Never before have such outsized compensation packages appeared on Crain's annual list of top-paid hospital executives. They are a reflection of how large hospital systems increasingly are putting in place long-term incentive plans for their executives so that they stick around and have a financial reason to implement strategies that do not have a short-term payoff. Only 14% of big systems nationally had such incentive plans in place in 2006, but by 2013, nearly 40% did, according to the 2013 Hay Group Healthcare Compensation Study, released last November.
"We're seeing an uptick in the use of long-term incentives as healthcare organizations work to align incentive plan opportunities with longer-term desired outcomes," said Ron Seifert, vice president at Hay Group.
Mr. Del Mauro's riches hail from a rather sophisticated pot of gold: a $14 million distribution from a supplemental executive retirement plan; $4.5 million from a split-dollar life insurance policy; $2 million from vested benefits in a long-term incentive plan; and a plain old performance bonus worth $870,000. All figures on the list are from hospitals' 2012 tax forms.
A Barnabas Health spokeswoman said that Mr. Del Mauro had been with the $2.6 billion health system for more than 44 years, including 26 years as CEO.
"When Mr. Del Mauro began his career, Saint Barnabas Medical Center was a stand-alone community hospital," she said, adding that Barnabas is "well positioned both financially and operationally, despite significant industry challenges. His retirement package is a function of over four decades of service ... and reflects his exceptional legacy."
The biggest chunk of Mr. Trunfio's package was $8 million in deferred compensation, plus a base salary and bonus of $1.9 million.
In a statement, Karen Kessler, board chair of Atlantic Health System, said that while Mr. Trunfio's "current agreement does not have these bonus provisions, his compensation is performance-based, aligned with industry standards and intended to assure we retain top executive talent to provide the best quality of care to the communities we serve."
Pay special attention to that phrase "aligned with industry standards" because those standards have been undergoing a change in the past few years. Quality outcomes are increasingly important benchmarks in healthcare. At the same time, there is a shift in demand for hospital beds as more care is delivered in outpatient settings. And more often, insurers and hospitals are striking deals that financially reward providers for better outcomes and patient satisfaction, as well as lower costs.