Erlanger's managers get $3.1 million in bonuses

Kevin Spiegel, Erlanger Health System CEO, speaks at the opening of the new $50 million expansion at Erlanger East on Gunbarrel Road.
Kevin Spiegel, Erlanger Health System CEO, speaks at the opening of the new $50 million expansion at Erlanger East on Gunbarrel Road.
photo A judge recently ruled that Walker County must repay Erlanger for loans made Hutcheson Medical Center before its bankruptcy which the county backed.

Some 161 of the Erlanger Health System's managers will divide about $3.1 million this year in incentive pay, according to hospital executives.

The bonuses are based on how the hospital performed both in improving patient care and in meeting its financial goals, Erlanger Chief Administrative Officer Gregg Gentry said in an interview Thursday.

About 3,700 of Erlanger's non-managerial employees received a $400 bonus earlier this year.

Managers and physicians each have their own separate incentive plans.

The Erlanger managers plan is complicated, based on financial goals and measurements of patient care, safety and satisfaction for managers at the corporate level, the main Baroness campus, Erlanger East and North, Children's Hospital, and Erlanger's Bledsoe County facility.

For example, one major safety goal is to reduce the number of patients who become infected from the catheters inserted to aid in dispensing drugs or other fluids. Another measured whether hospital employees followed proper procedures in washing their hands regularly to prevent the spread of disease or infections.

An outside firm measures patient satisfaction with their hospital experiences, including whether doctors and nurses did a good job communicating with them and how clean the bathrooms were.

Gentry said offering middle-level managers incentive pay gives them a reason to worry about how well the hospital is performing beyond their immediate areas of responsibility.

"We like [managers] to take a comprehensive view of their unit, whether it is environmental services, getting supplies to the patient at the right time, the patient's satisfaction, how the family and visitors feel - making certain that the overall experience of the entire family unit is as good as could be expected," he said.

Erlanger's board of trustees adopted a budget last year that called for the hospital system to earn at least $18 million in income beyond its expenses. The hospital beat that goal soundly, collecting $30 million in income beyond expenses, Gentry said. While the bonuses are based on both patient quality and financial goals, the money is only available if the hospital exceeds its financial targets, he said. In other words, if managers had exceeded their patient quality goals but failed to meet the financial targets, there would be no excess money for incentive pay.

The financial performance comprised 45 percent of the incentive plan's goals, while what the hospital called its "quality-safety-service" goals counted for 55 percent.

The incentive plan is for the hospital as a whole, i.e., managers don't have individual goals. But individual units get rated on how well they achieved their goals. For example, managers at the corporate level met all but one of their goals and exceeded them in four categories, while Children's Hospital missed three of its five goals and exceeded two others.

All units of the hospital system struggled to meet the service excellence goal, with the corporate and main Baroness campus units reaching only a "threshold" level, below their target, and Children's and Erlanger East and North (counted as one unit) failing to meet their goal. The main hospital and the Children's Hospital units also did not meet their net operating income goals, according to information prepared by SullivanCotter and Associates, the outside firm Erlanger hired to evaluate its performance.

The amount of the bonuses managers receive for achieving their goals varies depending on their rank within the hospital management system.

CEO Kevin Spiegel, for example, will receive about a 34 percent bonus on his salary of about $800,000, based on the corporate unit's performance. Vice presidents will receive between 10 and 30 percent, administrators between 7.5 percent and 22.5 percent, and directors and managers between 5 and 15 percent, again depending on how well their part of the hospital system performed.

Gentry said hospital officials believe the incentive pay plan helps it recruit top talent and also helps to improve the health care that the hospital provides.

"The health system is able to achieve at a higher level because incentive pay drives performance," he said.

Erlanger was in dire financial straits when Spiegel arrived nearly four years ago, losing $36 million between 2008 and 2013. The hospital earned $11.3 million in 2014 and $37.3 million in 2015.

Some 115 managers at the corporate level were eligible for bonuses, plus another 28 who work only at the main Baroness campus on Third Street, another eight at Children's Hospital, seven at Erlanger East and Erlanger North, and three at the hospital's Bledsoe County facility.

Erlanger paid out $2.1 million in incentive pay to its top 124 executives in 2015, and $1.7 million to 99 top managers the year before. That is an average of about $16,900 in 2014, $17,200 in 2015, and $19,200 in 2016.

CHI Memorial also offers incentive pay to its top managers, but because the hospital system is not public, it does not have to release the information until it files its Form 990 tax return. In the most recent year available, for 2014, CHI Memorial CEO James Hobson, who has since left the hospital, earned $109,497 in incentive pay, according to the form, plus another $108,861 in "other reportable compensation" and $75,470 in retirement and other deferred compensation. Hobson's base pay was $495,219, according to the tax form.

As a for-profit institution, HCA-owned Parkridge Health System is not required to release details of its employee compensation system.

In comparison, the Tennessee Valley Authority, which is also a public entity, is paying $102 million in incentive pay to 10,700 employees in 2016.

Contact staff writer Steve Johnson at 423-757-6673, sjohnson@timesfreepress.com, on Twitter @stevejohnsonTFP, and on Facebook, www.facebook.com/noogahealth.

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