Click photo to enlarge
Frank Tiedemann, Former CEO, Children's Hospital and Research Center, Oakland (Staff Archive)

Amid rising medical costs that challenge families and health care organizations, East Bay hospital executives enjoy seven-figure salaries and an array of perks.

Eight hospital leaders in Alameda and Contra Costa counties reaped more than $1 million each in 2009, and many had benefits such as car allowances, gym memberships, financial planning services and housing loans.

Those who spend decades on the job often retire with multimillion-dollar payouts.

Hospital CEO pay is drawing increased scrutiny as critics question whether nonprofit institutions should offer lucrative compensation when numerous patients and hospital employees face cutbacks and many of these institutions contribute only a small amount of their operating budget to charity care for the poor and uninsured.

"It's literally coming out of the hides of patients," said Jamie Court, president of Consumer Watchdog, a statewide advocacy group. "Hospital CEOs that make a million or more a year are just taking away money from patient care, from upgrades to facilities, from seismic safety retrofits."

The hospitals counter that they pay their executives market rates, as determined by consultants' studies. They note the complexity of the health care field and say they seek to retain top leaders who will help maintain the stability and quality that patients expect.

"We need to go out into the marketplace and attract the best possible executives that we can to help us fulfill the needs and mission of the organization," said Andy Pansini, chairman of the directors' compensation committee for the large Sutter Health system.


Advertisement

"In order to do that, we have to make sure that our compensation package is very competitive."

CEO compensation has become a sore point with unions such as the California Nurses Association/National Nurses United. It recently held a one-day strike at Bay Area hospitals as it attempts to negotiate new contracts with the Sutter Health chain and Children's Hospital Oakland.

Sutter hospitals have proposed increasing nurses' out-of-pocket costs for health care, reducing their sick pay and maternity leave, and many other cutbacks, said union spokesman Charles Idelson.

Deborah McKeehan, Chair of the ValleyCare Board of Directors, left, and ValleyCare Health System President and CEO Marcy Feit  (Doug Duran/Staff File)
Deborah McKeehan, Chair of the ValleyCare Board of Directors, left, and ValleyCare Health System President and CEO Marcy Feit (Doug Duran/Staff File)

"Yet they're paying out these very fancy perks and pay packages for their top executives," he said. "Something is seriously amiss."

Bay Area News Group examined executive compensation at all East Bay nonprofit and public hospitals, aided by new federal reporting requirements that shed more light on nonprofit pay.

The lone for-profit hospital, San Ramon Regional Medical Center, was not included because it does not have to disclose compensation information.

The top earner was J. Kendall Anderson, then-president and CEO of the nonprofit John Muir Health system. His compensation totaled $2.9 million in 2009.

In 2008, he received $7.4 million, including a $5.3 million retirement payment for his 35 years of service.

That made him the state's highest-paid nonprofit hospital leader that year among 119 executives surveyed by the trade publication Payers & Providers.

John Muir employed four of the eight executives who made at least $1 million in 2009, documents reveal. The totals include salary, bonuses, health benefits, retirement and other deferred compensation.

Joining Anderson in the seven-figure pay scale were Executive Vice President of Administration Paul Swenson at $1.28 million, Executive Vice President of Operations Kenneth Meehan with $1.26 million, and Chief Administrative Officer Jane Willemsen at $1.01 million.

John Muir leaders note that the health system is a $1.2 billion corporation with hospitals in Walnut Creek and Concord and nearly 6,500 employees.

President and CEO Dr. Bertram Lubin (Dean Coppola/Staff File)
President and CEO Dr. Bertram Lubin (Dean Coppola/Staff File)

"Relative to other like-organizations and scope of responsibilities and all that, I have no doubt in my mind that the compensation here is appropriate and absolutely is not excessive," said Alice Villanueva, senior vice president of human resources.

Other hospital executives who topped $1 million in 2009 included:

  • Warren Kirk, then-CEO of Alta Bates Summit Medical Center, with hospitals in Oakland and Berkeley, at $1.27 million.

