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778
The highest paid hospital executive in the
Midwest in 2008 was Rand L. ODonnell, who
was paid $5,98 million to run Childrens
Mercy Hospitals and Clinics in Kansas City,
Mo.
The fact that the leader of a childrens
hospital is the No. 1 total compensation
champion should not come as a surprise.
Chief executive ofcers of childrens hospitals
earn a handsome premium over CEOs of
garden variety medical-surgical hospitals,
according to compensation experts
interviewed for a new Payers & Providers
report on non-prot hospital CEO
compensation.
But the amount of the disparity in total
compensation offered to childrens hospital
CEOs versus other CEOS in the Midwest is an
astonishing $1 million.
Those are the results of a study of CEO
compensation in 10 Midwestern states
published this week by Payers & Providers.
The publication compiled a database of
compensation packages of 731 hospital CEOs
in Iowa, Illinois, Indiana, Kansas, Michigan,
Minnesota, Missouri, Nebraska, Ohio, and
Wisconsin, derived from gures submitted on
IRS Form 990 by not-for-prot organizations.
The survey didnt include government-
owned hospitals, state university institutions,
or specialty hospitals. Likewise, for-prot
organizations, such as HCA or Tenet
Healthcare, are not required to le executive
compensation reports to the IRS.
The main factor pushing ODonnells
compensation so high was the payout of a
Supplemental Executive Retirement Plan, or
SERP, that was triggered in 2008, when he
became 57.5 years old. The trustees had put
the SERP in place many years earlier as an
inducement for ODonnell to stay at the
hospital and achieve the aspirational plan that
the board had conceived when it hired him in
1993.
For more details on ODonnells situation,
and the hospital boards explanation of how
the compensation package was intended to
work, please obtain the full report, available at
www.healthexecstore.com.
A close look at executive compensation
across the Midwest reveals that CEOs of
hospitals dedicated to children are paid
substantially more than medical-surgical
hospital CEOs. The 14 childrens hospital
CEOs in our 10-state database earned an
average of $1,417,627 in total compensation
in 2008.
That compares to an average of $480,804
in total compensation for the 732 hospitals
surveyed a difference of almost $1 million a
year.
Eight of the 14 childrens hospital CEOs,
or 57% of them, topped the million dollar
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October 5
September 14-16
Calendar
9 August 2011
August 23-25
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E-Mail
info@payersandproviders.com with
the details of your event, or call
(877) 248-2360, ext. 3. It will be
published in the Calendar section,
space permitting.
www.lakesidecommunityhealthcare.com
Midwest Edition
Childrens Hospitals CEOs Tops in Pay
Compensation Averages Almost $1 Million More
Continued on Next Page
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Payers & Providers Page 2
Top Placement...
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In Brief
Wisconsin Declines
to Apply for Federal
Grants Worth $9 Million
The government of Wisconsin has
declined to pursue $9 million in health
funding grants from the federal
government because of opposition to
federal healthcare policies.
The group ABC for Health, based in
Madison, sought a renewal of a federal
grant of $380,000 over two years to
sign up patients who qualify for the
states BadgerCare Plus Medicaid
program. It said the state refused to
support the grant application, because
it allegedly duplicated other efforts.
The Department of Health Services
must approve grant applications before
they can be led. Gov. Scott Walker, a
Republican, opposes the federal health
reform law, although his administration
has made certain exceptions to its
opposition where funding streams
were concerned.
Deputy Health Services Secretary
Kitty Rhoades said her agency
declined to go after grants that
duplicated existing efforts, were
unneeded, or hadnt been adequately
planned for. The state also doesnt wish
to commit itself to programs that might
require matching grants paid for by
Wisconsin taxpayers.
Another grant for $1.6 million a
year for ve years to expand alcohol
and drug screening by primary care
providers was also not supported.
UnitedHealthcare
Closes Down Evercare
After Allina Backs Out
Evercare, the innovative program to
bring evidence-based medical care to
elderly residents of nursing homes, is
calling it quits in its Minnesota
birthplace.
Continued on Page 3
NEWS
Childrens Hospital CEOs (Continued from Page One)
mark. To put that into perspective against the
complete universe of hospital CEO total
compensation: For the entire database, only
65 leaders, or 8.9% of all CEOs, earned at
least $1 million in 2008 or 2009. Subtract out
the childrens hospital CEOs from the
database, and 7.8% of all non-childrens CEOs
earn that amount. And if we further subtract
out the 14 non-childrens CEOs who lead
systems and are paid more than $1 million,
we get 43 non-childrens, non-system CEOs
hitting the million-dollar threshold, or 5.9%.
Just for fun, we wondered how much the
14 childrens CEOs were paid as a cohort. The
answer is $19,846,773.
