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Health CEOs In Ventura County Paid More Than Obama

THE VENTURA COUNTY STAR
http://www.vcstar.com/story/news/local/2016/12/09/health-ceos-ventura-county-paid-more-than-obama/94839694/

Gary Wilde gained $1.4 million in salary, bonuses, benefits and deferred compensation while leading the nonprofit Community Memorial Health System in 2015.

Tax records filed in November show the health system paid annually over 12 years into a retirement fund for the 61-year-old CEO. The plan had reached more than $4.2 million by the end of 2015. Wilde says taxes have cut the number by more than half. The system Wilde leads is nearing the end of a $350 million hospital construction project funded by bonds and contributions solicited from the community.

Citing similar compensation packages given to other California hospital system CEOs, Wilde noted that his compensation dipped in 2016. He did not receive a salary raise or the roughly $150,000 in bonuses recorded the previous year.

Still, the numbers reflect pay levels that ignite arguments about how nonprofit health systems operate and the ripples stemming from compensation doled out to top executives.

"I think especially in nonprofits, that money should go directly into patient care or facility improvements or equipment upgrades," said Chris Slane, union field representative for nurses at hospitals in Oxnard and Camarillo. "It should not be going to CEOs."

Wilde's compensation is the largest among nonprofit and government-run hospital or clinic systems in Ventura County. It is not the only surprise.

 

Roberto S. Juarez, co-founder of a Clinicas del Camino Real system of clinics aimed at people without insurance or money for medical care, was paid a base salary of $395,800, according to tax forms filed for the fiscal year ending in June 2015. He's the beneficiary of a retirement plan that has accumulated over years to a tally making up the lion's share of $3.3 million listed on the tax record as other compensation.

Darren Lee, CEO of St. John's hospitals in Oxnard and Camarillo, received a $346,000 base salary along with bonuses and incentives that reached almost $280,000, according to tax documents submitted for the 2014-2015 fiscal year. His total compensation was $757,000. The Dignity Health System that operates St. John's hospitals has faced debt issues and is considering merging with Catholic Health Initiatives.

Simi Valley Hospital and Healthcare Services paid three CEOs in one year. Current leader Jennifer Swenson, hired in July 2015, received $178,000 in total compensation for the balance of the year. Interim CEO Caroline Esparaza, also the system's chief nursing officer, was paid total compensation of $404,995. Kim Milstien, who resigned as CEO in November 2014, received $268,068 in 2015. She said the compensation was her severance.

The digits would be easier to digest if the price of health care were falling, more Californians were insured and people weren't paralyzed by the idea that one trip to the emergency room could bankrupt them, said Carmen Balber, executive director of Consumer Watchdog in Santa Monica. She worries that pay packages that soar above what government-run hospitals offer mean there's less money to pay other hospital employees.

A union-backed initiative that would have prevented nonprofit hospitals from paying CEOs more than $450,000 a year was withdrawn by its backers before the November election. Balber's group didn't take a position on the proposal, but its wants limits.

"We have traditionally supported efforts to increase the amount of charitable care that nonprofits provide and lower executive salaries," she said.

CEOs lead massively complex organizations that employ hundreds, sometimes thousands, of people and can deal with operating expenses of $300 million or more. Hospital boards compete fiercely for the best leaders, pushing compensation levels higher.

"You have to pay what the market is," said Sung Won Sohn, a nationally known economist from CSU Channel Islands and former board member of a large nonprofit hospital system in Minnesota. He said retirement plans can cost a third or more of what a health system pays in total compensation.

"If you're looking at $1 million," he said of pay, benefits and other compensation, "$300,000 ... is not out of line."

 

Catch-up game

Patrick Fry, now-retired CEO of the 21-hospital Sutter Health, gained $6.01 million in total compensation in 2013, according to a statewide database of nonprofit executive compensation provided by the Modern Healthcare news organization and culled from two years of tax forms. Lloyd Dean, leader of the Dignity system that includes hospitals and clinics in Ventura County, received $3.9 million in total compensation and was third on that list.

Wilde received $1.1 million in total compensation in 2013. He ranked 26th on Modern Healthcare's list of 127 current and former health system CEOs.

Tax records for 2015 appear at first glance to rocket Wilde, who leads two hospitals and 14 clinics, toward the top of state rankings. They show Wilde's total compensation at $5.6 million, including $4.3 million listed as "other reportable compensation."

Community Memorial officials say the numbers are skewed because they include $4.2 million from a retirement fund that wasn't paid out in 2015 but accumulated over Wilde's tenure with the health system. The total emerged in the 990 tax form because Wilde turned 60, meaning the plan was vested and became taxable.

"You report it first in the year it vests and you report it again when the executive receives the cash," said Brian Yacker, an Orange County lawyer and accountant who specializes in nonprofits.

 

Wilde's retirement money remains in investment funds controlled by Community Memorial. The vesting means he's poised to walk away with it when he retires or otherwise leaves the hospital. He said the 52 percent tax rate means the amount he would receive if he left today would be closer to $2 million than $4 million.

The supplemental executive retirement plan was built for Community Memorial's executives who also collect money from the employer in the nonprofit sector's version of a 401(k) investment plan.

The system has paid into Wilde's retirement plan at a higher rate than with other executives, an average of more than $300,000 a year. Wilde said that flow was part of his initial negotiations with Community Memorial before he left Santa Barbara Cottage Health, where he was chief operating officer for 22 years. He said he wanted his plan paid at a rate that would make up the retirement funds he lost by leaving Cottage.

"I would not have come otherwise," said Wilde, who lives in Somis and has five children and 14 grandchildren.

