Medical millionaires The compensation packages of hospital heads are drawing attention

Jessica Perry//March 5, 2014

Medical millionaires The compensation packages of hospital heads are drawing attention

Jessica Perry//March 5, 2014

In a time when every dollar spent in the health care industry is being carefully scrutinized, the level of compensation for a leader and a recently retired leader of two of New Jersey’s largest not-for-profit health care systems is raising eyebrows.

Ronald J. Del Mauro received $21.6 million in compensation in 2012, the year he retired as chief executive of Barnabas Health, the state’s largest hospital system.

Joseph Trunfio, the current chief executive of the $1.6 billion Atlantic Health System, was paid $10.69 million in 2012.

An NJBIZ investigation of the executive pay of the biggest hospital systems in the state found the heads of these systems typically earned base salaries between $1 million and $3 million annually.

Clearly, however, there is an opportunity to make much more.

In the cases of Del Mauro and Trunfio, officials at both hospital systems said the large payouts were connected to deferred compensation.

According to Barnabas, Del Mauro’s payout included $13.9 million in accrued retirement benefits, most of which was reported in previous years, while the rest is a combination of base pay, bonus and incentive compensation.

In Trunfio’s case, more than $8 million of his pay was deferred compensation that was reported previously, including more than $4 million that had accrued over 15 years and a retention bonus of $3.7 million that had accrued over three years.

Karen Kessler, the chair of Atlantic’s board of trustees, released a statement about Trunfio’s compensation.

“While his current agreement does not have these bonus provisions, his compensation is performance-based, aligned with industry standards and intended to assure we retain top executive talent to provide the best quality of care to the communities we serve,” she said.

Trunfio’s base salary and bonus of $1.9 million is in line with the industry norm.

Tom Fuller, the managing director of the executive search firm Epsen Fuller Group in Mendham, said it’s not excessive for the CEO of a hospital system with more than $1.5 billion in revenue to earn $1.5 million or more.

Fuller, who said he has conducted searches for the top hospital positions, said the job is as tough if not tougher than running many Fortune 1,000 companies, where the CEO has the chance to earn far more from stock options.

“While you have a lot of bright people running around the hospital who can do brain surgery, running that hospital is a whole different ball of wax,” Fuller said.

Fuller said the CEO needs deep financial and operational acumen; they have to be able to talk to doctors and deal with the community and oversee “a tremendous level of risk” because the lives of the hospital’s patients are in their hands every day.

Ken Berger, the chief executive of Glen Rock-based Charity Navigator — a group which rates the financial health, accountability and transparency of charities with an eye to helping donors make informed giving decisions — isn’t so sure.

In Berger’s view, these $1 million-plus hospital salaries are excessive.

He said when lawmakers created tax-exempt nonprofits, “I don’t think they had anything like millionaires in mind, to say the least.”

Berger said not-for-profit hospital salaries have been rising for years, resulting in “a kind of log rolling where everyone is becoming a millionaire.”

The compensation totals used in this story came from the form 990 annual reports that not-for-profits must file with the Internal Revenue Service. They are from 2012, the latest year such information is available.

Among other notable 2012 paychecks for New Jersey hospital system CEOs:

Barry Ostrowsky (who succeeded Del Mauro as CEO of the $2.6 billion Barnabas) made $2.838 million.

Robert C. Garrett (of the $1.72 billion Hackensack University Health Network) was paid $2.72 million.

John Lloyd (of the $1.6 billion Meridian Health System) earned $2.26 million.

Richard Miller (of the $1.14 billion Virtua Health) made $1.99 million.

David Tilton (of the $726.9 million AtlantiCare) was paid $1.67 million.

Stephen K. Jones (of the $1.1 billion Robert Wood Johnson Health System) earned $1.56 million.

William A. McDonald (of the $694 million St. Joseph’s Health System in Paterson) was paid $1.45 million.

Chester B. Kaletkowski (of the $411 million Inspira Medical Centers in Vineland) made $1.08 million.

John T. Sheridan Jr. (of the $913 million Cooper Health System) received $963,433.

Such salary figures are not limited to the heads of giant health care systems. NJBIZ found the leaders of other well-known hospitals around the state earned similar salaries in 2012.

Audrey Meyers, the CEO of The Valley Hospital in Ridgewood, earned $2.18 million.

Michael Maron, the CEO of Holy Name Medical Center in Teaneck, was paid $1.83 million.

Barry S. Rabner, the CEO of Princeton Healthcare System, received $1.35 million.

John T. Gribbin, the CEO of CentraState Medical Center in Freehold, earned $1.2 million.

Gary S. Horan, the CEO of Trinitas Regional Medical Center in Elizabeth, was paid $1.19 million

Douglas Duchak, the former CEO of Englewood Hospital and Medical Center, made $999,023.

The compensation comes at a time when the Affordable Care Act has the health care industry searching for ways to cut the ever-expanding cost of care.

Industry insiders will point to this idea as a reason for such salaries, saying these leaders are driving the search for such savings — and doing it at a time when some hospitals in the state are on the verge of bankruptcy and in danger of closing.

For those reasons and more, Barnabas officials feel Del Mauro’s compensation is appropriate.

“The contribution over 44 years of Ronald J. Del Mauro was extraordinary,” they said in a statement. “The organization today — as the largest healthcare system in New Jersey — is well positioned both financially and operationally despite significant industry challenges. His retirement package is a function of over four decades of service and reflects his exceptional legacy.”

The salaries of the hospital heads are not unusual for CEOs in New Jersey. In fact, they are far below what others are earning.

The NJBIZ list of the highest-paid CEOs of public companies lists 25 making more than $7 million annually — and 45 making more than $3 million.

The difference, Berger said, is that these salaries were earned at public for-profit companies.

“I have no problem with people becoming millionaires if they’re not working for a tax-subsidized nonprofit,” he said.