NH AG Reviews Hospital CEO Pay

The unveiled a study by a public policy think tank analyzing hospital executive compensation and whether or not hospital trustees were meeting their fiduciary responsibilities to citizens and the charities they serve.

Following the proposed merger of Catholic Medical Center and Dartmouth Hitchcock, Attorney General directed the Charitable Trust Unit of the NH AG’s Office to review compensation levels after seeing some unusual pay increases.

“This review was based on concerns that I had expressed publicly about recent salary increases of the former CEO at CMC,” he said. “We felt that the public could benefit from a more comprehensive and transparent reporting of hospital CEO salaries reported to our office. We also believed that an in-depth study of this complicated area was necessary to assist us in carrying out our statutory and common law duties.”  

Delaney said investigators requested specific information about compensation and then commissioned the to create a report based on the data gathered.

The report found that while hospitals were following specific processes handed down by the IRS, they were not being as thorough or transparent when reporting non-salary benefits and compensation. The report also found that, on average, pay increases for CEOs at New Hampshire’s hospitals received nearly five times the rate of private sector employees, between 2006-2009. Compensation level and pay increases though were not based on any specific criteria, such as quality of care issued to patients, and often were based on what Massachusetts hospitals were paying their CEOs.

“The report concludes that there is no meaningful correlation between CEO wages and the amount of charity care being provided by the hospitals with charitable missions,” Delaney said. “There is no clear link between hospital CEO compensation and the goals of the nonprofit hospital sectors.”

The average total compensation paid to a CEO was about $485,000, while the highest paid CEO, at CMC, made nearly $1.4 million. The report noted that the CMC CEO pay skewed the figures, with the average being 8 percent when CMC’s pay was excluded from the averaging. Delaney said there were “sharp swings” in pay and other compensation tools, like bonuses, which made it difficult to report compensation information.

Delaney stated that the report was “not a witch hunt.” He noted that 23 hospitals analyzed in the report were some of the largest nonprofits and largest employers in the state. At the same time, Delaney said that the hospitals had tax-exempt statuses that didn’t pay property or federal taxes and were required to file reports with the NH DOJ. He added that nonprofits played an important role in the lives of the citizens of the state with them playing “a critical role” in offering services around the state. Delaney said the AG’s Office “embraced its role” as watchdog with the chartable trusts unit to ensure that assets were used for their set purposes. He called the report “a starting point” for the unit to enhance communication with nonprofits about compensation issues such as clear reporting.

Delaney and Anthony Blenkinsop, the director of the Charitable Trust Unit, noted that legislation might be filed to correct some of the reporting issues by charitable hospitals. Delaney said there could also be legislation that would ensure that trustees focused more on the charitable work and award such high levels of compensation increases that was found in the report. Neither would speculate on whether laws would be sponsored or approved by the Legislature limiting CEO compensation or creating respectful ranges of level of pay although Blenkinsop said IRS regulations shift the burden of establishing just compensation “to the regulator,” in this case, the AG’s Office.

Delaney did note that the hospitals in the western part of the state and north country has much lower CEO compensation figures, regardless of the size of the hospital, while those hospitals in the southern part of the state were paid at higher levels.

Blenkinsop said New Hampshire hospitals often relied on Massachusetts and Connecticut data and that skewed the pay rates higher. As those state’s raised CEO pay, the New Hampshire hospitals followed suit. Lastly, Blenkinsop said hospitals did not show that they were meeting the standards required for charitable organizations, especially when comparing costs of care and quality of care to the compensation received by CEOs.

"Moving forward, this office welcomes the discourse," Blenkinsop stated.