Payers & Providers National Edition August 2011

8/4/2019 Payers & Providers National Edition August 2011

http://slidepdf.com/reader/full/payers-providers-national-edition-august-2011 1/9

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Payers & Providers commissioned a survey of 732 hospitals in 10 Midwestern states toascertain how much hospital chief executiveof cers earned in the most recent reporting

year. The data are collected from the Form990s that not-for-pro t hospitals must le withthe Internal Revenue Service .

Because hospital scal years vary, andbecause the 990s are led well after the closeof the accounting year and made public evenlater, the most recent data are in most casesfrom 2008 and in some cases from 2009.This is our rst year analyzing thecompensation trends, so we can’t give ade nitive average percentage increase acrossour sample. But we can report anecdotallywhat compensation experts are seeing in the

eld.Prior to the recession, said Kevin Talbot ,

of Integrated Healthcare Strategies , aMinneapolis-based human resourcesconsulting rm, CEO compensation rosearound 4% a year for a number of years. In2009 and 2010, that fell to 2% to 2.5%, andsome hospitals froze salaries entirely. “In 2011we are seeing a slight uptick median increase,around 2.8% so far,” Talbot said.

At the Hay Group , a Philadelphia-basedcompensation consulting rm, “We’re stillconservative in salary increases,” said RonSeifert, head of healthcare executivecompensation. “I’m not expecting big jumps –2.5% to 3% would be normative now inhealthcare.”

“The variance is enormous,” said ClaudiaWyatt-Johnson , a compensation expert inChicago. “Some institutions have very highcompensation, others do not.” She notes astrong correlation between net revenues andexecutive compensation in hospitals. Asfreestanding institutions combine into systemsand other tight relationships, the jobs becomebigger and more complex. That should makecompensation go up. Many jobs have beeneliminated, leaving fewer independent CEOposts available.

But if you thought that would create anexcess of quali ed CEO candidates lyingaround, and thereby drive down the averagepackage, you’d be mistaken, she added. “Thelaws of supply and demand don’t alwaysapply.”

Demand for top performing executivesremains high, Talbot said, and the competitionto land them is erce. This helps contribute torising employment costs for ambitiousinstitutions.

Most hospital and system executives getsome portion of their pay through an incentiveprogram, where they must achieve certainprede ned targets to trigger the reward payout.“In the recession, the triggers were not met asfrequently as before. The data show theaverage award paid out, across the nation, was

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September 21-23

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published in the Calendar section,space permitting.

National Edition

A Look At Midwest Hospital CEO PayChildren’s Hospital Execs Fare Far Better Than Others

Continued on Next Page

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In Brief

Michigan AG LooksInto Blues’ Purchase of

AmeriHealth Mercy

Michigan Attorney General BillSchuette is reviewing a proposal bythe state’s leading health plan toinvest $215 million in a Pennsylvaniahealth plan.

Blue Cross Blue Shield of Michigan announced it planned to

join Independence Blue Cross , basedin Philadelphia, to purchase a 50%interest in AmeriHealth Mercy Familyof Companies , which serves about800,000 Medicaid recipients in threestates. Mercy Health System is sellingits stake in the Medicaid payer.

The Michigan Blues would receivea 40% interest in the organization.Medicaid enrollments are expected togrow after the national health reformlaw goes fully into effect in 2014.

The attorney general is reviewingthe investment because the state’sNonpro t Health Care CorporationReform Act gives him oversight overcertain of the Blues’ decisions. TheBlues are non-pro t in Michigan. Andrew Hetzel, spokesman for theBlues, said the insurer would workcollaboratively to answer Schuette’squestions. The health plan would usemoney in its investment portfolio to

nance the purchase.

WellPoint CompletesCareMore Deal

The acquisition of Cerritos, Calif.-based Medicare Advantage PlanCareMore by WellPoint, Inc. hasbeen completed ahead of schedule,according to a statement issued by thecompanies.

The $800 million deal wasoriginally announced in June, pendingregulatory approvals. CareMore has

Continued on Page 3

NEWS

Compensation (Continued from Page One)

lower than it had been relative to the targets inprevious years,” Talbot added.

In fact, our database covers the period

just as the economy started to tank. Thecascading nancial trauma set off by theLehman Brothers collapse in September 2008didn’t gather full momentum until 2009, sodata for 2008 might not show the effects of theimpact on hospitals just yet.

