plans to cut about $640,000 in salary expenses, which is expected to mean some job losses at the hospital, the largest private employer in Bennington County.”
Another area that needs scrutiny is the Vermont Association of Hospitals and Health Systems (VAHHS). It is an organization that provides a lot of important services to Vermont’s hospitals from education to program implementation. They are also one of the most powerful and effective lobbying entities in the state.
Vermont hospitals paid VAHHS $1.2 million in dues last year. The organization’s president received $250,164 in compensation that same year to keep the ship on course. I’m sure they can justify their salaries and activities, but one has to wonder if they couldn’t add a notch or two to their belt and lower expenses a little. Keep in mind that a big chunk of health care dollars are our tax dollars, so we need to be critical of how our money is being spent.
This all leads to H 304, a bill to create a new system for hospital health care in Vermont. It would give all Vermonters equal access to hospital care and each would pay according to their means. It is a radical idea, but it is getting public air time in Montpelier thanks to vocal citizen activists.
H. 304 would require a process called global budgeting. It would force hospitals to negotiate with the state for their yearly budgets. The hospitals would get a lump of money and then have to live within their budget or take a hit. If they operate below budget, they keep the excess.
Vermont hospitals don’t want H. 304 to pass. If it did, the hospital CEOs might have to take pay increases of only one or two percent a year. In the overall scheme of things, hospital CEO salaries are an insignificant drop in the bucket. But, to paraphrase Washington politicians, a hundred thousand here and a hundred thousand there and pretty soon you’re talking real money.
The CEO spreadsheet is available at www.universalhealthvt.org