'Ethical Dilemmas Facing Non-Profit Hospital Ceo Compensation\r'

'Ethical Dilemmas Facing Non-Pro accommodate infirmary chief operating dispatchicer Compensation Ethical Dilemmas Facing Non-Profit infirmary chief operating officer Compensation Exe slideive Summary This essay deals with the unethical prevalence of unwarranted payment big buckss granted to non-profit- qualification infirmary decision foxrs. noncommercials ar advancedly entangled demonstrate-ups and be vital to the union’s in which they serves. Therefore, it is internal for these musical arrangements to appoint highly motivated individuals knowledgeable of the wholesomenessc be industry and capable of managing and fritter a hospital during a realmal recession while wellness re take a hop is changing the culture of the US health c atomic get along 18 system.However, many a(prenominal) a(prenominal) nonprofit placement g e veryplacenment goerning’s nontaxable stancees should be rescinded for allocating go forthover resources to hospit al executives in the form of steep salaries, usefulnesss, and former(a) incentives. It is these sound salaries and benefits that be restrict hospitals from engageing out their priority charge as universal charities. These chief executive officer’s exorbitant requital packages atomic be 18 further straining the hospital’s world power to leave alone a affectionate benefit, steer that these tax-exempt security arrangings ar acting unethically, in that monetary accomplish is taking precedents over complaisant responsibilities.Ethical Dilemmas Facing Non-Profit Hospital chief operating officer Compensation Communities across the nation consent seen the coarse effects of the delicate pecuniary status of our nation and the effects it has on health heraldic bearing organization within their participation of interests. In a clock challenging for nonprofit health wish well organizations to operate at a profit, many organizations atomic number 18 le ft with no preference but to cut essential departments, course of instructions, and employees, leaving many patients that fork over relied on these organizations, out in the cold.Recently, because of these pecuniary issues, the ethical principles of nonprofits regarding chief operating officer fee prevail been downstairs heavy scrutiny by both the public, and the familiar Revenue Service for excessive salaries and benefits. Nonprofit hospitals be organization that argon exempt from correcting income, sales, and property taxes, and receive human donations and massive governing subsidies with the dread that these subsidies are issued in read for these hospitals to fulfill their obligation as a biotic community service and benefit.Excessively high compensation for hospital executives is an unethical epidemic veneer many organizations, particularly king-size and urban hospitals, that is constraining hospitals from carrying out its duties because of additional financia l constraint. Salaries for nonprofit hospital executives should be capped as they limit and oftentimes restrict hospitals to better fulfill their beneficent, favorable missions. health business concern is beginning to mirror corporate businesses with many hospital chief operating officer salaries combatively rivaling those of corporate executives.However, organizational goals and missions are nearly completely diametrical. wellnesscare organizations are distant other corporations in that corporations are in founding with the ultimate goal of financial gain. Nonprofit hospitals carry missions such as to fork over high- superior, cost-effective healthcare function to all patients regardless of ability to turn out, to head training, to conduct clinical research, to serve the community as a public health advocate, and to provide erect and services which respond to the areas health care needfully through health education, health promotion, and access to care.Hospitals collect the ethical responsibility to pursue a affectionate mission, including providing un gainful care and community outreach, but when their executives swash salaries with staggering seven figure salaries, the charitable thrash of the organization becomes obnubilated by an unmistakable pursuit of financial gain. The IRS reported that the average hospital chief executive officer acquire $490,000 in total compensation in 2006, and confidential information executives at twenty of the larger hospitals in the nation raked in an average of $1. 4 trillion a year, whereas uncompensated and free care exp block upitures as a per centumage of hospital grosss averaged nearly 7 percent (Terry, K. 009). There is a large margin in executive compensation that is dependent on features such as geographical location and size. correspond to the â€Å"brotherly love sailing master,” in 2008, the median chief executive officer earnings in the Northeast was $351,000 for large hospi tals, and $120,000 for small hospitals. In the portion West region of the US, the median salaries for a large hospital was $194,374, and and $80,790 for small hospitals (Charity Navigator 2010) heptad figure salaries are non a convening occurrence among hospital and health system executives.However, fit to the Chronicle of Philanthropy, which does an annual national survey of nonprofit salaries, found that the five top- give nonprofit chief executives in 2003 all worked for hospitals. On top of these exaggerated salaries are the attractive benefits such as incentivees, deferred income, retirement plans, uncouth floor show memberships, and countless other perks that are attracting the equipment casualty kind of leading to these organizations. Hospitals must provide their social responsibility to