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Hospitals might limit executives' pay hikes after run of big increases

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Before local hospitals slashed staff and expenses last year, they had been boosting the pay packages of their top executives faster than hospitals around the country.

Seven of every 10 senior executives at the major hospital systems in Indianapolis saw their total compensation rise more than 10 percent from 2010 to 2012, according to the latest compensation information hospitals have filed with the Internal Revenue Service.

More than half of the region’s 40 top hospital executives enjoyed compensation boosts of 15 percent or more during that three-year period—bringing the group’s average compensation in 2012 to $771,000.

Evans IU Health CEO Dan Evans earned nearly $2.3 million in compensation in 2012.

But those figures might reflect a high-water mark for hospital executive pay. All four of the major hospital systems operating in Indianapolis rolled out cost-cutting programs last year, which included hundreds of layoffs that even reached into the executive ranks.

The financial problems hospitals now face mean they no longer can afford to employ as many executives making a quarter-million dollars or more, said Tom Fischer, who until December was the chief operating officer and chief financial officer at Indianapolis-based Community Health Network.

“There are a lot of people being paid $300,000 or above across a very wide span of control,” he said. “They’re hard-working, dedicated people; don’t get me wrong. But we’re going to have to reduce the amount of overhead costs.”

The compensation figures in IBJ’’s analysis include salaries, bonuses, benefits and gains in retirement plans. IBJ included all executives whose compensation was reported by the four major hospital systems operating in Indianapolis in each of the past three years, as well as the CEOs of individual hospital campuses in the counties immediately surrounding Indianapolis.

Executives who retired in 2012 were excluded from this analysis, because their 2012 compensation was inflated by large retirement payouts.

The hospital systems have not yet filed 2013 compensation with the IRS.

Mills Mills

Nationwide, cash compensation increases in 2011 and 2012 hovered around 5 percent—or 10 percent over two years—according to surveys of hospital executives’ compensation conducted by consulting and search firms such as Integrated Healthcare Strategies, the Hay Group and Cejka Executive Search. Those firms expect increases to remain at that level for the foreseeable future.

Most Indianapolis hospital executives easily surpassed that 10-percent average growth rate.

Not all Indianapolis-area hospitals provide sufficiently detailed information to the IRS to compare cash-only compensation from year to year. For those that do—Indiana University Health and Franciscan Alliance—10 of 12 executives received cash-only increases of at least 10 percent and two-thirds enjoyed bumps of at least 15 percent.

Among Indianapolis hospital executives for which cash compensation figures are available, the average amount of cash received was $631,000. Cash made up 82 percent of those executives’ total compensation.

‘Recovery years’

Brody Brody

One reason for the compensation hikes is that the period from 2010 to 2012 was considered “recovery years” after the deep recession of 2008 and 2009, noted Ed Abel, a hospital accountant at Indianapolis-based Blue & Co.

Those years also were a time the Indianapolis hospital systems grew significantly larger and more complex, as they acquired numerous smaller hospitals and physician practices.

In some cases, executives saw their compensation jump as they took on significant new responsibilities. For example, Dr. Tim Hobbs became chief physician executive at Community Health Network in 2011, which helped lift his 2012 compensation to $787,000, double where it was in 2010.

“We’ve got this huge infrastructure and a very complex business,” said Fischer, who received 2012 compensation of $868,000. In general, he said, “I don’t think people are being overpaid.”

But since 2012, Congress cut hospital reimbursement rates in the federal Medicare program, and a new Obamacare formula for Medicare took effect that will slow future reimbursement increases by tying them to inflation.

Meanwhile, Medicare and private insurers pushed hospitals to sign new contracts that reward them for performing fewer services—not more—on patients. In addition, patient visits to hospitals fell unexpectedly in 2013.

That prompted hospitals to cut employees, who account for about 60 percent of a typical hospital’s operations. Nearly all hospitals say they’re trying to cut overall expenses 20 percent.

“The financial pressures have not lessened; if anything, they’ve only increased. They don’t have any choice but to look at it and make some hard decisions,” said Abel, the hospital accountant, referring to overall executive compensation.

hospital-chart-for-web.gifIndeed, those difficult decisions already are starting to happen.

