FIRST: DISCLOSURES. 1. Columbia Memorial Hospital is a customer of this newspaper. 2. I’ve been a patient for short periods at the hospital and my experiences were good. This may be too much information unless your opinion of CMH is influenced by a bad experience.
A story last weekend in the Register-Star, the Hudson daily newspaper, listed the salaries of the highest paid administrators and employees at Columbia Memorial. It presented jaw-dropping numbers about what the county’s largest employer paid its top people in 2011, the most recent records publically available. The data come from IRS Form 990, which non-profit organizations file annually to maintain their tax-exempt status. The 2011 form is available online from the tax agency. Jane Ehrlich, who was hospital CEO in 2011 but has since moved on, received total compensation that year of $535,943. The highest paid doctor was Christopher Gorcznyski, MD, an orthopedic surgeon. He earned $690,047.
How could it be that anybody made so much money at a job in this county that has yet to fully recover from the recession? Columbia Memorial isn’t a hedge fund. It’s a non-profit hospital.
But that’s precisely the point. Non-profit hospitals are a familiar feature of American healthcare, and yet only when we glimpse facts like the salaries of the people who run our hospitals, do we stop and take notice of what’s really going on. And while the CMH salary figures, considered by themselves, are sure to provoke disbelief and anger, the salaries are a symptom–not a cause–of what’s gone wrong.
Hospitals are businesses, even those set up on a non-profit basis. They provide a service and they need revenue. They create jobs for people. Lots of them. Columbia Memorial was a $138-million enterprise in 2011. Counting its Hudson campus, the CMH nursing home in Catskill and various outpatient services in places like Valatie and Copake, it employs about 1,400 people, making it the largest private employer in the county. And as a business, Columbia Memorial Hospital is subject to the same market forces that affect other businesses in our capitalist system.
There are choices all around us when it comes to hospitals–from Albany and Troy to Poughkeepsie, Rhinebeck, Kingston, Sharon, CT, Pittsfield and Gt. Barrington, MA., not to mention New York City and Boston. CMH has to compete with all of them. Nothing requires this county to have its own independent hospital. Columbia Memorial exists only because its board, whose members receive no pay for their efforts, believe that having a hospital run by local people is the best way to meet the healthcare needs of the community.
But how in good conscience can the hospital board approve such high salaries at the top? Turns out the board relies on outside firms that determine pay levels the IRS will accept. That’s where the market comes in. The highest paid physician at CMH, an orthopedic surgeon, gets a handsome salary compared to other workers in the county. But it looks different when you compare his pay to data on the whole U.S. medical industry, where the median salary–the midpoint between the highest and lowest earners–for an orthopedic surgeon ranges from $1.7 million to $3 million annually. By that reckoning he’s underpaid.
In 2009 the IRS investigated whether non-profit hospitals deserved tax-exempt status, and part of the agency’s research matched what top hospital administrators were earning with their hospital’s revenue. The average compensation for a CEO at a hospital with revenues like those for CMH was about $554,000 annually. That’s roughly $20,000 more than Ms. Ehrlich’s got paid two years later. Nobody will shed a tear that she got a raw deal, but her compensation was right in line with industry norms.
The nasty truth about this country’s healthcare industry that we pay too much and get too little in terms of better health outcomes. That is not the fault of the CMH board or its employees.
CMH could insist on paying less. But it’s likely that would encourage paying patients to turn elsewhere leaving the hospital to care only for the poor. So the board must pay market rates to attract qualified people at all levels of the organization.
Other developed nations don’t treat their healthcare like Wall Street roulette. They choose instead to limit costs and they live longer, healthier lives. We can lament the hefty CMH paychecks but we’ll have to accept their necessity until we truly reform our broken healthcare system.