Valley Medical Center

Executive Compensation Study

November 23, 2009

Presented by:John Hankerson1301 Fifth Avenue, Suite 3800Seattle, Washington 98101-2605206/504.5965 or 206/504.5545

2

Scope of Analysis

Milliman evaluated the total compensation of the Chief Executive Officer:

Milliman’s assessment included a comprehensive analysis of total compensation and its components (base salary, annual incentives, long-term incentives and major benefits) for this position.

Name Position

CurrentBase

Salary

LastAnnual

Incentive

Actual Total Cash

Rich Roodman CEO $587,800 $0 $587,800

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SAO Summary Data

75.9%86.4%98.3%$774.8$680.0$597.7$587.8Total Cash Compensation 

   $182.9$161.9$143.5$0.0Actual Annual Incentive

 

   30.9%31.2%31.6%0.0%Actual Annual Incentive as a % of base 

99.3%113.5%129.4%$591.9$518.1$454.2$587.8Base Salary 

75th %50th %25th %Mkt 75th

%Mkt 50th

%Mkt

25th %2009

CompCEO - Valley ($309.3M) Systems

Overall CompetitivenessBase Salary   

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Data Sources Milliman used the following published surveys to evaluate CEO compensation: Mercer Executive

MSA Healthcare Executive

Hay Hospital Report

Mercer Integrated Health Networks

Sullivan Cotter Healthcare Management

Clark Consulting Healthcare Executive

In addition Milliman collected information on CEO compensation from the following

“regional” organizations:

Evergreen Medical Center Southwest Washington Medical Center Multicare Health System Virginia Mason Medical Center University of Washington Medical Center Legacy Health System

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Base Salary Comparisons

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

Ba

se

Sa

lary

VMC Base Mkt 50thBase

Reg Hosp50th Base

VMC Base Mkt 75thBase

Reg Hosp75th Base

VMC Base Salary vs. Market

6

Total Cash Comparisons

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

Ba

se

Sa

lary

+ In

ce

nti

ve

VMC TCC Mkt 50thTCC

Reg Hosp50th TCC

VMC TCC Mkt 75thTCC

Reg Hosp75th TCC

VMC Base + Incentive vs. Market

7

Cash Comparison Table

Base pay among the regional organizations ranges from a low of $477,372 to a high of $895,000. Total cash (base plus annual incentive only) ranges from a low of $477,372 to a high of $1,326,061.

VMC

Market

Median Market 75th

VMC vs.

Market

Median

VMC vs.

Market

75th VMC

Market

Median Market 75th

VMC vs.

Market

Median

VMC vs.

Market

75th

$587,000 $502,768 $596,330 117% 98% $587,000 $619,484 $762,188 95% 77%

Regional Organizations: $662,500 $771,098 89% 76% $807,700 $1,139,028 73% 52%

CEO Valley Medical Center vs. Published Market Data

Total Cash CompensationBase Salary

8

Annual Incentive Comparisons

Annual Incentive as a % of Base Salary

23%

27%

32%

40%

0%

10%

20%

30%

40%

50%

60%

CEO

Per

cent

of B

ase

Sal

ary

VMC Target Market Median Target Market Median Actual Regional Avg Actual

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Annual Incentives

VMC establishes a target bonus of ~32% (of base salary) for the CEO and all other executives. The table below contains typical market incentive levels in the industry for the CEO:

– Annual incentive opportunity should always be calibrated with base salary to produce competitive total cash compensation, appropriate for the individual’s and the organization’s performance.

– In addition, total cash compensation should be aligned with the board’s pay philosophy and the magnitude of any long-term compensation.

Position Target Maximum

CEO 40% 80%

10

Other Compensation It is our experience that several factors should play a prominent role in the

process used to develop appropriate compensation and benefit plans for

executives. Market practice information can provide a useful frame of reference but

prevalence of a particular practice does not determine appropriateness. In other

words, doing what everyone else is doing is not necessarily the best approach for a

particular organization or situation. We believe that: Specific plans should be adopted because they meet a critical business need

Plans should always work to further the short and long-term objectives of the organization

Plans should reflect good business judgment of the situation and integration with market practices

Plans together should create a total compensation package that:

– Improves performance

– Improves retention

– Aligns with short and long-term business strategies

– Assists with attracting executive talent

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Total Compensation Comparison

  VMC Mkt 75th*

Base salary $587,000 $596,330

Last bonus $0 $259,420

Car allowance $7,212 $9,000

Retention $239,717 N/A

SERP $157,342 $89,449

Life insurance $7,835 $8,500

Disability $4,603 $5,000

Long-term incentive $0 $238,532

Financial assistance $17,315 $20,000

Total $1,021,024 $1,226,231

*The numbers reflected here are individual values for each element and do not reflect the actual aggregate practice of specific organizations or executives

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Detailed Market Data

Chief Executive Officer

Survey Name Survey Job Title Scope Base 25th Base 50th Base Avg Base 75th TCC 50th TCC 75th TCC 90th

17. Mercer Executive CEO Healthcare; <5000 ees $402,302 $413,912 $465,292 --- $483,223 $556,097 ---

18. MSA Healthcare Executive CEO System Net Rev: $300-$500M $488,510 $507,016 $517,361 --- $600,580 $699,776 ---

19. Hay Hospital Report CEO Net Rev: $250-$500M $546,236 $541,295 $581,920 $632,426 $541,295 $765,938 $892,313

20. Mercer Integrated Health Networks CEO Net Rev: <$400M $551,729 $717,823 $852,421 --- $878,399 $1,162,424 ---

21. Sullivan Cotter Healthcare Mgmt CEO Net Rev: <$500M $460,085 $463,085 $515,936 --- $535,438 $602,945 ---

25. Clark Consulting Healthcare Exec CEO Net Rev: $250-$750M $567,747 $577,522 $645,049 --- $677,970 $785,947 ---

Average: $502,768 $536,775 $596,330 $632,426 $619,484 $762,188 $892,313