The clearest example came at St. Vincent Health last year, which let go of three of its highest-paid executives as it laid off about 865 employees. Two receiving pink slips were Dr. Jon Rahman, St. Vincent’s chief medical officer, and Dr. Alan Snell, chief medical informatics officer.

Rahman received $544,000 in 2012 compensation. Snell received nearly $362,000.

Also departing was St. Vincent CEO Vince Caponi, who moved into another job with St. Vincent’s parent organization, St. Louis-based Ascension Health. Caponi’s 2012 compensation topped $2.1 million.

“The C suite is not immune to it. It’s across the board,” said Paul Esselman, managing principal at St. Louis-based Cejka Executive Search, which recruits health care executives and physicians around the country.

Community has elevated some of its hospital presidents to instead be regional executives over a variety of operations, while letting other executives go. For example, Mike Blanchet, who formerly oversaw Community’s Indianapolis hospitals, retired in 2012. So did Dr. Bill VanNess, CEO of Community Hospital-Anderson, who is now Indiana’s health commissioner.

Both Blanchet and VanNess received annual compensation of more than $500,000.

Community CEO Bryan Mills’ compensation actually went down 4.6 percent from 2010 to 2012—the only CEO of an Indianapolis-area hospital system who saw a decline in that period. Mills, who declined an interview request, received nearly $1.3 million in compensation in 2012.

Indiana University Health let Jim Terwilliger go in March after less than two years running Methodist and University hospitals. He received 2012 compensation of $522,000.

Dr. Jeff Sperring, CEO of Riley Hospital for Children, is also overseeing those two hospitals, while IU Health seeks a permanent replacement.

IU Health also saw a number of high-paid executives retire in 2012, including Sam Odle, former chief operating officer; Norm Tabler, former general counsel who is now back to practicing at his former law firm; and Debra Uhl, former chief operating officer at University Hospital, who now teaches at Butler University. Also departing were Dr. Rich Graffis, former chief medical officer, and Jim Jorgenson, former chief pharmacy officer.

The annual compensation of those executives ranges from a low of $272,000 for Jorgenson to a high of $2 million for Odle.

IU Health provided $2.3 million in compensation in 2012 to its CEO, Dan Evans, as well as more than $1 million to Linda Everett, its chief nursing officer.

“IU Health needs to be able to attract and retain the best talent to lead the organization in providing the best care possible to our patients,” wrote IU Health spokeswoman Whitney Ertel in an email.

Doing more with less

The biggest compensation packages can be found at Franciscan Alliance, which is based in Mishawaka and operates three hospitals in the Indianapolis area.

Franciscan CEO Kevin Leahy received compensation of $2.5 million in 2012, while three of Franciscan’s regional CEOs—Eugene Diamond, Bob Brody and Terrance Wilson—received $1.6 million, $1.6 million and $1.1 million, respectively.

Each executive saw his compensation rise at least 22 percent from 2010 to 2012.

Franciscan executives declined to be interviewed for this story.

The large pay packages have been criticized by some hospital employees, especially those who lost their jobs in 2013. In addition to St. Vincent’s cuts, IU Health cut 935 people, Franciscan eliminated 925 jobs, and Community laid off more than 150 people.

Some hospital executives have said physicians may have to accept a pay cut soon.

“As third-party payers, such as Medicare and Medicaid, reduce physician payments, our system and all others will be forced to pass these cuts along to physicians, but also will do all we can to compensate physicians at current market levels,” Franciscan’s Leahy said in a 2013 statement.

But hospital boards are not talking about reducing their executives’ pay, said Esselman, the executive search consultant.

Instead, they are asking executives to take on more responsibilities—but are not raising their compensation the same proportion as their increase in duties.

Boards also have been tying larger portions of executive pay to performance-based metrics, such as quality, safety, patient satisfaction and physician engagement.

