Nonprofit hospital CEO gets 16% raise to $3.4 million

[MU82]

http://www.charlotteobserver.com/news/business/article186711158.html

The CEO of Novant Health saw his compensation rise more than 16 percent in 2016. One of Charlotte’s biggest hospital systems, Novant awarded Carl Armato a total of $3.4 million in 2016, including a salary of $1.3 million and bonus and incentive compensation of $1.4 million. The rest included retirement payments, insurance and other benefits.

The 16.6 percent jump in compensation came in a year when Novant posted stronger financial results than the previous year. The Winston-Salem-based system reported $4.3 billion in revenue, up 5.1 percent, according to its annual report. Net income was $412.8 million, up 115.5 percent.

As a private nonprofit, Novant Health publishes executive compensation each year in its Internal Revenue Service Form 990. Novant released its latest 990 this month.

This year marks Armato’s sixth as CEO at Novant, where he was previously chief operating officer. The 2016 report shows Armato and 10 other executives made more than $1 million apiece.

As is the case with other nonprofit hospitals, this place gets major, major tax benefits. In other words, taxpayers like me and you chip in toward these outrageous salaries.

These major nonprofits, by law, have to put profits back into the hospital. They do this in two major ways: 1. By building, building, building; my wife's hospital keeps building new stuff, some of which has been seriously underutilized. 2. By lavishing huge raises on executives.

My wife actually is a nurse at the largest hospital in the Carolinas, the direct competitor to the above hospital. They have several dozen managers making more than $1 million each, and those managers routinely get double-digit percentage raises. The HR director makes more than $1.5 million. The freakin' HR director!

Even though my wife has received the highest employee scores possible in each of her 7 annual reviews, she (like the rest of the RNs) has never received a raise of more than 2.5%; most raises were closer to 1.5%. And her health insurance costs have risen at a rate that has outpaced her salary bumps, so she actually receives less in total compensation today than she did several years ago.

Now, I am not suggesting that Mrs. 82 make anywhere near what any of the managers do. They are responsible for hundreds or even thousands of employees under them, and they have major responsibilities.

But I seriously doubt any of them did their jobs 8x better than she did last year to merit a raise that was 8x higher than she got on a percentage basis. This personifies the disconnect between the rich and the middle class.

[GGGG]

These major nonprofits, by law, have to put profits back into the hospital. They do this in two major ways: 1. By building, building, building; my wife's hospital keeps building new stuff, some of which has been seriously underutilized. 2. By lavishing huge raises on executives.

That's not really accurate.  By law, non-profits don't have owners so there is no one to pay dividends to.  They don't have to build.  They don't have to give compensation.  They can hold everything in cash reserve if they want.

The question I have is, is the salary excessive when compared to the market?  Non-profit compensation is fine if it is consistent with the marketplace. 

[jesmu84]

If he met his contract goals, and then some, then his award is deemed appropriate.

Like sultan said, how does his compensation compare to the marketplace.

Having said that, I'd want to know how his staff feels. Are they competitively compensated? Do they use temp workers? Maintain floors with short staff? Etc.

Lots of ways to meet "bottom line" targets, stress your staff to the max and get your bonus.

In my opinion, and I realize it's not a popular one, bring down exec/etc compensation across the board slightly to increase staff, staff compensation, long term success, patient/customer care, etc.

[warriorchick]

If he met his contract goals, and then some, then his award is deemed appropriate.

Like sultan said, how does his compensation compare to the marketplace.

Having said that, I'd want to know how his staff feels. Are they competitively compensated? Do they use temp workers? Maintain floors with short staff? Etc.

Lots of ways to meet "bottom line" targets, stress your staff to the max and get your bonus.

In my opinion, and I realize it's not a popular one, bring down exec/etc compensation across the board slightly to increase staff, staff compensation, long term success, patient/customer care, etc.

Novant Health has over 26,000 employees.  The CEO could work for free and split his pay among all the other workers, and they would each receive a raise of a whopping $130.


Yes, maybe Novant could hire a handful of additional workers if they found someone who was willing to take the job for say, $2 million.  But if the bottom line of the hospital drops by $5 million because New Guy wasn't as effective a leader, is that really the smart business move?

[StillAWarrior]

I agree with Sultan -- market is key.