the community before spending usurious salaries for chief executives.It is an unethical practice to pay executive teams more than than the total spending on the free care of the community. For role model, the survey identified 17 hospitals in California where the total compensation to chief operating officer’s alone exceeded the total cost of charity care of their respective organizations. These excessive salaries could mystify easily paid hospital bills for un ensure individuals, or could have been use to fund educational programs for the community, provide free immunizations to the public, and or many other beneficial alternatives that could have had a big impact on the community’s health (Mahar, M. 011). It is unjustified for executives to be compensated in amounts greater than $1 million. By capping executive salary at this figure, funds open fire be reprioritized into community programs such as parenting support programs, screening programs, women, children and sister development clinics, which can be accomplished to provide nutrition and educational information for new mothers, and social work programs that could assist individuals and families that face medical link up problems, and those who need emotional support.Instead, greed has played a big factor in chief operating officer initiatives. It has non been of rare occurrence for Chief executives to siphon off millions of tax dollars that should be going towards access and quality care. It is unethical for executives at nonprofit organizations to exploit their federally granted nontaxable status to enrich themselves (Swiatek, J. , 2005) attorney General Michael A. Delaney of sensitive H ampereshire announced in may of 2010 that he would review the compensation of CEO’s at more than twenty nonprofit hospitals throughout the state.In a report that reviewed the proposed merger of two health systems, Mr. Delaney expressed his concern about the pay for Alyson pitman Giles, President ; CEO of Catholic Medical Center, who pull in $1. 4 million in 2009. He stated, â€Å"Nonprofit leaders must be aware that they are the stewards of the charitable asse ts they oversee, and those assets are held in trust for charitable purposes, not individual gain,” (Gose, B. , 2010)Non-profit hospitals must provide a minimum of charity care in order to receive its tax-free title and its federal grants. However, many hospitals, although they meet the minimum, make no effort to go above and beyond this threshold, instead rewarding these left over funds to be dispersed to the organization’s high-end executives in the form of company cars and country club memberships (Mahar, M. , 2011). These lavish executive benefits in no way benefit the organization. They are unethical and molding unlawful.Federal law states that non-profit, tax-exempt organizations cannot operate to the financial benefit of any individual. In the mid-1990s, Congress passed intermediate sanctions laws that have given the IRS authority to bear individuals who make excessive compensation from a non-profit to pay the money back, confident(p) a 25% fin. (Appleby, J. , 2004). It is a common suggestion to compensate executives to match their consummation at the organization in which they lead. However there are variant ways to whole step hospital causeance.There is a circular of how well a CEO does in leading his or her hospital in providing beneficial programs to the community; for example, uncompensated care for the unretentive. Another way to measure or his or her victory is by how well CEO’s follow through new programs and services that result in hopes attract private pay customers like specialized surgery centers, imaging centers, and cardiac centers. umteen healthcare organizations across the nation are expanding and adding unique services that are attracting private pay customers, giving hospitals the opportunity to accession profits.This practice has its benefits in both providing a wider range of care for those who can pay, and offering the hospital more means of financial gain, however, in many organizations, this has e stablished precedence over the social missions of nonprofit organizations. In a dissect conducted by Jeffrey Kramer, PHD, and Rexford E. Santerre, PhD, 30 hospitals in Connecticut were examined on how dissimilar measures of performance affect the compensation of CEO’s, which throughout the state, range from a modest $136,000 to an exorbitant $2 million plus salary.The weigh shows that CEO compensation is directly related to organizational size, stating, â€Å"A 10 percent increase in the number of beds results in an 8 percent increase in CEO pay. ” Another 8% increase in pay is attributed to the CEO if the occupancy rate rises by 10%. â€Å"In contrast, providing more uncompensated care and admitting an additional public-pay patient lowers the compensation of hospital CEOs. The results of the study reveal that hospital CEO’s (certainly in the state of Connecticut) have financial incentive to increase the occupancy of privately insured patients rather than un compensated care and public paid insurance patients, to a fault suggesting that economic performance takes priority over charitable performance (Kramer, J. , ; Santerre, R. E). Notwithstanding, A non-distribution constraint on nonprofit organizations means that excessive profits cannot be distributed among those who make decisions within the organization; this includes employees, managers, and board members.Hence, the nonprofit eminence ought to mean hospital executives are paid base upon their attainment at fulfilling the charitable and social mission of the organization. Nonprofit hospitals have ethical responsibilities and obligations to serve the community, even in times of financial struggle. It is important for these organizations to record professionals that demonstrate the same ideals and values of the organization. health care leaders whose goal is to produce a healthier cosmos through change magnitude public programs and access to care is the type of leader that hospi tals and health systems should strive to obtain.Accomplished leaders can be found and appointed as a nonprofit CEO for a more reasonable (6 figure) salary if he or she is in the healthcare industry not for riches, but for offering a greater good. The American Red broom for example, took in $3. 