Hospital CEO Bonuses Reward Volume and Growth


Kaiser Health News and ABC News obtained compensation details for CEOs at dozens of top nonprofit and government-supported hospital systems for 2011 or 2012 via public information requests and tax filings. In many cases hospitals declined to provide full details of bonus packages. At the same time, CEOs were quick to point out that their financial incentives are often part of a package that also promotes clinical quality, patient satisfaction and other goals.

"More than 60 percent of my performance incentives were either in academic missions or quality measures," said Dr. Sheldon Retchin, CEO of the Virginia Commonwealth University Health System in Richmond. "To say that I'm only interested in profits misses the entire mission."

Read Retchin's response. Retchin's goals for earning a bonus of $205,885 (plus a salary of $864,700) included boosting profits, surgeries, admissions and outpatient visits.

But for all the talk about reform, across the industry CEO incentives for traditional financial goals of boosting revenue and the bottom line still far outweigh those for rigorous quality and efficiency targets, experts say.

"What you're seeing is incentive plans that look pretty similar to what they looked like five years ago or 10 years ago," said James Guthrie, a hospital compensation consultant for Integrated Healthcare Strategies. "They're changing, but they're changing fairly slowly."

Examples of CEO pay linked to finance and growth include:

Incentive targets for UCLA Hospital System CEO Dr. David Feinberg included profits, revenue increases and "further hospital system growth." Feinberg earned a 2012 bonus of $262,534. Growth accounts for "only a fraction" of Feinberg's bonus, a system spokeswoman said.UCLA's response.

At Banner Health, a large, nonprofit system based in Arizona, CEO Peter Fine speaks of "an unwavering commitment to improve clinical quality and efficiency." But Fine's long-term incentive goals included profits and revenue growth, the organization's most recent filings with the Internal Revenue Service show. Banner's response.

Goals for the $84,394 bonus earned in fiscal 2012 by Dr. Steven Gabbe, CEO of Ohio State University's Wexner Medical Center, included profits, cash and growth in admissions, according to internal documents. OSU's response.

Michael Tarwater, CEO of fast-growing, Charlotte-based Carolinas HealthCare System, earned a $2.8 million bonus last year that included $1.6 million tied to targets including undisclosed financial goals. His total pay of $4.8 million that year reflects the "growth in scope and scale" of the organization, according to the system. Carolinas' response.

At the University of Virginia Medical Center, CEO Edward Howell proposed that his 2012 incentive bonus be tied partly to profits, new clinical initiatives and "expansion of the UVA Health System," according to internal documents. His performance bonus paid in 2012 came to $199,002. UVA's response.

Richard Umbdenstock, CEO of the American Hospital Association, said financial goals in executive bonus packages "have to include profitability or you are out of business tomorrow."

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