Tri-State Area: If You Can Make It Here, You Can Make Out Pretty Well
Healthcare Compensation News will devote a large part of each issue to healthcare payment data and trends in various regions of the United States, with a focus on not-for-profit hospitals.
Why hospitals? Because they pose complex financial questions seen in few other facets of healthcare delivery.
Hospitals are often among the bigger, if not biggest, employer in the communities they serve. And unlike large health plans – a large majority of which are for-profit and often publicly traded – most of these non-profit institutions have pledged themselves to either a religious or a charitable mission.
Each issue will focus on two to three states at a time. The states will border one another or be part of what has been a historic regional cluster (e.g., the Carolinas, the Pacific Northwest).
As the publication progresses, the data will be used for comparison purposes, giving an idea of how hospital and other healthcare executive pay in specific states and geographic areas trends over time.
Currently, data will focus on 2010-2011, the most recent years for which tax data is available in large amounts. As the publication grows and more resources become available, it will strive to obtain tax returns from each hospital individually, which will allow it report compensation data about one year sooner.
For its debut issue, Healthcare Compensation News decided to turn its eyes to the most prominent geographical region in the United States – the tri-state area of New York, New Jersey and Connecticut. Combined, those states are home to nearly 32 million people. That's still less than the population of California, at 36 million (Payers & Providers California Edition last crunched compensation data for 153 hospitals in that state in early 2013, and we will include some of the figures here for the comparison's sake).
However, these three states – all anchored by New York City – are the most economically powerful and culturally influential in the nation. According to Census Bureau data, New Jersey had the highest median family income in the United States in 2011, at nearly $104,000 for a four-person household. Connecticut was right behind the Garden State. New York State runs about 20% behind those two states. However, that is because poor regions in the upstate region and poor populations of New York City dilutes the fact that the per capita income in New York City is nearly double that of the rest of the state, and more than double that of Los Angeles. It is the home of 70 billionaires, the most of any city in the world. And as will be discussed, the pay of C-suite executives at hospitals in New York City dwarves that of the rest of the Tri-State region.
Compensation figures quoted here include the executive's base compensation, additional compensation that includes bonuses, retirement and other payments, and total compensation, which is the combination of the two. We will be reporting on the compensation of the CEO, chief operating officer and chief financial officer (CFO and COO data will be in graphical boxes that accompany this and future articles). They are typically the first, second and third in the organizational hierarchy of a hospital or healthcare system, and are usually paid accordingly.
Also reported is data for the highest-paid executive for each hospital. In most cases that is the CEO, but in some instances it may be the head of medical affairs, or an outgoing executive who is leaving due to retirement or another issue, and collected additional pay as a result.
For hospitals, we will also be reporting on compensation per bed and the hospital's financial performance and level of charity care. Again, these are relevant indicators, to determine whether a hospital's performance is tied in any way to how it pays its executives.
State Level Data
Altogether, the C-suite compensation for a total of 219 hospitals in the three states was obtained. That included 36 hospitals in Connecticut, 40 hospitals in New Jersey and 143 hospitals in New York, representing more than 600 C-suite level or senior executives altogether. Thirty-three of the New York hospitals were in New York City, with the rest being either in the nearby suburban counties or further upstate.
The vast majority of payment data was from the 2011 tax year, which included 182 facilities. Thirty-six had data for the 2010 year, and one had data available for 2012.
Healthcare Compensation News was unable to obtain the compensation data for the C-suite executives at the State University of New York's three-hospital system, as such data is not publicly available. The SUNY system publishes salary ranges for faculty and other positions, but not for its hospitals. SUNY has received significant criticism for its opaque pay practices.
Compensation Trends
Overall, the average total compensation for a hospital CEO in the Tri-State area was $754,877. Total compensation ranged from $12,500 to just over $5 million, with the median at $625,853.
The overall compensation per bed fir CEOs averaged $2,248. Bed size per hospital ranged from only four beds to more than 2,200 beds, with the average size being just over 300 beds. The median compensation per bed was $1,497.
That is significantly higher than the overall compensation for CEOs in California, which averaged $705,573, although that was tempered by the fact that the California survey included CEOs at the University of California hospital system, which pays at the lower end of competitive rates given the beds sizes of the hospitals it operates.
Of those on the Tri-State list, 49 received total compensation of more than $1 million annually – or 27% of the total.
Base compensation averaged $467,065, with the median at $458,563. Additional compensation averaged $286,476, with the median at $165,874.
Among the highest paid executives, the total compensation averaged $885,540, which is more than $130,000 above the average CEO pay. The compensation ranged from $134,718 to more than $5 million. A total of 65 executives on this list earned more than $1 million. A dozen executives on the list were former C-suite officials who were receiving exit packages or retirement pay.
The highest-paid hospital CEO in the Tri-State area was Steven Safyer, M.D., who leads Montefiore Medical Center in the Bronx. In 2011, his base compensation was $1.425 million. He received an additional $3.6 million in compensation, which was based in part on his performance, as well as retirement pay. He also has a driver for business and incidental travel – the only CEO on the list with such a perk.
That Sayfer is the highest-paid hospital CEO on this list boldly illustrates the stark differences in income distribution in the United States. While Montefiore is located in the 17th Congressional District, which includes the very wealthy area of Westchester County, it is literally steps from the adjoining 16th District, which has the highest poverty rate of any Congressional District in America. Its households earn less than a quarter of those in the next district north.
That is borne out in Montefiore's safety net status. It spent more than $359 million on charity care in 2011, the second highest of all the hospitals surveyed.
Whether Safyer should have a more modest paycheck for leading an institution that cares for patients of more modest means remains to be seen.
