When it comes to CEO pay at children’s hospitals, how much is too much? In a recent article in the Fresno Bee, Lown Institute president Dr. Vikas Saini explains what’s behind a growing trend of rising executive compensation at hospitals.
An outlier in compensation
The Fresno Bee highlighted the compensation of Todd Suntrapak, the CEO of Valley Children’s Hospital in Madera, California. Suntrapak was paid $5.1 million in total compensation in fiscal year ending 2022 and $5.5 million in 2021.
“[That’s] pretty hefty for a hospital of that size,” Dr. Vikas Saini told The Bee. “We don’t pretend to know the ‘right pay’ for a hospital CEO, but we do think it’s reasonable to ask, what’s it for?”
“We don’t pretend to know the ‘right pay’ for a hospital CEO, but we do think it’s reasonable to ask, what’s it for?”
Dr. Vikas Saini, The Fresno Bee
The majority of Suntrapak’s pay in 2022 and 2021 was from bonuses. “I think there’s a legitimate public interest in (knowing) what that bonus was for,” said Saini. “What is it that’s being incentivized? Is it just for racking up the billings?”
Suntrapak’s pay in 2022 was more than double the next-highest compensated nonprofit executive in the San Joaquin Valley area, according to the Fresno Bee. It’s also higher than CEO pay of children’s hospitals in California that are larger. For example, Children’s Hospital of Los Angeles has 413 beds (Valley Children’s has 358) and paid their CEO $1.7 million in 2022. Rady Children’s Hospital in San Diego has 511 beds and paid their CEO $1.7 million as well.
Valley Children’s CEO pay is also much greater than the amount the hospital gave in financial assistance in 2022, which was about $182,000 according to their tax forms. If Valley had paid their CEO the same amount that their California hospital peers did in 2022, they could have theoretically increased their financial assistance spending by a factor of 18.
Behind the upward trend
What explains such a high compensation? Dr. Saini explains in the Bee that the corporatization of healthcare and competition for talent play a role.
Over the past several decades, hospitals have added more board members from the private sector “who are oriented to the bottom line, who think about it like a regular business,” said Saini. One study found that among hospitals ranked high on the US News list, a plurality of board members (44%) come from the financial sector, including private equity, wealth management firms, banks, and insurance. That perspective can impact how hospitals pay their CEOs.
Nonprofit hospitals also may have to compete with for-profit organizations for executive talent, which can drive pay upward.
“When [hospitals] hire a new CEO, they’re not going to pay below the median; they’re not even going to pay at the median. They’re saying, ‘We’ve got to go higher.’ And if everybody does that, it creates an upward spiral, and that’s what we’ve seen for 30 years,” said Saini.