When Grays Harbor Community Hospital CEO Tom Jensen signed his new contract in September of 2013, he agreed to a three-year pact to lead the facility at a starting salary just below the average for chief executives of similarly sized hospitals around the state.
But exactly how to gauge what “similarly sized” means in today’s health care realm is the question. Salaries for hospital executives vary widely in Washington, and with health care branching out beyond the standard measure of beds per facility, it’s easy to see why. Strictly using that benchmark, Jensen falls within the salary range of lead administrators in other like-sized facilities, but, as many in the industry point out, bed count is an increasingly outdated measure of the breadth of services a particular hospital provides.
A Daily World analysis of lead administrator salaries for 2013 — the most recent year reported to the state Department of Health — revealed a wide disparity in annual pay for hospital CEOs and other executives.
Jensen, who was originally hired in 2010, spent four months at his 2013 base salary of $245,000 per year. According to his current contract, acquired by The Daily World through a public records request, in January of 2014 his base pay increased to $278,950 — a nearly 14 percent raise. This year, his base salary rose a comparatively modest 6 percent to $295,600. Jensen is in line for a more than 11 percent pay hike in January of 2016 to a base salary of $329,750 per year.
His contract also includes the possibility for a bonus of up to 11 percent of his annual salary. But, Jensen, in Boise, Idaho, this week participating in a panel discussion on physician groups, stressed that he’s never taken one.
Jensen replaced former Community Hospital CEO John Mitchell, who left in December of 2009. He came to Grays Harbor from Coulee Medical Center in Eastern Washington, where he also served as a health care finance instructor at Eastern Washington University, his alma mater. Jensen’s current contract with Grays Harbor Community Hospital expires on Sept. 6, 2016.
His contract does include a clause that allows Jensen to “opt out” upon a reorganization of the hospital’s structure or ownership, as long as he exercises the option within six months of the reorganization. The clause requires the hospital to pay a year of Jensen’s salary. Conversion to a public hospital district, with a new board in charge, would presumably qualify, but Jensen says he has no interest at this time in exercising it.
“I’m very happy with the new board,” he said.
And, though he’s “always interested” in discussing a contract extension, Jensen said he hasn’t been approached on the subject.
“A year and a half for them has to seem like a long ways away,” he said of the recent switch to a public hospital district and the new board’s learning curve.
Complicated comparisons
In 2013, the highest paid lead hospital administrator in the state was Legacy Salmon Creek Medical Center President &CEO Dr. George J. Brown. The leader of the 220-bed Vancouver, Wash., facility made a base salary of $960,288 per year.
It becomes apparent when comparing salaries that a hospital’s number of beds doesn’t necessarily prove to be an accurate benchmark. Even though Virginia Mason Medical Center has nearly 150 more registered beds than Legacy Salmon Creek, its CEO, Dr. Gary S. Kaplan, made about $21,500 less than Brown in 2013 at $938,733 per year.
At about 140 beds, Grays Harbor is decidedly much smaller, and no lead administrator at a comparably sized facility broke the half-million mark in annual salary in 2013. While bed count does provide a very general benchmark to CEO pay, even among similar hospitals to Grays Harbor, there is significant variation.
For hospitals between 120 and 150 beds, salaries in 2013 ranged from a low of $180,070, earned by Olympic Medical Center’s Eric Lewis in Port Angeles, to a high of $458,880 for Skagit Valley Hospital lead administrator Gregg Davidson in Mount Vernon.
Among the seven facilities between 120 and 150 beds statewide, the average salary was $266,336, besting Jensen’s 2013 base salary by more than $21,000.
Among the same group of seven hospitals, separating the public facilities from the private hospitals provides even less of a measuring stick. While Grays Harbor Community Hospital is now controlled by Grays Harbor Public Hospital District 2, Jensen’s contract was agreed upon while the hospital was still privately controlled by a nonprofit corporation.
