Executive Pay and the High Cost of Healthcare

Two recent articles examined hospital executive pay. One was “Bitter Pill: Why Medical Bills Are Killing Us” from Time magazine (1). We reviewed this article in our “March 2013 Critical Care Journal Club” (2). The other is a more recent article from Kaiser Health News (3). The later is particularly intriguing since it discusses healthcare executive compensation. We thought it might be of interest to examine executive compensation from selected nonprofit hospital tax returns from Arizona, New Mexico and Arizona. (Table 1). [Editor's note: It may be necessary to enlarge the view on your browswer to adquately visualize the tables.]

Table 1. Financial information from Southwest hospitals latest year tax return as listed by GuideStar (4).

*Includes Scottsdale Healthcare Corporation

These Southwest hospitals appear to be doing quite well. Overall they had combined incomes of $19,831,088,546, assets of $ 10,228,640,923 and profits of $1,145,888,944. None lost money. Although the data from organizations such as Dignity, Banner, Scottsdale Healthcare, Exempla, and Presbyterian Healthcare include several hospitals, they are doing well, especially for “nonprofit” hospitals.

The CEOs were also doing well (Table 2).

Table 2. CEO and executive compensation from Southwest hospitals latest year tax return as listed by GuideStar (4).

*Includes employees listed on Form 990.

**Includes Scottsdale Healthcare Corporation

The CEOs were paid an average of $1,718,484 and the average executive made $591,618. Not bad for being paid by a “nonprofit” organization. The CEO pay is nearly 8 times and the executive pay is nearly 3 times the slightly over $200,000 average Southwest pulmonary and critical care physician received in 2011 (5).

The Kaiser Healthcare News article went on to point out that boards at nonprofit hospitals are often paying hospital administrators much more for boosting volume than delivering healthcare value (3). Hospital administrators agreed but were quick to point out that compensation is increasingly being determined by healthcare performance incentives. However, James Guthrie, a hospital compensation consultant for Integrated Healthcare Strategies stated about administrative compensation, "What you're seeing is incentive plans that look pretty similar to what they looked like five years ago or ten years ago…they're changing, but they're changing fairly slowly."

Two of the local executives mentioned in the Kaiser Healthcare News article were Lloyd Dean and Peter Fine, heads of Dignity Health and Banner Health respectively. Incentive goals for Dean included unspecified "annual and long-term financial performance” (4). Dean's bonus for 2011 was $2.1 million. Fine speaks of "an unwavering commitment to improve clinical quality and efficiency" but Fine's long-term incentive goals included profits and revenue growth (4).

"Boards of trustees in health care are oriented around top-line, revenue goals," said Dr. Donald Berwick, who was CEO of the Institute of Healthcare Improvement (IHI) and later the Administrator for the Centers for Medicare and Medicaid Services (CMS) (Figure 1).

Figure 1. Dr. Donald Berwick

"They celebrate the CEO when the hospital is full instead of rewarding business models that improve patients' care." Such deals undermine measures in the 2010 health law that aim to cut unnecessary treatment and control costs, say economists and policy authorities (3).

An explosion of medical regulatory groups have arisen to improve quality, including Berwick’s IHI. These regulatory groups have often produced guidelines embraced by hospital administrators as improving healthcare. However, the administrators are often self-servingly paid bonuses for guideline compliance. Because nearly all the regulatory organizations are “nonprofit” like the hospitals, surely they would have more modest profits (Table 3).

Table 3. Financial information of healthcare regulatory organizations from latest year tax return as listed by GuideStar (4).

We are happy to report that the regulatory organizations had much more humble finances compared to the Southwest hospitals. Overall the four we examined totaled incomes of $589,724,293, assets of $563,032,211 and profits of $30,489,739. Only the American Board of Internal Medicine lost money with a loss of $-1,733,146 on income of nearly $50 million. For comparison, we added the Phoenix Pulmonary and Critical Care Research and Education Foundation to Table 3. It is the financial source behind the Southwest Journal of Pulmonary and Critical Care.

Executive pay was also more modest than Southwest hospital administrators (Table 4).

Table 4. CEO and executive compensation from healthcare regulatory organizations latest year tax return as listed by GuideStar (4).