Another question that I think is important:  looking at the mission of this particular non-profit, what will they be doing with the approximately $200 million increase in revenues that were achieved last year.  If the CEO is furthering the mission to the tune of an extra $200 million, I'm not going to begrudge him the bonus/increase absent any evidence that it was inappropriate.  Some people are very skilled and do great work and are highly compensated.  If the company is performing well -- as this hospital clearly did last year -- my default position is to not question the salary because I don't have all the other data points that contribute to deciding whether he's overpaid.  A big number, by itself, doesn't bother me.  A big number only bothers me is there is something that suggests to me that it is inappropriate.  Unless someone can show me that it is out of line, $3.4 million for the CEO of a $4.3 billion hospital system doesn't seem out of line to me.  A very quick research of our local systems (2015 numbers):  Cleveland Clinic's CEO made $4.8 million ($6.8 billion revenue) and UHHS' CEO made $2.1 million ($2.6 billion revenue).

[MU82]

Thanks for the different insights provided so far. Appreciate both the clarifications on some facts and the tone of the discussion.

A couple of things ...

I was not begrudging the CEO his compensation per se. I was just saying that taking a 16% raise on an already 7-figure salary while the highly-regarded people who have actual contact with the patients get 2% is, at worst, bad optics. I can't speak for this hospital, but my wife's hospital - the largest health-care chain in the entire Southeast - is woefully understaffed in many departments.

chickadee, I understand what you're saying but I never really care for the argument that reducing the CEO's pay of any company would only give X number of employees X more dollars each. Again, I'm not really asking for that. How about just giving the highly-graded employees the same percentage raise in compensation? Or how about a mega health-care company giving its employees access to health care that isn't outrageously expensive?

I don't really expect to solve any "problems" here. And I know (and respect) that many folks might think there aren't any problems at all here. I just think it's an interesting situation to discuss, and again I am happy we are doing so with a measure of decorum so far.

[PBRme]

Instead of putting cash in reserve they could lower prices or provide more reduced cost or no cost services

[GGGG]

Instead of putting cash in reserve they could lower prices or provide more reduced cost of no cost services

Maybe they are already doing that.

https://www.novanthealth.org/home/patients--visitors/your-healthcare-costs/financial-assistance-for-the-uninsured.aspx

[Jay Bee]

Reasonable pay.

[Tugg Speedman]

I was not begrudging the CEO his compensation per se.

Yes you were ...and how many threads have to start on this subject ... that anyone in healthcare management in any capacity is essentially an overpaid criminal. 

[4everwarriors]

Reasonable pay.

Chump change, ai na?

[MU82]

Yes you were ...and how many threads have to start on this subject ... that anyone in healthcare management in any capacity is essentially an overpaid criminal.

As I said, the discussion had been reasonable and respectful.

Until you showed up.

[forgetful]

Novant Health has over 26,000 employees.  The CEO could work for free and split his pay among all the other workers, and they would each receive a raise of a whopping $130.


Yes, maybe Novant could hire a handful of additional workers if they found someone who was willing to take the job for say, $2 million.  But if the bottom line of the hospital drops by $5 million because New Guy wasn't as effective a leader, is that really the smart business move?

I've always hated this argument.  It assumes he is the only one getting these massive benefits.  The fact is that at most institutions, companies etc., the highest wage earners get raises of 10%+.  That accounts for the vast majority of the raise pool.  The rest of the workers are told they have to get by with a 1-2% raise. 

If you took all those 10%+ raises and divided them amongst the common worker, they would likely easily see 4-5% raises. 

I did the calculation for a few Universities that release their numbers once, and the top 50 wage earners average annual raises of ~12%.  The rest of the employees average 1.9%.  If you froze the raises for the top 50 wage earners at ~1.9% instead, you could have given everyone of the remaining employees around a $3,000 raise.  This isn't isolated to Universities, this is a nationwide, industry wide problem of income increases going to the top 1, or top 0.1% of individuals. 

[#UnleashSean]

Unfortunately your wife is easily replaceable. The CEO, not so much. Have to keep the indispensable people happy. If your wife feels that she is not making enough/losing compensation, other hospitals are hiring. It's 2017, loyalty is crap, shop around for a new employer.

[rocket surgeon]

I've always hated this argument.  It assumes he is the only one getting these massive benefits.  The fact is that at most institutions, companies etc., the highest wage earners get raises of 10%+.  That accounts for the vast majority of the raise pool.  The rest of the workers are told they have to get by with a 1-2% raise. 

If you took all those 10%+ raises and divided them amongst the common worker, they would likely easily see 4-5% raises. 

I did the calculation for a few Universities that release their numbers once, and the top 50 wage earners average annual raises of ~12%.  The rest of the employees average 1.9%.  If you froze the raises for the top 50 wage earners at ~1.9% instead, you could have given everyone of the remaining employees around a $3,000 raise.  This isn't isolated to Universities, this is a nationwide, industry wide problem of income increases going to the top 1, or top 0.1% of individuals.

   i'm sure you as well as many others here, have read animal farm.  man, george orwell was a genius, eyn'er? 

