Although the local hospitals have not received federal bailout money, Christopher Koller, Rhode Island's health insurance commissioner, estimates that more than half of their revenues are paid by the government-financed Medicare and Medicaid programs. Sole control of compensation for the hospital CEOs, however, rests with the boards of directors of their respective institutions.
David Gifford, director of the Rhode Island Department of Health, declined to comment on the high level of CEO pay, saying he needs more information on comparable compensation elsewhere, but he warned that lower salaries could produce weaker hospitals.
Regardless, the state Health Department has no explicit authority to regulate CEO compensation, he says. And neither does Attorney General Patrick Lynch, according to the chief of his civil division, Jim Lee. "If somebody thinks there ought to be a law limiting the compensation of CEOs of nonprofit institutions," Lynch spokesman Michael Healey says via e-mail, "they should take it up with the legislature."
But the legislature, with the state facing hundreds of millions of dollars in state debt, is struggling with other issues, and it has not showed any inclination to tackle this topic.
How big salaries get madeAlfred Verrecchia, the chairman of Lifespan's board of directors, defends the generous salaries paid by Rhode Island's largest hospital network.
TOP DOG: While some criticize Vecchione’s lucrative compensation, one observer calls him a workaholic who is always on call and constantly handling crises.
"If you go back several years ago, Lifespan was running a $50 million deficit," Verrecchia says. "George Vecchione and his team have rebuilt the financial soundness of Lifespan . . . We have to pay competitive salaries, [because] otherwise we won't be able to hire the managers that you need to run an institution as complex as Lifespan."
Verrecchia also chairs Lifespan's compensation committee, a five-member group that includes V. Duncan Johnson, a partner at Edwards Angell Palmer & Dodge; William H.D. Goddard, manager at Brown & Ives Land Co.; East Side Marketplace owner Scott Laurans; and Seekonk businessman Lawrence Aubin.
The committee, Verrecchia explains, hires a consultant to review executive salaries at comparable institutions, and then recommends base salaries, annual bonuses and long-term incentives to the board of directors.
This process has made Vecchione, a New York City native who began his career as an accountant, and who recently celebrated his tenth anniversary as Lifespan's CEO, New England's highest-paid health-care executive. The region's largest health-care system, Boston's Partners HealthCare System, includes Harvard University-affiliated Brigham and Women's Hospital, Massachusetts General Hospital, and six other institutions. In 2007, its net patient revenue — a number used to compare network sizes — was $4.95 billion, according to Richard Copp, Partners' director of communications.
By comparison, net patient revenue at Lifespan, with four hospitals (and which is seeking to merge with Care New England), was $1.2 billion.
Nevertheless, Vecchione received $2.95 million in compensation and benefits in 2007, while Partners CEO James Mongan received $2.02 million. In 2006, Vecchione collected $2.94 million in compensation, while Mongan received $1.96 million.
(Since the Phoenix last surveyed hospital compensation, the gap between Vecchione's compensation and the CEOs of the major Boston networks has increased. In 2000, Vecchione made $700,000 more than the CEOs at Partners and Caritas. The disparity has since widened to more than $900,000.)