Union slams Lifespan executives’ pay

“We are angry, we feel disrespected,” said Helene Macedo, president of the United Nurses & Allied Professionals which represents 2,200 employees at Rhode Island Hospital, about a release of Lifespan's executives' salary, bonuses and supplemental retirement contributions.
Posted 9/19/11

PROVIDENCE – A release of Lifespan’s executives’ salary, bonuses and supplemental retirement contributions has been met with great consternation by the Rhode Island Hospital union.

The forms - the U.S. Internal Revenue Service 990 forms for non-profit organizations - show that Lifespan’s nine highest-paid executives received $9.4 million in total compensation in the last reported year, including $1.8 million in bonuses and $2.6 million in supplemental retirement contributions.

Lifespan President and CEO George A. Vecchione received a total of $2.9 million in salary and benefits – including $853,024 in base salary, $522,051 in bonuses, and $1,485,197 in retirement or deferred compensation.

Dr. Timothy J. Babineau, president and CEO of Rhode Island Hospital and The Miriam Hospital, received $1.1 million in salary and benefits – including $573,675, in base salary, $379,376 in bonuses and $92,035 in retirement or deferred compensation.

“We are angry, we feel disrespected,” said Helene Macedo, president of the United Nurses & Allied Professionals which represents 2,200 employees at Rhode Island Hospital.

“It’s not justified, when we see the sacrifice that those of us who are working at the bedside are being asked to make,” she told Providence Business News.

Macedo, an operating room nurse who has been at Rhode Island Hospital for 20 years, was further irked by the fact that Lifespan had just announced a decision to cutting the matching contributions to employee’s 403(b) Fidelity plan for 2011 and eliminating the matching contribution for 2012.

“It looks like another example of corporate greed,” she said, “when you look at their executives’ salaries, bonuses and supplemental retirement, compared to that of what employees are making – and the sacrifices we’ve been asked to make during the last several years.”

The atmosphere in the hospital, Macedo said, “is one where we’re counting every penny and cutting every corner. But there doesn’t appear to be any corner-cutting or counting in the corner office.”

In response, Alfred Verrecchia, chairman of Lifespan’s board of directors, said that because of the hospital system’s significant size and complexity, the board places a priority on recruiting and retaining a highly skilled leadership team who can manage in both good and bad times, with the goal of providing the highest quality care to patients. “The process for setting leadership compensation is undertaken by a board committee and is informed by national surveys provide by the The Hay Group, an independent compensation consultant,” Verrecchia said.

Over the past several years, Verrecchia continued, “base pay for executives has been relatively flat. A significant portion of the executive pay is at risk and is only paid out if quality, service and financial performance goals established by the compensation committee are achieved.”

Verrecchia praised the current leadership team at Lifespan, saying: “Lifespan hospitals are fortunate to have a stable, sound leadership team with a proven track record of addressing significant financial challenges in order to continue to fulfill our mission of providing the best and safest care to our patients.”

In explaining the rationale for reductions of Lifespan’s corporate contributions to employees’ retirement plans, Lifespan spokeswoman Gail Leach Carvelli said the effects of the current recession was the major cause, creating a need to reduce expenses. Lifespan, she continued, made a choice to cut the corporate contribution to employees’ retirement plan in order to continue making investments in the hospital systems infrastructure.

“We’ve taken steps in the last couple of years to mitigate these effects [of the recession], she said. As a result, she continued, “Lifespan has been able to reinvest any modest surpluses – in the order of less than 1 percent to 2.5 percent against an overall budget of approximately $1.6 billion in recent years – in people, programs, infrastructure and new technology.” However, given the current economic downturn, Carvelli said, Lifespan “realized we needed to reduce expenses further to continue those investments, which are essential to supporting our ability to provide the best care possible.”

Carvelli said that Lifespan continues to offer rich and comprehensive health and benefits plans, despite the reduction in employer contributions to the 403 (b), including a significant component of the retirement plan paid for entirely by Lifespan. “We have an obligation to the community we serve to continue to make investments that allow us to deliver state-of-the-art care and we’ve been able to do this while preserving jobs,” she said, explaining the rationale behind the decision.

Rhode Island Attorney General Peter F. Kilmartin, who as a member of the R.I. General Assembly submitted legislation in 2009 and 2010 to address health care executive compensation, has no specific authority to investigate hospital executive compensation, according to spokeswoman Amy Kempe.

“He believes the issue is a matter for the legislature and encourages the General Assembly to research and act upon it with effective legislation,” Kempe said.

Because Lifespan is a not-for-profit provider, it is the responsibility of its board of directors to set compensation packages for executives, Kempe continued. “The Attorney General encourages the board to ensure that executive compensation packages are in line with similar sized health care networks in the region,” she said.

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