*Includes employees listed on Form 990.

The CEOs were paid an average of $885,938 and the average executive made $382,009. Although much lower than the average $1,718,484 and the $591,618 paid to Southwest hospital CEO and executives, these salaries are still not bad for a “nonprofit” organization.

The only regulatory organization to lose money was the American Board of Internal Medicine. Either an increase or revenue or a decrease in expenses will eventually be necessary. The major source of income for the American Board is test revenue and increasing the fee for certification or the frequency and/or fees for maintenance of certification may be necessary. Alternatively, they could pay their CEO less than $786,751, eliminate the CEO’s spousal travel benefits, or lower the compensation for general internists such as Eric Holmboe from $417,945 to be more in line with the $161,000 average income of general internists in the mid-Atlantic region (4,5).

Donald Berwick has a good point and is correct. Hospital administrators need to be rewarded more for improving healthcare and less for keeping the hospital full and profits high. However, in 2009 while CEO at IHI Berwick was compensated $920,952 (4). This is almost 7 times the compensation of the average pediatrician in New England (5). Included were $88,200 in bonuses. It is unclear from the tax return what justified these bonuses (4).

Executive pay for both hospital and regulatory administrators is too high and contributes to the high cost of healthcare. We find no evidence that either type of administrator contributes much to improved patient-centered outcomes. Quality care continues to rely on an adequate number of good doctors, nurses and other healthcare providers. If anyone should be paid bonuses for healthcare, it is those providing care, not administrators.

Present bonus systems for healthcare administrators are perverse. As noted above these include bonuses for keeping the hospital full and profits high, neither consistent with what should be the goals of a nonprofit organization. Furthermore, increasing pay for supervising an increased number of administrative personnel will only add to the increasing costs. If administrators must be paid a bonus let them be paid for performance directly under their control. This could include ensuring that adequate numbers of good doctors and nurses are caring for the patients and improving administrative efficiency. These should result in better care but lower numbers of administrators consuming fewer healthcare dollars.

Last Friday, June 14, the Medicare Payment Advisory Commission, or MedPAC released their recommendations to Congress (8). These include recommendations that may be relative to hospital administrative pay. One is for “site-neutral payment”. Currently Medicare pays hospitals more than private physician offices for many services. MedPAC recommended that Congress “move immediately to cut payments to hospitals for many services that can be provided at much lower cost in doctors’ offices.” The commission said that “current payment disparities had created incentives for hospitals to buy physician practices, driving up costs...” This will increase the hospital’s bottom line, and therefore, the administrators’ bonuses. We agree with MedPAC’s recommendation.

MedPAC also told Congress that “the financial penalties that Medicare imposes on hospitals with high rates of patient readmissions are too harsh for hospitals serving the poor and should be changed.” Based on this and data that higher mortality is associated with lower readmission rates, we agree (9). Rewarding hospitals for potentially harmful patient practices that increase the hospital’s bottom line are not appropriate. Financial incentives for reducing readmissions should only be part of a more global assessment of patient outcomes including mortality, length of stay and morbidity. Regulatory administrators need to become more focused on patients and less on an endless array of surrogate markers that have little to do with quality of care.

