Exec pay varies widely at R.I., Mass. hospitals

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Lifespan Corp. President and Chief Executive Officer George A. Vecchione’s compensation topped $3 million for the first time in 2008, according to an analysis of federal tax returns by Providence Business News.
Lifespan paid Vecchione $3.2 million in salary and benefits during the fiscal year ended Sept. 30, 2008, up 8.1 percent from the nearly $3 million he got in fiscal 2007, according to the hospital group’s latest income tax filing. (Lifespan says Vecchione agreed to an effective pay reduction of 26 percent for fiscal 2009, which would put his compensation for that year at roughly $2.4 million. His official compensation for the year won’t be disclosed until this summer.)
The study found a wide variation in executive compensation trends at local hospitals in fiscal 2008, which included the start of the recession in December 2007.
Vecchione was far and away the best-paid hospital executive in Rhode Island or Bristol County, Mass. His compensation was more than triple that of second-ranked Linda Shyavitz, president and CEO of Sturdy Memorial Hospital in Attleboro, who received $1.06 million. Westerly Hospital’s Charles Kinney, at $293,454, got the smallest amount.
Kent Hospital’s Mark E. Crevier, who retired in October 2008, saw his pay jump 20 percent to $752,006 in one year. At the other extreme, John J. Hynes of Care New England saw his compensation fall 37.5 percent to $873,332, down from $1.4 million in 2007.
For the 21 executives included in the study, the average compensation package in fiscal 2008 was $771,496, up 1.6 percent from the prior year’s average of $759,443. Although the executives received an average pay increase of 1.8 percent, that was partly because of steep pay cuts taken by a small number. By contrast, the median raise was 6.7 percent.
Shyavitz was the only executive other than Vecchione whose compensation totaled more than $1 million in fiscal 2008. A spokesperson for Sturdy did not immediately return a phone call seeking comment.
The pay earned by local hospital executives became an issue last year after a survey in the trade magazine Modern Healthcare showed most hospital CEOs in Rhode Island were paid more than the national average for similar-sized institutions. In June, the R.I. Senate passed a bill that would have capped the pay of hospital executives in the state at 110 percent of the regional average for their peers in the Northeast. But the measure never made it out of committee in the House.
“The resources just don’t exist to justify paying millions to executives at hospitals,” the measure’s sponsor, Sen. Michael J. McCaffrey, D-Warwick, said at the time. “These enormous salaries for top executives are just helping to push the cost of health care even further out of the reach of the public.”
Alfred J. Verrecchia, chairman of Lifespan’s board of directors, defended Vecchione’s compensation, arguing that it was necessary to pay top dollar in order to attract qualified executives. The nonprofit organization, which has more than 11,000 employees, saw its net income fall 64 percent to $36.4 million in fiscal 2008 even as its revenue rose 5 percent to $1.5 billion.
Executive pay at Lifespan is set by a board committee based on data provided by the Hay Group, a consulting firm in New York. In a statement, Verrecchia said the group aims to keep its executives’ total compensation between the 50th and 75th percentile for their peers.
“A significant portion of the executive pay is … only paid out if quality, service and financial performance goals established by the compensation committee are achieved,” he said.
Verrecchia said Vecchione’s pay package was mostly made up of his base salary, which was relatively flat year over year; bonuses he received based on the organization’s performance; and contributions to his retirement plan.
“It is important to realize that these figures reflect 2008 data, a time prior to the current fiscal challenges,” Verrecchia added. Vecchione agreed to forego his annual merit raise for fiscal 2009 and take a permanent reduction in benefits. Two months later, he agreed to a further 10 percent cut in his base salary. Lifespan declined to provide details on Vecchione’s pay package for the current fiscal year. •