Very Healthy Paychecks

Greg Van Pelt wants to cut your health-care costs.

As the retiring CEO for Providence Oregon, he's talked about working to find solutions for ballooning medical expenses and creating community care organizations, key to Gov. John Kitzhaber's health-care reform plans.

Part of the Oregon Health Leadership Council, he has spearheaded the group's mission to find ways to reduce costs, even testifying on the issue in front of the state Legislature.

"We all complain about health-care spending, but nobody does anything about it," Van Pelt, 61, told The Washington Post in January. "Now, that's changing."

But Van Pelt's own swelling paycheck topped $4.2 million, according to Providence's 2011 tax return, the most recent on record. That's triple what his predecessor took home two years ago.

WW examined tax returns filed at nonprofit hospitals and health systems operating in Oregon and found that compensation for a handful of executive positions has exploded.

Van Pelt is near the top in hospital-exec pay. Only his boss, outgoing Providence Health & Services CEO John Koster, has seen his pay rise   faster. Records show Koster earned $1.8 million in 2009, but now brings in $6.3 million. Van Pelt and Koster declined to be interviewed for this story.

"It's shocking," says Felisa Hagins, political director at Service Employees International Union Local 49, which represents more than 10,000 health-industry workers in Oregon and Southwest Washington. "Some of our members working at these hospitals can't even pay their own deductibles."

Oregon was marked as a leader in cutting health-care costs and slowing the growth of Medicaid. The Obama administration has promised Kitzhaber almost $2 billion over the next five years, but the state will see the federal funds only if it can achieve a slower growth rate in health-care costs than the rest of the nation.

Big pay increases like those for Van Pelt and Koster—first reported by The Lund Report, a health-care news website—show up at hospitals praised for their work in controlling costs.

St. Charles Health System, based in Bend, has been held up by Kitzhaber and others as a leader in pioneering community-based care strategies.

Meanwhile, its CEO, James Diegel, saw his pay go from $481,000 in 2009 to $1.17 million—a 143 percent increase, records show. The CEO of St. Charles Medical Center, Jay Henry, saw a 66 percent increase, to $571,000 a year. Diegel and Henry also declined to be interviewed.

Dennis Dempsey, chairman of the compensation committee for St. Charles, says Diegel's increase comes largely from one-time incentive and deferred pay.

"He's paid well, but he's not overpaid," says Dempsey. "In fact, I have to commend Mr. Diegel for taking way below the market comparison."

Other hospital officials say their executives' pay is in line with the market.

"The numbers can be very misleading," says Providence spokeswoman Colleen Wadden, who adds that Van Pelt's and Koster's increases include retirement benefits. "It's appropriate to look at what the market average is and stay in mind with that."

Providence and St. Charles declined to share their compensation studies, as did Corvallis-based Samaritan Health Services, whose CEO and chief financial officer since 2009 saw pay increases of 32 and 40 percent, respectively.

Few spokespeople were willing to comment on the big pay increases received by some hospital administrators. "We really truly try to be just and fair with what we pay our leadership," says Sister Andrea Nenzel, board chairwoman for PeaceHealth, whose Oregon executives' pay increased an average of 6 percent since 2009. "I would hope that others are doing the same."

Others, like Bruce Goldberg, director of the Oregon Health Authority, stress that the focus should be on reducing the cost of health care, not on CEO pay.

"Quite frankly, there are a lot of people making a lot of money in the health-care sector. [It's] a problem throughout," Goldberg says. "To fundamentally reduce costs in our state and in our society, it's going to be how we deliver care. That’s really where the money is.” 

WWeek 2015