5 Recent Healthcare Compensation Controversies

Here are five healthcare compensation controversies from the last several months.

1. University of California executive pensions. The president of University of California said in early January the system is under no legal obligation to raise the pensions of its highest-paid executives — including the CEO of UC San Francisco Medical Center — and it's too expensive to do so. At the end of December, 36 UC executives, including UCSF Medical Center's CEO Mark Laret, signed a letter threatening to sue unless the institution increased their retirement benefits.

The Internal Revenue Service approved UC's waiver of a $245,000 pension cap in 2007, but the system never extended the pension benefit. The three-dozen executives who signed the letter earned between $174,000 and $756,000 in 2009. Their letter was penned at a time when UC's retiree pension and healthcare obligations have gone to $21 billion beyond what the system has in its retirement fund.

2. Proposed bill to cap executive salaries in Maine. Rep. Brian Bolduc (D-Auburn) submitted a bill in early January that would cap the salaries of Maine hospital executives at the same salary as the governor. Rep. Bolduc said because hospitals are state-subsidized, the state government should have a say in hospital leader salaries. The governor's salary is currently set at $70,000 a year, compared to salaries of $1-$3 million for some Maine non-profit hospital CEOs. Jeffrey Austin, a lobbyist for the Maine Hospital Association, said Rep. Bolduc's bill appeared to punish administrators for publicizing government-owed debt, which has forced some hospitals to cut staff and services even as executives are given raises.

3. Disclosure of Wuesthoff executive separation packages. In mid-November, Florida's Attorney General asked a judge to decide whether the separation packages paid to eight former Wuesthoff Health System executives following its rescue-sale to Health Management Associates should be publicized. The Naples, Fla.-based HMA purchased non-profit Wuesthoff on Oct. 1 for $145 million and formed a foundation to manage the proceeds of the sale. The health system refused to disclose its executive separation packages to the state, claiming they were covered by a trade-secret exemption under state law.

The executive separation package amounts were disclosed later in the week, following negotiations between the AG and the former board members and their lawyers. The executives split $10.6 million in separation pay, with former Wuesthoff CEO Emil Miller receiving 60 percent of the separation pay.

4. New York State Department of Labor claim against St. Vincent's.
The New York State Department of Labor asked St. Vincent's Hospital to pay $50 million to hospital workers who lost their jobs earlier this year, claiming the hospital violated a state law governing mass layoffs when it closed its doors in April 2010. If the New York DOL is successful, the hospital would pay $48.8 million for allegedly violating the New York State Worker Adjustment and Retraining Notification Act, which requires employers to give 90 days of notice to workers before a mass layoff. St. Vincent's Hospital lawyers say the state assisted the closure, as the hospital worked closely with the Department of Health and governor's office, and that the hospital does not meet the definition of a "business enterprise" or "employer" subject to WARN notice, in part because it was in liquidation.

5. Self-employed urologists and imaging tests. A study by researchers at the University of Michigan Medical School found that self-employed urologists were more likely to order x-rays, ultrasounds and diagnostic imaging tests than employed urologists on salary. The volume of an urologist's work generally does not affect the salary of most employed physicians, while self-employed physicians can make more money by taking on more patients or ordering more tests. The study looked at more than 37 million outpatient visits to urologists across the country, using data from the National Ambulatory Medical Care Survey conducted in 2006 and 2007. Four out of every five physicians surveyed were self-employed.

In recent months, some healthcare providers have pointed to the discrepancy in ordering between self-employed and employed physicians, saying self-employment leads to unnecessary medical testing and higher costs for insurers and patients.

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