  #ulrowsey-right on!!

  82-the reason you don't like chicks argument is because it's effective and very pertinent.  typically when raises are considered, the company has so much they can allocate.  the person overseeing the others has a lot of responsibility.  therefore, he/she gets more money.  also refer to #rowsey comment .  if they are understaffed, it sure isn't reflected in their numbers.  2.5% raises is about in the middle for large companies.  when one makes money, they have to show expenses to off set it.  eventually the building process will or should show some productivity.  the building should also show a vision looking forward.  being ready for and/or being able to handle more going forward. 

   here's another thought and don't take it the wrong way, but i believe everyone needs to experience what it's like to own/run your own business.  experience the risks, the pressures, the forces to meet requirements, etc etc and then ask yourself-am i being paid enough to do this?  there are always pros and cons.  rarely has a business not had a little class envy.  when i note or feel this is happening?  i can do one of two things-get rid of the squeaky wheel and replace it with a nice new shiny one or grease it.  most of my employees have been with me 10-30 years.  we even retired one who started with my dad right out of high school(over 50 years of employment total)

[MU82]

Unfortunately your wife is easily replaceable. The CEO, not so much. Have to keep the indispensable people happy. If your wife feels that she is not making enough/losing compensation, other hospitals are hiring. It's 2017, loyalty is crap, shop around for a new employer.

Oh, I understand this. I have made this argument for years when discussing the salaries pro athletes get with naive people who think nurses, teachers and firefighters should make more than LeBron and Brady because the nurses, teachers and firefighters are "more valuable to society" than LeBron and Brady.

Nobody is holding a gun to my wife's head. She theoretically could leave for a higher-paying gig - although that would require her to leave NC, as she's in the highest-paying hospital system now. She also could go back to school and get the degree necessary to go into management if she wants more money (and more responsibility). But ...

Is that the message we want to send the nurses who treat our kids? (My wife is a pediatric RN) That they are easily replaceable and not especially important?

And again, I am not in any way saying pay nurses more than CEOs. That's silly. It's like saying pay a cop more than the actor who plays a cop in the movies.

All I was talking about was giving the CEO and other top executives double-digit percentage raises on their already significant salaries while giving the highest-ranked nursing staff - the creme de la creme - 2% raises. To me, it seems wrong. Others can (and have) disagreed.

And yes, I'll admit it's possible I'm biased because my wife is a nurse. But I would say it for many other professions, too. Obviously, the state superintendent of schools is going to make more money than a teacher. But when it is time to dole out the raises, do you really want to give the top dog a 16% raise on his/her $400,000 salary while only giving a 2% raise to the $40K teacher ... and then go out on the political stump claiming to value teachers?

See, I don't think you suggest a nurse or teacher is more "valuable" or less "replaceable" than the executive if you bump up the CEO or superintendent's pay "only" 5% to $3.2 million or $420,000, while also bumping up the nurse or teacher's salary 5% to $42,000.

[Benny B]

82 -- I have two sisters who are RN's, and while I have no idea how much they're being paid, I can say without a doubt that they're both being grossly overcompensated. 

If you want, I'll have one of them pass your wife's resume along.

[Tugg Speedman]

Oh, I understand this. I have made this argument for years when discussing the salaries pro athletes get with naive people who think nurses, teachers and firefighters should make more than LeBron and Brady because the nurses, teachers and firefighters are "more valuable to society" than LeBron and Brady.

Nobody is holding a gun to my wife's head. She theoretically could leave for a higher-paying gig - although that would require her to leave NC, as she's in the highest-paying hospital system now. She also could go back to school and get the degree necessary to go into management if she wants more money (and more responsibility). But ...

Is that the message we want to send the nurses who treat our kids? (My wife is a pediatric RN) That they are easily replaceable and not especially important?

And again, I am not in any way saying pay nurses more than CEOs. That's silly. It's like saying pay a cop more than the actor who plays a cop in the movies.

All I was talking about was giving the CEO and other top executives double-digit percentage raises on their already significant salaries while giving the highest-ranked nursing staff - the creme de la creme - 2% raises. To me, it seems wrong. Others can (and have) disagreed.

And yes, I'll admit it's possible I'm biased because my wife is a nurse. But I would say it for many other professions, too. Obviously, the state superintendent of schools is going to make more money than a teacher. But when it is time to dole out the raises, do you really want to give the top dog a 16% raise on his/her $400,000 salary while only giving a 2% raise to the $40K teacher ... and then go out on the political stump claiming to value teachers?

