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How Does The CEO Earn His Bonus? At Most Hospitals, It’s Hard to Know

The business of Rick Goings, CEO of Orlando-based Tupperware Brands, is selling containers for leftover tuna salad. By law, his employment contract is posted online along with all the details of his compensation incentives.

How Does The CEO Earn His Bonus? At Most Hospitals, It's Hard to Know


On the other side of Orlando, Donald Jernigan is CEO of Adventist Health System. His business is saving lives at more than 40 nonprofit hospitals in a dozen states. But information about the compensation and incentives that motivate Jernigan and other hospital CEOs is much harder to come by than that of bosses in less vital industries.

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KHN, in collaboration with ABC News, investigates hospital leader pay at nonprofit hospital systems.

Health spending has grown almost twice as fast as the overall economy in recent years, shocking government budgets and eroding workers’ raises at companies forced to pay more and more for health coverage. Hospitals account for the biggest piece of the rising bill.

To shed light on incentives for medical system growth, Kaiser Health News queried dozens of hospital groups, including 30 of the biggest public and private nonprofit medical organizations in the country. We asked for copies of the CEO’s employment contract as well as the targets that determine his or her incentive bonus. The institutions’ responses and the documents disclosing what are frequently multimillion-dollar pay packages can be found here.

State institutions such as Ohio State University’s Wexner Medical Center and UCLA Hospital System are often subject to public information laws. Most of these systems furnished at least a portion of what KHN sought. The University of Michigan Hospitals and Health Centers supplied descriptions of CEO Douglas Strong’s bonuses for 2010 but not for later years. Those incentives, it said, are “sensitive information” that might give an edge to competitors if disclosed.

Almost all the private, nonprofit systems declined to provide KHN with their CEO’s employment contract or full details of incentive plans.  To get some information on their incentives, KHN turned to Internal Revenue Service filings. Since 2008 the agency has required nonprofits to disclose the amount of incentive bonuses for top people, descriptions of these “non-fixed payments” and indications of whether they are tied to profits or revenue.

But disclosures are limited at best. Adventist’s filing gives no explanation for Jernigan’s $271,000 incentive and bonus compensation for 2011. A spokesman said it was for achieving operating and performance targets, without elaboration.

How Does The CEO Earn His Bonus? At Most Hospitals, It's Hard to Know


At Kaiser Permanente, the California-based insurer and hospital chain, CEO George Halvorson’s pay of $7.9 million included a $5 million bonus — the largest of any that KHN looked at. (KHN is not affiliated with Kaiser Permanente.)

Kaiser Permanente’s IRS filing says that the bonus came from the achievement of goals to “support the organization’s mission to provide high-quality, affordable care and improve the health of its members and the communities it serves.”

Asked for details, the company said Halvorson’s incentive goals included “quality measures, membership growth, operating income and expense trends and community benefit levels.” But it didn’t disclose targets or payouts for each category.

Nowhere are IRS filings as informative as what Catholic Health Partners, a private nonprofit system in Cincinnati, has disclosed voluntarily. All targets for CHP’s “system scorecard” for bonuses — from cash in the bank to minority employment to mortality and readmissions rates — were published last year (see page 79) by the Commonwealth Center for Governance Studies in Kentucky.

“It never hit my consciousness screen that I wouldn’t want to do this,” CHP CEO Michael Connelly said of furnishing the data. Disclosing incentive formulas that many systems deem confidential, he said, is part of “our mission to be advancing the quality of health care and serving the community.”

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