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Vt. Hospital CEO Pay 
Averages Over $500,000

Saturday, December 19, 2015
Montpelier — The chief executive officer at Vermont’s 14 hospitals and Dartmouth-­Hitchcock Medical Center in Lebanon made an average of $514,977 in 2013, according to a VtDigger analysis of tax records.

The median total compensation package was $355,326. The numbers include base salaries, bonuses, retirement benefits and other compensation.

The data show that hospital CEO pay is more than double what chief executives in other industries in Vermont make each year. The average CEO compensation was $162,210 in 2013, and the median was $141,050 that year, according to data from the Vermont Department of Labor.

The Internal Revenue Service collects hospital pay information on a federal tax form called a 990.

The nonprofit hospitals file the form every year and must list the salaries of top administrators and highest­-paid employees. The most recent tax filings available for Vermont hospitals are from 2013.

Many of Vermont’s top­-paid administrators are at the state’s largest hospital, the University of Vermont Medical Center in Burlington, formerly Fletcher Allen Health Care. The medical center had 15 administrators listed in 2013 who were collectively paid more than $9 million. The chief executive officer of UVM Medical Center, John Brumsted, made $1.9 million. Nine others made more than $600,000.

The Central Vermont Medical Center in Berlin, which is part of the UVM health system, had nine administrators who made a total of $2.2 million. The chief executive officer, Judith Tarr Tartaglia, made $434,718 — a roughly $95,000 increase over the previous year, largely because of deferred bonuses that were reported in response to new IRS rules.

Ken Libertoff, the former director of the Vermont Association for Mental Health, said hospital salaries “have lacked transparency for some time” despite being part of the “rising tide” of health care expenses in Vermont.

According to a 2013 expenditure analysis from the Green Mountain Care Board, hospitals made up between 38 percent and 45 percent of health care dollars spent in Vermont. Health care expenditures represent 18.1 percent of Vermont’s economy versus 16.4 percent of the U.S. economy.

“It is the consumer who ultimately pays the bill,” Libertoff said. “Because Vermont’s health care system is not financially sustainable, further debate about the administrative costs of hospitals is not only important but it is essential.”

Thomas Huebner, the CEO of Rutland Regional Medical Center, said hospitals are “very complicated organizations.” “There are many management consultants who have said they’re the most complicated organizational structure there is,” Huebner said. “It’s not the only hard job in the world, because sure, there’s lots of hard jobs, but the responsibility of ensuring that a hospital is there for a community is a big deal.”

Setting CEO Compensation

In many cases, hospital CEOs have no direct control over their compensation. Boards of directors across the state typically work with outside consultants to put together a compensation package, which a CEO can either accept or reject.

Scottie Ginn, a retired engineer and vice president for IBM, is the chair of the compensation committee at UVM Medical Center, a subcommittee of local business people who work under the hospital’s board of directors and decide the CEO’s pay.

Each year, the committee hires a consultant to determine how much CEOs of academic hospitals make in other states. The committee aims to keep the CEO salary in the 50th percentile, Ginn says, and bonuses for the CEO can fall as high as the 65th percentile.

In 2013, Brumsted’s figure included a base salary of $790,219, incentive and bonus pay of $815,101, retirement benefits, and a payout for long­term bonuses because of a change to an IRS rule.

By comparison, in 2013, the CEO of the Massachusetts General Hospital in Boston made $2.7 million; the CEO of Minnesota’s Mayo Clinic received $1.9 million in compensation; and the Yale­New Haven Health System in Connecticut paid its CEO $2.9 million.

Ginn said the UVM Medical Center board decided to no longer use long-­term bonuses, in part because the IRS rule change inflated Brumsted’s annual compensation in 2013. The board will instead stick with three short-term incentives: a financial goal, an operational goal, and a quality goal.

The level of bonus is based on how well the senior leadership meets the goals, she said. For each senior administrator to get the full bonus in a given year, they would have to “knock it out of the park,” so to speak, according to Ginn.

