There are few legal restrictions on paying not-for-profit board members. The IRS recommends any compensation be justifiable from the lens of independent third parties and helpful to an organization's cause. Mark Madden, a senior vice president at executive search firm B.E. Smith, agreed that any organization has to “have the data to back it up.”
Yet the practice has been publicly condemned in some cases. Former Massachusetts Attorney General Martha Coakley distributed a report in 2011 that excoriated not-for-profit organizations that compensated their trustees, taking particular aim at health insurers.
“Nonprofit charitable organizations operate for the exclusive benefit of the public, and the vast majority of directors view voluntary service as a primary means of giving back to the greater community the value of their skills and experience,” Coakley wrote. “Compensating directors is contrary to this spirit and diverts resources otherwise focused on achieving the charitable mission of the organization.”
Nearly all stand-alone hospitals and smaller systems adhere to that mantra, according to the analysis. “Your role on a nonprofit board is to represent the best interests of the community,” said Lahey Health's Jellinek. He wrote an article in the April issue of JAMA that said trustees should push health systems toward risk-based contracting and population health management and away from fee-for-service payments, even though that hurts the system's financial picture in the short term. He also prefers trustees remain unpaid.
Not-for-profit organizations that paid their independent board members the most were health insurers or multistate systems that also provide health insurance. For example, J. Robert Baum made $134,719 in 2013 as board chair of Highmark, the Blue Cross and Blue Shield affiliate and provider system in Pittsburgh. Glen Bergert, a director of Delta Dental of California, earned $134,113. Pay for board members at Scan Health Plan, an insurer based in Long Beach, Calif., ranged from $47,000 to $114,000.
Non-employee board members at Kaiser, headquartered in Oakland, Calif., were among the highest paid in the not-for-profit healthcare sector. Kaiser doled out
$2.5 million to 12 top directors in 2013. Judith Johansen, a lawyer and former president of Marylhurst University, made the most with $231,370.
Dr. Christine Cassel made $189,000 as a Kaiser board member in 2013, but she resigned in 2014 after ProPublica, an investigative journalism not-for-profit, raised concerns about potential conflicts of interest with her role as CEO of the National Quality Forum, which establishes hospital performance standards. Cassel has since left the NQF to join the leadership team at Kaiser's new medical school.