Massachusetts Hospital CEO Compensation Fact Sheet
At a time when healthcare is becoming more and more expensive for consumers and hospitals are
cutting services and laying off staff, some hospital executives in Massachusetts are taking home
excessive compensation packages. In Fiscal Year 2011, more than twenty hospital CEOs made more than
$1 million, while some of their lowest-paid employees made less than $23,000.1
Perversely, these compensation packages do not serve to improve quality of care, a current Journal of
the American Medical Association (JAMA) study points out. Study authors used first-time publicly
available compensation data to show that CEO compensation is not associated with quality of care,
patient outcomes or community benefit.2 Yet, the JAMA study also points to data showing that boards
of directors consider CEOs to be the single most influential individuals in shaping quality performance at
their institutions. It appears that hospital boards are designing handsome CEO compensation packages
that are not achieving what boards assume they are: high quality or good outcomes.
The problem of excessive executive compensation has become so serious that Massachusetts Attorney
General Martha Coakley’s Division of Non-Profit Organizations/Public Charities undertook a review of
CEO pay at some of the Commonwealth’s largest nonprofits. The office examined three years’ worth of
executive compensation data, largely from hospitals and health plans, and discovered that despite the
complex procedures some hospitals employ to determine executive pay, “there is little evidence that
the process restrained CEO compensation or its growth.”3
The Attorney General ‘s Office hopes to address it by requiring hospitals to provide more timely, more
transparent information about what they are paying their executives with the expectation that greater
scrutiny could lead to:
“. . . More moderate rates of increase in CEO compensation, allowing more charitable
resources to be devoted to the organization’s charitable mission. That might also
decrease the disparity between CEO pay and that of the rest of the workforce, a
disparity that has generally increased in the United States in recent years and is a cause
of concern to many.”
While the Attorney General’s program is a good first step in securing more information on executive pay
with recommendations that hospital boards consider non-executive pay, the use of public funds, and the
organization’s charitable mission in designing reasonable compensation packages, it does not set limits
on hospital CEO pay, and it does not tackle the disparities that are growing daily between giant hospital
systems and their underfunded community counterparts.
1
Minimum wage compensation was calculated as follows: $8/hour multiplied by 40 hours = $320 multiplied by 52
weeks & including 38% benefit value = $22,963.20. Minimum wage compensation was used as a stand-in for the
lowest-paid hospital employee, as healthcare facilities are not required to provide this information to the state
2
Karen E. Joynt, MD, MPH et. al., “Compensation of Chief Executive Officers at Nonprofit US Hospitals,”JAMA. Jan.
2014, Vol. 174, No 1
3
Massachusetts Public Charities CEO Compensation Review, Office of the Massachusetts Attorney General.
December, 2013
Thus, sharing the Attorney General’s goal of redressing outsize executive compensation at some
hospitals, and in response to the need for more resources to provide care at others, the Massachusetts
Nurses Association/National Nurse United (MNA/NNU) has proposed The Hospital Profit Transparency
and Fairness Act, which will appear on the ballot in 2014.
The Act would require facilities that compensate their CEOs at a rate more than one hundred times their
lowest-paid or minimum wage employee to pay a civil penalty to the Medicaid Reimbursement
Enhancement Fund, a fund designed to improve Medicaid reimbursement to hospitals most in need of
those funds. According to the Attorney General and a report produced for the MNA by GuideStar, an
organization that tracks financial information on not-for-profit entities, the following executives – many
of them from Partners facilities – approached or exceeded this threshold4:
Organization
Boston Medical Center
Lawrence General Hospital
MGH (Partners HealthCare)
Morton Hospital (Steward)
Newton Wellesley Hospital (Partners HealthCare)
Partners HealthCare System
South Shore Hospital
Steward Health Care
UMass Memorial Healthcare
Name
Elaine S. Ullian (former)
Joseph S. McManus
Peter L. Slavin, MD
Thomas C. Porter (former)
Michael S. Jellinek MD (fmr.)
Gary Gottlieb, MD
Richard Aubut
Ralph de la Torre, MD
John G. O'Brien (former)
Compensation
$2,204,988.00
$2,974,003.00
$2,550,957.00
$3,487,519.00
$2,865,767.00
$2,163,200.00
$3,252,086.00
$2,151,913.00
$2,337,923.00
The chart above tells only part of the story. The Attorney General found that Boston Medical Center
paid former CEO Elaine Ullian and her replacement, Kathleen Walsh, more than $6.7 million between
2009 and 2011. Ralph de la Torre’s most recent salary is unavailable, as for-profit Steward Health Care
does not provide this information to the public. And Partners HealthCare paid CEO Gary Gottlieb and his
predecessor more than $7.4 million over this three-year period, more than any other organization
surveyed.5
It is worth noting that, as in the case of Partners and BMC, many of the top-earning CEOs have left their
positions, and have been replaced by executives earning similar compensation. Yet the only accessible
information available on CEO pay is two years old, as hospitals do not provide the public with current,
comprehensive financial information.6 The Hospital Profit Transparency and Fairness Act would change
that. Hospitals would be required to provide the Center for Health Information and Analysis (CHIA) with
financial information on an annual basis, and CHIA would be required to release that information to the
public within seven days.
Passing the Hospital Profit Transparency and Fairness Act would provide the Commonwealth and its
residents with up-to-date information on the financial condition and priorities of its healthcare facilities,
and establish a mechanism to both address inflated CEO compensation and provide in-need hospitals
with access to improved reimbursements.
4
Using the AG’s three-year review period: Joseph McManus’ pay is from FYE2010. Thomas Porter’s compensation
is from FYE 2009, the year he retired; it does not include the $144k he received it
5
Massachusetts Public Charities CEO Compensation Review, Office of the Massachusetts Attorney General.
December, 2013
6
Executive pay data comes from IRS Form 990s, which is the most easily-accessed source, but has old data