On June 16, Kaiser Health News, in collaboration with ABC News, released an article focusing on compensation of executives at non-profit hospital systems. Kaiser Health News obtained compensation information for CEOs at numerous top non-profit and government-supported hospital systems for 2011 or 2012.

The article highlighted specific examples of bonus compensation and incentives for executives at non-profit hospital systems across the nation. Kaiser Health News reported that hospital executives often receive thousands of dollars in bonuses based on volume, rather than cost control or patient care. The authors argue that these bonuses drive profits and expansion that are unnecessary and unaffordable. The article also noted that incentives for growth and profits, however, are often part of a broader bonus incentive package to promote clinical quality, patient satisfaction, or other goals.

The Kaiser Health News story highlights the potential for further Congressional oversight of non-profit executive compensation. In recent years, hospital executive compensation has been a concern of some members of Congress, particularly Senator Chuck Grassley (R-IA). Senator Grassley has been concerned with resource allocation at non-profit hospitals for many years, including executive compensation practices and use of the 340B discount prescription drug program. Reacting to the Kaiser Health News article, he released a statement emphasizing that his staff found that all but one hospital system discussed in the article has at least one 340B-eligible hospital. Senator Grassley commented that "if some 340B-eligible hospitals have significant money available for executive bonuses, that raises questions about how they allocate their resources." Senator Grassley further stated that he will continue to investigate how hospitals are using the 340B program. Senator Grassley's reaction to the Kaiser Health News story raises the likelihood of renewed congressional scrutiny of non-profit hospitals' executive compensation practices.

King & Spalding will continue to monitor this issue. The Kaiser Health News article can be found here. Senator Grassley's statement can be found here.

Authors: Daniel F. Donovan, Lauren E. Slive, Lauren M. Donoghue