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Approach To CEO Compensation

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Approach to CEO Compensation

Washington Township Health Care District Approach to CEO Compensation

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 (IHS), and any and all other factors the Board considers important. The Board then decides whether or not the CEO’s 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 with the District.

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 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 40 percent of base salary. Benchmarking executive compensation based on peer group data is not only a standard practice but an accepted methodology that is required by the IRS 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. 

 Last year, Washington Hospital Healthcare System began the fiscal year in a challenging financial environment largely due to the implementation of the Affordable Care Act, in conjunction with significant reductions in Medicare reimbursement, and the proliferation of high deductible, high co-pay insurance products. Hospitals and health care systems across the country experienced a dramatic reduction in reimbursements.

Notwithstanding these challenges, the Washington Hospital’s CEO made significant progress to enhance services and to preserve WHHS’ ability to deliver quality health care to its residents and patients. 

Washington Hospital’s Income from operations for the five months ended November 30, 2014 was $6,150,000, up $15,399,000 from the operating loss of $(9,249,000) in the same period last fiscal year.  Also, at December 31, 2014, days cash on hand for the Hospital was 174, up 15.2 percent from the 151 days cash at July 1, 2014 and up 31.8 percent from days cash at November 30, 2013 of 132 days. 

Additionally, the Board of Directors mentioned these achievements in setting the compensation of the CEO, Nancy Farber.

  • In 2014, Nancy Farber was instrumental in continuing to expand the important partnership between WHHS and UCSF. Through this affiliation, both local residents and physicians have access to this world-renowned academic medical center.  A few of the initiatives include:
    • In collaboration with UCSF, WHHS opened the new Washington Special Care Nursery.  The Special Care Nursery transitioned from Packard Children’s Hospital to Washington Hospital without any disruption in care for our youngest, at-risk patients. 
    • Transitioned the pediatric hospitalist program to UCSF who are now available 24/7 in Washington’s Pediatric Unit and Emergency Department.
    • In conjunction with UCSF’s Heart Transplant Program, the hospitals are working together to offer local heart failure outreach clinics as a “bridge to transplant” for those requiring transplant services.
    • Established a liver outreach clinic so patients needing liver transplant services can be seen in the local community for evaluation and for care after any procedures.
    • Launched the Washington Cancer Genetics Program with UCSF that provides greater access to genetic counseling services for residents of our district.
  • Washington Hospital received a full three-year accreditation from the Joint Commission Survey with acknowledgement of best practices for Medication Safety and the successful implementation of our electronic medical records system (Epic). The successful survey demonstrates our commitment and leadership role in providing quality patient care.
  • Additional enhancements were made to EPIC (the Healthcare System’s electronic medical record) including the secure patient portal, MyChart, which gives individuals access to their own personal medical record whenever and wherever they need it. Additionally, Care Everywhere was implemented which gives our clinicians fast, secure access to the medical records of visitors from outside our community and gives other hospitals on the Epic system access, with permission, to our patients medical records when there is a medical emergency away from home.
  • Washington Hospital will begin phase 2 of the Facility Master Plan with the groundbreaking for the Morris Hyman Critical Care Pavilion and nearby parking structure. 
  • In 2014, US News & World Report recognized Washington Hospital as the best hospital in the San Francisco Metro Region in seven specialty areas. Washington Hospital was recognized for its high performance in nine specialties including gastroenterology and GI surgery, geriatrics, gynecology, nephrology, neurology and neurosurgery, orthopedics, and urology. The Hospital was the only East Bay hospital recognized by Consumer Reports for overall excellence in surgical site infection scores. 

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 by the Affordable Care Act, 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.

This year, as a result of numerous achievements noted by the Board of Directors, at its January 14 meeting, the Board voted to award the CEO a 30 percent of the base salary "at risk" compensation award and extended her contract by one year. Board members also noted that the California peer group from IHS contains 22 organizations, mostly non-profits, and many recognizable names and it would be more appropriate to use the California versus blended peer group, as has been previously used to determine compensation.  Additionally, the Board noted that when it first adopted a maximum 40 percent of at risk compensation as part of the CEO’s total compensation, it made sense at the time, but future awards should be lowered to a maximum of 20 percent to be consistent with the Board’s philosophy of compensating the CEO at the 75th percentile of her peers in California.   As a result, the Board voted to adjust the CEO’s base salary to $747,800, which is the 65th percentile of her peer group, and reduce future maximum at-risk compensation awards to 20 percent of her base salary. The vote was unanimous.  

To review the CEO's contract, CLICK HERE or use the link below: