Annually, the publicly elected Board of Directors of the Washington Township Health Care District (also known as Washington Hospital or the Washington Hospital Healthcare System) reviews the CEO’s base salary and considers an award of At-Risk Performance Compensation. This year, the Board conducted its review during the December 14, 2011 open public meeting of the District.

The purpose of the annual review is to consider adjustments to the CEO’s compensation based on the Board of Directors’ compensation philosophy and the performance of the CEO during the past year. The Board of Directors exercises its oversight responsibilities over the District by hiring the CEO who is entrusted to make sure that Washington Hospital remains financially strong and capable of meeting its responsibilities to provide high quality health care to its patients.

Although the Washington Township Health Care District is a public entity, unlike cities or counties, it does not receive any taxpayer funds to cover its operations. Rather, the District is required to compete against other profit and not-for-profit healthcare providers to cover not only its operational costs (including employee salaries) but also to fund its community and charity care programs.

2011 Discussion Regarding Adjustments to the CEO’s Compensation

At the end of each year the Board of Directors reviews the performance of the CEO, Nancy Farber, and makes adjustments to her compensation consistent with the hospital’s compensation philosophy. The Board’s process includes a review of the CEO’s achievements for the prior year. The Board also receives a report from its independent compensation consultant to satisfy Internal Revenue Service guidelines for determining the range of reasonable compensation.

Integrated Healthcare Strategies was retained to provide independent compensation data to make sure that the CEO is paid fairly and appropriately. Integrated Healthcare Strategies is the leading healthcare compensation consultant in the United States. Hundreds of healthcare systems use Integrated Healthcare Strategies’ services on an annual basis to assist those organizations with the very same process that is followed at Washington Hospital.

Integrated Healthcare Strategies helps the Board properly align the CEO’s compensation rate with other similar hospitals in California and across the country that compete for the same executive talent. Integrated Healthcare Strategies uses its own proprietary database and in addition, uses two other commercially available databases in its analysis.

Previously, the Board determined that the CEO’s base salary should be administered using ranges built around the 65th percentile of the selected peer group and that her overall cash compensation should be administered using ranges targeting the 75th percentile of the selected peer group.

Eric Reehl, a consultant with Integrated Healthcare Strategies, presented his findings at the November 9, 2011 Board of Director’s meeting. The video of his presentation can be viewed above.

Achievements

Washington Hospital Healthcare System ended 2011 on a high note. Significant milestones were reached that continue to reinforce the reputation of the institution as a premiere medical facility committed to meeting the health care needs of our community.

This high level of success is evident in Washington Hospital’s financial statements and the numerous accomplishments. Washington had a strong financial performance in FY 2010-11 compared to other hospitals. The total net operating income for last fiscal year was $36.8M, well above the budget.

Again, millions of dollars for charity care were provided, specifically in 2011 Washington provided $44 million in health care services to the District’s medically indigent who could not pay. This includes care provided for free and also care provided to the Medi-Cal population that Washington subsidizes since the Hospital is compensated much less than the cost of providing care.

Just recently, the Board "cut the ribbon" on the newly completed Central Utility Plant, a very complex construction project and a critical piece of infrastructure needed to support the operations of the Hospital in the decades to come. The Central Utility Plant was completed on time and on budget.

Also Washington Hospital was granted Magnet Status recognition by the American Nurses Credentialing Center. A Magnet designation is the highest level of recognition that a hospital can achieve for nursing excellence. Only 6.7% of hospitals in the United States have earned this status and Washington is one of only four hospitals in the Bay Area to have this designation.

The Joint Commission, which rates hospitals on key measures of service and patient care, named Washington Hospital as a top performer on key quality and patient safety measures. It is a prestigious designation awarded to an elite group of only 405 hospitals in the entire nation.

Washington Hospital also received the 2011 HealthGrades award for patient safety excellence, which places the hospital among the top 5% in the nation for patient safety. Washington is the only hospital in the East Bay and one of only 268 hospitals nationally to receive this designation.

Washington Hospital’s Center for Joint Replacement (CJR) received a five-star customer service award and the Top Performer Award from Professional Research Consultants. The CJR also scored in the top 10% nationally based on excellent patient responses. HealthGrades, the leading national health care rating information and advisory service, ranked it the number one joint replacement program in California.

Washington’s stroke program received the 2011 HealthGrades Five-Star Award, ranking among the top 15% in the nation for the treatment of stroke. For the third year in a row the Hospital was also awarded the Gold Seal of approval from the Joint Commission for Primary Stroke Centers.

As a result, the Board determined that the CEO’s performance has been exceptional especially when considering the difficult economic climate and the great uncertainty surrounding health care reform. Washington Hospital Healthcare System achievements are in large part the result of Nancy Farber’s strong leadership and commitment to building a healthcare system that will serve this community for years to come.

Action Taken

At the December 14, 2011 meeting of the Washington Township Health Care District, the Board of Directors took the following actions:

1. Because of the CEO’s exemplary performance this past year, the Board voted to award Nancy Farber the maximum At-Risk Performance Compensation Award possible of 40% of base salary which equals $252,867. This award is made in accordance with the Board’s compensation philosophy for the CEO and still places the CEO below the 75th percentile of the selected peer group in overall cash compensation.

2. The Board awarded the CEO a 3% increase in base salary but noted the following: this past year the CEO’s salary was 16% below the 65th percentile level of the selected peer group. The 65th percentile is the target level for setting the base salary of the CEO. In part, the CEO’s base salary has fallen further behind the 65th percentile because she voluntarily refused salary adjustments in the past which would have kept her base salary at the 65th percentile. The Board acknowledged that it could not just make up the difference in one year and determined that she should receive an increase of 3% to her base salary effective November 1, 2011 which is approximately equal to the average increase for executive compensation as reported by Integrated Healthcare Strategies.

3. Lastly, the Board of Directors voted to extend the CEO’s contract by one year, for a new term beginning November 1, 2011 and ending October 31, 2015.