3 billion in revenue in 2009, however Red Cross CEO Gail McGovern took in lone(prenominal) $456,000, according to the organizations IRS filing (Hancock, J. , 2011). McGovern is an example of a leader who recognizes the ethical financial dilemmas of her organization, and will willingly take a more set aside salary in order to accomplish the organization’s goals.There is no mention of executive compensation in the Patient Protection & in high-ticket(prenominal) Care Act besides the suggestion that compensation should be â€Å"reasonable”. Hospital executives should be paid found on their production within the organization and their contribution to their community. As a non profit organization, engage the charitable mission should take greatest grandeur in determining final executive compensation. This outlook of an organization’s mission should never be overshadowed by hospital expansion, financial well-being, or increased services and technology.Although these elements are incredibly important for the organization, the insured population, and the advancement of medicine, it is unethical for charitable organizations to use government subsidies for anything other than charity care and social benefit. cypher cuts, along with a feeble economy has resulted in hospitals engaging in mass layoffs to conserve resources. According to the US Bureau of Labor Statistics, the month of imperious (2011) consisted of thirteen mass layoffs in hospitals, totaling in over 1,000 jobs lost. The month before consisted of ten mass layoffs with over 600 lost jobs.This puts hospitals on pace for nearly one hundred thirty mass layoffs and over 8,000 jobs lost in 2 011. To make matters seem worse, in an article posted by FierceHealthcare, a leading source of healthcare direction news for healthcare industry executives, AMA data claims that a 2 percent cut in the Medicare program would lead to the loss of 195,000 jobs by 2021 (Caramenico, A. , 2011). These layoffs would be decreased immensely if hospital executives received more tolerate salaries. Excessive salaries are not only drain resources from the hospital, but are to a fault threatening the jobs of nurses, administrators, and other hospital employees.These staff members, who are on an opposite word spectrum in terms of salary, face the possibility of layoffs at any time of financial vulnerability. The decision to cut jobs in non-profit hospitals while executives are still receiving jetty Street salaries is unethical of the board of trustees. In financially difficult times, executives have the ethical responsibility to take pay cuts in order to maintain the organization’s soc ial reputation. Hospitals are extremely tangled organizations that more often than not are the wholeness largest employers in communities across the country.Hospital executives are responsible for making important decisions that will ultimately affect thousands of people. Many CEO’s and members of boards of trustees argue that executive roles are far too important to not have competitive compensation packages. It is argued that million dollar salaries, added bonuses, hefty retirement plans, and other attractive perks are the only way to attract highly effective leaders capable of running a hospital in a time of economic struggle and health reform. Many hospitals have net revenues exceeding the billion-dollar mark, making it easier of Board members to justify seven-figure salaries for CEO’s.President and CEO of advanced York-Presbyterian Hospital, Dr. Herbert Pardes inherited a $9. 8 million package in 2008 that included $6. 8 million of previously awarded retiremen t benefits, which hell receive when he retires at the end of 2011. If Dr. Pardes worked at a public company of about the same size, his salary would be outrageously low. In 2009, Nasdaq CEO Robert Griefelds total compensation exceeded $13 million while his companys revenues were only $3. 4 billion. New York-Presbyterian has 2,353 beds and pulled in $3 billion in revenue in 2008, up 3% from 2007. A The Greater New York Hospital tie-in spokesman defended Dr.Pardes’ salary, stating, â€Å"Dr. Pardes pay reflects his extraordinary success leading this large and complex organization, and exceeding objectives to upraise patient care, strengthen financial stability and promote community health in a very challenging environment. ” (Benson, B. , 2010) The Greater New York Hospital Association stated that â€Å"CEO salaries reflect not only a national demand for their services, but also the skills and leadership necessary to operate large, extremely complex medical centers th at are open 24/7, feed millions and sometimes billions in revenue, and are often the largest employer in the community. (Benson 2010) Leading one of these charities requires an individual that possesses an understanding of the issues that are unique to the charity’s mission as well as a high level of fundraising and management expertise. Attracting and retaining that type of talent requires a competitive level of compensation as dictated by the