Monday, May 03, 2004

Hospital CEOs' pay a heated issue

Seventeen thousand babies a year.

The annual baby boom at Northside Hospital - more deliveries, it says, than any other community hospital in the United States - helps sustain the Sandy Springs facility's reputation and revenue.

Its chief executive's pay reflects that success. Compensation for Northside CEO Sidney Kirschner, with a salary of $965,680 plus a one-time bonus of $1 million, topped that of other executives leading Georgia nonprofit health systems and hospitals in their 2002 fiscal years.

Kirschner's pay is high on lists of Georgia hospital salaries compiled by groups opposing major revisions in Georgia's medical malpractice system. Tort reform was fiercely contested in the recent General Assembly session but failed to pass.

Bill Clark of the Georgia Trial Lawyers Association, which fought a proposed $250,000 cap on "pain and suffering" damage awards in malpractice cases, says the size of executive pay guts the argument that hospitals teeter on the financial brink.

"These organizations scream poverty, when at the same time spending exorbitant amounts of money on CEOs' salaries, benefits and perks," Clark says.

Pu-leez, talk about a straw man. What's next, an argument that physicians are overpaid and they don't deserve relief? I, like many physicians I know, complain about how much hospital administrators are paid all the time. But I can see the rationale behind the "hospitals are businesses and their CEO's need to be paid like private sector CEO's". Looking at the chart there is not a solid connection between CEO pay and hospital revenue.
The fact is that most hospitals in Georgia are self-insured, since hospital underwriting is so expensive. Even those who can get a policy pay dearly for it:

DeKalb Regional Healthcare System, for example, says its malpractice premiums increased $3.1 million to $8.8 million in 2003. The system's net income was about $1 million in fiscal 2002.

Given that according to MAG Mutual their average plaintiff award in 2002 was $4.65 million and the average payout was $457,000, you can see that one case can put a serious dent in any net income that a hospital may generate.
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