Every year, the Boston Globe publishes a story listing the total compensation received by the CEOs of the major Boston hospitals. The story is derived from the Forms 990 that are filed by every non-profit, and the numbers are interesting enough that the story always gets good placement in the newspaper.
CEOs do not set their own salaries. Each hospital has a public board of trustees who determine the compensation for their chief executives and who also hold that CEO accountable for running the organization. The levels of compensation are subject to review by the Internal Revenue Service to ensure that they are within reason for that organization and compared to other organizations, and also to ensure that the board itself, rather than the CEO, has made the compensation decision.
Notwithstanding this level of legal guidance, the issue often arises as to whether hospital CEO salaries are out of line. Americans are often ambivalent about high salaries for corporate executives: They often complain about them, but, at the same, time, everybody hopes that he or she can someday earn them! Putting aside that personal sociological observation, let me ask you the question directly: Do you think I earn too much?
Here are the facts. As noted by the Globe, my total compensation was about $1 million in fiscal 2005. Of this, $650,000 was the base salary. Also, I was eligible for a 30% incentive compensation payment if the hospital achieved specified results for clinical quality, patient satisfaction, and financial performance. I received the full amount that year, $195,000. The rest of the million comprised payments made by BIDMC for life insurance and retirement. (Don't worry, there are no other perks, like cars or country club memberships!)
Now, some background on BIDMC: The hospital is a billion-dollar-a-year enterprise, about $800 million in clinical revenues and $200 million in research programs. Our annual capital budget is roughly in the range of $80 million. Last year, we raised $30 million in philanthropic donations from people in the community. We have facilities that cover about 3 million square feet. We see 50,000 emergency room visitors per year, 40,000 inpatients, and 500,000 outpatients. We have about 8,000 employees and about 800 doctors on staff. We are affiliated with six community health centers (one of which we own); several community hospitals and physician practices; and we own and run two off-site clinics in Chelsea and Lexington and one small community hospital in Needham.
So, if you were on my board, how would you set an appropriate salary? You might look at the competition, and as the Globe notes, the salaries for most of the Boston-area hospital CEOs center around the same level. Would you look at salaries of people in for-profit companies, and, if so, how do you measure comparable size and complexity? Would you look at salaries of other types of non-profits, like universities and museums?
Does it matter that the average tenure of a hospital CEO is under six years? If that is roughly the tenure of a major league baseball player, should CEO salaries be in the same ballpark? Sorry, I couldn't resist!
And, of course, how do you measure performance, so that the salary does not get out of whack with expected results. (By the way, for a broader survey of non-profit salaries, check out this site from Charity Navigator.)
This is serious business that affects both the perception of hospitals in the public eye and also the ability of hospitals to attract the talent they need to run a complicated organization that is vital to the community. What do you think: Do I get paid too much? Here is your chance to send a message to me, my board, or the community at large. I promise, all comments will be included (unless you use bad language!)