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Board Won’t Weigh In  On CEO Pay

Published: 9/6/2018 11:27:54 PM
Modified: 9/6/2018 11:28:34 PM

The Green Mountain Care Board won’t “micromanage” hospitals by getting directly involved in executive pay or personnel issues, Chairman Kevin Mullin said on Wednesday.

Mullin, who was responding to a request that the board order a compensation freeze for some hospital administrators, said there are legal obstacles to the board intervening in contractual relationships between nonprofits and employees.

He also argued that the care board is applying cost-control pressure to hospitals in other ways. That’s partly by limiting hospitals’ revenue and rates as part of the annual budget-review process, and also via the board’s collection and dissemination of hospital salary information.

“I think that we have started that process of shining the light on it,” Mullin said. “These are nonprofit hospitals run by their local communities. I think that board members are hearing from their community members that maybe it’s time to take a pause (on compensation). We’ll see.”

Mullin’s comments came after Ken Libertoff — former director of the Vermont Association for Mental Health and now a frequent participant in care board matters — asked the board to consider freezing for one year the salary of any hospital administrator earning more than $500,000.

The request came as the board is reviewing fiscal year 2019 budget proposals for Vermont’s 14 medical hospitals. The hospital budget year begins on Oct. 1; the board is scheduled to issue orders this month.

The issue of executive pay has received new attention in recent weeks due to an ongoing labor dispute between University of Vermont Medical Center and its unionized nurses. The union has taken issue with the fact that the hospital paid two top executives more than $3 million in 2016.

In addition to asking for a salary freeze, Libertoff also petitioned the board to undertake a study of increases in UVM Medical Center and UVM Health Network administrative salaries “as compared to salary increases in other components of the hospital system.”

Libertoff noted the board previously has taken a pass on regulating compensation.

“While there were arguments to support this decision, it has proven to be a ‘dereliction of duty’ because it has created not a sound, prudent and judicious (salary) approach but an exorbitant administrative salary structure in Vermont that is excessive, lavish and overindulgent,” Libertoff wrote to the board.

Libertoff isn’t the only one urging action on the issue. The UVM nurses union protested the hospital’s budget presentation last month partly on the basis of executive salaries, and state Auditor Doug Hoffer a few months ago wrote a letter to Mullin on the same topic.

Hoffer wrote that he “can understand why hard-pressed Vermonters express anger and frustration at the high salaries paid to top health care industry administrators while premiums keep growing and wages don’t keep up.”

“Therefore, I hope you and your colleagues will consider a more granular analysis of hospital and insurer salaries, benefits and bonuses as you review proposed budgets and rate increases,” he wrote.

The board’s hospital budget review rule says hospitals must submit “wage and salary data” to the board. The rule also appears to give the board broad latitude in its deliberations: In addition to a list of factors that should factor in decisions, officials can consider “any other information the board deems relevant or appropriate to hospital budgets.”

But at the outset of a care board meeting on Wednesday, Mullin said the board would not step directly into the executive salary fray.

“The board has never interfered in any type of contractual relationship that an institution has either with an employee or an outside party,” he said. “And while we do examine their budgets, what we are looking at is basically revenues and expenses. We don’t get into such detail to set someone’s specific salary or say how much a hospital bed would cost or things like that.”

He noted that the care board collects hospital salary data as part of the budget process. “I think this board has acted in a manner to try to create transparency that allows the overall Vermont community to see what the expenditures are,” Mullin said.

The board exercises control over hospital finances by annually setting each facility’s net patient revenues and its rates, or the amounts hospitals charge insurers.

That regulatory function was on display as board members, while debating the merits of several hospital’s proposed budgets, signaled their intention to decrease requested rate hikes. A rate increase decline of 1 percentage point can save hundreds of thousands of dollars or, in the case of some larger hospitals, $1 million or more.

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