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Approach to CEO Compensation

The Chief Executive Officer (CEO) is the only employee of the District who is hired directly by the Washington Township Health Care District Board of Directors. In 2019, the District’s longtime CEO, Nancy Farber, decided to retire. As Ms. Farber’s successor, the Board appointed Kimberly Hartz as the District’s new CEO.

Previously, Ms. Hartz served as a Senior Associate Administrator. Her duties included financial and operational oversight of the following: Strategic Management, Contracting, Community Relations, Governmental Relations, Off-Site Facilities, Women’s Center, Inpatient/Outpatient Ancillary Services, the Washington Township Medical Foundation, and the Development Corporation, which includes the Washington Outpatient Surgery Center, the Washington Outpatient Rehabilitation Center, Washington Medical Billing, Washington On Wheels, Washington Urgent Care, Washington Sports Medicine Program, and the Ohlone Student Health Center. In her previous role, Ms. Hartz also played a vital role in the establishment and ongoing growth of the District’s affiliation with UCSF.

In setting the CEO’s compensation, the Board considers data provided by an independent health care compensation consultant, Integrated Healthcare Strategies/Arthur J. Gallagher & Company, and any other factors the Board considers important.

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 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 the CEO’s peer group with a possible incentive award of up to 25% of base salary. Benchmarking executive compensation based on peer group data is standard practice for establishing reasonable compensation for executives working for non-profits.

For the first year of the Chief Executive Officer’s employment, the Board decided that Ms. Hartz’s base salary would be set at 80% of the 65th percentile ($712,000), which the Board believed was appropriate while she gained experience in her new role as the chief executive officer, a role she had never previously held.

The CEO’s base salary for subsequent years would be adjusted as she gained experience as CEO of the District. Any adjustment to base salary would also reflect her performance and the results of an updated compensation survey.

According to the CEO’s Employment Agreement, the Board was due to consider an annual base salary adjustment and incentive award by October 31, 2020, for the fiscal year ended June 30, 2020. Due to the impact of the COVID-19 Pandemic, Ms. Hartz requested that the Board defer any consideration of a base salary adjustment and incentive award until after the end of the fiscal year ended June 30, 2021. Ms. Hartz’s base salary has remained the same since July 1, 2019, and she received no portion of the incentive award for the prior fiscal year.

On December 8, 2021, at the Board’s regular meeting, the Board considered a base salary adjustment and an incentive award. Prior to taking any action, the Board reviewed a report from Arthur J. Gallagher & Company. Gallagher is a leading healthcare compensation consultant in the United States. Hundreds of healthcare systems use Gallagher’s services as an independent consultant to satisfy Internal Revenue regulations for determining the range of reasonable compensation.

The Gallagher Report assesses the competitiveness of the cash compensation for the Chief Executive Officer. Appendix A of the Gallagher Report includes a list of similarly situated California organizations in Gallagher’s proprietary database. The Gallagher Report for the current fiscal year, dated September 2021, was posted on the District’s website for this agenda item.

The Gallagher Report provides the Board with appropriate comparability data in accordance with IRS regulations. In its report, Gallagher reviewed background data on the District for the 2020-2021 and 2021-2022 fiscal years. Gallagher then compiled data on compensation levels for California healthcare systems regressed for size using data from Gallagher’s proprietary database and salary surveys. Based on the foregoing, Gallagher prepared market charts summarizing compensation survey data at the 25th, 50th, and 65th percentiles for the California peer group. The charts are prepared for both base salary and total cash compensation.

At the December 8, 2021, meeting, the Board considered the CEO’s performance since her appointment on July 1, 2019. The Board members commented that the CEO’s performance has been outstanding, particularly given the unprecedented challenges of the COVID-19 Pandemic. The Board decided to adjust the CEO’s base salary to match the 50th percentile, which equals $861,000. The Board indicated that the adjustment was consistent with its intent to adjust the CEO’s base salary to make progress toward setting the CEO’s base salary at the 65th percentile over time, consistent with the Board’s compensation philosophy. Also, the adjustment was made in recognition of the CEO’s outstanding leadership and performance.

In addition, the Board awarded the CEO an incentive award of $100,000, also due to the CEO’s outstanding performance. The Board noted the accomplishments listed in the CEO’s memo to the Board (posted as part of this agenda item). Under the terms of the Employment Agreement, the CEO was eligible to receive an incentive award of up to 25% of base salary or $178,000. Although the CEO’s performance justified a maximum award of $178,000, the Board felt that a $100,000 award was appropriate given that the District’s finances, while improving, have not recovered from the impact of the COVID-19 Pandemic.

To review the CEO's contract, click on the link below:

CURRENT CEO CONTRACT

FIRST AMENDMENT TO EMPLOYMENT AGREEMENT