People walk on the pedestrian bridge walkway over North Duke Street from the main Lancaster General Hospital building.
In October 2010, Lancaster General Health had a problem.
Its CEO, Tom Beeman, was shipping out for a military tour of duty, to serve as deputy director of the National Intrepid Center of Excellence in Bethesda, Md. Two other administrators —\!q Executive Vice Presidents Jan Bergen and Marion W. McGowan — would step into Beeman's shoes while he was away.
Yet Beeman stayed involved. "We had regular Skype [video-conferencing] calls," said Alex Henderson, chairman of the LGH Board of Trustees.
That, LGH officials believed, merited a bonus. So Beeman got nearly $90,000 for his efforts in absentia.
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All told, the 25 highest-paid executives at Lancaster General took home $2.1 million in bonus and incentive pay in 2010. Beeman's was the highest; McGowan ($192,226), Bergen ($177,752), former Chief Financial Officer F. Joseph Byorick III ($140,500) and Chief Legal Officer Robert P. Macina ($111,562) rounded out the top five.
Bonus and incentive pay is awarded for hitting certain benchmarks, such as clinical quality and patient satisfaction. But in a national survey released last month, Integrated Healthcare Strategies reported the most common category for annual incentives remains financial — often, operating margin (the proportion of operating revenue retained as income, a significant indicator of the system's profitability).
According to the Pennsylvania Health Care Cost Containment Council, the margin at Lancaster General Hospital (by far the largest component of Lancaster General Health) fell each of the past three years, from 9.3 percent in fiscal year 2009 to 6.89 percent in fiscal year 2011.
Trustee Henderson said that as LGH's goal isn't to maximize revenue but save lives, executives can be doing a fantastic job — worthy of six-figure bonus and incentive pay — even when the system's financial performance slips.
Consider an executive who devises a way to shorten stays for patients, Henderson said: "That's great for the patients, for insurance companies, for nurses who don't have to take care of people who don't need to be here" — but it's bad for LGH's bottom line.
"We've looked at the issue of, should there be a bonus pool tied to some financial metric," Henderson said. "It could be net revenue, it could be bond ratings, it could be the balance sheet ... but its view, and the Compensation Committee's view, is that overweighting the financial side of it is detrimental to what we're telling the executive team to do.
"If we were a for-profit, we'd have a very different business model."
