CEO Compensation at Washington Hospital Healthcare System
The Chief Executive Officer is the only employee of the District who is
hired directly by the Washington Township Health Care District Board of
Directors. Annually, the Board reviews the CEO’s performance as
required by the employment agreement. As a part of that process, the Board
considers data provided by an independent health care compensation consultant,
Integrated Healthcare Strategies/Arthur J. Gallagher & Company, and
any and all other factors the Board considers important. The Board then
decides whether or not base salary should be adjusted and whether to make
an award of “at-risk” compensation. Concurrently, the Board
also considers whether to make any other revisions to the Chief Executive
Officer’s Employment Agreement.
The District has a long-standing philosophy of wage parity for all employees,
which includes the CEO. Wage parity means the CEO is not paid at the top
of the scale nor is she compensated towards the bottom. The District’s
compensation philosophy of marketplace parity establishes a base salary
for the CEO at around the 65th percentile of her peer group and total
cash compensation for the CEO in the range of the 75th percentile of her
peer group with a maximum possible “at-risk” award of 20 percent
of base salary. Benchmarking executive compensation based on peer group
data is a standard practice for establishing reasonable compensation for
executives working for non-profits. The District’s compensation
philosophy not only reflects the District’s long standing philosophy
of wage parity for all employees but also acknowledges the CEO’s
30-plus years of experience as a health care executive.
Washington Hospital Healthcare System continues to find success in a challenging
financial environment largely due to continued reductions in Medicare
reimbursement, and the proliferation of high deductible, high co-pay insurance
products. Hospitals and health care systems across the country continue
to experience a dramatic reduction in reimbursements.
Notwithstanding these challenges, Washington Hospital’s CEO made
significant progress to enhance services and to preserve the Hospital’s
ability to deliver quality health care to its residents and patients.
The Board of Directors noted that the District’s performance last
year was nothing short of outstanding and thanked Ms. Farber and her executive
team for leading the District and confronting the challenges of an increasingly
difficult economic environment. Total net income for fiscal year 2016-17
was $17.9 million, which was 16.9 percent over budget, despite net operating
revenues being below budget by $4.7 million.
Additionally, the Board of Directors mentioned the following achievements
in setting the compensation of the CEO, Nancy Farber.
- The Hospital successfully completed multiple surveys from independent organizations,
including the Joint Commission and the California Department of Public
Health (CDPH). Additionally, the Hospital was again designated as a Magnet
Hospital by the American Nurses Credentialing Center last fall.
- The construction of the Morris Hyman Critical Care Pavilion is moving forward
on time and on budget and will comply with California’s stringent
seismic safety standards, with a “base isolation” system similar
to that of other advanced facilities in the Bay Area and many earthquake-prone
areas throughout the world. Once complete, the facility will house a greatly
expanded Emergency Room that will be approximately four times the size
of the current one and will also house a state-of-the-art intensive care
unit (ICU) as well as an advanced coronary care unit (CCU). The new ICU
and CCU will have 48 beds compared to the current capacity of 28 beds.
All of the rooms will be private and larger in size. The pavilion will
also have an additional 68 private med-surg beds and support space. The
Pavilion is scheduled to open in 2018.
- The District is also continuing with the implementation of its Lean transformation
journey which is based on the extensively proven Toyota Production System.
The program, which has been part of Washington Hospital for more than
two years, will help Washington Hospital reach its goal to be the high-quality,
low-cost provider of choice. Lean is critical to the Hospital’s
mission of successfully serving the health care needs of the residents
of the District now and into the future. Lean focuses on improving patient
safety and quality while reducing non-value-added services from our operations.
- In 2017, Washington Hospital again has been recognized by Healthgrades
as one of the top hospitals in the United States for clinical excellence,
for four-years. Healthgrades is a leading source of safety, quality and
patient satisfaction information about hospitals and physicians. Several
clinical services within the hospital, including treatment of heart attacks,
sepsis treatment, orthopedics/joint replacement and treatment of pneumonia
were cited for excellence by Healthgrades.
Hospital and health care system CEOs face unique challenges and their pay
reflects the complexity of the job. At WHHS, the CEO oversees all health
care system operations, which run 24-hours-a-day, seven days a week. Regardless
of the challenges created, Washington Hospital Healthcare System is vital
to meeting the health care needs of the community by providing a wide
range of acute care and diagnostic services, supporting public health
needs and offering a myriad of other community services to promote the
health and well-being of the community.
WHHS receives no taxpayer or government financial support to cover its
operations, aside from local voter-approved funds dedicated only to capital
improvement projects required by California’s unfunded, state-mandated
seismic standards. So, when reimbursements are reduced, whether from government
payors (i.e. Medicare) or from private payors (i.e. insurance companies),
the CEO must find a way to address reduced reimbursements while still
making sure that WHHS provides exceptional quality of care for its patients
and needed services for its residents.
At its September 13, 2017 meeting, the Board voted to adjust the CEO’s
base salary to $840,320, which is the 65th percentile of her peer group
and is consistent with the Board’s compensation philosophy. As a
result of numerous achievements noted by the Board of Directors, the Board
also voted to provide the CEO with an “at risk” compensation
award equal to 20 percent of the base salary which is also consistent
with the Board’s compensation philosophy.
The vote was unanimous.
To review the CEO's contract, click on the link below:
CURRENT CEO CONTRACT