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CEO pay at Charlotte nonprofit hospitals higher than average

Karen Garloch
Karen Garloch writes on Health for The Charlotte Observer. Her column appears each Tuesday.

Total compensation for Mecklenburg County’s two nonprofit hospital chief executives is far above the national average, based on findings from a recent Harvard University study.

Compensation for chief executive officers of U.S. nonprofit hospitals averaged $595,781 a year in 2009, according to the study published by JAMA Internal Medicine. Those paid the most oversee large, urban teaching hospitals and had median compensation of more than $1.6 million.

Carolinas HealthCare System CEO Michael Tarwater, the highest paid hospital executive in the Carolinas, received twice that – $3.2 million in 2009, which increased to $4.76 million in 2012. Today, Carolinas HealthCare has $7.5 billion in annual revenue and operates about 40 hospitals in the Carolinas.

In 2009, Novant Health paid CEO Paul Wiles $2 million, which increased to $2.25 million in 2011. Wiles retired at the end of that year and was replaced by Carl Armato, whose 2012 compensation was $1.6 million, according to its publicly available IRS Form 990 tax return. Novant, based in Winston-Salem, operates 14 hospitals in four states, including four in Mecklenburg. It reported annual revenue of $3.6 billion in 2011.

CEO compensation makes news in North Carolina, where 25 nonprofit hospital executives were paid more than $1 million a year in either 2010 or 2011.

Harvard researchers examined records for 1,877 CEOs responsible for 2,681 hospitals and concluded that the presence of advanced technology played a bigger factor in higher compensation than did quality of care, charity care or initiatives to reduce readmission rates. (The study didn’t identify which hospitals were surveyed.)

Dr. Ashish Jha, one of the authors, told Bloomberg News he was “surprised that quality… seemed to have little influence on CEO compensation. These findings suggest that while doctors are increasingly paid based on their quality scores, the same may not be happening for senior hospital leaders.”

Charlotte hospital officials challenged that conclusion.

Novant spokeswoman Kati Everett said a significant portion of long-term executive compensation is based on “organizational performance in quality and safety, patient satisfaction, transforming to the electronic health record, financial stewardship and providing community benefit.”

Amy Murphy, a spokeswoman for Carolinas HealthCare, said: “The majority of executive incentive compensation is based on quality, employee engagement, customer service and other non-financial metrics.”

She said the hospital board follows IRS standards and reviews data on organizations of similar size, scope and complexity. “Carolinas HealthCare System is one of the nation’s most comprehensive healthcare organizations, public or private. As such, CHS is not comparable to single or small healthcare groups.”

Garloch: 704-358-5078
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