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Providence, SEIU Clash Over High Exec Pay, Union Push

January 12, 2019

An Oregon labor union is embroiled in a dispute with Providence Health & Services over millions of dollars in Providence executive pay while trying to win representation for hundreds of lower-paid workers.

SEIU 49, the  Portland-based Service Employees International Union local, seeks to represent some 800 clerical and technical workers at Providence Portland Medical Center in what would be SEIU’s biggest foray into Oregon’s largest health care system.

The representation vote took place in mid-December, but the results are close, contested and may not be settled for weeks.

As a measure of the stakes, just days before the vote, SEIU Local 49 filed an unusual complaint with Oregon Attorney General Ellen Rosenblum asking her to investigate high executive pay at Providence.

SEIU pointed to Rod Hochman -- president and CEO of Providence St. Joseph Health, the seven-state system of 51 hospitals -- being paid $5.2 million in salary plus $6.3 million in retirement and other deferred compensation in 2017, the latest publicly available numbers. SEIU also pointed to Providence Health & Services paying Mike Butler, St. Joseph's president of operations and strategy, $2.5 million in salary and other related pay, plus $2 million in retirement and other deferred compensation that year. SEIU questioned whether the pay was reasonable and complied with federal tax laws. 

Providence says the pay is justified and follows all applicable laws.

The workers SEIU represents at numerous other Oregon hospitals – cooks, occupational therapy aides, lab assistants and the like – fall on the other end on the pay spectrum. Most earn $30,000 to $50,000, depending on experience, contracts show.

Rosenblum has not yet said whether she will investigate executive pay at Providence. Her agency oversees nonprofits, but it’s unclear what if anything she might do about the compensation.

The timing of the letter to Rosenblum was not coincidental, one observer said.

It illustrates “SEIU’s comprehensive approach to exert pressure” during a unionization drive, said Bob Bussel, director of the Labor Education and Research Center at the University of Oregon.

High executive pay irks the lower tiers of employees who worry about staffing levels and quality of patient care, along with wages, hours, health insurance, pensions and other “bellwether working-class concerns,” Bussel said.

Hospital systems in Oregon and nationwide are “real combustible material” for unionization and “certain to be a battleground moving forward,” added Bussel, a former union organizer.

(See more: Health care jobs grow as union membership spreads.)

SEIU Drives  Unionization In Health Care

The tension between SEIU and Providence highlights two trends: Washington, D.C.-based SEIU’s increasing prominence in unionizing the health-care industry and the continuing rise in pay for health care executives who are trying to control expenses, maximize revenues and implement new strategies in the evolving marketplace.

In contrast to many U.S. labor unions, SEIU is steadily expanding its membership. It hit 1.9 million in 2017, up from 1.7 million 10 years earlier, according to its filings with the federal Department of Labor. The health-care field has been particularly fruitful for the union, where it says its membership now tops 1 million.

SEIU Local 49 has scored a series of wins in Oregon hospitals.

Last summer at Providence Milwaukie Hospital in Oregon, less than 200 nursing assistants, dietary aides, environmental services workers and others voted to join SEIU. It was the first time SEIU had successfully organized at a facility in the 24,000-employee, eight-hospital Oregon Providence chain. The sides are negotiating a contract.

SEIU Local 49’s biggest recent victory was in 2015, when a successful vote put 1,000 tech workers, nursing assistants, clerks and other similar staff at PeaceHealth hospitals in Springfield and Eugene under SEIU representation. The sides reached a contract in 2016. At the time, the union stressed that the three-year contract won on average 21 percent pay increases for employees over the contract’s duration. The contract includes a total of 5.5 percent in cost of living raises plus annual step increases as high as 3.5 percent a year.

SEIU followed that with wins at the Vancouver, Wash.-based PeaceHealth system:

In 2016, a majority of about 100 tech workers at PeaceHealth St. John’s Medical Center in Portland voted to join SEIU. The sides reached a contract the following year. SEIU also represents clerical, food preparation, secretarial and other jobs at St. John’s. In 2017, a majority of about 200 tech, clerical and other workers at PeaceHealth Peace Harbor Medical Center in Florence voted to join the SEIU, with a contract reached earlier this year. With both the St. John’s and Peace Harbor contracts, SEIU touted that it gained substantial pay increases.