“Boards are saying, ‘We can’t cut [patient] services,’” Esselman said. “So boards are telling their executives, ‘You’re going to take on more responsibility, and you’re going to take on more accountability.’ That will continue.”•

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  • Craven greed
    The Vince Caponis, Ian Wordens, and the whole Merry band of craven executives within the St. Vincent Hospital system are serving themselves, not the supposed "mission" of this hospital system. Those who know, those who have seen firsthand that dedication, hard work and devotion to this hospital is often ignored understand that St. Vincent is a toxic place. Many physicians look at the gentlemen aforementioned as lacking character while having, as their main attribute, hubris...as they take their overinflated salaries with smiles on their faces. Shameful greed.
  • 98% of Doctors Don't Make This Kind of Money
    My spouse is a Neuroradiologist and has been in private practice for over 20 years. She paid her way through undergraduate school, and an additional 10-12 years of medical school and studying to be a brain and spine specialist in her field. She graduated at the top of her class. She has been the president of her group of 30 docs for the last 7-8 years. For the last 5-6 years, her pay has decreased every year. This year, she will make less than $400k. Is she paid well? Yes. But there is a huge misnomer about doctors pay. Are there some that make the kind of money being discussed above? Yes. But they are very few and far between. Hospital executives, and key hospital administration, most of who have no medical training, have astronomical salaries. 98% of doctors, who studied for years, and who are charged with your medical care, make less every year. Additionally, key medical staff and techs that so many doctors rely on, and who are employed by the hospitals, continue to lose their jobs and/or have their pay decreased every year as well. Doctors and key medical staff are required by hospitals to do more with less everyday. Perhaps it wouldn't be near as discouraging if the Hospital Executives were taking pay cuts as well. I don't understand how these executives can ask doctors and staff to do more with less year after year, and not be willing to do the same. It's shameful. And not sure about you, but I'd rather pay the doctors and staff that provide my medical care than a hospital executive, who can't help me at all.
  • Redirection
    I am troubled with this whole string of comments as I am not sure anyone pointed out that many of the "high paying" positions have been eliminated identified by asterisks as of fiscal year 2012. That indicates to me that the hospitals are making responsible yet difficult decisions and eliminating heavy paying positions. To make this more problematic, we have created a society of "entitlement" where individuals believe they should receive free services at no cost to them. I have yet to get a house repair done at no cost nor have I taken my car that is out of warranty for repair for free repair expecting the government to pay for it even though it is the second largest investment one makes in their life besides purchasing a home. Yet, we continue to hear verbal and aggressive abuse from the consumer who expects free services and have to reward them as a result of HCAHPS surveys which we have no influence over as it is 3rd party required by CMS. Peel the onion and get to the root of the problem...you will find that society has created the problem and our current political landscape and not the people who were fortunate to lead healthcare in the right direction before becoming distorted. As a side note, I had a friend sit in an ED in Canada for nearly two days prior to being evaluated and then finally...3 months later got a CT of the head. You pay for what you get...
  • the word Industry is not appropriate for Healthcare
    I am not sorry for saying this, but once the term was put on it, Healthcare Industry,patient care and employee care went out the window and the beancounters took over, efficiency, cost cutting, layoffs, etc. in thename of profit. Same applies to the Higher Education Industry, Colleges, Universities, Public and Private are only interested in the numbers and dollars and higher education is not interested incost as long as student loans are flowing. So now we as a democracy turn our health and education programs into industries no different than producing cars on an assembly line. We know how that goes with GM, countless defects and issues due to mass production, in this case patients and students. Only capitalism could subvert and make our health and our education a profitable business.
  • layoffs and executive pay raises
    This country is resembling a Feudal society more every day. The top 1 percent determining the fate of the other 99 percent. No wonder they are worried, the top 1 percent about a potential for the other 99 percent to revolt.
  • Jacobins
    It's quotes like "I don't think people are overpaid," from out-of-touch c-suits who have made millions by bankrupting sick and injured folks that inspire future Robespierres.
  • Ms.
