Eight-Figure Pay For Top Kaiser Exec

When the last Payers & Providers compensation survey was released two-and-a-half years ago, Kaiser Chairman and CEO George C. Halvorson was the highest-paid executive on the list.

Halvorson retains the title of highest-paid executive for Payers & Providers' latest survey, but with a new twist: He joins the rarified list of non-profit healthcare system CEOs who have earned eight figures – more than $10 million – in a calendar year.

Halvorson earned a total of $10.16 million in 2013, the most recent year for which data is available, including a base salary of $1.3 million and additional compensation of $8.86 million. 

Halvorson retired from Kaiser in July 2013 after holding top leadership positions at the organization for 11 years.

Those numbers place Halvorson in the company of Barnabas Health CEO Ronald J. Del Mauro, who received total pay of $21.6 million in 2012, Joseph Trunfio of the Atlantic Health System, who was paid $10.69 million, also in 2012, and Dean Harrison of Northwestern Healthcare, who earned $10 million in 2010. Barnabas and Atlantic are both based in New Jersey; Northwestern, in Chicago.  Del Mauro’s eight-figure package also came in the year he retired. 

Halvorson earned $9.9 million in 2012 and $7.9 million in 2011, records show. 

Kaiser spokesperson John Nelson said that 70% of Halvorson's 2013 pay was based on Kaiser's financial performance. 

In that year, Kaiser reported net income of $2.7 billion, up about 4% from 2012, when it reported net income of $2.6 billion. Much of that gain was due to gains in investment income. Revenue was up 6%, to $53.1 billion, from 2012’s $50.1 billion.

“As a broadly used best practice, Kaiser Permanente’s compensation program makes a significant portion of executive compensation dependent upon the organization and individuals meeting goals and annual and strategic plan commitments, including improvements in care and service quality, and the organization’s contributions to the communities we serve,” Nelson said. He added that Halvorson's additional compensation consisted of consisted of “annual and long-term incentive plan payments, and retirement and other benefits.” 

Industry observers who study compensation trends say they are uneasy regarding such large pay packages for those heading not-for-profit healthcare systems.

Alan Sager, a professor of a professor of health policy and management at Boston University, noted that bonus and incentive pay has been on the rise at not-for-profit healthcare organizations in recent years.

That was borne out by data from the Payers & Providers survey, which indicated that additional compensation paid to C-suite executives was up 33% between 2010 and 2013.

That was also confirmed by Brian Cadman, a professor of accounting at the University of Utah.

“Long-term pay has increased tremendously,” he said, adding that it is typically tied to indicators such as revenue growth and cost controls. Cadman noted that pay at not-for-profit organizations has also risen as they have become larger enterprises with more assets to manage.

However, Cadman did observe that healthcare organizations should consider other factors in granting incentive pay other than general finances.

“What may really influence change is if we think about performance measures that aren't necessarily revenue-related, and think more about measures that are healthcare or community-related,” he said.

The Payers & Providers non-profit hospital and hospital system compensation survey and data is available for purchase here.