As healthcare costs continue to skyrocket nationwide, the salaries of the chief executives at two local nonprofit hospitals easily topped $1 million in fiscal 2015. For-profit hospitals CEO salary data for the privately owned Good Samaritan Medical Center in Brockton, Taunton’s Morton Hospital and St. Anne’s Hospital in Fall River were not available.
BROCKTON — As healthcare costs continue to skyrocket nationwide, the salaries of the chief executives at two local nonprofit hospitals easily topped $1 million in fiscal 2015.
CEO compensation at nonprofit medical centers are consistently among the highest in the nonprofit sector, and that’s drawn a critical eye from many who argue that there isn’t enough being done to rein in national healthcare costs, which exceeded $3.2 trillion in 2015, or about $9,200 per American citizen. About 32 percent of that went toward hospital care, according to the federal Centers for Disease Control and Prevention.
Hospitals registered as nonprofits are required to submit annual financial disclosures, known as 990 forms, to the Internal Revenue Service each year. Those reports must include the compensation of the organization’s highest-paid employees.
Among southeastern Massachusetts’ hospitals, Southcoast Health Systems CEO Keith Hovan, which includes Southcoast Hospitals Group, was the highest- paid executive, pulling in about $1.7 million in fiscal 2015 – the most recent year for which complete data was available.
The hospital group operates Charlton Hospital in Fall River, St. Luke's Hospital in New Bedford and Tobey Hospital Wareham.
At Weymouth’s South Shore Hospital, former CEO Richard Aubut, who has since retired, saw a salary of just over $1.3
Hospital spokeswoman Peg Holda said Aubut made a total of $2.7 million between salary, benefits and his retirement package in fiscal 2016, when he stepped down.
His successor, Dr. Gene Green, made $474,851 in his first year, Holda said.
Compensation is set by the hospital’s trustees and based on performance and benchmarked for parity among peers within the industry, she said.
A 2013 study published in the Journal of the American Medical Association found nonprofit hospital CEOs took in about $600,000 on average nationally, which would place Hovan and Aubut’s pay in the top 10 percent of nonprofit CEO salaries for 2014, according to the report.
Compensation at two other area hospitals, though substantially lower than Hovan and Aubut’s, were also higher than that average.
Beth Israel Deaconess-Plymouth CEO Peter Holden made about $879,000 in 2015, while Signature Healthcare Brockton Hospital CEO Kim Hollon brought home about $755,000.
Rachael Labas, a spokeswoman for Signature Healthcare Brockton Hospital, said the CEO’s salary is set each year by the organization’s trustees, based on their progress toward goals set in the prior year.
She noted Signature is one of the largest organizations in the area, with approximately 2,500 employees, and it operates the only hospital-based nursing school in the state.
The hospital has also found itself adapting to complex changes in the national healthcare industry, including a shift of the risk of providing healthcare from the insurance companies to providers in an effort to reduce unnecessary tests and procedures.
“Those changes have significantly increased the complexity of managing healthcare organizations,” Labas wrote. Despite breaking the $1 million threshold, both Hovan and Aubut have seen their salaries increase at a slower clip than Holden’s and Hollon’s.
Hovan’s pay rose a total of 1.5 percent between 2013 and 2015, while Aubut’s rose 3 percent. He took a 2 percent cut in pay in 2014 and retired the next year.
Holden and Hollon’s salaries both rose more than 20 percent between 2013 and 2015.
For-profit hospitals CEO salary data for the privately owned Good Samaritan Medical Center in Brockton, Taunton’s Morton Hospital and St. Anne’s Hospital in Fall River were not available.
Steward Health Care System, which owns those hospitals, did not respond to a request for information regarding the compensation of its executives.
The system also did not file required financial information for a report on hospital profits recently released by the Center for Health Information and Analysis, but the organization was able to place Good Samaritan and St Anne’s profit margins at 10.9 percent – the highest in the state, according to the report – and Morton’s at 0.6 percent through federal filings.
Catherine Bromberg, a spokeswoman for the Massachusetts Health and Hospital Association, said having to compete for talent with other nonprofit hospitals and against for-profit medical centers is one of the biggest drivers of CEO pay packages.
“Massachusetts hospitals and health systems compete not only against each other for top leaders — they compete against peer organizations nationally,” Bromberg said in a statement. “The job of a hospital or health system CEO is multifaceted, particularly during this transformative period in healthcare reform.”
Alan Sager, a professor of health law, policy and management at Boston University’s School of Public Health, attributed the lofty salaries seen mostly to market forces. Healthcare CEO salaries are set in the private sector, he said, and those tend to be much higher in America than in other developed countries. Increasing competition with and encroachment by for-profit medical centers means that traditionally mission-driven nonprofit hospitals must work harder to attract talent and stay afloat.
“Boards and CEOs say ‘No margin, no mission,’ ” Sager said. “If you don’t earn a surplus, at least 3 percent, then you won’t have enough to reinvest and attract doctors and nurses so, in some respect, they’ve come to worship competition and the bottom line.”
But, Sager said that mentality tends to lend itself to patient care quality getting lost in the mix. The 2013 study by the Journal of the American Medical Association found no clear ties between CEO compensation and increases in hospital quality metrics.
“Good management always makes sense, but you don’t want the pursuit of a profit to cloud good patient care and unfortunately that worship of the bottom line may be distorting many hospitals’ decisions,” he said. Sager said the high administrative salaries could also likely be attributed to constant instability in government oversight and regulation of the healthcare industry, where mergers are commonplace among large hospital and health systems as providers seek to gain leverage over the insurance companies that mostly foot the bills for their patients’ care.
“It’s complex, it’s confusing and it changes all the time,” Sager said. “That’s why we have high rates of CEO turnover — the job is often very difficult, and the best way to do well is to merge with nearby hospitals and gain leverage over insurance companies. Becoming dominant is one way to reduce chaos and get higher prices.”
In other states, including California and Arizona, caps of around $450,000 on nonprofit CEO compensation have been proposed.