State of Health Care 2019 Rockland/Westchester Journal News
New York’s top hospital executives and doctors received millions in salaries, bonuses and other perks at the same time politically charged fights were raging over reducing health care spending.
As patients shouldered rising medical bills, some hospitals used seven-figure payouts to drive executives to hit profit and performance goals, the USA TODAY Network found.
Bonuses totaling about $80 million went to 366 hospital officials in the Hudson Valley, Finger Lakes, Southern Tier and other communities across the state in 2016 alone, the most recent data show. That is an average bonus of about $218,000.
Much of the money flowed to leaders of New York’s most powerful hospital networks as they consolidated health care wealth, notwithstanding financial hardships facing patients and some smaller community hospitals.
“It’s supposed to be about their health care mission and not supposed to be about the money,” said Doug Sauer, chief executive officer of the New York Council of Nonprofits. “These are charitable organizations. They’re not private business, but there is a point where it begins to look like a for-profit business.”
Yet hospital trade groups described the rising executive payouts as a necessity of American medicine.
“Hospital CEO compensation reflects their myriad operational and fiscal responsibilities, the complexity of running sophisticated medical centers that literally never close and employ thousands, and the national market for their talents,” said Brian Conway, a Greater New York Hospital Association spokesman.
Amid the heated debate, an exclusive USA TODAY Network New York analysis of hospital financial records reveals new details about rising health care costs.
Among the findings are that an arms race among top hospitals to offer Wall Street-style bonuses, severances and retirement perks, for instance, suggests efforts to cut health care spending through consolidation missed some executive suites.
One wave of payouts came in the wake of key Affordable Care Act reforms between 2014 and 2016, a span when hospitals collected billions in revenue as federal subsidies and consolidation incentives boosted bottom lines.
Further, the average pay sweetener in 2016 for top hospital workers increased 21% from two years prior, when it was $177,500. The overall bonus tally was also up about 13% from $71 million in 2014.
Some hospitals noted New York state law effectively bans for-profit hospitals, but its nonprofit ones must still offer comparable pay to attract and retain top workers.
“Without competitive compensation and benefits, hospitals are not able to maintain enough staff to meet community needs,” said Darren Dopp, a spokesman for the Healthcare Association of New York State.
Still, the payouts underscored questionable financial dealings of some New York nonprofit hospitals that reap tax exemptions stateside but also invest in murky offshore accounts catering to corporate giants and criminal elements alike.
Yet hospital spending has historically been overshadowed by political debates over fixing health insurance and drug pricing to stop American medicine from bankrupting the country.
What follows is part of an ongoing USA TODAY Network investigation of thousands of pages of key New York hospitals’ federal tax filings. The probe included 42 of the state’s more than 200 hospitals and health systems.
Health pay inequality
Rising hospital revenues fed spikes in payouts at many New York health systems since the Affordable Care Act, a trend fueled in part by Medicaid expansion and federal tax dollars aiding those on private health plans.
To understand the stakes, consider about 120 hospital executives and doctors each were paid at least $1 million in total in 2016. Of that group, the overall tally was about $223 million, roughly matching the earnings of the next 460 highest-paid hospital employees.
The elite group of 120 workers also got a majority of the bonus money, about $56 million, or an average of $468,000 each.
Unions, patient advocates and nonprofit experts like Sauer have criticized the top-heavy structure of health care finances, citing ongoing battles over sustaining rural hospitals and paying those treating patients.
“When you create huge mammoth health systems, that’s rule number one: The bigger it is, the more bureaucracy it’s going to be, and the people at the top are the ones pulling the riches,” Sauer said. “It seems to become a haves and have-nots situation.”
One of the largest bonus pools flowed to New York-Presbyterian health system leaders who declined to answer questions for this report.
The bonus tally for its flagship Manhattan hospital, which lists top system executives, was about $15 million in 2016, including nearly $1.9 million for President and CEO Dr. Steven Corwin, who has overseen its expansion into Westchester County and New York City suburbs.
Despite the bonuses, one of New York-Presbyterian’s affiliates, Lawrence Hospital in Bronxville, had a roughly $9.8 million operating loss in 2016, records show. The flagship hospital in Manhattan, however, reported a $387 million profit.