The UVM Medical Center is ranked No. 16 out of 104 in nationwide quality rankings, and the financial goal could include meeting the budget the hospital promised to the Green Mountain Care Board. That was about $1.1 billion in 2016, or about half of the money patients spend in hospitals in Vermont.

For UVM Medical Center, the only comparable hospital serving Vermonters is Dartmouth­-Hitchcock Medical Center. Forty percent of the Lebanon hospital’s patients come from Vermont, and it is the closest teaching hospital to southern Vermont residents. That year, CEO James Weinstein made $1.03 million.

A spokesperson said the board of trustees compensation committee sets CEO pay. The total amount spent on administrators, according to tax forms, was $16.3 million in 2013 and $12.9 million in 2012.

Thomas Dee at Southwestern Vermont Medical Center in Bennington is the third­-highest paid Vermont hospital CEO and the 14th­-highest paid Vermont hospital administrator. David Meiselman, chairman of the board of trustees, said the hospital couldn’t replace the CEO for what they pay him.

“I would venture to say that there are some CEOs that are overpaid at $200,000 and some CEOs that are underpaid at $400,000,” Meiselman said. He said that Dee joined Southwestern Vermont Medical Center around 2008, when the hospital was involved in a legal battle with its former CEO, and Dee helped turn the hospital’s image around.

“He could go to Boston and get two or three times what we’re paying him. He could go to Westchester County (New York) and get two or three times what we’re paying him,” Meiselman said.

In south­central Vermont, Michael Dick, the chair of the Rutland Regional Medical Center board of directors, said the board does a performance review and salary review for Thomas Huebner, the fourth­-highest compensated Vermont hospital CEO, every year.

The board of directors requires the human resources department to collect market data on CEO pay at comparable hospitals, plus market pay rates for each job at the hospital. The board negotiates with the CEO, who then has broader authority to set others’ pay scales.

In 2013, Huebner’s salary was $432,740, and benefits brought the total to $507,483. But the total compensation numbers don’t include any bonuses or incentive pay because Dick said making more money on patients shouldn’t be an incentive.

“There should always be a little tension between management and the board,” Dick said. “They typically would want more, and we don’t want to pay for all that. We of course want all the goods and services but at a better cost.”

In Brattleboro, the community is largely served by a Medicare­-dependent hospital. Peter Carvell, the chair of the Brattleboro Memorial Hospital board of directors, said the board takes its fiduciary responsibility to the organization “very seriously.”

In 2012, Brattleboro’s Steve Gordon was the second­-lowest­ paid hospital CEO in Vermont. The board has since been working to increase Gordon’s pay to the 75th percentile of comparable hospitals nationwide — his total compensation went from $240,000 in 2011 to $347,000 in 2013. His pay is now in the mid­range among Vermont hospitals.

Carvell said Gordon has a performance review every year and either gets a pay raise or a bonus, but not both.

That’s in part because the hospital is often reimbursed pennies on the dollar for Medicare services, while the volume of care it performs is decreasing and expenses are rising, according to Cavell.

Salary Oversight?

At the federal level, the Internal Revenue Service has been monitoring for more than a decade whether 501(c) (3) organizations comply with federal laws regarding executive compensation.

The general rule is that compensation must be reasonable, and the executives cannot receive “improper personal gain” from the charity organization, according to the IRS. Compliance websites therefore recommend that nonprofits use market data and other resources to make sure the salaries they pay are “reasonable.” In Vermont, the Green Mountain Care Board has regulated health insurance rates and hospital income from medical procedures for the past few years in order to rein in health care spending. But the board has no intention of telling hospitals how much they can pay administrators, doctors or nurses, according to Al Gobeille, chairman of the Green Mountain board.

“What we’ve tried to do is work at a high level of overall growth and not micromanage the running of the hospitals,” Gobeille said. “I think that’d be a very dangerous path for the board to go down. I think that’s the role of the board of the hospital.”

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