    Know wonder Vince Caponi left and went to work for Ascension Health Network, I'm sure his next bonus will be even bigger than the 2.1 million he took from the employees at St. Vincent. Now that we are on a new pay system, our beeper pay has been cut, PTO has been cut, we pay our own holiday time off, call back time has been cut. I had 54 hrs of call time on my check and three call backs, should have been a nice check. WRONG! It was less than a check with none of the extra work on it.
  • SERIOUSLY?!?
    hospital morale is VERY low. we lost 60% of our department last year but NONE of our work has gone away. and we continue to increase our work load. no raise in over 2 years. insurance cost has gone up. vacation time has decreased. patient safety has gone down. tired of these executives telling US that WE have to take on more with less. where is OUR million dollar compensation for a job well done? i don't see how these people sleep at night.
  • moral sucks at these hospitals
    Moral sucks at these hospitals. I don't care what your cooking demonstration. Who padded the ballot box to be named one of the top workplaces in Indiana?? Try taking care of more patients with less time!
  • Unionize
    I'm all for being loyal to the company that you work for. But Community Hospital has betrayed their long time employees laying them off then presenting themselves with raises, perks and probably golden parachutes. I was laid off from Community Hospital East in 2010 way before this so-called Obamacare thing hit. I believe that the executives should have taken a pay cut too. It is unforgivable and just plain evil to walk out of there with a million dollar salary while laying off all of the LPNs and cleaning people and replacing them with part time contract workers with no benefits. I was 61 years old when this happened to me and thank god was able to get my pension and reduced SS. I hold Community Hospital accountable for what happened to my family in the days after I was laid off. They are responsible for the horrible effects suddenly not having a job does to people's lives. Was not thought given to the damage they did? I'm am sure some folks were close to suicide after some of the sudden layoffs. Shame, shame, shame. Go on back to your mansions in Carmel, Fishers and Geist and think about what you have done.
  • Who approved this?
    Seriously, whomever approved Sam Odle's severence should be dragged out for questioning.
  • Sam Odle
    Wow, now thats a severence package. How does he sleep?
    • Disgusting does not even begin to describe
      Within the information services division, 70 out of 470 employees received the pink slip. Due to lost morale, many more left looking for greener pastures. One of the people that was let go, committed suicide. I will not forget about these outrageous pay scales. Making cuts to our pensions, removing the matching on our 403, no raise, no bonus (which generally was never more than 300$). At this juncture, nursing and EMR support are as critical as the physicians! The cuts, the CEO salary, is embarrassing. What we are forced to do is Less with Less. And the patients suffer, the staff are having mental breakdowns from the stress. Shame on this company.
      • collective bargaining
        The hospital boards seem out of touch with the real functioning of the hospital. We need to bring collective bargaining into the situation. There is no protection for workers, and no incentive to protect them.
      • Sickening
        I just read the salaries of Community Health Network and the top two make over a million dollars. 600 or 700 long-time employees were laid off from Community between 2010 and 2014. How can these ridiculous salaries be justified but they can't hang onto a LPN or cleaning person making about $18,000. This is just sickening and I don't know how these people can look at themselves in the mirror. They are not worth these salaries.
      • Our Own Fault
        Elections have consequences. Yes, this is about the bill called Obama care the Democrats passed at 3:00am Christmas Eve.
        • the known facts, cost of healthcare must include reigning in the cost of Dr''s, Hospitals, and regulating Insurance profits
          No longer can we afford to line the pockets of Hospital Executives, Administration, Dr's, Surgeons, and Insurance Companies. There must be a line drawn and for standard medical procedures across the country, a standard charge no matter the location and regulate/control the profit margins of Hospitals, Insurance Companies, Physician Groups, literally any group that is having double digit profits does not need to do so. Only recently has Health Care been called an industry, it should not be so. It has become a monolithic bureacratic mess and costly mostly to the employees and those who use their services. Out of 1 million bankruptcies, nearly 75 percent were due to healthcare costs. Essenatially bankruptcy is the only answer to avoiding financial ruin caused by a healthcare system that demands payment and not writing off life saving that cannot be afforded by families and individuals. The patient has the right up front to know the cost, the insurance payments, and what they need to pay