Further, revenue for New York’s hospitals overall increased by $14 billion from 2012 to 2016, according to a report by Albany-based conservative think tank Empire Center.
The report noted the share of hospitals running deficits increased, from 38% to 44%, during that span. It linked the conflicting trends to consolidation, as the minority of mostly larger hospitals are gaining patients and revenue, while the majority of smaller ones are in decline.
Health care politics
Hospital spending has recently faced heightened scrutiny as 2020 Democratic presidential candidates push Medicare For All legislation, a federal government takeover of health insurance.
One aspect of Medicare For All, and other similar bills, involves cutting how much hospitals currently get paid. It mostly requires replacing the complicated mix of private health insurance and government programs, like Medicaid and Medicare, that fund hospitals.
But powerful industry groups like the American Hospital Association, or AHA, are fighting against the legislation. They’ve argued the funding cuts, which have yet to be specified, would limit patient access and threaten the survival of some hospitals.
“Our first priority should be fixing what’s broken instead of ripping apart our entire health care system and starting from scratch,” AHA President and CEO Rick Pollack said in February.
Instead, hospital groups have urged lawmakers to reform the Affordable Care Act, which is shrouded in uncertainty amid the Trump administration’s renewed efforts to strike it down.
Meanwhile, the New York Health Act, the state’s government-run health care bill, has failed this year to gain sufficient support in the Democratic-controlled legislature.
State Sen. Gustavo Rivera, D-Bronx, who is backing the legislation, described its potential for reducing hospital costs as a missing element of most prior political debate.
Reacting to the USA TODAY Network hospital pay data, Rivera said it raised questions about hospital administrative costs in New York.
“Even at nonprofit institutions, if they’re not led by the right people and they’re not led with the right mission, they’re a problem,” he said.
Many opponents of the New York Health Act, however, have cited its potential economic repercussions, such as the 156 percent increase in state tax collections the bill would need in 2022, according to an independent study by Rand Corp.
Still, the bill’s progressive tax plan mostly hits households earning above $276,100 and has the potential to reduce health care payments for the majority of New Yorkers, the study added.
Yet Gov. Andrew Cuomo, a Democrat, has dampened prospects of New York becoming the first state government to run its health care, also known as single-payer. He has repeatedly called it a federal government issue and cited concerns about tax increases.
Doctor paid $1.1 million before suspension
Records reveal Lourdes Hospital in Binghamton paid Dr. Stephen Lauterbach $1.1 million, with a bonus accounting for nearly half, before he was suspended for alcohol abuse in November 2016. Before his suspension, Lauterbach was put on probation in 2012 for five years after the state accused him of being a habitual alcohol user, according to state records. The probation required Lauterbach to not use alcohol or drugs.
Lauterbach, a 1994 graduate of SUNY Upstate Medical University, admitted in a signed consent order he violated probation by drinking again. Lauterbach’s history of alcohol abuse includes fines worth thousands of dollars and jail time for having assaulted his ex-wife, records show.
Lautenbach was second on the list of highly compensated Southern Tier hospital administrators and doctors. The highest-paid hospital executive in 2016 was UHS Chief Executive Matthew Salanger, at nearly $1.4 million; about 20 percent of the compensation was listed as bonus. Salanger left his full-time role at the hospital system on Jan. 1, 2018.
The 15 administrators and doctors leading the Southern Tier list are male. Kathryn Connerton, Lourdes Hospital chief executive, was paid $557,000 in 2016 — $75,000 of the total in bonus — and was 16th on the list.
At St. Joseph’s Hospital in Elmira, the top five physicians were paid a cumulative $4.7 million, with $444,000 as bonus payments.
Nearly one-quarter of the $734,000 in compensation to Cayuga Medical Center oncologist Dr. Timothy Bael was listed as bonus.
Big bonuses follow expansion efforts
Many of the top bonuses went to leaders at health systems during historic expansion projects.
That includes Northwell Health’s President and CEO Michael Dowling, at $2.6 million, during its takeover of hospitals in the Hudson Valley and other communities.
Officials at Long Island-based Northwell, formerly called North Shore-LIJ, cited competition as a primary reason for rising pay.