The only childrens CEOs to earn below the
database average of $480,804 total
compensation were Stephen Churchill, at
Crittenton Childrens Center in Missouri
($433,176), and Paul Jaudes, M.D., at La
Rabida Childrens Hospital in Chicago
($470,690). Crittenton is a mental health and
behavioral center afliated with the St. Lukes
Health System in Kansas City. La Rabida is for
children with chronic illnesses and
developmental issues. Neither of these
hospitals is a full-service med-surg childrens
hospital like the others on the list, and
probably should not be counted in the same
basket with them.
After ODonnell, at Childrens Mercy in
Kansas City, the second-highest paid was
Patrick Magnon at Childrens Memorial
Hospital in Chicago, at $1,802,955.
The National Association of Childrens
Hospitals and Related Institutions in
Alexandria, Va. does not collect or track CEO
compensation data and is unable to speak to
the issue, said spokesman Gillian Ray. The
organization represents 220 of the 250
childrens hospitals of various types in the U.S.
Ray advised speaking to a compensation
consultant.
Childrens hospitals have always been
considered unique, said one such consultant,
Bob Roeder, of Mercer U.S. in Indianapolis.
They are dealing with a wide array of
challenges not typical of an acute care
hospital that does not specialize. Theyre
almost like a specialty hospital.
Childrens hospitals are not merely centers
for diagnosis and treatment of pediatric
illnesses, but major research centers, he said.
Theyre trying to identify things that can be
done today for younger children, that can
ultimately impact the population in the
future. The current focus on childhood
obesity is an example of a pediatric health
problem that will have enormous
consequences for the public health over the
long term, he said.
The leader of a childrens hospital must
have an unusually wide and deep skillset,
therefore, to manage the entire operation and
its sensitive relations to the community. A
very unique talent is required, Roeder said.
Further, childrens hospitals tend to be
highly visible and popular in their
metropolitan areas. They are almost adopted
by the community, in the sense that a
childrens hospital becomes the focal point of
the status of the city, showing what healthcare
can be. There is a lot of nancial support for it,
that is different from that associated with an
acute care hospital, Roeder added.
Being nominated for a seat on the board of
trustees of a childrens hospital is one of the
great honors that can be bestowed on a
supporter, and usually comes with high
philanthropic expectations.
Along with that comes a deep emotional
linkage of the larger community to the
hospital and its mission. It is heartwarming
and sometimes heartbreaking to be involved
with childrens hospitals, Roeder pointed out.
There is always going to be a different
emotional attachment to any child.
The board of such an institution feels a
stronger-than-average obligation to live up to
the communitys trust, Roeder said. That
translates into a determination to nd the right
leadership, in the sense of being able to
efciently and effectively operate the day-to-
day realities of that unique institution, but also
to build a vision for the community, the U.S.,
and in some cases in the international
community, to demonstrate why that childrens
hospital is different and brings value that no
one else can bring.
Roeder consults to a number of childrens
hospitals across the U.S., including Childrens
Mercy, and has observed that foundations,
endowments, and community leaders have
always been drawn to the mission of childrens
hospitals. It may have something to do with
the campaign by television star Danny Thomas
on behalf of the St. Judes Childrens Hospital.
During the 1960s. TV viewers were
accustomed to hearing appeals from Thomas
and his family to send donations to the
Memphis hospital. Likewise, the March of
Dimes was originally a charity to help
crippled children.
If Im on the board, Roeder said, I want
to make sure I have the right leader in place,
make sure were operationally effective, and
make sure in fact we are considered to be the
leader in the community.
!!!"#$$!%&!'(&)*+!,!'*-./0)*+!'1%2/+3/456!778
Page 3
Payers & Providers
Longer ALOS!*
Advertise Here
(877) 248-2360, ext. 2
*For our ads, not your hospital
NEWS
In Brief
Evercare, developed by United-
Healthcare in 1987, used nurse
practitioners to coordinate care with
doctors and nurses. It kept patients out
of the hospital and kept costs low.
UnitedHealthcare is closing out
the program because its main partner,
Allina Hospitals and Clinics, decided
to take the program in-house. Evercare
ofcials decided it could no longer be
successful independent of the
physicians and patients at Allina.
HealthPartners, Fairview, and Park
Nicollet had already studied the
program and designed their own
initiatives to improve care for long-
term care patients.
A study by the University of
Minnesota in the 1990s found that
hospitalization rates and emergency
room utilization for Evercare patients
in ve states were 50% less frequent
as those of other nursing home
patients.
Health Benefits Costs
for Milwaukee Firms
Increase 8% to 10%
The average cost of employee benets
in the Milwaukee region continued its
climb this year, rising 8% to 10% for
employers and employees
A survey by HCTrends showed that
the trendline is still going steadily
upward, even though increases were
lower than the 11% to 13% of last
year.