and to take out catastrophic insurance to cover the cost that would essentially bankrupt them otherwise. Perhaps if the Physicians, Hospital Executives, and Insurance Executives were on the recieving side of costs that would bankrupt them they would think otherwise. This is not an industry, it should be and will be a social insurance covered benefit in our lifetimes, the same as Canada, Europe and most of ther rest of the world with preventative medicine, healthy living, etc. rather than covering those who insist on unhealthy behavior such as smoking, drinking alcohol, drug abuse, obesity, and other habits that are harmful to health. Essentially, these behaviors should not be covered by insurance, cirrosis of the liver due to alcohol consumption, lung cancer and issues due to smoking, obesity that is abnormal and an issue with high blood pressure, diabetes, and heart problems.
        • Union
          Someone needs to contact a Union. The only way to stop them is to unionize.
        • No Surprise!
          All of this doesn't surprise me one single bit. I worked as an RN for two of these companies. While I one of the 900 and something that was laid off in the IU system, I am very surprised over the inflated salaries in the Franciscan Alliance system. They both preach that patients come first but it's hard to see that when bedside nurses get laid off or positions eliminated all the while execs receive pay increases. Patient to nurse ratios are so high now I hardly have the time to care for my patients. While we are all told this is where staffing should be, the patient is the one getting the short end of the stick. I think hospital execs need to explain these changes to the community as well as explaining their inflated salaries.
        • Corrupt Reality
          Bumping up their own pay before laying off the people who take care of the patients?Wow...I really don't know how these execs sleep at night. But ya know...karma will get them. One day they will be on the receiving end of the corrupt and broken healthcare system they helped create. All of the money in the world will not help them when there are no experienced doctors and nurses left to take care of them and their families.
        • Erroneous Photo Caption
          The caption appearing under the photo of Mr. Evans contains an error. It reads "IU Health CEO Dan Evans earned nearly $2.3 million in compensation in 2012". It should read "...Evans received nearly..."
        • Reprehensible
          I laugh at the comment that executives get raises because of their increased span of control. Every time they layoff front line staff the work is absorbed by the front line staff left behind. Executives have no idea, especially at Community what is going on. Ask Community to publish their organizational chart of today as compared to 2011-2012 and you will see that their top executive staff has increased, not decreased. But they lay off all of their unit secretaries?? Same thing happens at all of the hospitals. Greedy, hard hearted, money matters first leadership. Hospitals are just like the worst big corporations when it comes to the top.
        • Really!?!
          OMG
        • Watch out patient
          My wife works for one of these hospitals. Her work load has doubled because of staff lay offs. Patients being treated are the ones who are critical because of the policy's put in place. After working 30 years in health care she has NEVER seen it this bad. She has a BS degree and is paid 60k. She used to have profit sharing and would get about 3k per year, changed to bonuses that went to 1k now nothing. How could a hospital make a profit then after cutting staff by 50% doubling patient loads now be LOSING money so no pay rasies except for executives. When they are over staffed she is sent home and either takes vacation or does not get paid. She used all of your vacation covering being sent home try so effectively eliminating being able to have a planned day off for a real vacation. The state of health care is now to the point of IF you don't need to have a surgery DON'T. Senior staff is quitting and retiring early to find other employment that does not run you 12 hours with NO breaks and maybe getting 30 minutes for lunch. New nurses don't have the ICU back ground to treat serious problems. Neglect along with mistakes are killing people. How many actual health care personal could be hired to treat patients from the BLOATED salary's paid to hospital and insurance executives that went along with La Bomba care. Was the system broke, YES. Has this solution fixed it. Please re-read the above story again. When the Doctors who spent over a decade going to school make a percentage of executives we have a problem. When the main line hospital workers are forced to do paper work instead of clerks (that were fired) and not take care of patients we have a problem. The worst part is the lack of outrage by the staff being abused. One last comment, why has not anyone figured out the conflict of interest having your retirement fund also decide if you will get treatment. No treatment, you won't be around to draw retirement. Be scared, very scared. I am because of my age.
