At hospital, ex-CEO Finds Lucrative Work

The U.S. pays far more per person for medical care than other developed countries, while trailing in life expectancy and child mortality.

By ANEMONA HARTOCOLLIS JULY 15, 2014

When Dr. Herbert Pardes retired as president and chief executive of NewYork-Presbyterian Hospital in 2011, the institution honored him at its annual “Cabaret” fund-raiser.

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But there were more thanks to come.

The next year, Dr. Pardes earned $5.6 million, which included $1 million in base salary, a $1.8 million bonus for his final year as chief executive and more than $2 million in deferred compensation, according to hospital tax records. That exceeded the amount earned by Dr. Pardes’s successor, Dr. Steven Corwin, who made $3.6 million that year.

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How much hospital executives should be compensated has been a matter of debate for several years and across the country. A study last year by researchers at the Harvard School of Public Health found that in general, executive pay bore no relation to patient outcomes, like mortality and readmission rates, and frequently had more to do — at least indirectly — with the bottom line.

Senator Charles E. Grassley, Republican of Iowa, who has been pressing for tax-exempt hospitals to be more accountable for the salaries they pay, said on Tuesday that Dr. Pardes’s compensation was an example of how “major nonprofit hospitals often are indistinguishable from for-profit hospitals in their operations.” The senator added: “It’s not enough to say high compensation is necessary and leave it at that. A nonprofit hospital should show how that compensation benefits its patients.”

Executive compensation continued to rise at major New York hospitals even after the stock market crash of 2008. And Dr. Pardes may be leading a trend. Another large hospital organization, North Shore-Long Island Jewish Health System, created the position of executive vice chairman of the board last year and filled it with Ralph Nappi, who had been president of the system’s foundation, its fund-raising arm. “It’s a relatively new title,” said Terence Lynam, a spokesman for North Shore-L.I.J. Mr. Nappi earns $700,000 in base salary, and it has not been determined if he will get a bonus, Mr. Lynam said.

NewYork-Presbyterian, one of the nation’s most prestigious hospital chains, said Dr. Pardes, 80, was asked to stay because of his close relationships with donors and his ability to raise money and lobby for academic medical causes.

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William Josephson, the former head of the New York State charities bureau, said that without commenting directly on Dr. Pardes’s salary, the problem with nonprofit compensation was that under federal law, it is set by a closed fraternity of organizations and not tied to objective quality measures. “It’s tautological,” said Mr. Josephson, who has testified on the issue before the Senate Finance Committee.

But the Harvard study found instead that hospital executive compensation was more related to business factors like size, location, the patient insurance mix and the use of technology.

“There was no financial reward for providing good care; there was financial reward for getting people through the doors and filling up the beds,” said Dr. Karen Joynt, an instructor at the Harvard School of Public Health and co-author of the study.

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