Forbes: Top U.S. Non Profit Hospitals and CEOs are Racking Up Huge Profits

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Adam Andrzejewski, Contributor
 

The rising cost of healthcare is undermining the American Dream. Families who are working hard to get ahead now pay nearly $20,000 per year in insurance premiums, deductibles, and out-of-pocket costs for healthcare.

 

Our auditors at OpenTheBooks.com looked at America’s healthcare system and found that so-called "non-profit" hospitals and their CEOs are getting richer while the American people are getting healthcare poorer.

 

Our new oversight report Investigating The Top 82 U.S. Non-Profit Hospitals, Quantifying Government Payments and Financial Assets specifically looked at large nonprofits organized as charities under IRS Section 501(c)3 with the mission of delivering affordable healthcare to their communities.

 

We found that these hospitals add billions of dollars annually to their bottom line, lavishly compensate their CEOs, and spend millions of dollars, which are generated by patient fees, lobbying government to defend the status quo.

 

Last year, patients spent 1 out of every 7 U.S. healthcare dollars within these powerful networks. Many are household names like Mayo Clinic* in Rochester, MN; Cleveland Clinic*, in Cleveland, OH; and Partners HealthCare in Massachusetts.

 

Here’s how executive compensation breaks down at the 82 largest non-profit hospitals using the IRS 990 informational returns and auditing the latest year available:

    • 13 organizations paid their top earner between $5 million and $21.6 million;
    • 61 organizations paid their top executive between $1 million and $5 million;
    • Only 8 organizations paid their top earner less than $1 million (which proves it’s possible).

 

This chart shows the income bands of top-paid executives in the 82 large charitable hospitals across America.

 

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Collectively, $297.5 million in cash compensation flowed to the top paid executive at each of the 82 hospitals. We found payouts as high as $10 million, $18 million and even $21.6 million per CEO or other top-paid employee.

 

Based in Phoenix, Arizona, Banner Health* paid out $34 million to just two executives. The president of Banner made $21.6 million and an executive vice-president made $12.4 million.

Consider other non-profit hospitals across America: the top paid "special advisor" and former CEO at Memorial Hermann* in Houston, Texas made $18.6 million. In St. Louis, Missouri, the chief at Ascension Health* made $13.6 million; the CEO at the Kaiser Foundation* in Oakland, California made $10.7 million; and $10.6 million went to the top paid executive of Northwestern Memorial HealthCare in Chicago, Illinois.

 

When summing the last four years of pay (2013-2017), each of these highly compensated executives - who made more than $10 million in 2017 alone -  earned an extraordinary amount of compensation: Ascension CEO ($59.1 million); Kaiser CEO ($29.8 million); Banner CEO ($29.6 million); Advocate Health CEO, based in Downers Grove, Illinois ($27.8 million); Memorial Hermann Special Advisor/CEO ($27.3 million); and Northwestern Memorial COO ($15.3 million).

 

We reached out for comment, context, and feedback to each hospital and responses (noted by an asterisk) are posted at the base of this article. The cash compensation for each top-paid executive  is summarized in the chart below.

 

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Even after paying lavish salaries, these non-profit hospitals had enough left over to add nearly $40 billion to their bottom-line.

 

We found that the assets, investments and bank accounts at these charitable hospitals increased by $38.9 billion last year – from $164.1 billion to $203.2 billion. That’s 23.6 percent growth, year-over-year, in net assets. Even deducting for the $5.2 billion in charitable gifts received from donors, these hospitals still registered an extraordinary 20.5 percent return on investment (ROI).

 

In 1970, healthcare amounted to seven percent of gross domestic product (GDP). Today, estimates suggest the soaring cost of healthcare will consume 20 percent of our GDP. That spending trajectory is unsustainable.

 

So, what are the charitable hospitals doing with their cash-on-hand? They are not reducing prices for patients.

 

Last year, these 82 hospitals spent $26.4 million on lobbying to defend the status quo. Because government money and charitable donations can’t be spent directly on lobbying, these hospitals used the payments from patients to lobby government to preserve their market position.

 

It’s time to embrace the transparency revolution and open the books on the real prices paid by patients for healthcare services. Let the open-government movement revolutionize the industry. Patients have a right to ask whether doctors are working for them or for the lavishly compensated hospital CEO.

 

Perhaps these hospitals don’t want you to see how much things cost, because they don’t want you to know how much they are making.

 

Our report suggests patients are caught in a monopoly. What they need is a market that features transparency, competition and choice – all of which will drive down costs and restore the doctor-patient relationship.

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Note: listed below are responses to our request for comment from all charitable hospitals mentioned in this article. For further information, read our comprehensive oversight report.

Ascension provided a piece from their board chairman regarding executive compensation policy, posted here.

 

Banner Health: "The President and CEO of Banner Health leads one of the largest health systems in the country with more than 52,000 employees across six states. Operations include 28 hospitals, plus an employed medical group, an academic medical division, an insurance division, health centers and clinics, urgent care centers, outpatient Surgery Centers, Physical Therapy centers, imaging centers, retail pharmacies, home health services and more. The compensation for the President and CEO of Banner Health is established annually by the Compensation Committee of the Banner Health Board of Directors, which is comprised of independent outside directors. The Committee works with an independent compensation consulting firm that assesses the proposed compensation each year against several benchmarks, including compensation paid by a peer group of comparable nonprofit health care systems."

 

"Cleveland Clinic was founded as a nonprofit group practice with a mission to care for the sick and improve patient care through research and education. Any and all extra funds from operations are invested back into the health system to fund new research and education initiatives and to continue our long-standing charitable efforts. In 2017, our Community Benefit contribution totaled $906.5 million."

 

"Kaiser Foundation Hospitals’ and Health Plans’ objective is to provide reasonable and competitive compensation to all employees including senior management, relative to healthcare organizations of similar size and complexity. Our senior leaders are responsible for operating both a health plan and hospital and care delivery system, and as a result their roles and responsibilities are unique, larger in scope and impact, and different than those of nonprofit hospital executives."

 

"Mayo Clinic is a dedicated and mission driven nonprofit that confers strong community benefit through providing hundreds of millions of dollars in charity and other uncompensated patient care. Any excess revenue supports cutting-edge programs in research and education that benefit patients everywhere."

 

Memorial Hermann: "As CEO, Dan (Woltermandan) received a supplemental executive retirement package, which provided for an annual contribution for each year of service. When he retired at the age of 60 in 2016, he was fully vested in the benefit and elected to receive a one-time lump sum payment in lieu of an annuity... Dan’s retirement in 2016 culminated a 17-year tenure at Memorial Hermann in which the organization experienced exceptional fiscal and organizational success, including national recognition for providing safe, high-quality patient care, as well as unprecedented growth and expansion in Greater Houston. Dan’s employment contract, which aligned with overall healthcare industry standards, recognized his contributions to the organization and the community as a whole."

 

We will update this piece with further responses, if any.

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