N.H. AG Eyes Nonprofit Hospital CEO Compensation

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July 2, 2012; Source: New Hampshire Public Radio

More federal and state officials are investigating and questioning compensation practices at nonprofit hospitals. New Hampshire Attorney General Michael Delaney commissioned a study from the New Hampshire Center for Public Policy Studies that found that compensation varies widely among the state’s nonprofit hospitals.

But, and this is the point on which politicians and the media will likely focus, on average, hospital CEO pay increased 18 percent from 2006 to 2009, far outpacing average wage gains in private sector pay in New Hampshire. The average gains in nonprofit CEO pay are compared to average gains in pay among all private sector workers of 4.8 percent and among all hospital workers at 12.8 percent. The report also finds big variations in changes in the compensation packages—with some actually declining and others including larger one-time payments, and it finds no obvious correlations between compensation and performance on quality of care, cost of care or level of charitable care. The correlation it did find was between compensation and the size of the institution. Over the same period, nonprofit hospital pay across New England increased by 29 percent.

The one-page executive summary and full 38-page study are available here. The report notes that almost all hospitals studied follow current best practice in setting executive pay. The questions Delaney and others are asking involve whether those standards should be changed to include a stronger focus on achievement of charitable purpose.

For hospital boards and executives who have traditionally been focused on health care delivery, the attention to what the IRS calls the “public benefit purpose” of a charitable nonprofit can be a bewildering change in emphasis. How many hospital leaders see themselves as charitable leaders akin to leaders of human service, arts, or social service agencies, which share the designation as charities? –Michael Wyland