A Look Back: Legacy Health Hikes Pay for Top Execs

The CEO’s total compensation drops to $1.65 million, but overall the nonprofit’s top workers see average hike of 8 percent

It pays to be at the top of the Legacy Health career ladder. The 23 top-paid workers at the nonprofit health system earned an average of $287,495 in base pay in the company’s 2013-2014 fiscal year. Add bonuses, retirement, benefits and all other forms of remuneration, and these workers received an average of $450,864 apiece over the course of the year.

And their salaries are climbing. Executives who’ve been in the same job for at least two years saw base pay climb an average of 8 percent over one year, according to figures reported to the IRS. By comparison, the average U.S. worker saw about a 2.1 percent pay raise from 2013 to 2014, according to government figures.

These 23 top officials make up just 0.2 percent of the health system's workforce – Legacy says it employed 11,690 part-time, full-time and temporary people over the course of 2013-14. But these execs received about 11 percent of the $90.3 million total compensation that the chain reported paying to its workers.

Asked to comment on these figures, Legacy officials did not dispute The Lund Report’s assertions, but did say that Legacy Health’s 990 tax form, the source of these numbers, does not tell the entire story

In a statement, a spokesman said: “The Legacy Health 990 only reports the expenses for the administrative functions for all of Legacy. All of the compensation reported on the Legacy 990 provide oversight and services to all of the Legacy entities. The combined total compensation for Legacy as a whole on our consolidated financial statements for the year ending March 31, 2014 is $831,404,000. The employee’s salaries and benefits reported on the Legacy Health 990, total $10,419,595 or 1.25% of the consolidated wages.”

Legacy also noted that the executives who received pay increases in the 2013-2014 included five who, according to the nonprofit's statement, “received promotions or additional responsibilities in 2013 and of these 5, one started with Legacy in 2012 and the other went from a part-time to a full-time position. One employee was on family leave during part of 2012 some of which was unpaid. Two employee(s) received market pay adjustments during the year.”

“If you include only those employees receiving a base pay increase (6 employees) the average base pay increase is 3.58 percent,” spokesman Brian Terrett said in an email.

These are among the findings of the second story in The Lund Report’s 2015 review of Oregon hospital finances.

For the third year, The Lund Report is digging into the money and operations of Oregon’s hospitals. Last week, we examined Providence Health and Services. For this second story in the series, we are looking at Legacy Health.

The figures underpinning these examinations come from multiple sources:

  • Profit, revenue and charity care figures come from audited reports prepared by each hospital and submitted to the Office for Oregon Health Policy & Research.
  • The size and reach of each hospital, as summarized through available beds, and inpatient, outpatient and emergency room figures, are reported by hospitals to the state-mandated Databank program.
  • Executive compensation figures come from the IRS 990 tax forms that all nonprofits are required to file.
  • Additional financial details about hospital chains come from IRS 990 forms and from the systems’ own unaudited reports.

In addition, The Lund Report is reviewing Medicare claims data from the American Hospital Directory and hospital debt information from bond databases.

Once we’ve completed our look at the facts and figures, The Lund Report will follow up with stories that tackle different questions about profits, compensation and the cost of caring for the poor.

Next week, we’ll look at Kaiser Permanente and several smaller hospital chains.

Legacy Health

Overview

Founded in 1970, Legacy Health combined Episcopal and Lutheran medical groups into a single chain. Today the nonprofit system considers itself home to five Oregon hospitals, including Randall Children’s, which is located at Legacy Emanuel. It also runs the Legacy Salmon Creek hospital in Vancouver, Washington, as well as clinics, a hospice and other health service sites.

Soon Legacy is set to expand by affiliating with Silverton Health, which owns Silverton Hospital. Silverton appeared set to join the Providence Health and Services family, but in March community members announced they would instead align with nondenominational Legacy out of concerns that aligning with the Catholic Providence chain could limit local access to some reproductive and contraceptive services.

Though Legacy and Silverton Health have signed a letter of intent to affiliate, negotiations are still ongoing. Silverton Hospital will be examined later in this series.

