Thursday, December 10, 2009

The Med: Help Wanted

Regional Medical Center seeks management and more funding.

Posted By on Thu, Dec 10, 2009 at 4:00 AM

There's a big management job open at the Med, but filling it is not going to be easy. Anyone want to play captain on the Titanic?

In a commentary in The Commercial Appeal last week, Gene Holcomb, chairman of the board for the Med, said the hospital has no type of service that is profitable and only 10 to 13 percent of its patients are covered by commercial insurance. Without more financial support, he said, "The Med will eventually die a natural death."

A spokesman for the Med told the Flyer that the board of directors is seeking a permanent chief executive for a salary of $450,000 to $500,000 a year, starting in March. The Med, which receives an annual subsidy of around $32 million from Shelby County government, has outsourced its management to FTI Cambio since July 2007.

The executive search will be complicated by at least two factors. As Holcomb said, the hospital's future is uncertain, with its emergency room scheduled to close next year and its very survival at stake. The Med serves indigent patients from Arkansas and Mississippi as well as Tennessee but receives, at best, partial reimbursements from neighboring states.

The second problem is that executive salaries at both nonprofit and for-profit hospitals and hospital systems in this area far exceed the $450,000 to $500,000 that the Med hopes to pay.

It is not clear how much the Med paid to individual corporate officers under its two contracts with FTI Cambio, which included a bonus for cost savings. The IRS Form 990 for 2008 lists "outsourced management services" for $7,377,225 but no specific salaries for a chief executive, chief financial officer, or chief medical officer. Monica Wharton, legal counsel for the Med, said that information could not be obtained. In 2006, the year before FTI Cambio came aboard, the Med's CEO was paid $274,722.

In contrast, the price of executive talent tops $2 million a year at one local nonprofit hospital and $10 million a year at a for-profit system in Memphis, according to a Flyer survey of tax returns, proxy statements, and other public documents.

At nonprofit Baptist Memorial Health Care, according to the 2008 IRS Form 990, 11 executives earned more than $500,000 in total compensation. Baptist has a 32 percent share of the Memphis market. Chief executive Stephen Reynolds received $1,697,000; chief information officer Jerry Brantley received $2,294,000; and chief operating officer David Hogan got $2,392,000.

Nonprofit Methodist Le Bonheur Healthcare has a 37 percent market share in Memphis. In 2008, chief executive Gary Shorb received $1,436,000; chief financial officer Christopher McLean received $744,700; and chief operating officer Peggy Troy got $665,000.

Baptist and Methodist compete for lucrative group accounts at corporations such as FedEx and local government entities such as the Memphis City Schools, entities with employees covered by insurance and able to pay their bills. They also battle over territorial rights in Olive Branch, Germantown, and other suburbs.

Bond analysts have noted that both hospital systems reported stronger-than-expected earnings and higher margins in 2009. Their tax-free status is justified by their mission of providing care for all in keeping with the tenets of their respective churches.

Indigent patients are a drag on earnings. If the Med fails, both Baptist and Methodist will get more indigent patients, says Arthur Sutherland, retired physician and founder of the Sutherland Cardiology Clinic.

"Nobody will escape this if the Med were to close," he said.

Here is the compensation for top executives at other hospital systems in the Memphis area:

• North Mississippi Health Services in Tupelo: John Heer, president, $774,000; Gerald Wages, treasurer, $695,000; Rodger Brown, vice president, $306,000.

• Baptist Health, a hospital network in Arkansas separate from Baptist Memorial Health Care: Russell Harrington Jr., CEO, $845,000; Allen Smith, senior VP, $460,000.

• Tenet Health Care, a private hospital network traded on the New York Stock Exchange, where compensation includes stock awards and options: Tenet has 14 percent of the Memphis market and operates St. Francis Hospital. According to Tenet's 2009 company proxy statement, the highest paid officers were: Trevor Fetter, CEO, $11,400,000; Biggs Porter, chief financial officer, $3,407,000; Stephen Newman, chief operating officer, $4,233,000.

• St. Jude Children's Research Hospital, a world-famous nonprofit specializing in the treatment of childhood cancer: William Evans, CEO, $711,000; James Downing, VP and scientific director, $604,000; Michael Canarios, CFO, $375,000.

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