        • work more with less
          The same organization cuts all the secretaries before Christmas because they have a great program that make all jobs easier. They continue to cut positions. Yes, how shameful.
          • Wow
            Wow. Just wow. This is astounding. I am a nurse and I got a pay raise that was about 50 cents (with an outstanding rating on my evaluation). You people who have been getting 2-3% at least got a lot more than I did. But these CEOs-- I just cannot fathom how they sleep at night. Is that living the mission? Doubtful.
          • frustrating
            How can they get away with this?!? We need better laws to protect indiana employees wages and benefits. It sounds like the wall street incident when banks asked the government for a bail out then got the government money and gave themselves raises. We are taking pay and benefitcuts while they take pay and benefit increases. Their needs be a law against this.
          • Foxes guard the hen house
            Hmmm....none of this data reflects my reality..less $$ in my take home pay...more $$ going out for my healthcare through higher deductibles and less coverage (but stable premiums)...loss of my shift differential...0% raise for 3 out of 5 years...we are led by crooks who utilize smoke and mirrors to hide the fact that they are foxes guarding the hen house while slight of hand moves hide their actions from the world. Ultimate deception.
          • Horrid
            Wow. How is this acceptable?? In the last five years, Community had one year with no raises for employees, one year with a max 2% raise, and so far this year is stating no pay increases. In the last seven years, they have made one market/cost of living adjustment of $0.50 per hour for RN's, who are the true lifeblood of hospitals. This is shameful, and one of many reasons I want to get out of hospital-based nursing. Some days I want to get out of nursing all together. I just love that all declined to comment...
            • Disgusted
              Wow.Thank you St.Vincent for the lies that were given to ALL the employees. It is now public knowledge that mgmt DID receive the raises yet when shift differential was cut what were we told??? When our fellow coworkers lost their jobs , what were we told? Oh that's right! We were told that no one had received any additional raises in mgmt. WHAT DO CALL AN INCREASE OF PAY LIKE THIS REPORT SHOWS? Well played St.Vincent. Well played. This truly shows the so called Spirit of Caring when the people who make all the decisions show how much they really care for their associates by not giving even a 1% raise yet that 17% that Anne Coleman took or that 20% that Kyle Defur too could have gone A LONG WAY towards keeping well trained staff but I guess that $$ was well spent on the Magnet status---or the Planetree status...or the Lean processes that never worked..or the staffing decisions to work with such tight staffing that it is scary for the associates and for the patients...or t :) e staffing decisions to cut VALUABLE associates and the have to hire others at a lower rate to do more work...the list could go on and on. Thank you IBJ for sharing what are so called "leaders" do for themselves...not for the associates or the patients.
              • "More responsibilities"? Not for them
                I see it daily at my place. Employees are the ones given more responsibilities & keep the same pay rate or get a 2-3% raise & act as Managers of departments while the true manager/director very rarely steps foot in the department let alone knows how to perform any of the job tasks. We're stuck playing Manager so they can receive the pay for the title & job we're doing. They get the title, recognition, extra vacation time. & the pay raise. I'm a "Team Leader" when it comes to my paycheck but when the Health Department comes in & they need to talk to the Manager. & ask questions , guess what my job title becomes immediately, Manager. They pile on more job responsibilities on their employees while they reap the benefits.
                • Hands n the cookie jar
                  So let me get this right. They cut salaries, overtime and laid people off ostensibly to cut costs because of Obamacare. But they still kept their hands in the cookie jar giving themselves raises. This is incredibly irresponsible business behavior. This is the kind of behavior that encourages the nurses and others that have been screwed to unionize
                • Duh....
                  Mr. Evans is also a board member. What do you think he's going to do? Vote himself a pay cut? Wake up people, the trend of CEO's also being on the board disappeared in the 80's. This board is a joke.
                  • Shameful
                    These are supposed non profit institutions. They laid off middle management to support their bloated salaries. My guess is they did nothing to support the nurses and technicians and doctors who are generating the income this is supporting these crazy salaries
                  • upsetting
                    This, at a time when colleagues are losing their jobs and having their hours cut.

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