System-wide, Legacy Health reported $189.46 million in revenue in its most recent reported fiscal year, which ended March 31, 2014. It told the IRS it had $2.3 million left after expenses that year, compared to $184.56 million in revenue and $3.9 million left after expenses the previous fiscal year.

Spending on salaries, other compensation and employee benefits climbed to $90.3 million in Legacy’s 2013-2014 fiscal year, up from $83.5 million the year before.

President and CEO George Brown actually saw his total compensation drop 9.7 percent in the 2013-2014 fiscal year, though his official base pay climbed. His compensation package was worth $1,653,560, with $960,288 in base pay, $340,000 in bonus and incentive pay, $121,794 categorized as “other compensation,”

$178,966 in retirement and deferred compensation and $52,509 in nontaxable benefits.

A year earlier, his compensation package was worth $1,831,835: $917,307 in base compensation, $255,586 in bonus and incentive pay, $277,557 in “other compensation,” $333,283 in retirement and deferred compensation and $48,102 in nontaxable benefits.

According to Legacy's IRS filings, Brown’s 2013-2014 fiscal year income included payments through an executive long-term incentive plan that ran from April 1, 2011, through March 31, 2014.

Legacy presented the following information to the IRS about this plan:

"The purpose of the plan is to attract and retain highly qualified senior executives, to focus management performance and reward participants for contributing to the accomplishments of Legacy's long-term objectives. The long-term strategic goals include improving the quality of care by preventing serious adverse events by insuring a culture of safety for employee, growth and strategy by achieving meaningful use and optimal care outcomes, and financial management with improved bond rating and increased philanthropic support for programs. Targets for operating margins are required over the three-year period and all goals are measured at March 31, 2014.”

In addition to Brown, Legacy Chief Operating Officer Everett Newcomb III was enrolled in this incentive plan. Former Chief Financial Officer Pamela Vukovich was initially eligible for incentives as well, but she left Legacy in 2013 and did not get a payout, Legacy told the IRS.

Of the 22 top-paid employees at the nonprofit, eight are women – including Vukovich, who no longer works there, and only received severance payments in the most recent fiscal year.

Among the people who lead Legacy’s four hospitals, three are women.

Click the attached spreadsheet to see a detailed compensation breakdown for all of Legacy Health’s top leaders.

Click here for last year's report on Legacy.

Click here for the report done two years ago.

Legacy Emanuel Medical Center

First established in 1912, the hospital now known as Legacy Emanuel has been through numerous expansions over the year. In 2012, it opened the nine-story Randall Children’s Hospital. Emanuel and OHSU are Oregon’s Level 1 trauma centers, capable of providing top-level surgical care to trauma patients.

Chief Administrative Officer Dr. Lori Morgan, who runs the hospital, received $647,164 in total compensation in fiscal year 2013-14: $428,221 in base pay, $100,198 in bonuses and incentive pay, $41,849 in “other compensation,” $44,147 in retirement and deferred compensation, $32,749 in nontaxable benefits. A year earlier, her total compensation including benefits was $629,950.

Finances, year 2013:

Profit: $6.2 million, up 77.7 percent from 2012.

Net patient revenue: $566.1 million, up 4 percent from a year earlier.

Reported charity care charges: $69.6 million, down 4.8 percent.

Profit margin: 1 percent, compared to 0.6 percent a year earlier.

Size and scope, as of 2013:

Available beds: 427.

Inpatient visits: 98,766.

Emergency department visits: 48,170.

Outpatient visits: 267,488.

Legacy Good Samaritan Medical Center

Legacy Good Samaritan can trace its roots to the Episcopal Diocese of Oregon, which founded a hospital in Northwest Portland in 1875. One hundred and forty years later, the hospital is focused on the future, with construction undergoing to transform its emergency department. Work is scheduled to end this December, and will create Oregon’s first urgent care center located within an ER, the hospital says. The upgrades will also modernize the emergency department, and give the hospital a new façade on Northwest 23rd Avenue.