Richard A. Robbins, M.D.*

Clement U. Singarajah, M.D.*

References

1. Brill S. Bitter Pill: Why Medical Bills Are Killing Us. Time. February 20, 2013. PDF available at: http://livingwithmcl.com/BitterPill.pdf (accessed 6/17/13).
2. Stander P. March 2013 critical care journal club. Southwest J Pulm Crit Care. 2013;6(4):168-9. Available at: http://www.swjpcc.com/critical-care-journal-club/2013/4/2/march-2013-critical-care-journal-club.html (accessed 6-17-13).
3. Hancock J. Hospital CEO Bonuses Reward Volume And Growth. Kaiser Health News. June 16, 2013. Available at: http://www.kaiserhealthnews.org/Stories/2013/June/06/hospital-ceo-compensation-mainbar.aspx (accessed 6-17-13).
4. http://www.guidestar.org/ (accessed 6-17-13).
5. http://www.medscape.com/sites/public/physician-comp/2012 (accessed 6-17-13).
6. Robbins RA, Thomas AR, Raschke RA. Guidelines, recommendations and improvement in healthcare. Southwest J Pulm Crit Care 2011;2:34-37. Available at: http://www.swjpcc.com/editorial/2011/2/25/guidelines-recommendations-and-improvement-in-healthcare.html
7. Robbins RA. Why is it so difficult to get rid of bad guidelines? Southwest J Pulm Crit Care 2011;3:141-3. Available at: http://www.swjpcc.com/editorial/2011/11/1/why-is-it-so-difficult-to-get-rid-of-bad-guidelines.html
8. http://www.medpac.gov/documents/Jun13_EntireReport.pdf (accessed 6-17-13).
9. Robbins RA, Gerkin RD. Comparisons between Medicare mortality, morbidity, readmission and complications. Southwest J Pulm Crit Care. 2013;6(6):278-86. Available at: http://www.swjpcc.com/general-medicine/2013/6/13/comparisons-between-medicare-mortality-readmission-and-compl.html

*The opinions expressed are those of the authors and not necessarily the Southwest Journal of Pulmonary and Critical Care or the Arizona, New Mexico or Colorado Thoracic Societies.

Reference as: Robbins RA, Singarajah CU. Executive pay and the high cost of healthcare. Southwest J Pulm Crit Care. 2013;6(6):299-304. doi: http://dx.doi.org/10.13175/swjpcc080-13 PDF

Choosing Wisely-Where Is the Choice?

A little over a year ago an editorial was posted in the Southwest Journal about the Choosing Wisely campaign from the American Board of Internal Medicine and Consumer Reports (1). You may remember that Choosing Wisely announced a list of procedures or treatments that patients should question (2). In the editorial we wondered why pulmonary organizations such as the American Thoracic Society (ATS) and the American College of Chest Physicians authored none of the recommendations and offered 10 suggestions. We also openly questioned if the recommendations were intended to improve patient care or reduce costs, and thus improve the profits of third party carriers.

We can now report that recommendations were announced at the recent ATS meeting in Philadelphia. Seven recommendations were made for critical care and seven for pulmonary disease. Five from the critical care list and five from the pulmonary list will eventually be chosen for inclusion in Choosing Wisely. The recommendations are listed below:

Critical Care

1. Thou shalt not order diagnostic tests at regular intervals (e.g., daily) but instead order tests based on needs.
2. Thou shalt not use parenteral nutrition in the first 7 days of an ICU admission in patients adequately nourished.
3. Thou shalt not transfuse red blood cells in hemodynamically stable patients with a hemoglobin > 7 gm/dL.
4. Thou shalt not sedate mechanically ventilated patients without an indication.
5. Thou shalt not continue life support for at patients at high risk for death.
6. Thou shalt not initiate or continue antimicrobials without an indication.
7. Thou shalt not place or maintain an arterial or central venous catheter without an indication.

Pulmonary

1. Thou shall not perform thoracic CT scans for follow up of pulmonary nodules more frequently than the guidelines (Fleishner Society) suggest.
2. Thou shalt not discontinue oxygen from recently discharged patient prescribed oxygen without checking for hypoxemia.
3. Thou shalt not routinely administer intravenous corticosteroids for exacerbations of asthma or chronic obstructive pulmonary disease when the patient is able to take oral steroids.
4. Thou shalt not do thoracic CT scan screening for patients at low risk for lung cancer.
5. Thou shalt not do chest x-rays on asymptomatic patients routinely.
6. Thou shalt not offer vasoactive agents for groups 2 (left heart disease) and 3 (hypoxia) pulmonary artery hypertension (PAH).
7. Thou shalt not perform thoracic CT angiography for pulmonary embolism on patients with low probability and a negative d-dimer.

In the question and answer session after the recommendations were presented, a member of the audience noted that most of the recommendations were negative, directing physicians what not to do. We confess that we added the “Thou shalt not …” to emphasize this point but cannot overlook the fact that these recommendations look suspiciously like commandments. The negativity implicit in the ATS recommendations is consistent with the recommendations by other subspecialties listed on the Choosing Wisely website (2).  While the recommendations are reputedly about reducing the use of unnecessary or potentially dangerous testing, both worthy goals, the tone suggests there will be consequences for failure to comply.