For single coverage, the cost of
health benets was around $5,250 to
$5,499. For family coverage it ran to
$14,000 to $14,999. The survey
estimates dont include how much
employees were required to pay in
deductibles and co-pays.
Even so, 16% of the employers
participating in the survey this year
saw jumps of more than 25%. Around
7% of employers responding to the
survey said they spent more than
$25,000 for family coverage.
The survey base was 200
employers with around 140,000
workers.
Voters in Ohio will have the opportunity to
vote the federal healthcare reform law up or
down when they go to the polls on Nov. 8.
Ohio Secretary of State Jon Husted
certied that a petition drive had collected
426,998 valid signatures; 385,245 signatures
were required to qualify for a referendum.
Tea Party activists and constitutional rights
activists had collected more than 546,000
signatures in their campaign to prohibit the
state from participating in the requirement that
all Americans carry health insurance, or pay a
tax penalty.
Ohioans want the freedom to choose the
healthcare options that are best for them and
their families, said Jeff Longstreth, a
spokesman for Ohioans for Healthcare
Freedom. Ohioans want patients and doctors
to make healthcare decisions, not government
regulators.
The law sets up health insurance
exchanges, or internet marketplaces, where
individuals will have the option to choose the
health plan that works for them and their
families, and compare pricing and coverage
options. Some opponents argue that the law
will encourage employers to drop health
insurance policies for their workers.
Brian Rothenberg, leader of
ProgressOhio, said he didnt understand why
supporters of the amendment want to
dismantle a law that offers citizens the chance
to do what those supporters say they want.
Constitutional scholars said the
amendment would not supercede the states
obligation to comply with federal law.
Hospitals will receive a 1.1% increase in
payments for inpatient stays in scal 2012
under a rule announced by the Centers for
Medicare and Medicaid Services last week.
That should amount to an additional $1.13
billion over scal 2011.
The rule came as a surprise, given that in
May the agency released a proposed rule that
would have trimmed Medicare reimbursements
to hospitals by 0.55%, or almost $500 million.
The hospital industry objected to that rule,
arguing that hospitals were already eating $155
billion in reduced payments over the next 10
years ordained through the Affordable Care Act.
In 2011, payments to hospitals declined $142
million.
CMS has developed its update policy in
response to many comments expressing
concerns about our original proposal, said
Jonathan Blum, director for the Center for
Medicare.!We believe that our nal policy
strikes the appropriate balance between
providing a fair update to hospitals and
ensuring careful stewardship of the Medicare
Trust Fund.
The new payment policy applies to 3,400
acute care hospitals. Rich Umbdenstock,
president of the American Hospital
Association, said the update was welcome
news for patients who depend on hospital
care. We are pleased CMS heeded hospitals
recommendations and recognized the
important work that hospitals are doing in
their communities to care for patients.
The update also provides a 2.5% increase
to the nations 420 long term care hospitals.
CMS Boosts Hospital Payment by 1%
Update Reverses Decrease Announced in May
HEALTHCARES BEST ADVERTISING VALUE
]
PAYERS & PROVIDERS reaches 5,000 hospital, health plan and non-
prot executives statewide. There is no better venue for marketing
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CALL (877) 248-2360, ext. 2
Tea Party Puts Reform on Ohio Ballot
Voters Can Decide Fate of Law in Referendum
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Payers & Providers Page 4
One of American politics most disingenuous
conceits is that healthcare must cost what we
currently pay. People think the only way to
make it cost less is to deny care. It has been in
industry executives nancial interests to
perpetuate these myths, but most will
acknowledge privately that the way we value
and pay for medical services lies at the root of
Americas healthcare cost explosion.
When the Resource-Based Relative Value
Scale (RBRVS) became the framework for
Medicare payment nearly 20 years ago, it
equated a medical services value with four
categories of physician work inputs: time,
mental effort and judgment, technical skill and
physical effort, and psychological stress. The
assessment process, handled from the outset by
the American Medical Associations secretive,
specialist-dominated Relative Value Scale
Update Committee (RUC), delineates and
quanties a services inputs in terms of its
Relative Value Units, which, with a monetary
multiplier, dene its worth.
The architects of RBRVS did not anticipate
that special interests would
capture the process and
manipulate it to nancial
advantage. Today, mental
effort and judgment has been
hijacked to favor specialist physicians and
hospitals, primary care has been stied, and the
relative value system has become a study in
caprice and distortion.
The resulting inconsistencies in how we
value services are breathtaking. For an
unexceptional example, compare the
reimbursements for a moderately complex
primary care ofce visit for an established
patient (CPT 99214) with an ophthalmologists
10-15 minute cataract extraction with
implantation of an intra-ocular lens.
A primary care ofce visit can be classied
as a 99214 if it requires 25 minutes of face time
and has two of three components: a detailed
history, a detailed examination, or medical
decision-making of moderate complexity.
