Reporter's Notebook

Grassley: Who Approved These Hospital CEO Bonuses?

By Jay Hancock

June 25th, 2013, 4:45 PM

Sen. Charles Grassley, a longtime member of the Senate Finance Committee and frequent critic of nonprofit hospitals, wants to know whose idea it was to pay hospital CEOs annual bonuses surpassing a million dollars in some cases.

Sen. Grassley finishes speaking during a press conference at the U.S. Capitol in 2011 (Photo by Win McNamee/Getty Images).

“Is the board in control?” he asked in an interview. “Is the board making these decisions and how do they make these decisions? Are they running the show or is the CEO running them?”

The Iowa Republican was responding to a report by Kaiser Health News and ABC News that showed CEOs reaping bonuses for profit, revenue and other financial goals even as policymakers talk about the need to promote efficiency instead of volume. The stories found that boards of nonprofit hospitals are rewarding bosses more for raising prices and increasing the number of procedures than for rigorous quality and cost-cutting goals.

In examining 30 of the biggest public and private nonprofit health systems in the country, KHN listed nine CEOs whose bonuses were at least seven figures.

Grassley has long chided trustees of nonprofit hospitals for what he sees as lax oversight of executive compensation and insufficient community contributions in return for the organizations’ exemption from taxes. Apropos of his question about how boards decide to pay bonuses, hospitals told KHN that they follow a careful process to set the optimal level and design of CEO pay.

“The Internal Revenue Service has a very specific set of steps that a hospital board has to follow in setting an executive’s compensation,” said Richard Umbdenstock, CEO of the American Hospital Association. Those include “having an independent board of directors, so nobody’s setting their own compensation, to comparing it to the market” for other CEOs, “to proper documentation and disclosure on a federal form annually,” he said.

But Grassley thinks such steps, which give nonprofits a legal “safe harbor” from IRS scrutiny, aren’t sufficient. Escalating nonprofit pay suggests that the safe-harbor recipe has failed, Grassley has said, and he has tried unsuccessfully to have it removed as a protection for nonprofit board members.

“In the meantime I’m trying to embarrass them into doing their jobs,” he said.

Bonuses may not be justified even to motivate hospital CEOs toward goals consistent with a nonprofit hospital’s mission, such as promoting charitable care, Grassley said.

“If they’re at a nonprofit hospital, they’re supposed to do that as part of their job,” he said. “They aren’t doing their job if they’re not doing the charity care.”

15 Responses to “Grassley: Who Approved These Hospital CEO Bonuses?”

  1. Tom says:

    The “Senior” Senator doesn’t know who approved hospital CEO bonus, huh? Oh, I forgot! The “Senior” Senator is 79 years old, right? How can we expect someone that old to remember such important things? Isn’t it enough that the “Senior” Senator can remember how to dress himself in the morning? Isn’t it time we set an age limit for members of Congress? Especially members that seem to be showing serious signs of dementia?

  2. Jean says:

    I feel strongly that you should remove “Tom’s” derogatory message above – it is an insult to your blog as well as ALL U.S. citizens, regardless of age!!!!!!!!!!

  3. Vlad says:

    I guess you where raised in a ‘jungle’.. only a jungle boy would not respect his elders. The probability of a male in his mid 70′s are less than 35% so I would say the odds are against you.

  4. Bobby says:

    I agree with Jean. Please remove Tom’s message. It adds nothing to the discussion of the article, and is derogatory.

  5. Fran says:

    Tom hasn’t made a single comment. As I read it, his post contains questions. Since when are we restricted from asking questions?

  6. Judy says:

    No one seems to be addressing his question which younger congressional reps apparently aren’t asking! I live in a community where the CEO of a non-profit hospital system receives – not earns – $5 million+, way out of line with other CEOs in the area. The spokesman for the system says much of it comes from investments, but money is money and could be directed toward other uses.

  7. Laura says:

    What? Asking to remove someone’s post? Are you joking? Isn’t that censorship? Isn’t that the kind of tactics used in Nazi Germany in the 1930′s? Shut people up if they don’t agree with your views? In case you didn’t know, Senator Chuck Grassley is a public personality. He chose a career in the limelight. In my opinion, by choosing to be a member of Congress, you set yourself up as a target for criticism, whether fair or unfair. If he can’t stand the heat, maybe he should get out of the kitchen. In my opinion, when it comes to derogatory criticism, Grassley gives much more than he gets. In my opinion, Chuck Grassley takes every opportunity he can to say derogatory things about our sitting President. Is that what you call honorable? Is that what you call respectful?

  8. Kelly says:

    Chuck Grassley’s brainless tea party base has apparently been offended

  9. John S. Y. says:

    Although Tom’s post obviously misses the salient point of the article (blog), it nevertheless does not deserve to be removed/censored.

  10. John S. Y. says:

    Getting back to the essence of the article (blog), Grassley makes a valid point about so-called ‘non-profit’ hospitals operating/hiding behind Safe Harbor protection, with Boards and Governance that are far less than independent or responsible.

  11. Goofy says:

    I completely disagree with Grassley. Sure, for every penny the CEO makes, that is a penny taken away from the hospital, but until CEO pay rules can be set in parody across all industries — I’m not saying pay, I’m saying rules and guidelines — there will continue to be abuses. The CEO’s in this country have made a mockery out of their salary abuses and the fact that most, 99%, do not earn what they make. Of course, all CEO’s will fight it.

  12. Kelly says:

    America’s corporate types took us into the economic abyss we experienced since 2008. They are not to be trusted. Republicans continue to protect these corporate shysters. The enemy is the GOP. Until voters understand that Republicans are the enemy, we will continue to have the gridlock and the obstruction we see within the beltway. There are roughly 62 tea party types in the House that need to be retired in 2014. If the American voter has any brains, they will not return these rural hayseeds back to Congress.

  13. ME says:

    WOW. If anyone lost the ball on this one, Kelly did! Nothing says american greatness than insinuating that you have no brains if you vote anything but democratic. Absolutely astounding.

  14. Kevin says:

    Censorship? Only a Neanderthal Republican would suggest censorship. Just look at what goes on these days in the 113th House of Representatives that’s completely controlled by the tea party. Our right-wing extreme Cro-Magnon Congress in action!

  15. susan pfettscher says:

    Sorry I am late in posting about this issue (a vacation from the issues of healthcare was nice). The executive pay in both for-profit and non-profit hospitals and health care agencies is a very real problem (as it is in other industries). The consumer has no control (I won’t go to the hospital) over this economic problem. I can choose not to buy goods from companies that I think are unethical, but I cannot boycott the hospital when it is needed.
    There is some hope–El Camino Hospital in Mountain View has had a cap put on executie salaries–it is a community hospital with taxpayer support. Of course, the executives are spending hospital money to fight this rule as it was passed by the voters last year. When health care is a free-market, for-profit (even as a non-profit) system, these abuses will continue. Decreasing corporate health care profits is the only way to address this problem.
    Maybe these greedy leaders will finally get the message….