What we find offensive is the Choosing Wisely and ultimately the ABIM foundation assertion that this is an initiative “focused on encouraging physicians, patients and other health care stakeholders to think and talk about medical tests and procedures that may be unnecessary” (2). Where is the encouragement and where is the choice in a series of DO NOT commandments?  It seems an even-handed approach of an objective statement would be much more appropriate and yet carry the same information, e.g. Chest CT scans are rarely required for screening patients at low risk for lung cancer rather than “Do not do thoracic CT scan screening for patients at low risk for lung cancer”.  It seems that rather than encouraging conversation the Choosing Wisely statement puts doctor and patient in an adversarial relationship especially if the doctor feels something is needed which is expressly stated with a “Do not”.

Rather than a laundry list of no-no’s a guiding principle might be better. The American College of Physicians (ACP) has offered, “The physician should always act in the best interests of the patient” (3). Despite objections to the profession of the author of the ACP statement, a lawyer, the overall sentiment is a good one (4). It removes the adversarial relationship the Choosing Wisely campaign encourages and places physicians where they belong-on the side of the patient.

In our view the present Choosing Wisely campaign has fundamental flaws-not because it is medically wrong but because it attempts to replace choice and good judgment with a rigid set of rules that undoubtedly will have many exceptions. Based on what we have seen so far, we suspect that Choosing Wisely is much more about saving money than improving patient care. We also predict it will be used by the unknowing or unscrupulous to further interfere with the doctor-patient relationship.  When the recommendations of an authoritarian body take the form of commandments and preempt clinical decision making, then it seems the wise choice of a wary clinician is to tacitly comply - in other words there is no choice.

Richard A. Robbins, M.D.*

Allen R. Thomas, M.D.*

References

1. Robbins RA, Thomas AR. Will fewer tests improve healthcare or profits? Southwest J Pulm Crit Care 2012;4:111-3.
2. http://www.choosingwisely.org/ (accessed 6/3/13).
3. Snyder L.  American College of Physicians Ethics Manual.  Sixth Edition.  Ann Intern Med. 2012:156;1:suppl 73-101.
4. Raschke RA. February 2012 critical care journal club. Southwest J Pulm Crit Care 2012;4:51-2.

*The opinions expressed in this editorial are the opinions of the authors and not necessarily the opinions of the Southwest Journal of Pulmonary and Critical Care or the Arizona, New Mexico or Colorado Thoracic Societies.

Reference as: Robbins RA, Thomas AR. Choosing wisely-where is the choice? Southwest J Pulm Crit Care. 2013;6(6):272-4. PDF

Will Fewer Tests Improve Healthcare or Profits?

Earlier this month, the American Board of Internal Medicine (ABIM) Foundation, in partnership with Consumer Reports, announced an educational initiative called Choosing Wisely (1). Nine medical organizations were asked to name five things physicians and patients should question. The initiative lists specific, evidence-based recommendations physicians and patients should discuss to make wise decisions on their individual situation. The list of tests and procedures Choosing Wisely advises against include common procedures and treatments such as EKGs done routinely during a physical examination, routine MRI’s for back pain, antibiotics for mild sinusitis, and routine EKG and chest X-rays preoperatively. Some experts estimate that up to one-third of the $2 trillion of annual health care costs in the United States each year is spent on unnecessary hospitalizations and tests, unproven treatments, ineffective new drugs and medical devices, and futile care at the end of life (2). We at the Southwest Journal of Pulmonary and Critical Care (SWJPCC) applaud the use of evidence-based medicine in determining testing and treatment. Any information that can inform medical decision making is welcome.

With most of the Choosing Wisely recommendations there is solid evidence that the procedures do not improve patient outcomes (1). Nevertheless several previous efforts to limit testing have failed and even provoked backlashes. For example, in November 2009, new mammography guidelines issued by the U.S. Preventive Services Task Force advised women to be screened less frequently for breast cancer, stoking fear among patients about increasing government control over personal health care decisions and the rationing of treatment (2). An area of further concern is that the Choosing Wisely recommendations will be used not just to make informed decisions, but by payers to limit decisions that a patient and physician can make. This is especially true since the motivation for these recommendations may not be to improve care but to decrease expenses and increase profits by insurers and other payers.

