How does hospital CEO pay affect care?

Nonprofit hospitals have to disclose what they pay their top administrators and surgeons as part of reporting requirements to maintain tax-exempt status with the Internal Revenue Service.

The Sentinel’s Dennis Webb looked at the IRS forms area hospitals have filed in recent years to provide a snapshot of what hospitals in Grand Junction and Glenwood Springs pay their chief executive officers.

We were surprised that Valley View Hospital’s CEO Gary Brewer earned nearly twice as much as St. Mary’s CEO Michael McBride. Brewer’s total compensation in 2012 was $1,010,889.

McBride runs a Level II trauma center and a 348-bed hospital with 2,000 employees. It’s the biggest medical facility between Denver and Salt Lake City. Brewer oversees 1,000 employees at his 80-bed hospital in Glenwood Springs.

Members of Valley View Hospital’s board of directors defend Brewer’s pay as the cost of having top-flight medical services in a small town.

“You’re not going to find another hospital in a town of 9,000 that can provide the access, the quality of care at the competitive price we do and that has the leadership that has attracted the quality of medical staff, physicians and support staff,” said board member Jeff Carlson.

CEO compensation is a thorny issue across the board. Even on Wall Street, there’s no correlation between CEO pay and how well a company performs. Many companies that have folded or needed a government bailout had highly paid CEOs.

The Atlantic Monthly’s Richard Gunderman wrote about the disconnect between CEO pay and hospital performance based on the conclusions of a Harvard School of Public Health study published last year in the “Journal of the American Medical Association: Internal Medicine.”

The boards of the country’s 4,000 nonprofit hospitals lack the firsthand health-care expertise needed to assess the quality of care, Gunderman observed. They may measure performance based on new equipment or new service lines, instead of quality indicators like mortality rates or readmission rates.

“Board members need to deepen their understanding of what quality and value in health care really mean, and then hire, fire and reward their CEOs accordingly,” Gunderman wrote.

We agree. Boards have many factors to consider in setting CEO pay: market surveys, the size of operations, the scope of responsibility, fiscal performance and patient satisfaction, just to name a few. But they must also guard against public perceptions that CEO compensation is inflating costs to patients or affecting a community’s quality of care.

Valley View’s board needs to ask itself if the health outcomes of the community it serves are twice those of Grand Junction’s. Because they’re paying a premium for them in administrative costs.


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