The public hospitals of similar size to Grays Harbor include both Olympic Medical Center, the low salary of the group, and Skagit Valley, whose lead administrator registered the highest. The four remaining private hospitals paid their lead administrators between $192,000 and $301,000 per year, and those two book-end figures came from the two smallest hospitals on the list, respectively — Valley Hospital in Monroe (123 beds) and St. Francis Hospital in Federal Way (124 beds).
Changing landscape
Across the health care industry, the last few decades have seen a shift away from a focus on inpatient services, Association of Washington Public Hospital Districts Executive Director Ben Lindekugel pointed out, making simple beds per facility an increasingly outdated measure of a hospital’s size and services.
“Health care everywhere is moving to outpatient services,” Lindekugel said. “There’s a lot of what hospitals do that isn’t about heads in the beds.”
While Grays Harbor Community Hospital “happens to have a very robust set of (inpatient) services,” Lindekugel said, it isn’t unlike other health care providers in its shift toward more community-based health care.
“There’s a growing move toward better integration of primary care and hospitals,” he said, which is often requested by the primary care doctors themselves, he added.
Grays Harbor is no different, with many doctors utilizing the hospital’s Harbor Medical Group for staffing, billing and other services.
“The real issue for many primary care providers is security,” Jensen said. “They’d rather just have someone else do (the business aspects) so they can take care of patients.”
Public Hospital District Board President Maryann Welch alluded to Grays Harbor’s expanded scope when she asked the board at its January meeting if Grays Harbor Community Hospital was still an adequate name to describe that expansion into community health care.
“The lines of business have expanded,” Welch told her fellow commissioners. “I don’t think our community understands the breadth of our services.”
That expansion has added to the CEO pay discussion, making location, total hospital expenses, total full-time employees — including affiliate organizations — more important factors in figuring CEO salaries than the bed count of the facility.
Or, as Jensen put it, “Are you just a hospital CEO, or are you responsible for a health system?”
“The big thing that people don’t understand is: How does the board justify what they pay somebody like me? There’s a methodology,” he said. “But, if it were different, I’d do it anyway. I love what I do.”
If Grays Harbor had been a public hospital district when Jensen’s contract was signed, would, or should, Jensen’s salary have been lower?
“(CEO pay) doesn’t have very much to do with whether it’s public or private,” Lindekugel said. He said some members of the public believe public hospital district chief executives should be paid less than their private counterparts, a thought he dismisses.
“Would you rather have lower-quality care because it’s a public hospital district?”
Grays Harbor Community Hospital CEO Tom Jensen’s contract by the numbers
• Signed Sept. 23, 2013
• Expires Sept. 6, 2016
Base salary
2013: $245,000 (Sept. 7, 2013, through end of the year, or about 4 months)
2014: $278,950 (13.9 percent raise)
2015: $295,600 (6 percent raise)
2016: $329,750 (11.6 percent raise)
Other benefits
• Medical benefits
• Retirement plan
• Participation in hospital’s performance incentive program, with maximum yearly bonuses equal to 11 percent of his annual salary
• Dues paid to professional organizations (upon approval of the board), plus professional leave time to participate in the organizations
• $1,000 per month automobile allowance, in lieu of mileage reimbursement
2015 Grays Harbor Community Hospital Executive Salaries
Chief Operating Officer Larry Kahl — $160,000
Chief Financial Officer Joe Vessey — $170,000
Chief Nursing Officer Cynthia Walsh — $171,000
Harbor Medical Group Administrator Josh Martin — $162,179*
* Harbor Medical Group Administrator Josh Martin was recruited and is employed by Medical Management Inc. in Idaho. The hospital signed a two-year contract with Medical Management to oversee Harbor Medical Group, which went into effect when Martin was hired in March of 2014. The hospital is responsible for Martin’s $162,179 annual salary, which it pays to Medical Management, and an additional management fee of $68,064 per year. The hospital was also required to pay a $20,000 recruiting fee to Medical Management Inc. when Martin was hired, according to the contract.
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