Several of the quality improvement and training organizations affiliated with the ABIM have recommendations and guidelines that are either non- or weakly-evidence based and have not been shown to improve patient outcomes. Surely, these should also be questioned. These include most of the hospital performance measures for acute myocardial infarction, congestive heart failure, pneumonia and surgical process of care, the ventilator-associated pneumonia guidelines, and the central line associated bloodstream infection guidelines (3-5).  Furthermore, in examining the requirements for recertification by the ABIM, the parent organization that sponsored the Choosing Wisely initiative, the evidence basis for the ever increasing frequency of examinations for ever increasing fees and the quality improvement initiative in individual practices is unclear (6).

The recommendations number only 5 from each society (with several overlapping) and come from only 9 of the over 50 medical societies, organizations and boards affiliated with the ABIM. Why recommendations from other medical societies including pulmonary and critical care organizations such as the American Thoracic Society (ATS)* and the American College of Chest Physicians (ACCP) were not included was not stated. In order to help the ABIM, ATS and ACCP, we list some procedures and treatments below that pulmonary and critical care physicians might consider for inclusion in the Choosing Wisely recommendations:

1. Pneumococcal vaccination with the 23 polyvalent vaccine in adults
2. Chest X-ray after bronchoscopy or needle biopsy in the absence of symptoms
3. Routine use of heparin for deep venous thrombosis prophylaxis 
4. Routine chest X-ray in the absence of clinical suspicion of intrathoracic pathology
5. Pulmonary consultation for bronchoscopy for nonobstructive atelectasis
6. Ordering blood troponin levels in the absence of a clinical suspicion of myocardial infarction
7. Admission of a patient to the ICU who has chosen not to be resuscitated (DNR) and without clear goals of what is be accomplished in the ICU
8. Provision of powered mobility devices where there is not a clear medical necessity. 
9. Diagnosis and management of  COPD without spirometry
10. Developing and calling guidelines “evidence-based” when they are opinion or developed from nonrandomized trials.

Overall, the Choosing Wisely recommendations are a welcome start provided they are put to the use intended by the ABIM and contributing organizations. These should be expanded by contributions from other specialty groups and societies, but only if the evidence basis for each recommendation is clearly stated and based on adequate trials. Efforts to use these recommendations to control physician practice by proxy for financial gain are unethical and should be prominently noted and publicized if found to occur.

Richard A. Robbins, MD

Allen R. Thomas, MD

References

1. http://choosingwisely.org/?page_id=13
2. http://www.nytimes.com/2012/04/04/health/doctor-panels-urge-fewer-routine-tests.html?_r=1&permid=67
3. Robbins RA, Gerkin R, Singarajah CU. Relationship between the Veterans Healthcare Administration hospital performance measures and outcomes. Southwest J Pulm Crit Care 2011;3:92-133.
4. Padrnos L, Bui T, Pattee JJ, Whitmore EJ, Iqbal M, Lee S, Singarajah CU, Robbins RA. Analysis of overall level of evidence behind the Institute of Healthcare Improvement ventilator-associated pneumonia guidelines. Southwest J Pulm Crit Care 2011;3:40-8.
5. Hurley J, Garciaorr R, Leudy H et al. Correlation of compliance with central line associated blood stream infection guidelines and outcomes: a review of the evidence. (Submitted)
6. http://www.abim.org/research/seminal-bibliography/certification.aspx

*The Southwest Journal of Pulmonary and Critical Care is the official publication of the Arizona Thoracic Society which is the Arizona state affiliate of the  American Thoracic Society.

The opinions expressed in this editorial are the opinions of the authors and not necessarily the opinions of the Southwest Journal of Pulmonary and Critical Care or the Arizona Thoracic Society.

Reference as: Robbins RA, Thomas AR. Will fewer tests improve healthcare or profits? Southwest J Pulm Crit Care 2012;4:111-3. (Click here for a PDF version of the editorial)