Such retirement plans are part of the nonprofit world. Tax records from 2014-2015 show nearly $3.3 million in other compensation for Juarez. In the 1970s, he left a government job to lead a Santa Paula community clinic that grew into a health system aimed at farmworkers and other people in need of health care. Today, Clinicas del Camino Real includes more than a dozen clinics and centers across Ventura County. It employs about 700 people and serves more than 70,000 patients.

System leaders say the vast majority of the $3.3 million represents a before-tax total that grew over several years in what they called "catch-up" efforts to provide retirement funds for long-term senior managers. They said the money used comes from revenue and has no impact on patient care.

The goal is to build Juarez's fund to $4 million before he retires, possibly in the next 18 months. Clinicas board President Chuck Hookstra estimated the amount could provide Juarez as much as $150,000 a year, depending on taxes and interest.

"These weren't things we were able to do early on," he said, characterizing the retirement as a testament to Juarez's efforts. "This is the guy early on who borrowed money on his house so he could make payments to his employees."

Leaders of Clinicas and Community Memorial justify their funding by pointing to pension plans paid out by government agencies.

Pierre Durand, once director of the county-run hospital and clinic system, retired a decade ago after 32 years with the county. Pension records show he's paid $222,500 a year, although changes in the state pension system have reduced payments for new hires.

"This is substantially smaller," said Wilde of his fund, predicting his supplemental executive retirement plan as of 2015 would provide $169,000 a year, possibly less because of taxes, for 12 years.

No more than the president

Nonprofit retirement plans, six-figure bonuses and the 33 CEO total compensation packages that exceeded $1 million in the Modern Healthcare database have brought calls for a line in the sand. Late last year, leaders of Service Employees International Union-United Healthcare Workers West proposed a ballot measure called California's Charitable Hospital Executive Compensation Act.

The measure would have mandated that executives of nonprofit health systems be limited to $450,000 in total annual compensation, including money deferred for retirement. The line equals the annual salary and expense account of the president of the United States.

The proposition was withdrawn by the union after a ruling that the measure violated a no-harm pact struck by the union and the California Hospital Association. If it had made it to the Nov. 8 ballot, Slane, the union field representative, would have voted for it.

"I wouldn't say it's money the nurses don't get," he said of the consequences of lucrative CEO compensation. "I would say it's money that could be put into patient care by providing updated equipment, additional CNAs (certified nursing assistants) to provide for patient care. ... All of that would allow nurses to do what nurses are supposed to be doing instead of doing the jobs of three different people."

Sohn said compensation is determined largely by what hospitals of similar size pay. Nonprofits often try not only to meet the median salary offered by peers but also to exceed it in an effort to make sure the executive doesn't leave.

"Hopefully, you have a CEO that you think highly of, and you want him or her to be happy and well-compensated," he said. "You want to be in the top half of the range."

Of the three nonprofit hospital systems in Ventura County, Community Memorial and St. John's both far surpassed $450,000 in total CEO compensation. Simi Valley Hospital nudged under that bar in 2014 with total CEO compensation of $419,000.

Officials of the only for-profit hospital system in the county, Los Robles Hospital & Medical Center in Thousand Oaks, declined requests for data on CEO Natalie Mussi's compensation.

Of the nonprofits, Wilde's salary was highest. He made $645,000 in 2015 with $153,600 in bonuses, according to tax records. Wilde said it's unfair to compare his pay to Simi Valley Hospital, St. John's or the $303,000 in total compensation paid in 2015 to Barry Fisher, then director of the Ventura County Health Care Agency.

"It's an apple to an orange to a cantaloupe," he said, noting that one hospital is government-run and the two others are part of massive organizations with corporate offices that provide guidance to the local hospitals. Community Memorial is an independent system, meaning the CEO and other executives run everything with guidance from their 23-member board.

Salary decisions are made by the board, driven partly by comparisons with a peer group of hospitals that includes 26 other California systems of similar size and mission, ranging from Antelope Valley Hospital in Lancaster to Kern Medical Center in Bakersfield. In that playing field, the median base salary was $662,000, according to an annual survey study used by Community Memorial. Wilde's salary was below that mark.

System leaders rejected suggestions that executive pay hurts the hospital's performance by taking away resources. They said CEO compensation, while large, remains a tiny fraction of the budget.

"We're a $400 million organization in one of the most complicated industries there is," said Community Memorial Chief Financial Officer David Glyer.

Pay levels also depend on a hospital's finances. Wilde and other senior executives didn't receive a raise or a bonus in 2016, said Jeff Paul, chair of the Community Memorial board.

"It's been a challenging year in health care," he said, referring to industrywide and system-specific financial pressures, including the construction of a new $275 million Community Memorial Hospital projected for completion next year. System administrators said there were concerns early but Community Memorial reached financial benchmarks by year's end.

 

The construction project has triggered a community fundraising drive that has gathered $23 million. Wilde said he sees no conflict between his pay level and the hospital's request for donations. He gave $100,000 to the fund.

The ability to accept tax-deductible donations is one of the biggest advantages of running a nonprofit. Exemptions can mean massive tax savings, too, Yacker said.

"I think it's of incredible importance," he said, reciting the regulations that allow hospitals to pursue nonprofit status. "You don't like it, Congress. Go and change the law."

They said it

"If you're going to have a top hospital, you need to have it managed by someone who's a real expert." — Arthur Rieman, lawyer specializing in nonprofits

"By and large, a lot of nonprofits behave almost identically to for-profits." — Glenn Melnick, USC economist

"This is a free-market system. ... It's not for me or, for that matter, you to decide if the system is right or wrong. That's the system we use." — Sung Won Sohn, CSUCI economist