After October 2008, Seifert said, hospitalsstarted feeling “the impact of nancial rates,debt structures, a host of nancial issues. Thenthe broader economy started to collapse.Volumes dropped in hospitals,” and thatdamaged their nancial performance. Theylost revenue on the top line, and because their

xed costs are so high and hard to remove,that led to rapidly deteriorating margins.“To add insult to injury, you see states such asIllinois and Wisconsin experiencing budgetarychallenges that cause them to rethinkreimbursement structures for Medicaid,”Seifert said. “It’s not a great picture if you’re inan underserved community-based arena.”

The highest paid hospital executive in theMidwest in 2008 was Rand L. O’Donnell , whowas paid $5,987,194 to run Children’s MercyHospitals and Clinics in Kansas City, Mo.

The fact that the leader of a children’shospital is the No. 1 total compensationchampion should not come as a surprise.Chief executive of cers of children’s hospitalsearn a handsome premium over CEOs of garden variety medical-surgical hospitals, itturns out.

But the amount of the disparity in totalcompensation offered to children’s hospitalCEOs vs. other CEOS in the Midwest is anastonishing $1 million.

Those are the results of a study of CEOcompensation in 10 Midwestern statespublished this week by Payers & Providers. Wecompiled a database of compensationpackages of 732 hospital CEOs in Iowa,Illinois, Indiana, Kansas, Michigan, Minnesota,Missouri, Nebraska, Ohio, and Wisconsin,derived from gures submitted on IRS Form990 by not-for-pro t organizations.

Our survey didn’t include government-owned hospitals, state university institutions,or specialty hospitals. Likewise, for-pro torganizations, such as HCA or TenetHealthcare, are not required to le executivecompensation reports to the IRS.

The main factor pushing O’Donnell’scompensation so high was the payout of aSupplemental Executive Retirement Plan, or

SERP, that was triggered in 2008, the year heturned 57 and a half. The trustees had put theSERP in place many years earlier as an

inducement for O’Donnell to stay at thehospital and achieve the aspirational plan thatthe board had conceived when it hired him in1993.

For more details on O’Donnell’s situationand the hospital board’s explanation of howthe compensation package was intended towork, please read the full report, available athealthexecstore.comA close look at executive compensation acrosthe Midwest reveals that CEOs of hospitalsdedicated to children are paid substantiallymore than medical-surgical hospital CEOs.The 14 children’s hospital CEOs in our 10-state database earned an average of $1,417,627 in total compensation in 2008.

That compares to an average of $480,804in total compensation for the 732 hospitals wesurveyed – a difference of almost a milliondollars a year.

Eight of the 14 children’s hospital CEOs, o57% of them, topped the million dollar mark.To put that into perspective against thecomplete universe of hospital CEO totalcompensation: For the entire database, only65 leaders, or 8.9% of all CEOs, earned atleast $1 million.

If we subtract out the children’s CEOsfrom the database, we get 7.8% of all non-children’s CEOs earning that amount. And if we further subtract out the 14 non-children’sCEOs who lead systems and are paid morethan $1 million, we get 43 non-children’s,non-system CEOs hitting the million-dollarthreshold, or 5.9%.

Just for fun, we wondered how much the14 children’s CEOs were paid as a cohort. Theanswer is $19,846,773.

The only children’s CEOs to earn below thdatabase average of $480,804 totalcompensation were Stephen Churchill , atCrittenton Children’s Center in Missouri($433,176), and Paul Jaudes , M.D., at LaRabida Children’s Hospital in Chicago($470,690). Crittenton is a mental health andbehavioral center af liated with the St. LukHealth System in Kansas City. La Rabida is children with chronic illnesses anddevelopmental issues. Neither of thesehospitals is a full-service med-surg children’s

Continued on Next Page



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NEWS

In Brief

about 54,000 enrollees in California,Nevada and Arizona.

CareMore CEO Alan Hoops willremain in his position, and the planwill continue to operate as a wholly-owned division of WellPoint.WellPoint reports that the acquisitionwill be nancially neutral in its rstyear, and accretive in the yearsmoving forward.

New Director, DeputyChief Named To DMHC

California Gov. Jerry Brown hasappointed a veteran of two leadinghealth plans as director of theDepartment of Managed Health Care ,the watchdog agency for the state’shealth maintenance and risk-bearingorganizations.

