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September 1, 2010

Are hospital CEOs worth their million-dollar pay?

Still getting intelligent feedback on Sunday's article by Andrea Walker and my column on executive pay at metro-Baltimore hospitals. Walker's piece reported that 8 hospital CEOs pulled in more than $1 million in year for which documents were most recently available, and more make just under that. I argued that the pay is too much for highly subsidized, charitable organizations that call themselves nonprofit.

Some readers were surprised and shocked that the pay was so high; others argue that these are complex institutions and that the people who lead them should be handsomely compensated. Thanks everybody for the ideas, a sampling of which are below:

Are you kidding me? I work at one of the hospitals in the article and think the CEO is worth every penny of his salary. When nurses make $100,000 and IT professionals make $150,000 and so on up the food chain, how much do you expect a CEO who runs a small city to make? These are smart, successful business men who keep the expenses down and the OR's humming. You are dreaming if you think they are overpaid. Sometimes I think you write this rubbish just to get readers' juices flowing. You did it this time.

And:

They only made $1.4 million? Seems to be paltry considering the job. Pick on Oprah instead.

And:

What do you think is fair and just compensation for the people who run the world's premiere medical institutions? I was struck more by the fact that the CEO of the U of MD Medical System earns 2.5 times the compensation of the President of the Hopkins Hospital and Health System. The relative sizes of these two numbers is remarkable in itself. And, unlike the CEOs of for-profit corporations, the most important responsibility of the non-profit CEO is fundraising. Would you put these people on commission?

I am not one to argue that excessive pay produces excessively good results. The "turndown" has revealed that notion to be fantasy. But rational policies dictate that there be a relationship between one's responsibilities and one's compensation...professional athletes and other celebrities excluded.

And:

Wonders never cease, CEO's getting a big bulk of the money while the hospitals continue to harass people over unpaid bills, I know one family out here in Harford County that lost every thing they including their home because they couldn't afford a hospital bill of over $30,000, and then having to read that the CEO of that very same hospital pulled in 7 million a year, it sort of make me wonder about the Doctor' Creed that they will do no harm? Hospital destroy people doesn't matter if the person lives or dies, it's seriously connected to Free Market System that continues to Rob and Steal billions from the people and make life happy and sustainable for the rich and miserable and nerve whacking for the poor and middle-class

And:

Thank you, thank you, thank you for exposing this and putting it in the strong and proper prospective.

And:

Thank you very much for shedding light on an area that the average person does not have time to investigate. We are often asked to contribute to St. Joseph's and GBMC's foundations. The huge salaries are truly excessive. Baltimore is not Paris, London, or Rome and while a charming city in some ways, these salaries in some part explain the enormous number of multi-million dollar homes listed each week in the Real Estate Section. I always wonder who lives in these homes? Now I, in part, know! I also have a question about the "need" for hospitals to advertise so much especially on the radio. This must also be very costly. Does one really shop for a hospital? Don't the doctors' admitting privileges, and patient's geographic convenience determine the choice of hospitals in most cases. I hear ads all the time as if one is considering surgery the way one might consider buying or replacing a car. I have asked two doctors and they just shrug and say that is how it is done. Shouldn't one's doctor or specialist keep up on the better medical centers for say women's health, or pediatrics, or hip replacement etc. Why would Arundel Medical Center be trying to attract patients from the entire WBAL listening area when it reaches up into DE and PA? Why would someone from Towson choose to go to AA County for medical care when traffic is so bad in this Baltimore area? It seems like a cost hospitals could reduce and simply promote themselves within the medical specialties of their respective regions. I am sure there are so many other ways medical costs could be cut. Excessive pay for CEO's is one good way to begin. I am sure dedicated CEO's could be found with compensation packages around $300,000 - $500,000 depending on size of institution.

And:

Just to play devil's advocate on attracting CEOs, depending on what hospitals mean by "qualified", they may need millions to pull in what they would consider a quality CEO.

Back to reality. I do not believe for a single second that any donors to non-profit hospitals like JHH are ignorant about the fact that the CEOs make millions. Many of the higher-end donors that donate in the hundreds of thousands to millions of dollars are attracted by things like the high-amenities wing at JHH, and participate in lavish fundraising gatherings. I've been to some, having been married to a JHH employee, and the donors wouldn't have attended had the event been a cheap hoe-down in a horse barn. Any donors' claims of ignorance are a load of road apples.


And:

Your case arguing that executive salaries for non-profit executives is a good one, but it left me with some questions. For example, you did not make the case for paying non-profit executives less than those of profit making corporations when the responsibilities and duties are comparable. Both have fiduciary responsibility: the non-profit executive to the mission of the organization and the for-profit executives to the corporation's bottom line. The Red Cross is not a good example; it has not always fulfilled its mission well.

The State of Maryland is a $12-13 trillion enterprise. It's CEO's salary is $150,000, about that of a GS-15 employee in the Federal Civil Service. Stanley Black and Decker ($3B in sales), a company that you cited, pays its CEO many times this amount. Perhaps his salary would be a bit steep for a roughly median-sized state, and his salary plus bonuses surely exceeds his value to the company. But I am continually struck by how little some folks, with so much responsibility, are paid. Even when you count the Governor's "perks," the total is modest by comparison.

And:

Your misunderstanding or misrepresentation of non-profit status is downright shameful. Non-profit status has NOTHING to do with the salaries of the lowest, middle, or highest positions on the employment ladder at a non-profit. Yes, you covered yourself by pointing out that not-for-profit is a tax designation but the suggestion is that there is something untoward about employee earnings. For folks donating to any charity or not-for-profit enterprise, it is vital that they determine what per centage of donations actually go to the cause for which they are solicited and accepted. You want to talk about people living high on the hog and using only the money of others to do so? Start with the Obamas and then move on to Pelosi, Reid and company!
Posted by Jay Hancock at 6:00 AM | | Comments (2)
Categories: Nonprofits
        

Comments

Your readers should know that while they may not be appalled by the salaries of the hospital CEOs, trust me employees of some of these institutions are! As an almost 20 yr employee of Johns Hopkins, my incentive raises are pitiful. For the last two years it has been 1%. This increase does not even cover the annual parking or health insurance increases. No cost of living raises. One year in fact Hopkins kept our annual incentive "because of the economy". Also, Hopkins employees pay an outrageous amount of money to park on hospital lots and or garages.

An eye-opener post from Mary Bender. Hopkins, come on, loosen up a bit. At least with the parking. That Hopkins neighborhood does not lend itself to meandering or strolling. As for CEO salaries, I can understand the exhorbitant amounts. In the ever-changing medical climate, you're the first to be acknowledged or damned as the case warrants. That being said though, we all know who really deserves those sky-high salaries are the medical personnel from doctors right on down the line who provide the nitty-gritty care, 24/7!

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About Jay Hancock
Jay Hancock has been a financial columnist for The Baltimore Sun since 2001. He has also been The Baltimore Sun's diplomatic correspondent in Washington and its chief economics writer. Before moving to Baltimore in 1994 he worked for The Virginian-Pilot of Norfolk and The Daily Press of Newport News.

His columns appear Tuesdays and Sundays.
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