Keep in mind that, in primary care, new
signs and symptoms must be weighed against
the whole of medicine. Is a persistent cough a
bronchial infection, tuberculosis, lung cancer,
or something else? The variation across patients
is staggering as well. Primary care doctors
typically see conditions ranging from sprains
and hernias to infectious diseases and vascular
ailments. In 2011, Medicare pays $111.36 for a
99214.
By contrast, specialist physicians in many
disciplines face less patient variation, at least
compared to primary care doctors experience,
but their work may have more wow. Cataract
removal, a 50-year-old procedure that has been
highly rened and automated, immediately
improves sight, a dramatic impact. Many
ophthalmologists operate focused factories,
processing an assembly line of 20 or more
cataract patients. With pre-screened patients and
a controlled clinical environment, the risks are
relatively predictable, the mental demands
limited, and the work repetitive. For cataract
extraction, Medicare currently reimburses the
ophthalmologist $697.12, and requires a $139.24
patient co-payment, for a total of $836.36.
In other words, relying on the RUCs
assessment using RBRVS, Medicare values the
ophthalmologists work 7.5 times more than the
primary care specialists. We might argue that the
mental effort, judgment, and skill required by the
primary care doctor are greater.
But there is a more serious
aw in the approach. RBRVS
bases value on the demands of
physician work, but ignores the
actual benet to the patient or
society. It doesnt consider whether the service
followed evidence-based guidelines (and whether
it was appropriate or even necessary) or whether
the hoped for health outcome was achieved.
We need both primary care specialists and
procedural specialists. We need a payment
approach that is fair, consistent, transparent and
more congruent with modern notions of value.
The aws in our medical services valuation
and payment system create incentives for
unnecessary and unnecessarily complex services
that expose patients to gratuitous risk (and
sometimes, harm), and that articially increase
cost for purchasers. This one mechanism is largely
responsible for taking the healthcare industry and
the larger economy to the edge of an economic
precipice.
OPINION
Its Time for CMS to Retire RBRVS
Distortions in Payment Have Damaged U.S. System
By Brian Klepper and
David Kibbe, M.D.
Briand Klepper is a healthcare consultant and
commentator. David Kibbe, M.D., is an expert
in healthcare informatics.
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Op-ed submissions of up to 600 words are
welcomed. Please e-mail proposals to
dmoore@payersandproviders.com,
!!!"#$$!%&!'(&)*+!,!'*-./0)*+!'1%2/+3/456!778
MARKETPLACE/EMPLOYMENT
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luyors & lrovdors und MCCL prosont koundtubo lntoructvo. lt dobuts Murch 20|| n tho luyors & lrovdors Nutonu odton.
Cur roudors uvuys vunt to knov vhut s on tho mnds ol houthcuro's c-suto oxocutvos. Conloroncos und trudo ovonts olton
ony uov lor crucu momonts to ntoruct vth thoso thought oudors. \th koundtubo lntoructvo, you' cut through tho
promnuros und mmodutoy knov vhut's on thor mnd.
Lvory koundtubo lntoructvo v louturo u C&A sosson conductod by luyors & lrovdors lubshor kon Shnkmun. Hs
docudos ol oxporonco n ournusm und tho houthcuro ndustry v promso concso und rovoung ntorvovs.
1opcs lor upcomng koundtubo lntoructvos ncudo:
!! lntogrutod Systoms vs. lrvuto lructco: 1o vhut dogroo v physcuns not uroudy n urgor modcu groups or ntogrutod
houth systoms romun n prvuto pructco durng ths docudo, und vhy. \hut uro tho udvuntugos, dsudvuntugos und
mpcutons n toduy's onvronmont:
!! Modcud luns und Dovory Systoms: Hov much s thor cout grovng us Modcud onromont s prooctod to sour us
purt ol rolorm: \ Modcud ncrousngy bo usod us u vohco lor sottng houthcuro pocy: 1o vhut dogroo v muor
houth puns und systoms try to ncrouso shuro und concontruton n ths murkot:
!! Accountubo Curo Crgunzutons: Aro thoy ovorhypod: \hut typo ol houth curo systoms shoud bo pursung ACCs, und
vhut systoms shoud bo sttng on tho sdonos lor nov: Hov tod s tho ACC movomont to tho succoss or luuro ol
Modcuro ACC pots: Doos tho dolnton ol ACCs nood moro spoclcty, or s t prolorubo to huvo u bg tont ol
ncuson:
Do you vunt to proposo or purtcputo n u luturo koundtubo lntoructvo: lurtcputon s ontroy onno, vth u commtmont ol
no moro thun ono hour. Cu kon Shnkmun ut 877-248-2360, oxt. |, or o-mu hm ut odtorpuyorsundprovdors.com.
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*New England Journal of Medicine, 2004.
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SEEKING A NEW POSITION?
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