When a not for-profit hospital recruits a CEO, they certainly need to bear in mind the salaries their candidate might be offered by a for-profit rivals, as well as their not for-profit competitors. However, does that justify a million or more dollars a year in compensation, even when the not for-profit is losing money or laying off staff?
This question has been embarrassing U.S. non-profits for quite some time, but of course, there’s no simple answer. The non-profits continue to argue that they can’t attract the talent they need without handing out top-dollar comp packages. Critics, meanwhile, say there’s no excuse for paying Joe CEO millions if the hospital is supposed to be dedicated to the less-fortunate.
To date, non-profits have been winning the battle, as megabucks salaries are still on the table in most markets. (Apparently, the critics haven’t had the juice to force industry change on the non-profit giants.) Still, regional controversies over public and non-profit hosp ital CEO pay flare up from time to time.
In Atlanta, for example, the Atlanta Journal-Constitution recently shined a light on the hefty compensation packages awarded to CEOs of several non-profit facilities.
As the paper notes, twelve of the 15 acute care hospital systems in metro Atlanta are exempt from paying any taxes on more than $2.6 billion worth of property and equipment. Unlike their for-profit brethren, the non-profit systems are spared millions in sales taxes and income taxes.
According to the AJC, at least five CEOs of non-profit hospitals or health systems made more than $1 million in the fiscal year ending in 2009. Take Edward Bonn of Southern Regional Health System, which operates Southern Regional Medical Center and two affiliated facilities. Not only did Bonn make $2,610,175 in 2009, he got $421,822 plus $2.2 million from a retirement plan when he left the plan that year.
When CEOs have salaries rivaling corporate executives, they certainly don’t come across as being charitable, says a former state Department of community Health commissioner. Says Russ Toal, now a professor of public health at Georgia Southern University: “I think, it makes a statement about what their priorities are.”
The problem isn’t limited to Georgia, of course. In Texas, for example, state Sen. Rodney Ellis is pushing for tougher enforcement of the state charity care requirements for not-for-profits hospitals. “If you get a tax exemption, you ought to be able to justify why,” Ellis told the AJC.
But big cities with large underserved populations (and financially shaky public institutions like Atlanta’s Grady Memorial, the nation’s 5th largest public hospital) will continue to get the most press. When a struggling metro can hardly care for the poorest and sickest patients, those big, bad salaries look even worse.
Let’s face it, though: while non-profit CEOs’ fat paychecks will continue to get slammed for the foreseeable future, nobody’s ready to slap strict limits on those paychecks. So if you’re bothered by reading about non-profit hospital CEOs taking home $1 million plus a year, you’d probably better turn to the sports pages.