Save Money in this Sunday's paper

comments

Senator questions bonuses for hospital CEOs, including Tarwater’s

More Information

  • Kaiser health news article
  • Carolinas HealthCare System statement

    Carolinas HealthCare System provides high quality care to everyone who needs it in our region, including some of the most at-risk members of our communities who would otherwise not be able to afford healthcare. In 2012, our System provided more than $1.25 billion of community benefit, including $284 million in financial assistance and discounts to uninsured patients, and then an additional $589 million in unreimbursed costs of care to Medicare and Medicaid patients.

    The 340B savings are passed along to community clinic patients--we do not raise the prices of these pharmaceuticals, even though these clinics operate at an annual deficit of $9.8M. 340B is a government program intended to help stretch scarce federal resources as far as possible, and 340B is in no way connected to executive compensation.

    Executive compensation is determined after reviewing national data on organizations of similar size, scope and complexity. Fulfillment of our mission depends upon our ability to recruit and retain talent capable of managing one of the nation’s most integrated and comprehensive healthcare systems. The overwhelming majority of executive incentive compensation is based on quality, employee engagement, customer service and other non-financial metrics, and none of the financial metrics are measures of profitability.

    Michael C. Tarwater currently serves as Carolinas HealthCare System’s Chief Executive Officer and began his career with the system, then Charlotte Memorial Hospital, 32 years ago. Over the years, his vision, diversified experience and team building skills have made a huge difference in assembling one of the most capable groups of medical and executive professionals in the country. Operating as a coordinated, integrated system from primary care providers to Level-1 trauma services and the full continuum of care for our patients, Carolinas HealthCare System provided care through more than 10 million patient encounters last year and continues to fulfill its long-standing mission of serving as the safety-net provider in our communities.



U.S. Sen. Chuck Grassley of Iowa, Congress’ leading critic of nonprofit abuses, is raising questions about bonuses for executives of hospitals that benefit from a federal discount prescription drug program.

One of the hospitals in question is Carolinas HealthCare System, whose CEO, Michael Tarwater, was awarded total 2012 compensation of $4.7 million, including bonuses of more than $2 million.

Several hospitals within Carolinas HealthCare qualify for the discount 340B program, a federal plan intended to help the poor and uninsured. It requires drug manufacturers to cut prices to hospitals that treat large numbers of financially needy patients.

Grassley raised questions about the bonuses this week in response to a report by Kaiser Health News that compared CEO compensation at more than 30 U.S. hospital systems. Tarwater’s compensation was fifth highest on the list.

“Hospitals eligible for the 340B program are supposed to have a high indigent patient population,” Grassley wrote in a memo. “If some (of the) hospitals have significant money available for executive bonuses, that raises questions about how they allocate their resources.

“Are they doing everything possible to help uninsured patients receive health care, including affordable prescription drugs?”

Officials with Carolinas HealthCare, a public, nonprofit system that operates about 40 hospitals, said they pass savings on to many uninsured patients, including those who visit its four community clinics, which operate at an annual deficit of $9.8 million and where uninsured patients are charged no more than $10 for any prescription.

CEO compensation is “in no way connected” to the 340B program, the hospital said in a statement. Tarwater’s pay is determined “after reviewing national data on organizations of similar size, scope and complexity. Fulfillment of our mission depends upon our ability to recruit and retain talent capable of managing one of the nation’s most integrated and comprehensive healthcare systems.”

Carolinas HealthCare officials said Tarwater joined the system 32 years ago.

“Over the years, his vision, diversified experience and team building skills have made a huge difference in assembling one of the most capable groups of medical and executive professionals in the country,” the statement said.

Hospital pay rises

After interviewing compensation consultants and reviewing CEO employment contracts and packages, Kaiser Health News reported that hospital boards are paying bosses extra for boosting volume rather than delivering quality. Carolinas HealthCare was the only North Carolina system included in the Kaiser review. At least two other systems larger than the $7 billion CHS paid their leaders less than Tarwater, according to Kaiser.

For example, Partners HealthCare, which includes Brigham and Women’s Hospital and Massachusetts General Hospital in Boston, had operating revenue of $9 billion in 2012 and paid its CEO $3.1 million in compensation, including $138,000 in bonus and incentive pay. The Mayo Clinic in Rochester, Minn., had total revenue of $8.8 billion in 2012 and paid its CEO $2 million in compensation, with no bonus pay.

Tarwater, Carolinas HealthCare CEO for more than 10 years, got a 12 percent increase in compensation in 2012. His salary was $1.1 million, with two bonuses totaling $2.8 million, and other compensation, including retirement and health benefits, of $795,724.

Grassley’s inquiry has been focused on the hospitals’ use of the drug discount program. He requested information last year from Carolinas HealthCare and two other nonprofit hospitals in North Carolina – Duke University Hospital and UNC Hospitals.

His inquiry came in response to an investigation by the Observer and The News & Observer of Raleigh which found that large nonprofit hospitals are dramatically inflating prices on chemotherapy drugs – up to 10 times over cost – at a time when they are cornering more of the market on cancer care.

Grassley concluded that the North Carolina hospitals have made millions from the 340B program. And he said his findings raise questions about whether the program is functioning as intended.

Questions about nonprofits

Hundreds of U.S. hospitals, including more than 40 in North Carolina, obtain discounts on outpatient drugs under the rapidly growing 340B program. Earlier this year, Carolinas HealthCare told Grassley it received $40 million in revenue from the 340B program in 2012. The system said it was able to save about $21 million through its participation in 2011 – up from about $13 million in 2008.

About 42 percent of 340B patients at Carolinas Medical Center – the largest hospital in Carolinas HealthCare – were covered by commercial insurance in 2011, and about 11 percent were uninsured. The rest were covered by Medicare and Medicaid.

Nonprofit hospitals are exempt from property, sales and income taxes. In exchange, federal officials expect them to provide a benefit to their communities, in part by providing care to those who can’t afford it.

In recent years, Grassley has questioned whether hospitals and other nonprofits earn their tax-free status, and he has proposed, unsuccessfully, that Congress establish a minimum of charity care that nonprofit hospitals provide. Carolinas Medical Center spends more than 5 percent of its budget on charity care – a larger percentage than most North Carolina hospitals. In 2012, Carolinas HealthCare provided more than $1.25 billion in “community benefit.” But Carolinas HealthCare also has filed thousands of lawsuits against patients who don’t pay their bills, and the newspapers’ investigation found that some of those patients appeared to qualify for charity care.

Garloch: 704-358-5078
Hide Comments

This affects comments on all stories.

Cancel OK

The Charlotte Observer welcomes your comments on news of the day. The more voices engaged in conversation, the better for us all, but do keep it civil. Please refrain from profanity, obscenity, spam, name-calling or attacking others for their views.

Have a news tip? You can send it to a local news editor; email local@charlotteobserver.com to send us your tip - or - consider joining the Public Insight Network and become a source for The Charlotte Observer.

  Read more



Hide Comments

This affects comments on all stories.

Cancel OK

The Charlotte Observer welcomes your comments on news of the day. The more voices engaged in conversation, the better for us all, but do keep it civil. Please refrain from profanity, obscenity, spam, name-calling or attacking others for their views.

Have a news tip? You can send it to a local news editor; email local@charlotteobserver.com to send us your tip - or - consider joining the Public Insight Network and become a source for The Charlotte Observer.

  Read more


Quick Job Search
Salary Databases
Your 2 Cents
Share your opinion with our Partners
Learn More