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October 14, 2009 > Healthcare- A stormy debate

Healthcare- A stormy debate

A TCV series by William Marshak

Part 4:
A discussion of hospital salary management issues with Dr. William Nicholson, Chair of Washington Hospital Healthcare District.

TCV: What is the responsibility of the Board of Directors of Washington Hospital Healthcare District?

Nicholson: The board has oversight responsibility for the hospital. It makes sure the mission of the hospital district is being carried out.

'At Washington Hospital, we believe in quality and the Patient First Ethic. We dedicate ourselves to working together to build and sustain a culture of safety and accountability with one goal in mind: Continuously improving outcomes for our patients and our community.'

We do this by working closely with [Chief Executive Officer] Nancy Farber and reviewing operational, strategic, human resource and legislative issues that affect our operations. The board then decides on the best direction for the hospital.

TCV: How does the board influence employee compensation?

Nicholson: The board sets policy. The CEO is our only employee. We have decided on a policy that compensates her according to market-based principles. Her compensation is compared with others with similar responsibilities at similar hospitals in similar districts. Our policy is that base salary is set at 65 percent of that peer group. An 'at risk' bonus opportunity is available as well. We go through a process including use of a consultant, to gather, explain and present the data. The board will then decide the appropriate salary level.

TCV: Why do some reports show the CEO salary as disproportionate to others in the area?

Nicholson: The data does not use a comparable group. Our CEO is not an administrator at a county or municipal system. She has chief executive responsibilities for an entity which supports its own operations. We are not taxpayer funded for operations.

TCV: What is bond money used for?

Nicholson: Bond money is used for construction, not for operations. The bond oversight committee which was not required but proper to assure us that citizen's money is being spent appropriately. Operations are funded by the revenue generated by patient care.

TCV: Is there any way to determine when market-rate compensation is unreasonable?

Nicholson: We look at the current market and information gathered by our consultant who gathers data from comparable facilities. We test this information against Bay Area institutions which are paying similar salaries to their chief executive officers. This allows us to see whether the salary proposed is reasonable and rational. It is our job as a Board to do what is best for the institution.

TCV: Will the same philosophy be true for succeeding CEOs?

Nicholson: We will continue to need a CEO to run this hospital. It is our job as a Board to have the most competent, experienced individual in that job who shares the values that will continue the mission of the district.

TCV: How are salaries determined for other hospital employees?

Nicholson: Each category of work at the hospital is in a different market. For instance, Physical Therapists, Critical Care Nursing, Operating Room Nurses all have a market different from each other. External forces are responsible for compensation for each group so the Board cannot artificially tie one to the other without unanticipated, adverse consequences. This would not be a good thing to do. Our Board should decide each year what is appropriate in respect to executive compensation.

TCV: What is your response to public criticism of executive compensation at Washington Hospital?

Nicholson: It is our responsibility as a publically elected Board with a fiduciary responsibility to the people to do what is in their best interests. We have to use our own independent judgment to decide what is in the best interests of the District. I am not defensive about what we need to do because, in my view, we are doing things correctly and have appropriate consultation.

TCV: How would you evaluate the 'health' of Washington Hospital?

Nicholson: I believe it is an extraordinarily vibrant institution, especially compared with other entities within California. This is the difference between employing a hospital administrator and the job that Nancy [Farber] is chartered to do.

How do we survive and flourish? We are flourishing if you look at many measurements from programs to financials. How do we guide our hospital to give the best care to our patients? That is a tough job through the shifting sands of legislation, insurance - payers and contracts, changes within medicine and determining which programs will be most fruitful for patients and our district.

We have an independent medical staff unlike a county hospital which can hire and fire at whim. This is a great benefit. Currently there are nearly 500 doctors affiliated with us and that number is growing. This is a tremendous resource and it is good to see this number grow representing more talent and more that can be done for our patients. That is why we are here!

TCV: What has set Washington Hospital apart from other hospitals? Why has it been so successful in a time when other hospitals are struggling?

Nicholson: It is combination of many things including the culture of 'patient first.' That attracts individuals who will work toward the mission of the District. We have good leadership and a stable, committed group of employees. The turnover of employees is very low in comparison to others and institutional longevity on the Board shares a common vision and mission to provide good care. In order to do this, we have to be financially successful. Good contracts and talented physicians who bring the right skill sets are attracted to this culture and are supported in this environment. Therefore, the institution flourishes. This is replicated over and over within many practices affiliated with the hospital.

TCV: What challenges face Washington Hospital over the next ten years?

Nicholson: The biggest challenge facing us is to weather whatever storm Washington, D.C., Sacramento, insurance payers and others have in store while maintaining a strong focus on our mission and goal. This is the fundamental challenge. In this changing landscape it will be difficult. But part of why we have been successful has been the administrative expertise and history to examine our situation, maintain the agility to deal with incidents and keep things going in the right direction.

Delivery of health care will be a big challenge in the future. Public education is also a key ingredient for good health. I was a very strong advocate of Channel 78 which is a successful and our website provides valuable information to the public.

I hope our structure always remains the same where our 'bottom line' is folded back into services for the community.

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