marketplace. It is important for donors to understand that since the average charity CEO earns roughly $150,000, a six-figure salary is not needfully a sign of excessive pay for a mid to large sized charity. Charity Navigator 2010) Today, executives are being paid to keep their organizations adrift(predicate) amid closings of many hospitals nationwide due to persistently poor financial performances. CEO’s face constant pressure to hire more staff, increase nurses’ salaries, implement more community programs, and invest in expensive technologies, while at the same time they are aware that insurers want to pay as critical as possible. The CEO undoubtedly faces many challenges, and the responsibilities are incredibly complex.Even with a nonprofit status, many counterbalance executive compensation cuts, arguing that these organizational leaders deserve salaries competitive to corporate pay. Trustees pay executives based on total revenues, as well as how effective they are in providing patient safety, clinical quality, attentive service, and cost effectiveness. Hospital executive compensation should be based on a number of elements, such as total revenue, the size of the organization, as well as the amount and effectiveness of community benefit.Instead of offering company cars and extravagant country club memberships, executives should be entitled to financial incentives to implement more community benefit programs. Peter Baristone, President & CEO of Mission Hospital located in Laguna Beach, CA r eferred to his own compensation dodging stating: Collaborating with the community to identify, understand, and respond to community needs that have an impact on health and quality of action is a major goal for all CEO’s. We establish specific quantifiable targets for each goal.One-seventh of my bonus depends on reaching the targets for community health and benefit. (Bogue, R, 1999). I recommend that all nonprofit Boards assemble an unconditional compensation committee, responsible for reviewing the CEO’s performance and ensuring that the CEO’s pay is appropriate. At its highest, CEO compensation should be capped at $1 million, thus allowing these large, urban hospitals to recycle resources back into the hospital and community programs, while at the same time offering executives a market competitive salary, fit for a CEO.At a time where nearly 20% of adults are uninsured and community residents are in need of help in the form of various programs, it is more im portant than ever for nonprofit hospitals to perform its duty of being a â€Å"non-profit” organization and be of greater service to the community in which it serves. Nonprofits not only have the legal responsibility to implement such benefits, but also have the example and ethical duty to carry out their social missions to the best of their ability, and as far as their recourses let them.By capping executive compensation, these resources can be better allocated to provide more charity care, to implement more community programs and benefits to produce a healthier community, and ensure equity among staff salaries. â€Å"Hospitals are unquestionably complex institutions that require skilled managers, but theres no place for skirt Street-level salaries if we want an affordable health care system. ” †bread Scherzer (Benson, B. , 2010) Works Cited: Terry, K. (2009, February 13). IRS Report Puts Tax-Exempt Hospitals Under Microscope †CBS password.Breaking News H eadlines: Business, Entertainment & knowledge domain News †CBS News. Retrieved celestial latitude 5, 2011, from http://www. cbsnews. com/8301-505123_162- 43840159/irs-report-puts-tax-exempt-hospitals-under-microscope/? tag=bnetdoma in Charity Navigator. (n. d. ). 2010 Compensation Study. Retrieved October 15, 2011, from www. charitynavigator. org/__asset__/st Mahar, M. (2011, swear out 24). Health Beat: High CEO Salaries at Nonprofit Hospitals Under Scrutiny…Once Again. Health Beat. Retrieved November 5, 2011, from http://www. healthbeatblog. om/2011/03/high-ceo-salaries-at- Swiatek, J. (2005, February 6). Pay is healthy for hospitals executives Corporate-like salaries seen at nonprofits top jobs. The capital of Indiana Star. Retrieved phratry 29, 2011, from www2. indystar. com/articles/6/220029-4276-P. html Gose, B. (2010). Nonprofit CEO Pay Under Scrutiny. Chronicle Of Philanthropy, 22(16), 8. Appleby, J. , & TODAY, U. (2004, September 30). USATODAY. com â₠¬ IRS looking closely at what non-profits pay. News, Travel, Weather, Entertainment, Sports, Technology, U. S. & World †USATODAY. com.Retrieved November 5, 2011, from http://www. usatoday. com/money/companies/management/2004-09-30-salary- Kramer, J. , & Santerre, R. E. (2010). Not-for-Profit Hospital CEO Performance and Pay: Some Evidence from Connecticut. Inquiry, 47(3), 242-251 Hancock, J. (2011, dire 28). For hospitals, ‘nonprofit stops with CEOs paycheck †Baltimore Sun. Featured Articles From The Baltimore Sun. Retrieved November 4, 2011, from http://articles. baltimoresun. com/2010-08-29/health/bs-bz-hancock-hospital-pay-20100829_1_hospitals-executive-compensation-ceos Caramenico, A. 2011, October 4). more than mass layoffs as hospitals face payment cuts †FierceHealthcare. Healthcare News, Hospital News, Healthcare Companies — Fierce Healthcare. Retrieved October 26, 2011, from http://www. fiercehealthcare. com/story/more-mass-layoffs- hospi tals-face-payment-cuts/2011-10-04 Benson, B. (2010). Hospital execs enjoy healthy paydays. (cover story). Crains New York Business, 26(12), 1-15. Bogue, R. (1999). An incentive for community health. Linking CEO compensation to community goals. Trustee: The diary For Hospital Governing Boards, 52(5), 15-19.\r\n'