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NC Nonprofit Hospital Execs Made Over $1.75B Since 2010, Report Shows

— State treasurer's report lays out "massive transfer of wealth" from workers to executives

MedpageToday
A photo of a business man holding a fan of $100 bills.

Over the past decade, CEOs and other top executives at North Carolina's nonprofit hospitals raked in massive amounts of money as worker wages were stymied, medical debt mounted, and a lack of transparency persisted, according to a .

Nonprofit hospitals in the state paid their top executives more than $1.75 billion from 2010 to 2021, with CEOs capturing nearly 20% of that amount, the North Carolina State Health Plan for Teachers and State Employees, a division of the state treasurer's office, wrote in the report.

To compile their findings, Dale Folwell, North Carolina's state treasurer, invited researchers from the North Carolina State Health Plan, Rice University's Baker Institute for Public Policy, and Johns Hopkins Bloomberg School of Public Health to analyze executive pay across health systems, including Atrium, Mission, Novant, Vidant, Duke, Cone, WakeMed, UNC REX, and Wake Forest Baptist Health, as well as Advocate Aurora Health (a system previously based in the Midwest that recently moved into North Carolina through its deal with Atrium).

"We're seeing a massive transfer of wealth from workers to hospital executives," Folwell said during a press briefing Wednesday morning. "We're seeing that these increased payments have a lot to do with the concentration of healthcare in the hands of fewer and fewer people."

According to the report, the majority of CEOs at North Carolina's largest nonprofit hospital systems doubled their compensation over a period of 5 years or less. Individual hospital CEOs "enjoyed pay increases that dwarfed the growth of their workers' wages," the report authors noted.

In addition, these hospital systems paid 11 current or former CEOs a total of $38.7 million in 2019, which would have been enough to pay 572 registered nurses, who made an average of $67,730 that year, they said.

They also pointed out that the COVID-19 pandemic did not interfere with pay raises for most hospital executives.

Out of 175 executives across eight systems, only 35 took pay reductions in 2020 that were not triggered by retirement. By 2021, at least 17 of the 35 earned pay that exceeded what they pocketed in 2019. Only three hospital systems cut their CEO's compensation -- by 1.7% to 6.5% -- in 2020.

Furthermore, though $1.5 billion of taxpayer-funded COVID relief meant for struggling hospitals was collected, CEOs at North Carolina's largest hospital systems took home an average of $3.4 million in 2020, with the majority of top executives also accepting pay increases.

Of note, "there is disturbing evidence that hospital executive pay is not meaningfully linked to either patient safety or nonprofit hospitals' charitable mission," the authors wrote in the report.

As patients' financial health suffered during the pandemic, some of North Carolina's nonprofit hospitals billed more than $149 million to poor patients who should have received charity care. Many of these hospitals also encouraged patients to sign up for medical credit cards that charged as much as 18% interest.

"Lawmakers should require publicly owned hospitals to abide by the same transparency standards as other nonprofit hospitals that publish tax filings," the authors concluded. "Likewise, policy makers should reconsider allowing hospitals to conceal the structure of their top executives' compensation in contracts."

"North Carolinians deserve better oversight and stronger accountability to make sure their sacrifice supports healthcare workers and patient care rather than profits for multimillion-dollar hospital executives," they added.

The North Carolina Healthcare Association (NCHA), which represents hospitals and other healthcare facilities across the state, , noting that the claims that hospital system executive compensation "should be called into question" and that executives are not "sincerely committed to their organizations' missions to improve the health of patients and communities" are "egregious for a host of reasons."

"Instead of contributing to doing the hard and serious work of positively changing the healthcare landscape in North Carolina for the long run, all he [the state treasurer] does is recycle tired rhetoric and vilify hospital leaders who are devoting their lives and careers to serving the people of our state," the statement continued.

Quoting Steve Lawler, president and CEO of the NCHA, the statement also noted that "it's a uniquely tough time to be a successful hospital CEO, COO or Chief Financial Officer. Many hospitals and health systems across the country and here in North Carolina are being forced to make difficult decisions to balance growing inflationary pressures and workforce shortages that drive up their labor expenses with inadequate reimbursement from Medicare and Medicaid on the revenue side. Through it all, their north star is improving the health of the patients and communities they serve and continuing to support their employees' well-being."

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    Jennifer Henderson joined ľֱ as an enterprise and investigative writer in Jan. 2021. She has covered the healthcare industry in NYC, life sciences and the business of law, among other areas.