Virtua's Richard P. Miller, chief executive since the system's formation in 1998 and the fifth-highest-paid locally in 2010, had $1.06 million in base salary. His incentive pay was $1.93 million, including a $725,636 contribution to a supplemental executive retirement plan and $1.19 million in performance-based pay.
The two other top-paid Virtua executives, ranked nine and 10 overall for salary and incentives, were former president and chief operating officer Ninfa Saunders and chief medical officer James P. Dwyer. Saunders had $788,790 in base pay and incentive pay of $889,762. Dwyer's incentive, or "at risk," pay was $858,580, nearly twice his $452,252 base pay.
Performance-based pay at Virtua is based on goals for quality and safety, patient satisfaction, employee engagement, and finance, but "no salary at risk is paid to anyone in the organization unless a financial threshold target is achieved," said Jane C. Yepez, Virtua's vice president of marketing and public affairs.
Ron Seifert, vice president and health-care executive-compensation leader at Hay Group Inc., a Philadelphia management-consulting firm, said about 90 percent of large integrated systems use annual incentives, up from 75 percent to 80 percent a decade ago.
"The utilization of incentives is highly prevalent and is part of the tool kit for boards to keep their executives focused," Seifert said. Boards also have used multiyear financial incentives to keep executives in place during a turbulent period in health care, he said.
Though financial incentives for top hospital executives are not new, public availability of details about them is fairly recent. Four years ago, the Internal Revenue Service required hospitals to start providing a more detailed breakdown of executive pay, including "bonus and incentive compensation," which used to be lumped in with salary.
About three-quarters of the region's health-care executives received incentive payments in 2010, the latest year for which full-year data were available for institutions in both Pennsylvania and New Jersey. The biggest incentive payment, $2.13 million, went to Joseph T. Sebastianelli, president and chief executive of Jefferson Health System since 2002.
Most of that money was from a $1.75 million retirement payout under a five-year plan that required Sebastianelli to remain until his originally planned retirement date of Dec. 31, 2010, said David F. Simon, Jefferson's chief legal officer. The board asked Sebastianelli, who ranked fourth overall in 2010, to stay three more years, to lead the system through a period "when major changes were expected to the health-care system due to health-care reform," Simon said.
Sebastianelli also received a merit bonus of $331,707, including $141,383 for achievement of quality-related goals, $126,883 for financial performance compared to budgeted revenues and expenses, and $63,441 for individual performance, Simon said.
At Jefferson, unlike at Virtua, meeting financial targets is not a prerequisite for bonuses based on safety and other measures.
The financial target at Virtua in 2010 was an operating margin of at least 4 percent. The system nearly doubled it, with an operating margin of 7.6 percent that year, the highest in New Jersey, a financial report from the New Jersey Hospital Association said.
Children's Hospital of Philadelphia did not disclose the financial targets for chief executive Steven M. Altschuler, who has led it through a period of explosive growth and was the region's second-highest-paid in 2010, with total pay of $4.17 million. He was by far the highest-paid chief executive at 10 major U.S. children's hospitals.
Altschuler's pay "recognizes his leadership and his many accomplishments in the delivery of world-class medical care, groundbreaking research, and pediatric education," the hospital said.
In 2000, Altschuler's pay totaled $1.1 million; he was one of just four executives in the region to collect at least that much. The number of million-dollar executives had soared to 28 by 2010.
Average pay for the region's top 100 health-care managers jumped 88 percent, to $712,486 from $379,679.
By contrast, pay for health-care workers overall rose 39 percent in Pennsylvania and 33 percent in New Jersey, according to data from the U.S. Bureau of Labor Statistics.
Bill Cruice, executive director of the Pennsylvania Association of Staff Nurses and Allied Professionals, a union, decried the big pay packages now common for nonprofit hospital executives.
"Extravagant compensation for hospital executives is one of the key reasons why health-care costs continue to escalate in the country," Cruice said.
Seifert, the compensation consultant, disputed that notion, saying executive pay is "minuscule in the grand scheme of things."
Speaking of the Philadelphia region, he said: "These businesses are critical to our economy. They are very, very complicated organizations.
"You don't find leaders who can run them and run them well for free," said Seifert, whose practice takes him all over the country. "Capable leadership comes at a price."
View a sortable table of executive compensation for health-system executives in the Philadelphia region at philly.com/business
Contact Harold Brubaker at 215-854-4651 or email@example.com.