Thomas Dolan, president and CEO of the American College of Healthcare Executives, isn't surprised by this type of scenario.
“I think the biggest change is experienced individuals are retiring and their successors oftentimes aren't earning quite what their predecessors were paid because they don't have tenure and experience that the retiree had,” Dolan says.
But that will be a short-lived trend, Dolan predicts, saying the successors at these organizations will soon see their pay catch up with levels enjoyed by their predecessors. “In five years, the replacement will make as much as the person they've replaced.”
Dolan himself saw a 2.2% drop in his total compensation, earning just under $833,000 in 2010 compared with about $852,000 in the previous year.
Tauzin's base pay of $1.1 million was about half of what he earned in tax year 2009, reflecting the partial year of employment. However, the former Louisiana congressman-turned-lobbyist earned a $1.2 million bonus and $9.2 million in other payments. His compensation also includes $368,430 in consulting fees. Tauzin's increased pay in 2010 came even with PhRMA's revenue dipping more than 40%, to nearly $203.9 million in 2010 from $350.5 million in the previous year. His pay represents 5.7% of PhRMA's revenue, which is lower than the overall survey average percentage of 6.4%.
PhRMA declined to specify the nature of the other payments to Tauzin, as the release of that information could be affected by confidentiality agreements, according to a spokeswoman. When asked about further clarification on payments to Tauzin, PhRMA shared a prepared statement that says the association met all IRS requirements for releasing salary, bonus and incentive compensation, deferred payments, nontaxable benefits, as well as employee retirement payments.
Tauzin serves as senior counsel for the Washington-based Partnership for Quality Home Healthcare. A call to the partnership seeking Tauzin's comment was not returned.
For executives overall, base pay fell in 2010, as the average executive earned $505,162, a 3.3% decrease from last year's analysis, which listed the average salary at $522,295. The 40 associations that offered “other compensation” to the executives, according to the IRS documents, paid out an average of $338,607. Last year's analysis showed 37 associations paid an average of $146,201 in “other compensation,” to their top administrator. That's a 133.7% increase for 2010.
Also, 50 associations represented in this year's survey gave executives deferred payments in 2010 averaging $94,680, a 7.8% increase from 2009. Last year's survey findings showed 46 associations offered deferred payments, averaging $88,082 per executive. Executives from 55 associations in 2010 also received nontaxable benefits with an average payout of $69,605, which is more than double the figure executives received in 2009. That year, 50 associations paid executives an average of $32,806.
The ACHE's Dolan balked at the notion of an overall trend toward declining organizational revenue. His point is bolstered upon closer review of this year's figures that shows a minority of associations in the survey—only 10—brought in less revenue in 2010 compared with the previous year. But two of the survey's revenue giants, the Blues and PhRMA, were among those associations, lowering the average of all associations for the year.
America's Health Insurance Plans saw the steepest revenue decrease in 2010, falling by $89.6 million, or 48.5%. However, the previous year saw AHIP with a 165% increase in its revenue. Meanwhile, the American Medical Association saw its revenue climb $28.1 million, or 13.5%, to $236 million. The AMA ranks second behind the Blues association in total revenue.
Overall, eight of the groups surveyed saw revenue increases of at least 20%. The National Center for Healthcare Leadership saw the biggest gain, with a 60.9% bump to more than $2 million. The American College of Surgeons was another big gainer, increasing revenue 22.8% or $15.1 million, to $81.3 million.
Fourteen organizations did not award executives with bonuses this year, and the average payment for the 44 groups that provided bonus information was $123,382. Last year's list showed 42 offered bonuses, at an average of $217,921. Tauzin's bonus gave him the largest payment on the list. Spencer Johnson, president of the Michigan Health & Hospital Association, trailed Tauzin and earned the second-largest bonus on the list with a $326,446 payment.