Top Senate leader wants tighter rules on pay for RI hospital executives

Senate Majority Leader Michael McCaffrey

PROVIDENCE, R.I. (WPRI) – A top Rhode Island Senate leader is proposing tighter rules for executive pay at the state’s hospitals, partly out of concern Care New England’s leaders could eventually get “a golden parachute” if the company is bought.

Senate Majority Leader Michael McCaffrey filed two bills last week on hospital compensation. The first would cap executives’ pay at 110% of the regional average for their peers in the Northeast, starting Oct. 1. The second would bar executives and board members from receiving any financial reward for agreeing to a merger.

In response to an inquiry from Eyewitness News, McCaffrey confirmed that the latter proposal is a direct response to the ongoing negotiations over the future of Care New England, Rhode Island’s second-largest hospital group. The company said last week it is proceeding on a planned merger with Partners HealthCare, Massachusetts’ biggest hospital group.

“As the CNE and Partners merger talks progress, I am certainly concerned that many executives will receive a golden parachute and take precious resources out of our state health care system,” McCaffrey, D-Warwick, said in a statement. Care New England owns Women & Infants, Kent and Butler hospitals.

Executive pay at hospitals has been a flashpoint in Rhode Island for years. George Vecchione, the former CEO of top hospital group Lifespan, was widely criticized when a tax filing revealed his pay package totaled $9.5 million in 2008. (McCaffrey proposed similar legislation after that disclosure.) Vecchione was paid nearly $40 million during his 14 years leading Lifespan.

Care New England’s most recent IRS filing shows its top earner in the 12 months ended Sept. 30, 2016, was Dennis Keefe, who retired at the end of last year as CEO. Keefe’s compensation totaled slightly more than $1 million in 2015-16, including a base salary of about $896,000. Nine other individuals were listed as earning more than $500,000. Care New England lost $53 million that year.

Jim Beardsworth, a spokesman for Care New England, declined to comment on the specifics of McCaffrey’s proposals. “We will review the proposed legislation carefully as we would with any legislation potentially impacting the health care industry,” he said in an email.

Care New England officials have said in the past that total compensation figures reported to the IRS can be misleading because they also include deferred earnings such as retirement benefits. McCaffrey, however, is not buying the argument.

“There’s no justification for the astronomical salaries paid to executives at ‘non-profit’ hospitals,” McCaffrey said.

“Public health care dollars are already stretched thin, and the cost of medical care rises every year,” he continued. “Exorbitant executive compensation compounds this problem and pushes health care costs further out of the reach of working families across our state.”

Both of McCaffrey’s bills were referred to the Senate Health and Human Services Committee. Hearings on them have not been scheduled yet.

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He is a weekly panelist on Newsmakers and hosts Executive Suite. Follow him on Twitter and Facebook

Tim White contributed to this report.