SEIU Local 49 spokeswoman Rae Dunnaville said that while pay gains are important, most union members are especially concerned about the quality of care issues such as staffing levels, followed by affordable health insurance for themselves and their families.

SEIU “has the vision, staffing and resources to gain representation” for workers, Bussel said. The union focuses on health-care systems in part because they have large groups of workers that can be unionized. At many Oregon hospitals, most nurses are already represented by the Oregon Nurses Association labor union. But clerks, kitchen staff, technicians, aides and other similar staff often are not unionized – presenting SEIU with an opportunity.

Providence declined to say whether it favors the proposed unionization.  But the hospital system “ is committed to making sure every eligible vote is counted,” said spokesman Gary Walker.  Providence does  “talk with employees during potential organizing … and we want to be sure employees get information from every source available to them, including Providence and the union,” he added.

A Debate Over Executive Pay

SEIU says the timing of the pay complaint to Rosenblum was driven by the fact that Providence only recently released its latest annual financial report to the Internal Revenue Service. The filing disclosed that Providence Health & Services Oregon paid 11 executives over $2 million apiece in salary/deferred compensation in 2017; 18 executives between $1 million and $2 million; and five executives $500,000 to $1 million.

Providence said that compensation is justified by the marketplace. The hospital system also questioned SEIU’s complaint to the state.

“The timing of the letter is interesting as it is dated eight days ahead of the” union vote, said Walker of Providence. Plus, “Providence is the only system SEIU is expressing concern about to the attorney general. Given the … election that also seems interesting.”

SEIU said there’s nothing untoward about its complaint. "We regularly review executive compensation for systems that operate in Oregon," said Kirsten Isaacson, research coordinator for SEIU 49.

"Executive compensation has been an area where SEIU has often been vocal,” she said.

But SEIU officials acknowledge workers become concerned when they learn about high executive pay. When hospitals nix spending to improve patient care, but also hand out million-dollar paychecks to top executives, “these are two things that are hard to see side by side,” Isaacson said.

The state has no rules limiting executive pay at nonprofits, said Kristina Edmunson, spokeswoman at the Department of Justice.

The IRS, meanwhile, has broad rules that presume executive compensation to be reasonable if the pay is approved in advance by the employer and is based on “appropriate data as to comparability” including data from “both taxable and tax-exempt” organizations.

Providence examines pay in the for-profit and tax-exempt sectors when setting compensation, and that complies with IRS rules, said Providence spokeswoman Melissa Tizon.

Walker said it’s important for Providence to compete with the for-profit sector for talent, especially in such fields as finance and technology.

“We set our salaries at the levels required to recruit and retain top-tier talent,” Walker said.

SEIU asserted that Providence should only benchmark itself to other nonprofit hospital systems, not the private sector. It also said it was concerned about the whopping deferred compensation packages Providence gave its top executives. Hochman’s $6 million in deferred compensation in 2017 was up from $25,000 the year before. The union also highlighted former Providence Health & Services Oregon CEO David Underriner receiving $750,000 in deferred compensation in 2017, up from $137,000 the previous year.

“We’re saying it warrants a closer look,” Isaacson said.

Providence is not the only nonprofit paying six-figure compensation packages. Some out-of-state health care systems pay even more. Tizon pointed to the California-based Kaiser system, which in its latest financials said it paid its CEO $10 million in salary and deferred compensation; St. Louis-based Ascencion which paid its CEO $13.9 million; Seattle-based Virginia Mason Health System, which paid its CEO $11.6 million in salary and deferred compensation, up from $2.5 million the previous year; and San Francisco based Dignity Health, which paid its CEO $8.2 million.

In its filings with the IRS, Providence Health & Services Oregon disclosed it paid 11 executives over $2 million apiece in salary/deferred compensation in 2017; 18 executives between $1 million and $2 million; and five executives $500,000 to $1 million.

Bussel said sky-high executive pay feeds unrest among workers because it highlights the gap between high-end and low-end employees. The bigger the gap, the more a nonprofit hospital system “looks a lot like the private for-profit sector,” Bussel said.

You can reach Christian Wihtol at [email protected].