Nonprofit hospital systems are defending the pay their executives receive after a report released by North Carolina Treasurer Dale Folwell on Feb. 15 found that the systems paid top executives more than $1.75 billion in the past decade, doubling CEO paychecks in less than five years.
The report is based on research from the North Carolina State Health Plan for Teachers and State Employees, Baltimore-based Johns Hopkins University Bloomberg School of Public Health, and Rice University's Baker Institute for Public Policy in Houston.
Researchers studied executive compensation across North Carolina's nine largest hospital systems, including Charlotte-based Atrium Health, Asheville-based Mission Health, Charlotte-based Novant Health, Chapel Hill-based UNC Health, Greenville-based Vidant Health, Durham-based Duke University Health System, Greensboro-based Cone Health, Raleigh-based WakeMed and Winston-Salem-based Wake Forest Baptist Health, as well as the Midwest system Advocate Aurora Health that merged with Atrium Health.
Mr. Folwell highlighted various findings from the data analysis, which he said showed that "executives enriched themselves while fueling a crisis of healthcare affordability in North Carolina." According to a news release from his office, the findings include that:
- The hospital systems paid executives more than $1.75 billion from 2010 to 2021.
- About 20 percent of that compensation from 2010 to 2021 was captured by a handful of hospital CEOs, who collectively received $308.8 million over 12 years.
- Across North Carolina's largest nonprofit systems, the average CEO compensation was $3.4 million in 2020.
- Out of 175 executives across eight systems, 35 executives took pay reductions in 2020 that were not spurred by departures.
Mr. Folwell noted that researchers could not analyze UNC Health's systemwide data and relied on partial overlapping data from UNC REX Hospital. He also noted that the report does not account for compensation hospital CEOs can draw from outside organizations.
"This is the biggest transfer of wealth in our generation, and it's being financed disproportionately on the backs of sick, low- and fixed-income people," Mr. Folwell said in the release. "These nonprofit hospital executives have lost their mission. They are supposed to make people better, not make themselves richer."
Atrium Health, Cone Health and the North Carolina Healthcare Association — on behalf of health systems named in the report — took issue with the treasurer's report, each sharing statements with Becker's.
Atrium Health said in its statement that it is "important to note that as prescribed by the Internal Revenue Service, our governing board determines the compensation of our executives based upon independent, expert advice and national data on organizations of similar size, scope and complexity.
"More than ever, healthcare administration requires strong, business-savvy leaders who can manage the complexities and challenges the industry is facing — and retaining top talent requires a competitive compensation package. As a nonprofit health system, we don't have the luxury of providing stock options and other typical corporate perks. We're proud of how our executive leadership team, including our CEO, strategically led this entire region through a global pandemic without any layoffs or rural facility closures. We have continued to elevate and expand top quality services and access focused on providing all individuals with the opportunity to live their healthiest lives."
Atrium Health also pointed to the more than $138 million it invested during 2022 into employees, beyond their previous or regular salaries.
"This included base-pay increases, market adjustments and other awards. Over the last two months, we have invested an additional $271 million in base-pay increases and incentives. Additionally, with a commitment to every community we serve, Atrium Health provided $2.46 billion last year in free and uncompensated care and other community benefits."
In its statement, Cone Health noted it "is a large, complex organization with more than 13,000 employees and revenue of more than $2.5 billion. To compete for and retain executive talent, our compensation packages must match those of similar-sized organizations. We compare very favorably with other organizations. Our CEO pay would not make the Triad Business Journal top 25 CEO pay list — despite Cone Health being one of the area's largest employers."
Cone Health also said its executive pay, which is reviewed and set by its board, is determined partially by meeting measurable corporate goals, which are tied to such areas as clinical quality, service to patients, operational performance and workforce engagement.
"To claim that CEO pay was unchanged while pay of doctors, nurses and others who risked their lives to care for others during the pandemic was cut is not the story at Cone Health," the health system added. "All executives shared the pain from director-level cuts of 10 percent to the CEO, who took a 35 percent hit in pay during the worst of the pandemic."
Cone Health also disputed any contention that federal COVID-19 relief funds were used to float CEO pay. The health system said the money helped pay for the opening of a COVID-19 hospital as well as tests, vaccinations and treatments, among other services.
"Cone Health's record of recruiting and retaining healthcare talent leading to nationally leading quality works," the health system said. "We have successfully brought in the high-caliber leadership needed to meet the changing and challenging healthcare needs of consumers in the communities we serve for almost 70 years."
The North Carolina Healthcare Association, in its statement, said the treasurer's report "suggests that North Carolina health system executives' compensation should be called into question and accuses them of not being sincerely committed to their organizations' missions to improve the health of patients and communities. These claims are egregious for a host of reasons, especially since North Carolina has some of the nation’s finest and best-led health systems and hospitals that excel at delivering safe, high-quality healthcare 24/7/365 and are respected and growing destinations for medical education, healthcare professions training and research."
The association also contends that the report fails to provide important context on significant challenges health system and hospital executives face, and that it fails to address how, from a financial perspective, 2022 was even bleaker for hospitals and health systems than the previous two years.
To read the North Carolina Healthcare Association's full statement, click here. To read the full release from the treasurer's office, click here.