“With a health system of our size, with 23 hospitals, $12 billion in annual revenues and the state’s largest private-sector workforce with more than 68,000 employees, we compete in a national market for administrative leaders and physicians,” said Terry Lynam, Northwell’s spokesman.
Further, Dowling is an outspoken opponent of single-payer plans and detailed his arguments in response to USA TODAY Network questions.
“The only way to provide current services under a single-payer system without raising taxes is to dramatically reduce payments for services or provide fewer services and benefits, which would result in further inequitable rationing of care,” he said.
Yet Northwell officials would not provide details about how their current consolidation plans affect hospital costs. They said mergers fostered savings through economies of scale, such as bulk purchasing for drugs, supplies and services.
Hospital trade groups also didn’t provide detailed responses to questions about executive spending trends amid hospital consolidation.
“Working to control administrative costs has many facets and is an ongoing challenge,” said Dopp, of the Healthcare Association of New York State.
The USA TODAY Network analysis shows that top-tier pay overall at New York hospitals stayed flat between 2014 and 2016, at about $436 million.
At the same time, however, the number of top-tier hospital executives and doctors disclosed as required by federal law dropped to 579 from 627, suggesting fewer workers got paid more through consolidation, as opposed to reducing administrative costs.
The analysis looked at the most recent data available for the entire group of key hospitals statewide, spanning between 2014 and 2016.
Other perks and conflicts
Other top bonuses included Rochester Regional Health’s CEO Eric Bieber, who got $2.4 million in 2016, two years after taking over the newly formed health system that merged Unity Health and Rochester General Health.
Like many other health systems in New York with deferred pay, severance plans and other perks, a former Rochester General executive, CEO Mark Clement, was also among the $1 million-plus total pay group in 2016. The system didn’t respond to questions.
Similarly, Dr. Kenneth Davis, president and CEO of Manhattan-based Mount Sinai Health System, topped the total pay list at nearly $7.3 million, which didn’t include bonus money. However, his payout included a $2.4 million base salary, $3.1 million from a supplemental retirement benefit and other compensation perks.
Several of the biggest individual bonuses went to leaders of Memorial Sloan Kettering Cancer Center, including the highest one, $3.7 million, for President and CEO Dr. Craig Thompson, who led the system’s expansion into Westchester County at the time.
Memorial Sloan Kettering didn’t respond to questions.
Thompson also recently headed Memorial Sloan Kettering’s policy changes to limit conflicts of interest for executives and staff.
They came last year after the resignation of its chief medical officer, Dr. José Baselga, who failed to disclose connections to the medical industry, as first reported by ProPublica and The New York Times.
Many of the hospitals reviewed by USA TODAY Network also disclosed potential conflicts of interest involving family members and business interests of key hospital officers and trustees. But several cited extensive internal checks on conflicts.
In addition to bonuses, the taxpayer-backed health care boom ignited high-stakes construction projects and hiring at many health systems as competition over patients heated up.
Amid mounting uncertainty over the Affordable Care Act’s fate, hospital trade groups have suggested losing recent fiscal gains in health care threaten the U.S. economy.
In New York, for example, private-sector jobs at hospitals and throughout health care exceeded 1.2 million in 2017, spiking more than 18 percent over the past decade.
Experts like Sauer conceded that reforming American medicine, which accounts for about one-fifth of the U.S. economy, is a daunting task.
“It’s not just health care; it’s jobs, it’s economic well-being, and that’s where the growth is: the health care industry. And so how do you pivot from that,” he said. “I don’t know how you make that radical pivot.”
But many lobbyists and lawmakers in Washington, D.C., and Albany are currently debating that very same pivot, which acknowledges the dire need to address financial challenges facing existing programs like Medicare.
That includes Rivera, who is trying to get the New York Health Act through the Senate now that Democrats control all branches of state government.
The bill previously passed the Assembly in prior years, only to stall in the then-GOP-led Senate.
“Ultimately, what we’re saying is we are going to equalize it and asking the question: Should your health care be determined by your wealth, and the answer for me is no,” Rivera said.
Binghamton Press & Sun-Bulletin reporter Jeff Platsky and USA TODAY Network Data Reporter Frank Esposito contributed to this report.
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