The 68-year-old Brent Barnhart ,an attorney who holds a law degreefrom Indiana University , served as

senior counsel for Kaiser Permanente between 1996 and 2009 and aslegislative affairs director for BlueCross of California in the early 1990s.He also served as counsel andsecretary for the Association of California Life and Health InsuranceCompanie s between 1987 and 1991.Barnhart told the Los Angeles Times hecame out of retirement to take theposition.

Barnhart, whose appointmentrequires Senate con rmation, wouldreplace Cindy Ehnes, a Democrat whowas appointed by Republican Gov.Arnold Schwarzenegger. She left theagency earlier this year and is now

executive director of the CaliforniaChildren’s Hospital Association .In addition to Barnhart, Brown

appointed 55-year-old ShelleyRouillard as the DMHC’s deputy chief director. She was previously deputydirector of the bene ts and qualitymonitoring division at the ManagedRisk Medical Insurance Board , andalso served at a high-ranking positionat the California Public EmployersRetirement System .

Barnhart will paid an annualsalary of $142,965 upon con rmation.Rouillard’s position does not requirelegislative con rmation.

Compensation (Continued from Page Two)

hospital like the others on the list, andprobably should not be counted in the samebasket with them.

After O’Donnell, at Children’s Mercy inKansas City, the second-highest paid wasPatrick Magnon at Children’s MemorialHospital in Chicago , at $1,802,955.

The Alexandria, Va.-based NationalAssociation of Children’s Hospitals andRelated Institutions “does not collect or trackCEO compensation data and is unable tospeak to the issue,” said spokesman GillianRay. The organization represents 220 of the250 children’s hospitals of various types in theU.S. Ray advised speaking to a compensationconsultant.

“Children’s hospitals have always been

considered unique,” said one such consultant,Bob Roeder , of Mercer in Indianapolis. “Theyare dealing with a wide array of challengesnot typical of an acute care hospital that doesnot specialize. They’re almost like a specialtyhospital.”

Children’s hospitals are not merely centersfor diagnosis and treatment of pediatricillnesses, but major research centers, he said.“They’re trying to identify things that can bedone today for younger children, that canultimately impact the population in thefuture.” The current focus on childhoodobesity is an example of a pediatric healthproblem that will have enormousconsequences for the public health over thelong term, he said.

The leader of a children’s hospital musthave an unusually wide and deep skillset,therefore, to manage the entire operation andits sensitive relations to the community. “Avery unique talent” is required, Roeder said.

Further, children’s hospitals tend to behighly visible and popular in theirmetropolitan areas. “They are almost adoptedby the community, in the sense that achildren’s hospital becomes the focal point of the status of the city, showing what healthcarecan be. There is a lot of nancial support for it,that is different from that associated with anacute care hospital.”

Being nominated for a seat on the board of trustees of a children’s hospital is one of thegreat honors that can be bestowed on asupporter, and usually comes with highphilanthropic expectations.

Along with that comes a deep emotionallinkage of the larger community to thehospital and its mission. “It is heartwarmingand sometimes heartbreaking to be involvedwith children’s hospitals,” Roeder pointed out.“There is always going to be a different

emotional attachment to any child, that bringsout a different sense of what we should bedoing.”

The board of such an institution feels astronger than average obligation to live up tothe community’s trust, Roeder said. Thattranslates into a determination to nd the rightleadership, “in the sense of being able toef ciently and effectively operate the day-to-day realities of that unique institution, but alsoto build a vision for the community, the U.S.,and in some cases in the internationalcommunity, to demonstrate why that children’shospital is different and brings value that noone else can bring.”

Roeder consults to a number of children’shospitals across the U.S., including Children’s

Mercy, and has observed that foundations,endowments, and community leaders havealways been drawn to the mission of children’shospitals. It may have something to do withthe campaign by television star Danny Thomason behalf of the St. Jude’s Children’s HospitalDuring the 1960s TV viewers wereaccustomed to hearing appeals from Thomasand his family to send donations to theMemphis hospital. Likewise, the March of Dimes was originally a charity to helpcrippled children.

“If I’m on the board,” Roeder said, “I wantto make sure I have the right leader in place,make sure we’re operationally effective, andmake sure in fact we are considered to be theleader in the community.”

Meanwhile, the IRS has commissioned avariety of studies in recent years on hospitalCEO compensation. Its rules are now muchmore stringent than they used to be regardingnot-for-pro t compensation. The agency hascommissioned various studies

Trustees must demonstrate that they haveused an independent, objective expert whocan provide comparable data on what isreasonable and fair compensation in a givenmarket or size of institution. The thoughtprocess must be clearly documented in casethe IRS makes inquiries.

