Hospital CEOs Looking To Circumvent Cuomo’s Nonprofit Pay Cap UPDATED

Cuomo set a cap on executive compensation in his budget proposal yesterday. (via governor's office Flickr)

Gov. Andrew Cuomo’s plan to cap nonprofit executive compensation at $200,000 may hit some New York hospital CEOs directly in the pocketbook – unless they can show good reasons for taking home their six- and seven-figure salaries.

The cap came out of recommendations from an executive compensation task force Cuomo formed last August, after the New York Times revealed that executives heading the disability service provider Young Adult Institute received more than $1 million per year in Medicaid-funded salaries.

The task force, led by Department of Financial Services Superintendent Ben Lawsky, has been gathering information since its formation and may yet issue a report of its findings, said spokesman Josh Vlasto. The task force’s meetings have not been conducted in public.

The compensation cap would likely apply to all CEOs of nonprofit service providers in the state, including hospital CEOs, who receive some of the largest compensation packages in the realm of nonprofit service providers. The cap only applies to state funds, State Budget Director Bob Megna said, so organizations could pay their executives more by using a source other than state money.

But hospital CEOs might be able to circumvent the cap, if they can provide good cause.

UPDATE: “We plan on working with the legislative and executive branch,” said Greater New York Hospital Association President Ken Raske. “I’ve never been shy on those kinds of issues. We know what the score is in terms of the marketplace for healthcare executives. With this plan, It was almost as if they were musing, just saying whatever was on their minds.”

Raske circulated a memo to hospital CEOs (full memo below) that says, “Agency commissioners would have the discretion to adjust this figure annually subject to the budget director’s approval within certain defined parameters.”

“The budget language allows providers a waiver from compliance with these requirements for good cause subject to the approval of the State agency and budget director,” the memo states. “GNYHA has long worked on executive compensation issues on behalf of our members, and will continue to do so throughout the budget process.”

The cap proposed by Cuomo is notable because of how low it is, health experts say. Legislation proposed by Assemblywoman Deborah Glick to cap executive compensation proposed a ceiling of $250,000. A plan proposed by the Commission on the Public Health System’s Judy Wessler would have put the cap at $1 million.

Wessler initially assumed the cap would not apply to hospitals, which have long argued that in order to be competitive, they must provide high compensation packages to their leaders. She said she thought the $199,000 compensation figure was low, and wondered if the Department of Health might provide broad waivers to hospital CEOs in general.

“I appreciate the fact that the governor’s budget also appears to apply to hospitals in terms of the executive compensation,” she said, adding that it would be curious to see what would happen to some of the state’s prominent hospital CEOs.

For example, Linda Brady, the CEO of Kingsbrook Jewish Medical Center, receives more than $4 million a year. UPDATE: Kingsbrook disputes that figure. Average national hospital CEO pay is $500,000, the IRS says, while the 21 top-earning New York hospital executives earned a collective $64.3 million in 2008, says Joanne Doroshow, executive director of the Center for Justice and Democracy.

Other hospital CEOs in the state draw similar compensation packages, Wessler noted.

“Even though they say they can’t get people if they don’t pay them $5 million, there are hospitals all over the place that don’t pay that kind of money,” she said, “so I think it’s wonderful that this cap appears to include hospitals as well.”
GNYHA memo New York State Budget 2012