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Hospital executive pay cap

Pay cap conflict

Calif. measure raises issue of how much is too much

By Andis Robeznieks
Posted: November 17, 2012 - 12:01 am ET

A local labor dispute at a public hospital in California could accelerate a national debate over how much healthcare executives should be paid.

Though some provisional ballots are still being counted, voters appeared to have approved a measure capping compensation for executives at El Camino Hospital in Mountain View at twice what California pays its governor. Late last week, the question put on the ballot during a labor dispute at the 361-bed, two-campus public institution was passing 51% to 49%, by a 1,752-vote margin.

Agreements between the Silicon Valley hospital and two labor unions—Professional Resources for Nurses and the Service Employees International Union-United Health Workers West—were reached in September, but “Measure M” lived on and was approved without any organized effort to promote it and despite an expensive campaign to kill it. Steve Trossman, spokesman for SEIU-UHW, denied reports that the union had abandoned its creation after the agreements were reached, and said the lack of a campaign was the result of a decision to focus resources on two statewide ballot propositions.

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In contrast, campaign disclosure documents show that, through Oct. 20, the hospital contributed $179,000 to Citizens for Responsible Health Care, a committee formed to fight Measure M. Through Oct. 20, the committee had received $248,500 in total contributions, according to its filings to the state.

Tomi Ryba, El Camino's president and CEO, receives a base salary of $695,000 and, at the board's Nov. 14 meeting, a $137,815 performance bonus was approved. Gov. Jerry Brown will be paid $165,000 after a 5% reduction effective Dec. 3. So, under the terms of Measure M, Ryba's compensation would be cut to $330,000.

The board voted Nov. 14 to legally challenge the measure's directive.

David Reeder, an El Camino board member and business operations manager for the Oracle computer company, said Ryba's compensation is based on a district policy to pay its CEO at the median level for chief executives of not-for-profit hospitals of similar size.

“I know we're doing the right thing,” Reeder said. “But there's a feeling out there that there are haves and have-nots and a strong feeling that we overpay at the top and underpay at the bottom.”

And, according to Reeder, the campaign against Measure M could not persuade people otherwise. “We were not able to overcome the perception that CEOs in this country are paid way too much,” Reeder said.

Hospital spokesman Chris Ernst said $330,000 is the compensation level that would be expected for a rural hospital about one-fifth the size of El Camino. Despite the referendum's results, Reeder said the executive team is all under contract and salaries will not be changed. “The board said we're going to abide by those contracts pending resolution by the court,” he said.

Reeder said legal arguments include that hospital operations—such as hiring and payment of employees—are run by a not-for-profit corporation and not the district itself, so the district technically doesn't have any employees and tax dollars are not used for paying hospital salaries. He also said the ballot initiative process was never intended to be used for hospital district matters.

Before joining El Camino last October, Ryba was president of 398-bed United Hospital in St. Paul, Minn., and senior vice president for its parent, Minneapolis-based Allina Hospital and Clinics. Previously, she was chief operating officer of UCSF Medical Center in San Francisco. El Camino argued in its campaign against the measure that it would limit the talent pool the hospital could choose from when recruiting new leaders.

It's an argument that Trossman, the union spokesman, doesn't buy. “We believe there are qualified people who would work for the lowly salary of $330,000 a year,” he said, adding that Measure M was designed to allow the hospital to “bring in more resources for front line workers.”

Ron Seifert, vice president and executive practice leader with the Philadelphia-based Hay Group, said Ryba's $695,000 salary is what the market calls for. “No one says that's not a lot of money,” he said. “It's easy to be critical—but many of these executives don't determine what they should be paid. There's a market that determines what people should be paid—whether its doctors, surgeons or NBA basketball players.”

Seifert said today's hospital CEOs must understand the economics of healthcare, service industry business fundamentals, strategies for growth and how to relate to employees and the community. “The more you pile into the role, the fewer people there are who can fill that role,” he said. Still, he said, the situation in Mountain View is one that both public hospitals and public officials “need to track carefully.”

Attacks on executive compensation and severance packages are heating up.

Elsewhere in California, the state auditor criticized the Salinas Valley Memorial Healthcare System for granting high-end compensation without transparent compensation policies and for granting a $4.9 million severance and retirement package to former CEO Sam Downing. In Colorado Springs, Colo., the City Council fired the board of the city-owned Memorial Health System after it refused to retract a $1.15 million severance package for its outgoing CEO, Dr. Larry McEvoy.

“This goes beyond the El Camino Hospital District,” Ernst said. “This could really set some precedents moving forward.”

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