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State targets health care officials’ pay

Salary, bonus data sought from insurers, hospitals

Martha Coakley has examined pay at some nonprofits. Martha Coakley has examined pay at some nonprofits.
By Robert Weisman
Globe Staff / September 3, 2009

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State officials yesterday unveiled plans to tighten their oversight of pay and other practices at nonprofit health care companies in Massachusetts, a move that promises to shine a spotlight on health insurers and hospitals at a time of rising medical costs.

The initiative was outlined by Attorney General Martha Coakley’s office, which regulates nonprofit and charitable health organizations, in a memo to the state’s major health insurers, and a trade group representing hospitals.

Coakley’s office has long examined compensation at specific nonprofits. But it broadened its inquiry last year after learning Blue Cross and Blue Shield of Massachusetts, the state’s largest nonprofit health plan, made a $16.4 million lump-sum retirement benefit payment to former chairman and chief executive William C. Van Faasen.

First Assistant Attorney General David Friedman said officials want to assure timely and consistent reporting of executive compensation at hospitals and insurers, to understand the rationale for the practice of paying board members at insurers, and to encourage nonprofits to separate the jobs of chairman and chief executive.

“We’re concerned about continual escalation of nonprofit compensation levels,’’ Friedman said, “and the attorney general wants to make sure there’s transparency in reporting. The unaffordable climate of health care costs in the state and the nation makes us particularly concerned about anything that contributes to those costs.’’

Marylou Buyse, the president of the Massachusetts Association of Health Plans, a Bos ton trade group representing most of the state’s nonprofit health insurers, defended insurers’ pay practices.

“We respect what the attorney general is doing,’’ Buyse said. “But the health plans operate in both the state and national marketplace where there is strong competition for talent in executive leadership and for directors. The most expensive mistake an organization can make is to put the wrong people at the helm or in the board room.’’

As part of its intensified oversight, the attorney general’s office will ask insurers and hospitals to submit by March 1 a list of their top executives’ total compensation - including salary and bonuses - for calendar year 2009. The reports are to be filed in a uniform manner so they can be compared across organizations. Health plans and hospitals currently have different methods of calculating compensation.

State officials are also planning to look at the practice of paying board members of nonprofit insurers, something not done at hospitals or other nonprofit organizations in Massachusetts. And they have talked with Blue Cross-Blue Shield about their objection to having one person hold the positions of chairman and chief executive.

After those discussions, the board of Blue Cross-Blue Shield last month voted to separate the jobs, beginning next March, with Cleve L. Killingsworth, who currently holds both posts, retaining the chief executive’s role. The decision was shared with employees, but not revealed publicly, said Jay McQuaide, vice president of corporate communications at Blue Cross-Blue Shield in Boston.

“We have a long tradition of following national best practices with regard to corporate governance,’’ McQuaide said. “The attorney general’s office did raise this issue with us. While many companies have combined roles, the emerging best practices trend suggests separating the roles.’’ McQuaide said Killingsworth recommended the separation.

Although the attorney general’s office apprised hospitals of its plan to increase oversight, the health care providers are still awaiting details, said Anuj Goel, vice president of legal and regulatory affairs at the Massachusetts Hospital Association in Burlington.

“Hospitals have been working closely with the attorney general’s office on transparency issues,’’ Goel said. “We’re a little confused about what they’re going to be looking at, given the detailed information we are already reporting for the public record.’’

Goel also said March 1 would be a “quick turnaround’’ for complying with the state’s request, noting that hospitals already file reports to Medicare and the Internal Revenue Service around the same time. “It’s an extremely busy time for finance people to get all these reports out,’’ he said.

Robert Weisman can be reached at weisman@globe.com.