The board can be liable for putting theorganization at risk if they don’t put together acompensation package and documentationtrail that re ect’s fair market value anddemonstrates a clear compensationphilosophy, said Kathryn Peisert , managingeditor for The Governance Institute in SanDiego.“Some boards say, ‘We need to be able toattract the most quali ed people...thatargument alone isn’t going to satisfy the IRS,”Peisert said.



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Payers & Providers OPINION Page 6

For local communities, particularly those hit

hardest by the Great Recession, expanding thehealthcare sector may look like an attractiveavenue to creating good jobs that can

jumpstart a return to prosperity. From theperspective of local leaders, healthcareexpansions are a potential economic boon.

Yet from the perspective of federal policymakers, growth in healthcare spending is thenation’s greatest long-term scal challenge.

Understanding the difference between thoseperspectives, and how it is that they can bothbe true, is critical to identifying alternativehealth- nancing arrangements that better alignlocal interests with those of the nation. Increasing spending on healthcare is notnecessarily a problem—advances in medicalcapabilities have produced tremendousbene ts. But the U.S. health system is clearlynot at the frontier of ef ciency. This raises thepossibility that additional spending has lessvalue than the resources sacri ced to pay for it.

For an economically distressed community,expanding the healthcare sector can beappealing on several levels: healthcare isrelatively recession-proof; jobs in health careare relatively high paying; ! anddemographic and technologicaltrends make it likely that theindustry will continue to expand forthe foreseeable future. In sharp contrast to the rest of the economy, employment inhealthcare grew steadily throughout thedownturn. Some cite Pittsburgh as a successfulmodel of a city that transformed its economicbase from heavy industry to medical care. And,there are signs other local of cials see healthcare investments as a way to resuscitatedepressed communities.

Another factor that makes healthcareexpansion an attractive way to restoreprosperity to a local community is that asigni cant portion—roughly 60% to 70%—of the spending for additional services will comefrom outside the community because of theway healthcare is nanced.

If all of the costs of increased healthspending were nanced by local residents, theattractiveness of strategies to expand the healthcare sector would be diminished. But given theway health spending is nanced in the UnitedStates, much of the burden of increasedspending on health care will, in fact, be borneoutside of the community.

In essence, expanding health care services

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locally results in higher spending nationally,

particularly through Medicare and Medicaid,but also because of revenue losses through thefavorable tax treatment of employer-sponsoredhealth insurance. In turn, higher healthcarespending contributes to higher federal de cit

So communities have incentives to expandhealthcare capacity to generate local economicbene t, but when many do this, the nation as awhole falls behind as healthcare spendingcontinues to grow at a much faster pace thanthe economy.

How might state and local of cials’ goals better aligned with the national interests? Somepossibilities include:

* Limit the tax exclusion for employer-sponsored insurance sooner—before 2018—and on a much broader scale than was donein the Patient Protection and Affordable CareAct. The unlimited nature of the tax exclusionfor employment-based coverage means thatthe federal and state governments are silentpartners to various aspects of healthcare thatincrease costs.

*Create incentives to motivatelocalities to focus on Medicaid costcontainment. The federal-state

nancing of Medicaid diffusesincentives for localities to limit thecosts of the program

* Make structural changes to Medicare beneand bene ciary premiums to engagebene ciaries in the cost of their care

* Reform provider payment to reduce therole of fee-for-service and to put providers at

nancial risk for more of the costs of patientcare. This would limit the local nancial gainsfrom boosting the volume of care through localcapacity expansions.

More Local Jobs, More U.S. Debt?Boosting The Local Healthcare Sector Has Its Costs

Chapin White is a senior researcher and PaulB. Ginsburg is the president of the Center forStudying Health System Change inWashington.

Op-ed submissions of up to 600 words arewelcomed. Please e-mail proposals to

[email protected] ,

By Chapin White

And Paul B.Ginsburg



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Page 7Payers & Providers MARKETPLACE/EMPLOYMENT

Keenan & Associates is a successful insurance brokerage and consulting firm meeting the insurance needs of hospitals,public entities and California school districts. Keenan specializes in providing consulting services in the areas of: Employeebenefits, Workers' Compensation, Loss Control, Financial, and Property & Liability. We have seen continuous progress andexpansion, making us the 18th largest consulting firm in the United States. This growth positions us to continue to lead theindustry into the 21st century.

