HCA Healthcare's CEO made almost $27 million in his first year at the helm of the country's second largest hospital provider by revenue.
Sam Hazen assumed the Nashville-based company's highest role in January 2019, taking over for R. Milton Johnson, who retired after five years as CEO. Hazen made $26.8 million in total compensation last year, mostly from stock awards, bonuses and increased pension benefits, according to the for-profit hospital chain's 2020 shareholder proxy statement.
Hazen's pay was 478 times that of HCA's median employee salary last year: $56,012, according to the company's proxy. That's up from a ratio of 383 to 1 in 2018.
Across the healthcare industry, the CEO pay ratio was 107 to 1 in 2018, according to a study by Pearl Meyer & Partners.
The union AFL-CIO calculated a 287 to 1 CEO pay ratio across all S&P 500 companies in 2018.
Deborah Lifshey, a managing director with the executive compensation consulting firm Pearl Meyer, said so many variables affect companies' CEO pay ratios that it's not useful to compare them within industries, company by company or even year over year. For one, companies have different ways of calculating their median employee income. And total compensation includes the fair value of equity, which could change once the executive is ready to realize the equity, she said.
"We would never take that number and use it to drive executive compensation decisions because we do not believe it's part of the strategy of a company," Lifshey said. "The strategy of a company is to tie pay to performance. If a company has stellar year, we would expect the CEO to be paid more even if the ratio goes up."
A large component of Hazen's 2019 compensation—$9.6 million—was comprised of increased pension value and deferred compensation earnings. Fluctuations in that category are driven by factors like interest rate changes, mortality rates and the executives' age—things that are beyond the company's control, Lifshey said.
HCA spokesman Harlow Sumerford wrote in an email that Hazen's salary and benefits were actually slightly less than his predecessor, but that the pension fund value fluctuates year-to-year. In 2019, that amount was primarily driven by Hazen's years of service and the interest rate.
Sumerford added that HCA's compensation committee consults with a third-party advisor to determine executive compensation.
"HCA Healthcare's primary objective is to provide high quality healthcare to our patients, and our executive compensation philosophy is centered around creating a strong, positive link between our performance and compensation," he said.
By comparison, Humana's CEO made $16.7 million in total compensation in 2019. Other investor-owned hospital chains and insurers haven't yet released their 2020 proxy statements, which show 2019 compensation. Centene Corp.'s CEO made $26.1 million in total compensation in 2018, positioning him as the highest paid health insurance CEO that year.
Tenet Healthcare, another for-profit hospital chain, paid its CEO just under $15 million in total compensation in 2018. The CEO of another for-profit chain, Community Health Systems, made $7 million in 2018.
HCA is the country's second largest hospital provider by revenue and largest with respect to number of hospitals. The 184-hospital chain drew $51.3 billion in revenue last year, up 10% from 2018. That trails only not-for-profit Kaiser Foundation Health Plan and Hospitals, which drew $84.5 billion in revenue last year, although a large portion of that came from membership dues.
HCA either surpassed or came in at the high end of its 2019 guidance on key metrics like revenues and non-GAAP earnings. The company's stock price grew about 23% over the course of 2019.
Bill Rutherford, HCA's chief financial officer, made $6.3 million in total compensation last year, down slightly from $6.8 million in 2018. HCA's American Group President, Jon Foster, made $7.8 million in total compensation. Johnson, the former CEO, made $4.3 million last year. In his final year as CEO, he took home $21.4 million in total compensation.
HCA faces scrutiny in North Carolina, where the state's attorney general is demanding answers after receiving 30 written complaints from residents alleging problems with billing, access, quality and safety at Mission Health. HCA bought six-hospital Mission, based in Asheville, a little over a year ago.