Dr. Tony Melaragno ran the hospital through late 2013, when he was named chief of Legacy’s behavioral health and oncology services. At that point Jonathan Avery – who had led Legacy Salmon Creek Medical Center in Vancouver, Washington – was named chief administrative officer in charge of Legacy Good Samaritan.

Melaragno’s total compensation in the 2013-2014 fiscal year was $857,035 - $375,353 in base pay, $73,483 in bonus and incentive compensation, $277,903 in “other compensation,” $96,941 in deferred compensation, and $33,355 in nontaxable benefits.

Avery’s $481,465 total compensation for the 2013-14 fiscal year was reported in Legacy Salmon Creek’s IRS filings. Avery received $318,915 in base pay, $66,052 in

bonus and incentive pay, $19,839 in “other compensation,” $47,387 in deferred compensation and $29,272 in nontaxable benefits.

Finances, year 2013:

Profit: $21.3 million, up 85.9 percent from 2012.

Net patient revenue: $271.9 million, down 1.5 percent from a year earlier.

Reported charity care charges: $32.8 million, down 3.2 percent.

Profit margin: 7.4 percent, compared to 4.0 percent a year earlier.

Size and scope, as of 2013:

Available beds: 248.

Inpatient visits: 50,267.

Emergency department visits: 21,486.

Outpatient visits: 157,114.

Legacy Meridian Park Hospital

Founded in 1973, Tualatin-based Legacy Meridian Park is one of Oregon’s younger hospitals. Though smaller than Emanuel and Good Samaritan, it is the most profitable of Legacy’s Oregon hospitals. Profits climbed in 2013, the most recent full year for which financial results are available.

Chief Administrative Officer Allyson Anderson, who runs the hospital, received total compensation of $520,575 in fiscal year 2013-14. According to the hospital’s IRS filing, she was penalized with negative $2,493 in the “other compensation” category – according to tax documents, this category includes “arrangements that contain elements of a substantial risk of forfeiture conditioned on continued employment, vesting and/or a non-compete provision upon termination of employment.” Several other employees of Meridian Park also have negative compensation reported in the “other” category on the hospital’s most recent tax filing. Anderson also received $292,101 in base pay, $66,932 in bonuses and incentives, $132,587 in retirement and deferred compensation and $31,448 in nontaxable benefits.

Finances, year 2013:

Profit: $30.5 million, up 21.3 percent from 2012.

Net patient revenue: $174.5 million, up 8.4 percent from a year earlier.

Reported charity care charges: $15.9 million, down 3.6 percent.

Profit margin: 16.1 percent, compared to 14.7 percent a year earlier.

Size and scope, as of 2013:

Available beds: 130.

Inpatient visits: 27,505.

Emergency department visits: 27,983.

Outpatient visits: 169,819.

Legacy Mount Hood Medical Center

Founded in 1922 as Gresham Community Hospital, Legacy Mount Hood has been at its current location since 1984. Though it’s the smallest hospital in Legacy’s Oregon system, Mount Hood is growing, with a new 68,000-square-foot outpatient and medical services building under construction to the east of the current hospital building.

Chief Administrative Officer Gretchen Nichols, who runs the hospital, received total compensation of $462,349 in fiscal year 2013-14: $273,972 in base pay, $59,687 in bonuses and incentives, $14,791 in “other compensation,” $88,726 in retirement and deferred compensation and $25,163 in nontaxable benefits.

Finances, year 2013:

Profit: $3.3 million, down 48.5 percent from 2012.

Net patient revenue: $101.5 million, up 2.5 percent from a year earlier.

Reported charity care charges: $25.1 million, down 4.2 percent.

Profit margin: 3.1 percent, compared to 6.2 percent a year earlier.

Size and scope, as of 2013:

Available beds: 92.

Inpatient visits: 20,493.

Emergency department visits: 41,501.

Outpatient visits: 91,273.

Reporter Courtney Sherwood can be reached at [email protected]. Follow her on Twitter at @csherwood.

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