Hospital executives received big raises

Cost-cutting measures have little impact on pay

UMass Memorial’s former president, John O’Brien, earned $4.8 million in 2012.John tlumacki/Globe Staff/file

The departing chief of UMass Memorial Health Care in Worcester earned $4.8 million in 2012, topping the list of Massachusetts hospital executives who received healthy increases in seven-figure pay packages — even as they faced growing pressure to bring costs under control.

John G. O’Brien, who retired in February 2013 after more than a decade at UMass Memorial, nearly doubled his compensation from 2011, when he earned $2.4 million as head of the biggest health care system in Central Massachusetts. Much of his 2012 compensation included retirement benefits earned during his tenure.

O’Brien’s payout came several months before UMass Memorial reported a staggering $55 million operating loss for the fiscal year ending September 2013. The system has since laid off hundreds of workers and made other changes to close the gap under the new chief, Dr. Eric W. Dickson.

Douglas Brown, UMass Memorial’s chief legal counsel, said O’Brien helped expand the health system and did “a remarkable job” as chief executive.

“It is true we suffered a lot in 2013,” Brown said. “We certainly don’t blame that on John O’Brien. We look at his [entire] tenure.”

Brown added that the health system, which employs 12,000 and collects $2.5 billion in revenues, needs to pay well to attract top talent. “We want to pay competitively with the markets so that we can get the best,” he said.

Massachusetts nonprofits are required to report executive compensation and other figures to the attorney general’s office and the Internal Revenue Service each year, although there is a lag of more than a year in the reporting. Nine nonprofit hospital systems provided those documents to the Globe on Friday.

Most of the 11 top executives at these nonprofit systems received raises. The increases are consistent with a national trend of growing compensation for executives, even as state and federal laws push them to get rising costs under control. Massachusetts, known for its top-quality hospitals, has the highest health costs in the nation.

The biggest health system in Massachusetts, Boston-based Partners HealthCare, gave its top executives big raises in 2012. Chief executive Dr. Gary L. Gottlieb’s compensation climbed 24 percent, to $2.6 million in total compensation, from $2.1 million the year before.

Dr. Elizabeth G. Nabel, president of the Partners-owned Brigham and Women’s Hospital, made about $2.4 million, a 26 percent raise from her 2011 pay of $1.9 million. At Massachusetts General Hospital, Partners’s other flagship location, president Dr. Peter L. Slavin earned $2.2 million, up nearly 30 percent from $1.7 million.

The highest-paid Partners executive was Peter K. Markell, the chief financial officer, who earned $3.9 million, including $2.6 million in deferred compensation and other benefits. Two other Partners executives earned at least $2.7 million each.

Annual compensation includes base pay, bonuses, retirement benefits, and other payments, and it is rising for hospital executives nationwide. But Thomas Flannery, partner at the consulting firm Mercer, said scrutiny of compensation is also increasing as consumers and employers focus more on the cost and quality of care.

“Over the next decade, the issue is going to be not just the level of compensation but the performance that these highly paid executives deliver,” Flannery said. “Those organizations that are able to demonstrate low cost, high quality are the organizations that are going to win in the long term.”

Chief executives of nearly all the state’s biggest nonprofit hospitals made more than $1 million in 2012. Former Tufts Medical Center chief executive Eric Beyer, who left the hospital last year, earned about $911,000. Dr. Kevin Tabb of Beth Israel Deaconess Medical Center earned $1.4 million in his first full year as chief executive.

Boston Medical Center paid chief executive Kate Walsh $1.3 million in 2012, slightly less than the year before.

Compensation for the Children’s Hospital’s chief, Dr. James Mandell, now retired, stayed at about $1.5 million. Dr. Edward J. Benz Jr. of Dana-Farber Cancer Institute was paid $1.3 million, also about the same as a year earlier.

Outside Boston, Dr. Howard R. Grant of Burlington-based Lahey Health earned $1.7 million, a 70 percent bump from about $1 million the year before. And in Springfield, compensation stayed steady at about $1.6 million for the former chief of Baystate Health, Mark R. Tolosky.

Dr. Karen Joynt, assistant professor at Harvard Medical School, said executive compensation needs to be tied more closely to the care patients receive, rather than just the revenues hospitals generate. Joynt conducted a recent study that found little connection between chief executive compensation and a hospital’s quality of care.

“We want incentives to be in place so that people are focused on making care better and more efficient, and not just making more money for the hospital,” she said.