Executive compensation increased at Wellmont, decreased at MSHA - WKRN News 2

Executive compensation increased at Wellmont, decreased at MSHA according to tax returns

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KINGSPORT, TN (WJHL) - They're tasked with running $700 million to $1 billion health care systems and they're paid accordingly, but despite declining profits at Wellmont Health System top executives' overall compensation hasn't taken a hit.

As we reported Tuesday, Wellmont and Mountain States Health Alliance aren't making as much money when it comes to operating income, which limits how much they can spend on major projects.

Despite those dropping profits, a Community Watchdog review of the two health systems' last two tax returns revealed executives at Wellmont continue to be rewarded and they say for good reason.

"It's very much earned and then some," Wellmont CEO and President Denny DeNarvaez said. "We're not apologetic about that quite frankly."

At both organizations, executives' base salaries, all of which are in the six-figure range, are meant to be competitive. After all, as DeNarvaez says, their jobs are just as important as the doctors who work for them. She says competitive salaries help recruit and keep good leaders; people who often could make more money at a private company.

In addition to their base pay, those executives also get incentive pay if they meet certain goals. Wellmont, like its counterpart, is coming off a tough budget year. This fiscal year the organization closed a hospital in Lee County and previously eliminated dozens of positions. However, a review of the not for profit's last two tax returns revealed overall, its top executives took home more compensation last fiscal year than they did the year before.

DeNarvaez alone collected an extra $90,000 in compensation, bringing her total compensation above the $1 million mark. DeNarvaez, just like every other Wellmont executive, is eligible for what's called at risk pay, which is basically a bonus awarded to leaders if the organization meets its financial, safety and patient satisfaction goals. Clearly, the fiscal year that ended in June 2013 was a successful one when it comes to meeting the organization's goals.

Wellmont Health System:

Job Title
FY 2012
FY 2013
Chief Information Off
Sr VP Finance
VP Marketing
Pres. HVMC
SR VP Business Dev
"I don't expect to ever not make any of that at risk compensation," DeNarvaez said. "As you can imagine, if you take that to the extreme, if you had several years where you were not making any of your goals and any of your at risk compensation I doubt very much that you'd continue to be the CEO. I don't think our board would be highly excited about me not making my goals. They've set the goals as an incentive to perform, so the better we perform on them they're happy if we can take home all of what we can take home in incentive compensation. Year by year by year my compensation changes based upon whether we meet our goals or not and I can't even tell you what 2013 and 2014 will be depending on if we meet our goals."

As for the other employees on the list, Wellmont says many have accepted additional job duties, been promoted or hit specific compensation markers outlined in their contracts. The organization's leaders say offering incentive pay holds executives accountable for the system's performance.

"The risk and the reward is meant to reflect that there is a lot more risk in these jobs than there is in others," she said. "Quite frankly, it also takes many more years. I've been at the CEO level now for 20 years, so it didn't happen yesterday and that is something I never apologize for. It didn't happen by luck. It happens by having to perform constantly. The worst thing you could have is to have an institution where you earn your salary no matter what just by coming in everyday. What we're basically saying is there's a big portion of your salary you need to earn by true metrics that are very objective."

Over at Mountain States, the executive compensation figures tell a different story. MSHA also offers at risk incentive pay, but during the last fiscal year take home compensation for the vast majority of the organization's top executives declined.

"Our board has always set high goals," MSHA Chief Financial Officer Marvin Eichorn said. "Every year we've improved our quality metrics, our stakeholders safety things like infections, it's just the board has set a very aggressive, you can almost call it a stretch goal, and we just didn't make it. We still improved, we just didn't make the goal."

"It was the fact that the system didn't perform quite as well and we didn't hit some of those key targets like the patient satisfaction or total revenues, whatever that may be, it was a lean year," MSHA Board Chairman Clem Wilkes said.

There is one exception when it comes to a major compensation change during that time, but MSHA leaders say there's a good explanation for it. MSHA's now retired CEO Dennis Vonderfecht collected $3.2 million in fiscal year 2013 compared to $1.2 million the year before. Executives say that was a lump some collection of money Vonderfecht set aside for retirement over the years.

Mountain States Health Alliance:
Job Title
 FY 2012
FY 2013
Sr VP TN Operations
VP/CMO Wash. Co.
VP/Corp. CFO
VP/Cardio Pulmonary

"Dennis was here for 24 years," Wilkes said. "He had the option to defer (a percentage of) his compensation until his retirement. Due to the expiration of President Bush's tax cuts in 2012, he was advised financially by his planner that it would be most conducive to him to go ahead and get paid that deferred compensation in 2012 as opposed to 2013 when he would be retiring."

As for the rest of Wellmont and MSHA's employees, both organizations say they haven't been huge raises, but both systems say they have offered their employees an opportunity to collect raises in recent years, even when executives weren't getting raises.

Wellmont says its employees were eligible for up to a 1.5% raise for each of the last four years based upon the service scores they received. Mountain States says its team members received at least a 1% raise over the last few years with the highest raise during that time reaching 1.75%.

While employees have seen an increase, Mountain States say its board has reduced some executives' salaries in recent years.

"When times are tough the people at the top really need to step up and should be willing to help the organization," Eichorn said.

Meanwhile, Wellmont says its board has tasked its experienced leaders with more responsibility, which is a cheaper alternative to hiring new employees.

"I'll take somebody who is capable instead of just bodies," DeNarvaez said.

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