Hospitals say $9M CEO pay isn’t a sign they can help Taveras

Rhode Island Hospital’s parent company paid its CEO $9.5 million in 2009, but the industry’s top lobbyist says that doesn’t mean Providence’s hospitals can afford to start contributing money to the city budget.

“You have to look at the role hospitals play in their community,” Ed Quinlan, president of the Hospital Association of Rhode Island, told WPRI.com on Thursday. “Executive compensation is determined by hospital boards based on the financial performance of the hospital, based on the financial stability of the hospital – there’s multiple factors.”

Local hospital chain Lifespan’s CEO George Vecchione earned $9.5 million in fiscal 2009, after getting paid $3.2 million in 2008 and just under $3 million in 2007, federal income tax filings show. House Speaker Gordon Fox cited Vecchione’s compensation on “Newsmakers” last month as evidence that all nonprofits should contribute.

Quinlan declined to say whether a portion of the money Lifepsan uses to pay Vecchione should be redirected to the city that’s home to three of its hospitals: Rhode Island, Hasbro Children’s and The Miriam. “I couldn’t respond to a specific case, because I’m not party to those discussions,” he said.

Providence Mayor Angel Taveras said Thursday the city is on “the brink of bankruptcy” and will be forced to file for Chapter 9 if retirees don’t agree to concessions and tax-exempt colleges and hospitals don’t contribute more to the budget. The schools began making voluntary payments under a 2003 agreement, while the hospitals never have.

That’s because they spend an enormous amount of money annually providing medical services to residents who never pay, unlike many cites which have public acute-care hospitals, Quinlan said. Total uncompensated care provided by Rhode Island’s 12 hospitals rose from $105 million to $160 million over the last four years, he said.

“Providing over $100 million in uncompensated care is the ultimate form of shared sacrifice,” Quinlan said. The state has reduced its Medicaid reimbursement for charity care from $35 million to $4 million over the same period, he said.

“We share the impact of a distressed state budget,” Quinlan said. “Private hospitals being asked to offset lower payments from state government is different. We’re not asking the city of Providence to offset lower payments from state government.”

“You know, the governor declared this ‘the Year of the Cities and Towns,'” Quinlan added. “There has not been, in recent years, a year for hospitals.” Two of Providence’s five hospitals – Rhode Island Hospital and St. Joseph’s – had a negative operating margin in 2011, he said.

Taveras said Thursday he wants to hold a meeting with the CEOs of the hospitals to discuss the city’s budget woes. Quinlan called that “appropriate.” He didn’t rule out the possibility of payments from them to Providence, saying: “No one is establishing markers. But I think we each have to establish the realities of our financial situations.”

Like the colleges, the hospitals point to their positive economic impact on Providence and the state [pdf], as well as their comparatively strong prospects for growth, in arguing they shouldn’t be forced to fork over as much money to the city budget as Taveras wants.

All but three of Boston’s 12 tax-exempt medical institutions made voluntary payments to the Massachusetts capital as of fiscal 2009, according to a study by the Lincoln Institute of Land Policy. The size of the payments ranged between $2.2 million from Mass. General and $77,534 from Spaulding Rehabilitation Hospital.

“Boston has one of the longest standing [payment in lieu of taxes] programs and the most revenue productive program in the country,” the study found. Boston got $15.7 million from its tax-exempts in fiscal 2009. That was less than 1% of the city’s annual budget and 4.3% of what they would have paid under the commercial property tax rate, the study said.

Quinlan said nonprofit hospitals in Boston and New Haven, Conn., are “significantly different” from those in Rhode Island because their financial conditions are stronger.

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

• Interactive: How much Providence’s tax-exempts own and how much they pay

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