Wake Forest Baptist Medical Center provided its top executive, Dr. John McConnell, an 11.9 percent raise in salary during 2011 to $983,777, although his total compensation dropped 18 percent, the center reported Wednesday as part of an annual regulatory filing.
McConnell was paid $2.04 million in total compensation, compared with almost $2.5 million for 2010. Although Wake Forest Baptist operates on fiscal years that end on June 30, the pay for its top executives is required to be listed on a calendar-year basis.
The main difference between the 2010 and 2011 compensation totals for McConnell was $461,575 he received as a one-time payment that replaced the retirement benefits he forfeited upon leaving the University of Texas Southwestern Medical Center in Dallas. McConnell was required to work at Wake Forest Baptist for two years to receive the one-time payment.
"The board of directors would say the payment was a critical part of his hiring," Cheryl Locke, Wake Forest Baptist's chief human resources officer, said in May 2012. "It felt it was important to make Dr. McConnell whole as he transitioned to our organization."
Because Wake Forest Baptist's fiscal year ended June 30, 2012, the latest compensation figures are 10½ months old.
McConnell’s base salary for fiscal 2010-11 was set at $1.02 million, up $20,000 from fiscal 2009-10, the difference reflecting a 2 percent merit increase he received in October 2011.
The executive compensation numbers are becoming public 14 days after McConnell told employees the center has launched a second phase of cost-cutting measures that include requests for voluntary furloughs and shorter workweeks among nonclinical employees, a hiring freeze and the elimination of incentive and bonus pay for the executive management team for the calendar year 2013. The center has not disclosed the amount of executive bonus and incentive pay that has been eliminated.
The first cost-cutting measure -- announced in November -- included eliminating 950 positions, of which 475 were current employees, by June 30.
With about 13,000 full- and part-time employees, the center has Forsyth County's largest workforce.
Novant Health Inc., which operates Forsyth Medical Center, will release its 2012 executive compensation totals before year’s end. Novant reports on a calendar-year basis.
Wake Forest Baptist said in a statement explaining its executive compensation packages that as an academic medical center, it requires management with “a special set of skills and experience to manage relationships with physicians and researchers, the university, its patients and community. … It takes proven talents possessed by a small group of health care executives.”
“Compensating executives, as we do all of our employees, competitively and appropriately, is crucial to the success of Wake Forest Baptist and to Northwest North Carolina.”
The release of Wake Forest Baptist’s executive compensation figures reopens the debate about what is fair and competitive for a not-for-profit health system to offer.
Critics say the systems receive tax advantages and public relations benefits from their not-for-profit status while compensation committees justify corporate-level wages and benefits to top executives.
Supporters of corporate-level compensation levels say nonprofit hospitals need to offer attractive pay to get the best executives in a complex industry.
Although high corporate pay in general has drawn attention, health care compensation is particularly sensitive because of its impact on medical costs and insurance premiums.
Baptist said its executive compensation is based primarily on comparisons with 32 academic medical centers, including Duke University Hospital and UNC Hospitals. Salary and total compensation levels for executives were "below the median" for comparable positions and in the 36th percentile in particular for McConnell, officials said.
Analysts have criticized the method of determining executive compensation – as they do for corporate America -- saying comparing with peers typically leads to higher compensation irrespective of how the health care system or corporation performs financially.
McConnell received $384,203 in bonus and incentives in fiscal 2010-11. The center said the amount reflects the achievement of clinical quality, academic and financial goals set by the board of directors. The bonus was down $115,797 from fiscal 2009-10 primarily because the center reduced the potential percentage of the incentive compensation from 75 percent of his base salary to 53 percent.
McConnell received $38,511 in other reportable compensation, which the center listed: as $8,797 in annual dues for Forsyth Country Club and Rotary Club membership, defined as for business purposes; $16,500 qualified deferred compensation; $3,612 in after-tax life-insurance deduction; and $9,602 in an automobile allowance. The center said it eliminated the dues and automobile allowance benefits beginning in fiscal 2011-12.
He also received $619,002 in contributions to retirement plans, including a supplemental executive retirement plan solely for McConnell’s benefit.
“This is a common benefit for executives at academic medical centers and health systems to encourage retention and provide competitive retirement benefits,” the center said in its statement. “This amount is forfeited if the executive leaves the organization before the vesting period.”
The base salary for a chief executive of a large health care system in the U.S. ranged from $857,000 to $1.2 million, using a range of 2011 net revenue of $1.6 billion to $4.9 billion, according to consulting firm Integrated Healthcare Strategies.
Wake Forest Baptist had net revenue of $1.89 billion for fiscal 2011-12, putting McConnell's salary in the lower end of the range for nonprofit hospital CEOs for 2011.
N.C. Baptist Hospital and Wake Forest University Health Sciences are the two main entities that make up Wake Forest Baptist. Wake Forest Baptist Health is a sub-brand of Wake Forest Baptist Medical Center.
Donny Lambeth, former president of N.C. Baptist Hospital, received $2.47 million in total compensation. Lambeth served as president of Davie County Hospital and Lexington Medical Center before retiring last year. He is now serving as an N.C. House representative.
Lambeth’s $495,595 in base salary represented an 8 percent decrease related to his reduced job responsibilities. His bonus and incentive compensation was down 2 percent to $181,988. The bulk of Lambeth’s compensation was $1.62 million related to a fully vested deferred compensation upon his retirement.
Dr. Thomas Sibert, president of Wake Forest Baptist Health and chief operating officer, received a 14 percent increase in total compensation to $1.13 million, including $631,297 in salary (up 15.7 percent) and $234,540 in bonus and incentive compensation (up 41.3 percent). Sibert took over his role in September 2010.
Edward Chadwick, chief financial officer, received a less than 1 percent increase in total compensation to $979,420. His salary rose 4.6 percent to $527,216, while his bonus and incentive compensation fell 5 percent to $189,929.
Russell Howerton, chief medical officer, was paid $295,714 in salary, $300,786 in bonus and incentive compensation and $657,025 in total compensation. Doug Edgeton, former president of Piedmont Triad Research Park (recently renamed as Wake Forest Innovation Quarter), received $490,485 in salary, $162,367 in bonus and incentive compensation and $710,729 in total compensation.
"Communities who want the best health care system they can get should support paying the compensation levels required to attract top talent," said John Challenger, chief executive of outplacement consultancy Challenger, Gray & Christmas Inc.
Equating health care executive salaries to economic-incentive packages, Challenger said, "Cutting salaries will result in an exodus of top talent to systems that will pay it."
That said, Challenger cautioned that the most pertinent question is "whether executive pay is out of line, period, whether they adhere to shareholders or taxpayers."