We currently have two exciting career opportunities in our Torrance, CA headquarters, supporting our Healthcare TPA:

NURSE CASE MANAGERWill identify, implement, and provide oversight of employer group populations in order to optimize Blue Cross Medical Management programs and/or strategies. It will include case management oversight of the Utilization Management, Care Coordination, Disease Management, Case Management, andTransition of Care programs.Essential responsibilities include:

• Implement and utilize protocols, criteria, guidelines, references, and resources to determine if current medical delivery of services is effective and optimal.• Evaluate current reporting capabilities and data feeds provided by carrier in order to triage and isolate employee populations that may not be optimizing their current Medical Management Services.• Develop Case Management Plan.• Gather information and coordinate multiple medical services .• Validate current plan of care or changes through ongoing monitoring and gathering of information.• Perform oversight of the medical care delivery systems. Monitor expediency of services.• Benchmark appropriate patient recovery against community standards and evaluation tools which are utilized by the carrier Medical Management Teams/Product Unit Managers.• Assess patient’s recovery and progress by frequent monitoring and interface with the Blue Cross Management Staff. This will involve review and evaluation of coordination of Home Care Services, Durable Medical Equipment, Pharmaceutical Services, and other auxiliary rehab/medical services.• Communicate collaboratively. Nurture healthy and effective communications.• Oversee appropriate correspondence in relation to the case management and utilization review process.• Assess the individual’s psychosocial status via frequent contact and relationship building. Divert barriers to recovery and progression via frequent conferenceand collaboration with the patient as well as the patient’s support system.• Document decisions, rationale, and resources regarding cases by maintaining on-line Nurse Case Management Software Systems and other applications.Minimum Suggested Qualifications: Requires clinical expertise, especially in assessing chronic care needs and service coordination. Registered Nurse with a

current, active, and unrestricted California license. Prefer graduates of an accredited school of Nursing (Associates Degree at minimum: BSN is preferred) andCCM. Advanced degree in Business Administration, Healthcare Administration, or IT highly desirable.. Must possess theoretical knowledge base of nursingprocess, clinical pathways, continuum of care, and case management methods & standards. Must be versed in Nursing Theories and Models of Recovery(Orem, Watson, Roy) Must be comfortable with IT applications and should be able to interpret and identify claims trending data.

MANAGER, CLAIMS AND CUSTOMER SERVICEWill be responsible for the Healthcare TPA departmental budgeting, procedures, production goals, quality standards, service metrics and personnelmanagement of the Claims, Customer Service, Provider Relations, Clerical Support and Adjustment teams.Essential responsibilities include:• Provide benefit claims team with technical direction and resources to achieve efficient benefit claims handling at efficient cost level while maintaining a highlevel of customer service.• Responsible for the development and implementation of the best claims practices which will result in operational excellence. Specifically, the claims team willachieve quantitative and qualitative performance expectations, meet customer expectations as outlined in client service plans, and achieve high ratings incustomer feedback surveys.• Continuously review all performance standards and measurements to ensure appropriateness and provide tracking and reporting of results against allmeasurements to facilitate improvement in customer service and productivity.• Accountable for developing and mentoring team members. Manage coaching and skill building to strengthen the technical and professional level of the team.• Responsible for quality assurance and audits of customer service representatives through either silent call monitoring or implementation of a call recordingprogram.• Responsible for meeting claim adjudication quality and processing turnaround in conformance with industry standards.• Conduct customer satisfaction interface/surveys and disseminate findings to management. Develop plan to address areas of improvement.Minimum Suggested Qualifications: Bachelor’s Degree or equivalent experience. Management, benefits administration and claims adjudication experiencenecessary. Must have strong understanding of all aspects of self-funded healthcare claims. Five plus years as a manager in a similar industry, environment..Experienced at monitoring and maintaining production goals. Must be proficient in Microsoft Word. Excel knowledge preferred, but not mandatory. Adept ataccessing data from the Internet when required.Keenan provides a competitive compensation and benefits package. We encourage teamwork and employee initiative - people working together is what makesKeenan a success. We invite you to share in the commitment of preserving our warm tradition, reputation and dedication to our clients. After all…What you domakes a difference!

Please submit your resume and salary history to Beth Cross at [email protected] . For more information, visit our website atwww.keenan.com . Keenan is an equal opportunity/affirmative action employer and supports workplace diversity.



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MARKETPLACE/EMPLOYMENTPayers & Providers Page 8

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Payers & Providers National Edition August 2011