Average total compensation among the top executives at the 52 associations whose tax forms were inspected by the magazine rose to $921,644 from $730,282 the year before. Several of the executives saw large percentage increases in their total compensation packages, though some of those were attributable to accounting changes or comparisons with partial-year salaries.
Industry experts noted that although such not-for-profit associations are viewed by the public as charities because of their tax-exempt status, board members typically base compensation rates on the salaries in comparable industries. In the case of this group of industries, the most commonly cited comparables were hospital C-suites and lobbying industries, both of which are well-compensated areas for executives.
Eleven of the 52 executives for which 2008 data figures were reported on the Modern Healthcare list earned more than $1 million in total compensation, including six who earned more than $2 million, three who earned more than $3 million and one who earned more than $4 million.
The top earner on the list was a new addition to the annual survey: Billy Tauzin, president and CEO of the Pharmaceutical Research and Manufacturers of America, who had just under $4.5 million in total compensation. Tauzin also was among the largest percentage increases in total compensation, 117%, in fiscal 2008. Tauzin has announced plans to step down in June.
For those executives who received deferred compensation in 2008, it constituted an average of 11% of their total compensation and in some cases was far more. The biggest percentage went to Marie Senioris of the National Center for Healthcare Leadership, whose $485,000 compensation was inflated by 41% because of deferred compensation of $200,000 that she'll receive at a later date.
Tauzin, Scott Serota of the Blue Cross and Blue Shield Association, and Richard Umbdenstock of the American Hospital Association all saw their total compensation figures as reported on tax forms increase by one-third or more through deferred compensation set-asides. Umbdenstock earned $2.08 million in total compensation that year, while Serota earned $3.99 million and Tauzin earned $4.48 million.
But using the new tax forms, observers can see that Tauzin received only a 4% base wage increase, and Umbdenstock received a 7% salary increase.
Serota, meanwhile, saw his base pay decline by 46% in 2008 in the same year that his total compensation rose by 53%, thanks to the fact that his base salary of $876,000 was dwarfed by his deferred compensation of $1.3 million. But he also received $1.5 million in performance bonuses and other incentives.
The swiftest gainer on the list was a name much in the news recently: Donald Berwick, president and CEO of the Institute for Healthcare Improvement, who last month officially became President Barack Obama's nominee to head the CMS.
Berwick's total compensation as reported on the IHI's Form 990 grew to $2.36 million in 2008 from $764,000 the year before—a 208% increase year-over-year.
However, the Cambridge, Mass.-based IHI issued a one-page fact sheet along with its tax forms explaining that one-time events led to reporting of total compensation for Berwick that “is significantly larger than the actual compensation related strictly to 2009 activities.”
Berwick had to report as taxable wages his contributions in a 7-year-old retirement plan that vested in 2009 because of accounting rules, even though it was reported on prior Form 990s, IHI Chief Financial Officer Amy Hosford-Swan says. And secondly, since the IRS required all taxable wages recorded in 2009 be disclosed on the tax forms, this amount showed up as income again even though it was reported previously, she says.
“As a result, there was seven years of retirement benefits that was reported in one chunk,” IHI spokesman Jonathan Small says. “This will never happen again. It was a one-time occurrence for him.”
Of the $2.36 million in total compensation for Berwick reported on the most recent tax form, $1.4 million came from this irregular reporting of deferred compensation and retirement benefits. Of the remainder, Berwick received about $474,248 in base compensation, $147,000 in bonuses, $300,262 in the Management Team Flexible Benefit Plan, and $26,241 in other taxable benefits.
That's a 3% decrease in base compensation from the $490,006 Berwick received the year before.