See, I don't think you suggest a nurse or teacher is more "valuable" or less "replaceable" than the executive if you bump up the CEO or superintendent's pay "only" 5% to $3.2 million or $420,000, while also bumping up the nurse or teacher's salary 5% to $42,000.

In total,  nurses, teachers and firefighters are paid more than the entire NFL becuase they are more valuable to society.  In total, I would guess than all the nurses in our wife’s hospital system are paid more then management.

So, our priorities are correct,  Capitalism works

Lastly, regarding her not wanting o leave NC.  that is a conscious choice she (and you) made to stay and the consequences are lower pay.  She is holding herself back by into wanting to move.  Note this is not specific to your wife, the number 1 reason that hold’s back one’s paycheck is a refusal to move.

[warriorchick]

See, I don't think you suggest a nurse or teacher is more "valuable" or less "replaceable" than the executive if you bump up the CEO or superintendent's pay "only" 5% to $3.2 million or $420,000, while also bumping up the nurse or teacher's salary 5% to $42,000.

If an experienced BSN working full-time is only making $42K, she is well under market.

Nursing grads nowadays are now among the highest paid coming out of school.  It shows you the beauty of the free market.  A couple of generations ago, nurses were horribly paid because it was one of the few  professional career options available to women.  Now women can have any job they want.  A lot of them who would have been nurses in the 50's and 60's are doctors and engineers now.  And guess what happened - there is a nursing shortage!  And how did organizations respond?  They started offering more money.  Now the pay is so good that even men are starting to get into the profession.

How many people can successfully run a major hospital company?  Only a handful.  And the difference between a hospital company run by a great CEO and a mediocre one can mean hundreds of millions of dollars in margin.  Isn't it only fair that the person responsible to get a reasonable sliver of that difference, espcially if the hospital down the street is willing to give it to them?  Through improved quality of care, efficient use of resources, and fundraising efforts,  high-performing CEO saves lives just as much as the nurses and doctors.

[jesmu84]

If an experienced BSN working full-time is only making $42K, she is well under market.

Chick (or any others with information to contribute), I have a question since you seem knowledgable in the area. Where would one go for compensation information? For example, I'm a PA. If I wanted to know what I'm "worth", I'd need to know current market, and more specific regional, compensations for other PAs in my field/experience/etc. However, it's very hard to obtain that info. I can get some information from friends/co-workers/classmates, but that's only a handful. My professional organization provides some salary info, but it isn't significant either. My organization/HR department will not provide other PA information to me. Most online websites appear to be woefully lacking in information. Online message boards/forums, much like in real-life, people are reluctant to divulge information.

So, where do I, or anyone else, go for information to see what they should be worth or to use in a salary negotiation? Suggestions?

It is a frustrating situation and employers appear to hold all the power (information) in these situations.

[Sir Lawrence]

So, where do I, or anyone else, go for information to see what they should be worth or to use in a salary negotiation? Suggestions?

It is a frustrating situation and employers appear to hold all the power (information) in these situations.

Have you looked at this?

https://www.bls.gov/ooh/healthcare/physician-assistants.htm

there is a regional tab as well.

[warriorchick]

Chick (or any others with information to contribute), I have a question since you seem knowledgable in the area. Where would one go for compensation information? For example, I'm a PA. If I wanted to know what I'm "worth", I'd need to know current market, and more specific regional, compensations for other PAs in my field/experience/etc. However, it's very hard to obtain that info. I can get some information from friends/co-workers/classmates, but that's only a handful. My professional organization provides some salary info, but it isn't significant either. My organization/HR department will not provide other PA information to me. Most online websites appear to be woefully lacking in information. Online message boards/forums, much like in real-life, people are reluctant to divulge information.

So, where do I, or anyone else, go for information to see what they should be worth or to use in a salary negotiation? Suggestions?

It is a frustrating situation and employers appear to hold all the power (information) in these situations.

Are there any large recruiting firms that deal with PA's (Robert Half, as an example)? They often publish salary surveys.

Payscale.com has reliable information. That is what my company uses.  Also try salary.com

[GooooMarquette]

The Bureau of Labor Statistics lists the median salary for an RN at almost $70k/year.

https://www.bls.gov/ooh/healthcare/registered-nurses.htm

[MU82]

OK, I've been shouted down by most here, and I accept that. I disagree, but that's cool, too. I appreciate the conversation.

Benny - just curious: Are your "grossly overcompensated" sisters in union environments?

[Benny B]

Benny - just curious: Are your "grossly overcompensated" sisters in union environments?

I honestly didn’t think so, but after giving it some thought, there’s no other logical explanation for them being employed.

Let me put it this way... I’d rather put my life in the hands of a capuchin monkey than one of my sisters.