Why Do Non-profit Hospitals Pay Their Administrators Huge Salaries?

As I seek to expose the less humanitarian side of non-profit hospitals, one subject that has come up quite a bit in my reading is the ridiculous salaries paid to chief executive officers and other administrators in these hospitals that are supposedly so dedicated to their communities.

Say What?

I’ll give a few of the more egregious examples of of highly paid administrators at non-profit hospitals in the U.S. The first one would be Jeffrey Romoff, the CEO of University of Pittsburgh Medical Center. According to an article in the Pittsburgh Post-Gazette (May 13, 2016), his total compensation that includes salary, along with bonuses and incentives, totaled $6.43 million in the fiscal year that ended June 30, 2015, which is the fourth consecutive year his compensation has topped $6 million.

The Post-Gazette article goes on to say that Romoff is not the only administrator at UPMC who is enjoying remarkably high compensation for his work. Others who received large compensation packages include James Luketich, chairman of the Department of Cardiothoracic Surgery who earned $2.48 million. Then Diane Holder, president and CEO of the UPMC Health Plan earned a total package of $2.46 million. Just so I don’t bore you to death with a laundry list of others making more than $2 million in a year at UPMC, I will just say that there are four more of them.

The Post-Gazette article states that a total of 31 administrators, including the aforementioned, made at least $1 million at UPMC in 2015.

These high salaries are not localized to UPMC, but are widespread in non-profit “health care” systems throughout the United States.

Another Example

An article in NJ.com dated September 22, 2016 reported that Joe Trunfio, the CEO of Atlantic Health System, which is the parent company of Morristown Medical Center in New Jersey, was making close to $5 million a year in total compensation before his retirement shortly after 2014.

The article further states that State Tax Court Judge Vito Bianco ruled that Morristown Medical Center should lose its tax-exempt status because of Trunfio’s excessively high pay.

The NJ.com article quotes Bianco as saying that today’s non-profit hospitals “generate significant revenue and pay their professionals salaries that are competitive even by for-profit standards.”

Morristown Medical Center has managed to wiggle out from under that judgment through a settlement in which the facility agreed to “pay out” a total of $15.5 million over the next decade to “help offset property taxes.” The interesting part of this story is that it does not specifically state to what agency Morristown MC will be making that payment. I would assume that it is to the state.

Wow! Morristown must be pretty desperate to hold onto its tax-exempt status if they were willing to pay the state (or whoever) a little more than $1.5 million a year for the next ten years. Since Trunfio has retired, I wonder what his successor is making.

This article made the statement, in its introduction, that non-profit hospital CEOs would say that they are not earning too much money because “their compensation packages are based on what other CEOs are making in a highly competitive market.”

Perspective Time

I believe heavily in capitalism and the free market, and that everyone should have the opportunity to make the money they want to make if they have the skills and drive to accomplish that. However, I have some major reservations about high administrator salaries in non-profit health systems.

These systems are paying no taxes, and yet they claim to be serving their local communities. Let me take you back a moment to my last post about whether non-profit hospitals really lower the cost of health care. I referred to a list of non-profit hospitals in which Gundersen Lutheran Medical Center in Lacrosse, Wisconsin reported an annual profit/surplus (whatever you want to call it) of $302 million.

An average hospital bill for a surgery or major illness can cost upwards of $100,000, and the average person rarely has that much money. Hospitals, whether they are non-profit or for-profit, charge excessive amounts of money for services (although I am learning that some physician-owned for-profit hospitals provide better pricing). One of the most notable investigative articles regarding outrageous charges, “Bitter Pill: Why Medical Bills Are Killing Us,” was published in Time Magazine about four years ago. In this article, Steven Brill discusses the ridiculously high charges for medical care at non-profit hospitals, the high salaries of non-profit hospital administrators and the large profits/surpluses these non-profit facilities drag in.

I will share some of the insights from this article, and others, in my next post about non-profit hospitals. I am on a roll here!

If you too are concerned about why health care costs are so high, please sign up to receive emails from me and continue to join me on this blog. We still have a lot of ground to cover. The sign-up is to the upper right of this post.

Sources:

http://www.post-gazette.com/business/healthcare-business/2016/05/13/UPMC-CEO-Jeffrey-Romoff-earned-6-4-million-in-fiscal-2015/stories/201605130194

http://www.nj.com/healthfit/index.ssf/2016/09/non-profit_hospital_ceo_pay.html

(Photo courtesy of www.canstockphoto.com.)

 

3 thoughts on “Why Do Non-profit Hospitals Pay Their Administrators Huge Salaries?”

  1. I have no audio feature on this blog, so I don’t know what you are talking about. You are clearly not commenting on the blog post, “Why do Non-profit Hospitals Pay Their Administrators Huge Salaries?” There is no audio with it.

    1. Well, I agree that the characters are not so super as far as non-profit hospitals are concerned. However, a “for profit” model of care that is transparent in pricing (as well as reasonably priced) and participates in the discipline of the competitive marketplace is much better because the goal is to actually reduce the prices for medical and surgical care. Some examples of this are Direct Primary Care because doctors in this model charge a very reasonable monthly fee for a wide array of services (in the range of $50-$75/month usually). Also, ambulatory surgery centers that post pricing on their websites that is bundled into one price for the surgeon’s fee, anesthesiologist fee, facility fee, and even implant cost in many cases, are a much better way of delivering care. Some physician-owned hospitals are doing this, but there are not too many of those. Doctors who offer care this way may make a good living, but they are most likely not making millions like hospital administrators.

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