“Anyone who is not an interested party would have to agree, that is a a very large amount of money for someone who is leading an institution that is servicing such a poor area,” said Claudia Wyatt-Johnson, a Chicago-based compensation consultant.
Johnson did note that geography tended to play less of a role in how a hospital CEO is compensated than other factors, such as a hospital's size. But the aggressiveness of the CEO in seeking play perhaps the biggest role of all, she added.
James Abruzzo, a New Jersey-based consultant to non-profit institutions believes pegging compensation to the income of the surrounding environs would lead to a statistically inaccurate gauge of their market worth as an executive.
Abruzzo also noted that it is difficult to operate a hospital no matter where it is located. “Maybe it is harder to run a hospital in the poorest area,” he said. “Maybe the emergency rooms are flooded with patients, it may be harder to recruit the best doctors, or maybe it's harder to raise additional funds.”
But Abruzzo did note that while having a personal driver may make an executive more efficient by being free to spend the transit time on work, it can be a troublesome perk.
“Far be it from me to be the judge, but having a car and driver sends a message, and you have to decide whether or not that is the message you want to send,” he said.
A spokesperson for Montefiore did not respond to a request seeking comment.
Financial Performance/Charity Care
The hospitals on this list, as a general rule, performed fairly well. Fifty-three of the facilities surveyed reported net losses, while the remainder were profitable. The average net income was $9.6 million.
Charity care has always been a sensitive topic with hospitals, given the tension between hospital chargemasters – which bear little reality to what large payers are charged for services – and the actual value of the charity care reported.
However, the hospitals on the list were fairly munificent. The average reported expenditure for charity care was $28.4 million.
State-by-State Performance:
New Jersey Leads The Way
The Garden State proved the greenest for the executives on the list – the average total compensation for CEOs on the list was $815,227. That included a base compensation that averaged $448,930 and additional compensation that averaged $364,838.
The median total compensation is $396,399, which suggests that there are some top-heavy earners among New Jersey hospital CEOs. Compensation per bed among the New Jersey hospitals is $2,722, about 25% higher than the overall average for the region. The median compensation per bed is $1,602.
The highest paid CEO of a standalone hospital is Robert C. Garrett, who heads Hackensack University Medical Center. In 2011, he received a base salary of $1.12 million, and additional compensation of $1.27 million, for a total of $2.38 million. His compensation was only slightly less than Richard P. Miller, CEO of the four-hospital Virtua system, at $2.41 million.
The highest-paid executives in New Jersey averaged total compensation of $906,471, with a median of $780,000. Altogether, New Jersey had nine CEOs or other executives on the list who were paid more than $1 million a year.
Connecticut
The average total compensation of hospital CEOs in Connecticut is $771,781. That includes base compensation that averages $484,295 and additional compensation that averages $287,486. The median total compensation is $701,558.
The highest paid standalone hospital CEO is Brian Grissler of Stamford Hospital. His pay package of $1.86 million included base compensation of $935,335 and additional compensation of $924,717.
Among the highest paid executives overall, their compensation averaged $1.025 million, with base pay averaging $501,854 and additional compensation averaging $524,022. The base pay median was $436,293, while the additional compensation median is $286,512.
Thomas Pipicelli, the now-departed CEO of the William W. Backus Hospital in Norwich, Conn. was the highest paid of the executives, at $3.82 million, including $3.2 million in additional compensation.
Altogether, eight Connecticut hospital CEOs were paid more than $1 million annually.
New York State
Because of the enormous discrepancies between the compensation paid to hospital executives outside of the New York City area, the upstate hospitals have been separated from those within the city limits.
As mentioned before, upstate New York's economic demographics suffer in comparison to those of Connecticut and New York; it is far poorer, and what is paid to top-tier hospital executives mostly reflects that reality.
According to the compiled data, upstate total hospital compensation averaged $605,207, more than $200,000 less than in New Jersey and more than $170,000 less than in Connecticut. The median was $524,148. Base compensation averaged $391,590, with the median at $359,944.
The highest paid of the standalone hospital CEOs is Jon B. Chandler of White Plains Hospital in Westchester County, just north of New York City. His 2011 compensation included base pay of $966,117 and additional compensation of $834,823. His compensation totaled $6,168 per bed, significantly higher than the per-bed average of $4,700.
With the list of highest-paid executives included, there are 22 on the New York State list earning more than $1 million a year.
New York City: A World Apart
No other city in the world except for London may be as economically influential or as powerful as New York City. Property costs are in the stratosphere, as are compensation and the overall concentration of wealth. New York City is also home to some of the most famous teaching and specialty hospitals in the United States, including Memorial Sloan-Kettering Cancer Center and Mount Sinai Medical Center.
As a result, the compensation for CEOs whose hospitals are within New York City limits is far higher than in any other part of the Tri-State area. Total compensation averaged $1.15 million – nearly 50% higher than the region as an average. The median total compensation was $996,154, which means that the high pay is distributed fairly evenly. Base compensation averaged $724,930, with a median of $697,764. Additional compensation averaged $424,258, with a median of $261,265.
The highest paid CEO in New York City is also the highest paid on the entire list: Steven Safyer. Second on the list is Steven J. Corwin, M.D., who leads New York-Presbyterian Hospital, with a total 2011 pay package of just under $3.1 million.
There are 15 hospital CEOs in New York City who are paid more than $1 million per year, With the highest-paid executives included, that rises to 17 in total. Among the highest paid, total compensation averaged $1.24 million, with a median of $1.03 million.
Editor's Note: The August 2014 edition of Healthcare Compensation News will discuss payment data for hospitals in the Carolinas.
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