Carl Armato, chief executive and president of Novant Health Inc., received a 5.2% increase in salary during fiscal 2018 to $1.5 million, the health system reported Friday.
Armato’s incentive pay increased 4 percent to $1.33 million.
Total compensation for Armato was up 3.9% to $3.55 million. That includes $653,931 in retirement contributions, $40,045 in nontaxable benefits, such as life and health insurance premium expenses, and $24,000 in accounting accruals for deferred compensation.
Not-for-profit health care systems are required to report executive compensation to the Internal Revenue Service in annual filings. Fiscal 2018 represents the latest filing by Novant, which typically files its annual financial report in February.
Armato took over as Novant’s top executive in January 2012 after the retirement of Paul Wiles. His salary has risen 115.1% from $699,113 in 2011, the last fiscal year before his promotion.
Novant is based in Winston-Salem, but with a major Charlotte presence. It operates 15 hospitals, including Forsyth, Clemmons, Kernersville and Thomasville medical centers and Medical Park Hospital in Winston-Salem.
Hospital management pay has become a hot-button issue in recent years, particularly as Forsyth and Wake Forest Baptist medical centers have cut or outsourced hundreds of jobs in response to regulatory changes.
Critics say hospital systems use their nonprofit status for tax advantages and public-relations purposes, while compensation committees have sought to justify corporate-level wages and benefits to top executives.
Some critics of paying not-for-profit executives more than $1 million in annual compensation challenge the notion of the skill level needed to run a health care system.
The Novant Board of Trustees said that executive compensation “must be considered ‘reasonable’ and within an acceptable range compared to similar organizations.”
“Compensation is designed to be competitive and to help recruit and retain leaders. Novant Health establishes executive base salaries in the same way it establishes compensation for all employees, by using market data and comparing to similar jobs.”
The system says “a significant part of executive compensation is based upon the performance of the organization and achieving goals that are challenging, balanced and focused on improving the services we provide to patients and communities. The executive team performs in the top quartile nationally.”
Novant reported Feb. 28 that it had $94 million in excess revenue for fiscal 2018, down from $477.8 million a year ago. Excess revenue over expenses in a not-for-profit organization, such as Novant, equates to profit in a for-profit business.
The biggest difference was a $160.5 million investment loss for fiscal 2018, compared with $307.8 million in investment income in fiscal 2017.
Core operating income was $272.2 million, up 56%. Core operating revenue rose 8.5% to $4.98 billion, while core operating expenses were up 6.8% to $4.39 billion.
Dr. Roy Poses, a clinical associate professor of medicine at Brown University in Providence, R.I., and a former physician at three academic medical centers, writes a blog called “Health Care Renewal” in which he frequently tackles the issue of executive compensation.
“When health care organizations are asked to justify their executives’ compensation, they invoke the same talking points: that these payments are necessary to retain executives; that the executives are brilliant and doing extremely hard jobs; and the compensation is set by the market,” Poses said in May.
“All three points have been debunked, at least when used to justify the compensation of executives in big, for-profit companies.
“Yet rarely are the talking points challenged when used to justify hospital executives’ pay.”