More healthcare association execs earn $1 million or more

(This article has been updated with a correction.)

The ranks of healthcare association chief executives who earned $1 million or more grew in 2012, Modern Healthcare's look at the latest publicly available data shows.

Seventeen CEOs earned from $1 million to $5 million, as boards awarded large payouts to retain and reward executives or send them into retirement.

But some prominent leaders saw their pay drop from 2011 to 2012, including Scott Serota of the Blue Cross and Blue Shield Association, Richard Umbdenstock of the American Hospital Association, James Greenwood of the Biotechnology Industry Organization, Karen Ignagni of America's Health Insurance Plans, and Chip Kahn of the Federation of American Hospitals.

Compensation among the highest-paid CEOs on Modern Healthcare's annual list of healthcare association executives soared or sank with the bonuses and incentives tied to lobbying success, membership growth or demand for professional education. Bonuses account for a sizable share of CEOs' total compensation among the highest earners—from 17% to 80%. Modern Healthcare's survey was based on IRS Form 990s, which not-for-profit organizations are required to file.

“You want to incent someone to perform,” said Bob Skelton, the chief administrative officer of the ASAE, a professional association for association executives. “You would want to see that in a well-run organization that there is an incentive to do well.”

Serota, president and CEO of the Blue Cross and Blue Shield Association, topped Modern Healthcare's pay ranking for the second year in a row, earning more than $5.2 million, though his pay dipped 5% from 2011. His bonus dropped by one-fifth to $1.9 million in 2012. The Blue Cross and Blue Shield Association did not respond to an interview request.

Joseph Parker, the now-retired chief executive of the Georgia Hospital Association, ranked No. 2, receiving nearly $4 million in 2012—311% higher than in 2011. Just 7% of that total was base compensation from the Georgia trade group. Third in the total pay ranking was Kenneth Raske, president and CEO of the Greater New York Hospital Association, who took home $3.5 million, 14% more than the year before. No. 4 was John Castellani, CEO of the Pharmaceutical Research and Manufacturers Association, whose total compensation in 2012 rose 30% to $3 million. Rounding out the top five was Umbdenstock, president and CEO of the American Hospital Association, who earned $2.9 million, down 13.5% from the prior year.

Some executives saw bonuses skyrocket while others saw theirs plunge.

The Association of American Medical Colleges awarded Dr. Darrell Kirch a bonus of $143,000 in 2012 after no bonus the prior year. His total compensation soared 30% to $1.2 million, putting him No. 13 on this year's list. PhRMA's Castellani and Stephen Ubl, top executive of the Advanced Medical Technology Association, saw bonuses jump 122% and 138%, respectively. Ubl's overall compensation climbed 37% to $1.9 million to land him at No. 6.

PhRMA and AdvaMed did not comment for this article.

Meanwhile, Ignagni of America's Health Insurance Plans earned no bonus or incentive pay in 2012 after taking home $931,700 the prior year. Her total compensation dropped 27% to $1.3 million, placing her at No. 12 on Modern Healthcare's list. AHIP declined to comment.

For some, retirement payouts significantly inflated compensation, as was the case for outgoing executives of the Georgia Hospital Association and American Academy of Dermatology.

The Georgia Hospital Association's Parker retired on June 30, 2013, after 26 years at the state association. Because of deferred earnings, his pay featured the most striking increase in bonus and retirement payouts on the list, with his “other” compensation listed on the association's Form 990 soaring 316% over 2011. “These earnings, which accumulated over many years, heavily skewed the 2012 Form 990,” said GHA spokesman Kevin Bloye. In addition, Parker earned pay from the association's for-profit and not-for-profit subsidiaries, doubling his association compensation.

The next closest one-year spike in total compensation was the 95% jump awarded to Ronald Henrichs, who retired as chief executive of the American Academy of Dermatology in June 2012. That included multiple years of retirement benefits paid out in 2012, said academy spokeswoman Jennifer Allyn. His total compensation in 2012 was $1.28 million, of which nearly 60% was bonus and awards. He ranked 11th on the list.

Overall, the number of CEOs paid at least $1 million increased to 17 in 2012 from 14 the prior year. The median total compensation among the CEOs on Modern Healthcare's list was $656,943.

Not surprisingly, the size of an association based on revenue is the factor with the most influence on CEO compensation, said Mark Graham, managing director of CEO Update, an association executive publication. The nature of the association's membership also matters. Associations within an industry where top executives are highly paid are more likely to pay their CEOs a lot. Also, trade groups that focus on lobbying are more likely to pay high sums, Graham said. For example, Kahn of the Federation of American Hospitals received $1.75 million in 2012—seventh on the Modern Healthcare list—even though his organization had a relatively modest $11.6 million in revenue.

Compensation increased more rapidly among chief executives earning $1 million or more than among CEOs overall on the Modern Healthcare list. The median increase in total compensation for the $1 million-plus earners was 14%. In contrast, there was no increase in median compensation for the entire list from 2011 to 2012.

A number of state hospital association chief executives ranked high on the list, with five earning $1 million or more in 2012, including Parker, Raske, Carolyn Scanlan of the Hospital and Healthsystem Association of Pennsylvania, the California Hospital Association's C. Duane Dauner and the Tennessee Hospital Association's Craig Becker. A little farther down the list, Herb Kuhn of the Missouri Hospital Association, Douglas Leonard of the Indiana Hospital Association and James Castle of the Ohio Hospital Association earned between $750,000 and $1 million.

Raske of the Greater New York Hospital Association received a 41% bump in bonus pay in 2012, to $1.9 million. Of that bonus, $778,483 was a partial award for a long-term incentive plan.

GNYHA spokesman Brian Conway explained Raske's pay by saying the group is “an extraordinarily unique hospital association, with a for-profit business arm that serves tens of thousands of customers nationwide and is involved in billions of dollars in commerce.” Raske's compensation “reflects both the breadth and scope of GNYHA's activities and his decades of leadership and accomplishments.”

Dauner saw his base pay increase 22% to $931,854 and his incentive pay drop 25% to $413,560. Jennifer Newman, chief financial officer of the California Hospital Association, said that was attributable to a change in reporting.

Among those CEOs whose pay dropped in 2012, FAH's Kahn saw his compensation decline 9% to $1.75 million in 2012. That's in part because a retention incentive boosted his 2011 compensation. His 2012 pay also reflected his annual bonus of $334,248, which is a discretionary award based on the board's view of Kahn's performance, said Jeffrey Micklos, the federation's executive vice president of management and compliance and general counsel.

The AHA's Umbdenstock also saw his total pay drop in 2012. His base pay, however, increased 2% in line with the increase awarded all AHA employees, said John Evans, the AHA's senior vice president and CFO. Umbdenstock's bonus, which is tied to performance, climbed 2% to $92,411. Umbdenstock saw his deferred compensation and payouts listed as “other” on the IRS Form 990 decline 61% and 9%, respectively.

Jim Hinton, president and CEO of Presbyterian Healthcare Services in Albuquerque and the AHA chairman, said the AHA's incentive payouts are tied to performance measurements and targets that go beyond the organization's financial health, including its success in achieving legislative and regulatory goals and the satisfaction of its members with AHA's meetings and education.

Follow Melanie Evans on Twitter: @MHmevans

(This article has been updated with a correction. The article initially stated incorrectly that the Association of American Medical Colleges did not respond to an interview request. The AAMC did agree to provide an interview.)