  • Frank Tiedemann, then-president and CEO of Children's Hospital Oakland, who left the organization in August 2009. He received $1.36 million, including $488,000 in severance and $290,000 in retirement payments.

    Click on image to enlarge.
    Click on image to enlarge.

  • Marcelina Feit, president and CEO of ValleyCare Health System in Pleasanton, at $1.21 million.

  • Nancy Farber, CEO of Washington Hospital in Fremont, who garnered $1.08 million.

    All of the $1 million-plus recipients were at nonprofit hospitals except Farber, who is one of the Bay Area's highest paid public employees. Washington is a district hospital that receives tax support for capital improvements.

    Although the pay of East Bay hospital executives is on the high side, it is not uncommon, several studies reveal.

    A 2007-08 survey by Payers & Providers found the average nonprofit hospital CEO in California had $732,004 in total compensation.

    The publication noted that the state's CEOs typically make 5 to 12 percent more than their counterparts elsewhere because of a higher cost of living here, especially in the Bay Area and Los Angeles.

    An IRS study found the average CEO compensation at nonprofit hospitals nationwide in 2007 was $490,000.

    The average rose to $780,000 in the nation's 26 largest urban areas and to $1.09 million at nonprofit hospitals with more than $500 million in annual revenue.

    Consumer advocates argue that nonprofit organizations should be held to a different standard than for-profit companies when it comes to executive pay.

    "Taxpayers are subsidizing these multimillion-dollar salaries because these hospitals aren't paying taxes," said Court, with Consumer Watchdog.

    "If you want to work for a for-profit corporation, perhaps then it's more appropriate to be making millions of dollars a year because shareholders are paying. But these executives are really accountable, or should be, to taxpayers."

    ValleyCare CEO Feit maintains that hospital pay should be judged against the millions that many athletes and celebrities such as Paris Hilton earn annually.

    "I make decisions every day to save people's lives," she said. "As a society, where do we want to put our value system?"

    Feit, who has worked at ValleyCare more than 39 years and been its CEO since 1997, said it is important for hospitals to use competitive salaries to maintain stability. It is not uncommon for recruiting firms to lure executives with large sign-on bonuses or big pay increases.

    "Do you want to go to a hospital that recruits a C-level or a D-level CEO?" she said. "Or a hospital system that's had a revolving door?

    "I saw it years ago here at ValleyCare," she said. "We went through a series in a five-year period where we turned the executive suites over three times. We lost a lot of money. We lost doctors. The community was angry at us. The infrastructure was failing."

    U.S. Sen. Charles Grassley, R-Iowa, has questioned the compensation studies that hospital boards use to determine pay. He has argued that the consultants who recommend big salaries are the most in demand, resulting in "a race to the top" as salaries continue to climb.

    Not all East Bay hospitals give their leaders million-dollar compensation packages. District and public hospitals often pay considerably less.

    At Doctors Medical Center in San Pablo, then-president and CEO Joseph Stewart received $395,000 in compensation in 2009.

    Alameda County Medical Center, which includes Highland Hospital in Oakland, paid CEO Wright Lassiter $614,000.

    In addition to salary and bonuses, many of the East Bay's nonprofit hospital executives enjoy an array of perks.

    Farber gets a $45,000 annual car allowance, Lassiter received a $125,000, four-year forgivable housing loan upon his hiring, and Children's Hospital Oakland increased the salaries of its top executives in 2009 to cover gym membership and financial planning services.

    Some longtime executives also earn sizable retirement benefits.

    At ValleyCare, Feit received a $1.1 million retirement payment in 2007-08 when she turned 65, bringing her total compensation for that year to $2.05 million.

    Staff writer Sandy Kleffman researched and wrote this story. Database producer Daniel Willis created the online elements, including a hospital employee compensation database. Contact Kleffman at skleffman@bayareanewsgroup.com or 925-943-8249. Contact Willis at dwillis@bayareanewsgroup.com.

    Shouldering the cost of care
    Sunday and online: Nonprofit hospitals receive millions of dollars in tax breaks, yet public hospitals provide bulk of charity care.
    Today: Debate rises over high executive pay at some nonprofit and public hospitals.