Publisher's Note: This post appears here courtesy of the Carolina Journal. The author of this post is Theresa Opeka.
A new report released by North Carolina Treasurer Dale Folwell Wednesday shows that CEOs across North Carolina's nine largest hospital systems doubled their paychecks in less than five years, half the time than previously thought.
"Getting this information to this point to present to you today is like digging through 16 feet of ash of volcanic ash in Pompeii,"
Folwell said Wednesday during a press conference.
He characterized the report as showing a massive transfer of wealth from hospital workers to executives, saying it is the result of the consolidation of hospital systems putting healthcare in the hands of fewer people. "Executives are incentivized to raise profits, not raise quality or access,"
Folwell invited researchers from the North Carolina State Health Plan, Johns Hopkins University Bloomberg School of Public Health, and Rice University's Baker Institute for Public Policy to study executive compensation in hospital systems, including Atrium, Mission, Novant, UNC, Vidant, Duke, Cone, WakeMed and Wake Forest Baptist Health, as well as the Midwest system Advocate Aurora Health that merged with Atrium Health.
The hospital systems paid highly paid executives more than $1.75 billion from 2010 to 2021. Almost 20% of that compensation was captured by a handful of hospital CEOs, who collectively took home $308.8 million over 12 years. Total spending on nonprofit CEOs rose 104% from $19 million in 2011 to $38.7 million in 2019.
Researchers say this is likely a significant underestimate because the public cannot access the tax filings that track how much publicly owned hospitals paid their top executives. A loophole in current law hides these tax filings for more than three in 10 nonprofit hospitals in North Carolina, including Atrium and UNC Health, who didn't answer a public records request for executive compensation data until Feb. 13, two days before the publication of this report, and almost three months after requesting it.
Folwell's report lists hospital systems as being the single largest driver of inflation in the United States. It also states that North Carolina is among the most consolidated and least affordable for healthcare, but its hospitals were three times more profitable than the national average in 2019.
The pay raises come when inflation has driven up the cost of everything from gas to food. The report indicates that healthcare costs take 20% of the average worker's paycheck and that one in five families is trapped in medical debt collection in North Carolina.
The report points out two notable examples. The first, Atrium Health CEO Gene Woods, grew his compensation by 473% over six years and was the highest-paid hospital CEO in 2021 with a salary of $9.8 million. At the same time, Atrium sued 1,000 patients over medical debt, some of which were over a decade old. Atrium even encouraged over 63,000 patients to enroll in "medical credit cards"
that can charge up to 18% interest on medical debt.
Mission Health CEO Ronald Paulus was paid $4 million in 2019, increasing his pay by 726% from 2011. In 2019, he also presided over the sale of the hospital to HCA Healthcare, a for-profit corporation.
It is also noted that nonprofit hospitals didn't limit their huge executive spending to CEOs. North Carolina's largest nonprofit hospital systems paid more than $1.75 billion to highly compensated executives like chief financial officers and chief legal officers from 2010-2021.
While the report shows CEOs and other top officials' compensation from the hospital systems themselves, researchers acknowledge that it doesn't capture the compensation many hospital CEOs get from outside organizations, including UNC Health CEO William Roper. The report states that he collected $5.5 million from sitting on the boards of outside organizations that did business with the state.
Researchers also note that hospital system leaders said they were in "dire straits"
in 2020 as they collected $1.5 billion in taxpayer-funded COVID relief meant for struggling hospitals while promising executive pay cuts. Instead, CEOs across North Carolina's largest nonprofit hospital systems took home an average of $3.4 million.
At the same time, frontline clinical workers only received a slight pay increase. On average, family medicine physicians' wages rose 22.7% from 2010 to 2019, while registered nurses' salaries rose only 14.8% during the same period.
Dr. Vivian Ho, Rice University, said there should be a lot of tough questions about compensating CEOs if you are a board member of one of these hospitals.
"The burden, unfortunately, is being placed on the middle class, who is being forced to pay higher health insurance premiums in order to cover these costs,"
she said. "These prices are forcing North Carolinians into medical debt and the only people that are benefiting our hospital executives, not the community that needs to have a healthy functioning healthcare system in order to survive and thrive."
"Remember there are no shareholders in nonprofit hospitals and the public are the stakeholders,"
said Dr. Ge Bai, Johns Hopkins Bloomberg School of Public Health. "The taxpayers rely on the board to oversee and ensure that there's alignment between activities from the hospitals and their charitable mission which is the reason they got all the tax benefits. Therefore, strong governance is important."
A reporter said that UNC Health had given them a response to the report saying that, "UNC Health receives a significant number of records requests, and these are fulfilled in the order in which they are received, and that the treasurer requested a great deal of information going back ten years and did not provide any deadline or explain how the data would be used."
Folwell responded by quoting Maya Angelou "When people show you who they are, believe them the first time"
and by showing several blacked-out redacted pages of information and said, "This is the result of their public records request response back to us four years ago when we asked them what the price of things were,"
he said. Everyone knows that something is wrong with healthcare in this state."
In response to the report, the North Carolina Healthcare Association said in a statement on their website, "Instead of contributing to doing the hard and serious work of positively changing the healthcare landscape in North Carolina for the long run, all he (Folwell) does is recycle tired rhetoric and vilify hospital leaders who are devoting their lives and careers to serving the people of our state."
NCHA also criticized the move by the State Health Plan to change its third-party administrator from BCBSNC to Aetna after more than 40 years.
"The timing of the Treasurer's report is also interesting in how it distracts public attention from the secretive selection process followed for a new third-party administrator for the State Health Plan. It's a change that will result in moving the State Health Plan's business administration from a North Carolina-based not-for-profit organization to a for-profit company where the CEO made more than $28 million in compensation last year."
During the press conference, Folwell mentioned that NCHA "has continued to boycott the state employees and their effort to bring higher quality, higher access, and lower cost healthcare and should be investigated in terms of the activities that they have been involved in that have resulted, in my opinion, in lower quality, lower access and higher costs for our state employees."
In an emailed statement to Carolina Journal, Cynthia Charles, vice president of communications and public relations for NCHA said, "The healthcare association's members proudly take care of all North Carolinians, including all those who are devoting their lives to state service. This has been true since the inception of the State Health Plan."