All but two Rhode Island hospital CEO executives would face massive pay cuts under legislation filed last week by state senator Michael McCaffrey (D-Warwick). The proposal caps administrative salaries at state-licensed hospitals, nursing homes, and other health-care facilities at 2-1/2 times the governor's salary, or approximately $300,000 a year.
The bill was coincidentally filed the same day the Phoenix reported that Lifespan CEO George Vecchione received, according to the hospital network's federal tax return, almost $3 million in compensation and benefits in 2007. Only Westerly Hospital CEO Charles Kinney and South County Hospital CEO Louis Giancola received less in 2007 than the $300,000 level proposed by McCaffrey.
After hearing complaints from physicians, the eight-term senator says he investigated and found some compensation levels "extremely high." Hospital CEOs, he adds, "are always coming to the legislature and saying, 'We need more money. We need more money' . . . It doesn't pass the smell test."
Although he has not read McCaffrey's bill, Lifespan chairman Alfred Verrecchia warns that limits on executive compensation may produce administrators who cannot do the job. "You've got to have competitive salaries," he says. "When you start putting caps on salaries, that's a slippery slope to go down."
Meanwhile middle managers at Lifespan are smarting because they did not receive customary merit raises in January, although executives received bonuses at the end of December. Lifespan's executive salaries are "preposterous," says a middle manager who requested anonymity for fear of retribution. "To perpetuate that by giving even more to the folks who don't need [it] . . . made health care more expensive and unreachable to people who need it." If Lifespan's finances are tight, he says, no bonuses should have been awarded.
Jane Bruno, Lifespan vice president of marketing and communications, says the executive bonuses were awarded based on the health-care giant's performance during the fiscal year that ended September 30, 2008. During the following three months, the hospital's endowment dropped, bad debt increased, and uncompensated care grew, forcing Vecchione to send a memo announcing that merit raises for middle managers and executives would be postponed at least until April. Since then, she says, Lifespan executives have met with employees to explain the network's financial situation.
"Lifespan is not in financial distress," Verrecchia stresses, but management and the board are reviewing all capital projects due to the shrinking endowment. In tight times, he promises, people at the high end of the pay scale will feel the belt tightening more than middle managers.
Unionized nurses and technicians at Rhode Island Hospital are scheduled to receive a raise in 2009. Members of the United Nurses & Allied Professionals, who received a 3.5 percent raise last July, will receive a 4 percent pay hike in July. Workers at the other Lifespan hospitals are not unionized.