Rate hikes help boost Partners' profit 25%

Healthcare group increases salaries for key executives

Partners HealthCare System yesterday reported a third-quarter profit from its hospitals of $54 million, 25 percent more than in the same period last year, driven by wider margins, rate hikes, and an increase in high-paying, complex cases.

But the healthcare giant's profits from nonoperating activities - principally investments - dropped significantly. During the third quarter last year, Partners' Massachusetts General Hospital received a onetime royalty payment of $206 million, pushing nonoperating profits to $250 million. For the third quarter this year, which ended June 30, nonoperating profits were $64 million.

Overall, surplus of revenues was $118 million for the quarter compared with $293 million in the same period last year.

The nonprofit system, made up of Mass. General, Brigham and Women's Hospital, and an array of community and specialty hospitals and other entities, said it lost $167 million from treatment of Medicare and Medicaid patients, because government payments don't cover the full cost of treatment, and from insufficient state reimbursement for the care of uninsured patients.

Also, several key Partners executives received substantial raises last year, according to statements filed with the state yesterday. Dr. Peter Slavin, president of Mass. General, earned $1.17 million in salary, deferred compensation and benefits in the year that ended Sept. 30, an 11.6 percent increase from the previous year. Dr. Gary Gottlieb, president of Brigham and Women's, earned $1.19 million, including salary, deferred compensation and benefits, an increase of nearly 16 percent.

Partners officials said salaries for senior executives at smaller hospitals in the Boston area have risen substantially, making it necessary to give the heads of two of the largest academic medical centers in Boston raises "to ensure that compensation is appropriate relative to smaller hospitals in the region."

The increase is intended to retain the "physician leaders" and keep them from being recruited to other parts of the country, Partners said.

Dr. James Mongan, chief executive of Partners, earned $2 million, an increase of about 3 percent.

The system's top earner was Dr. Lawrence H. Cohn, a cardiac surgeon at Brigham and Women's, who earned $3.1 million in fiscal 2007. The figure includes about $2.4 million in deferred compensation - money earned in earlier years that isn't paid out, but is invested, an arrangement available to many high wage earners that provides tax benefits and other advantages. Including the deferred compensation, Cohn's annual compensation increased nearly fourfold from the previous year.

Jeffrey Krasner can be reached at krasner@globe.com.