@@facebook=
@@
Hospice CEO pay in 2010
|
|---|
*Includes a $55,700 cashout of accrued paid time off and 54 weeks of pay (including two weeks for the end of 2009) instead of 52 weeks. ** Includes a $908,100 deferred compensation payout for 10 years of service Source: Forms 990, the hospices
DAYTON — Hospice of Dayton in 2010 paid its retiring chief executive, Deborah S. Dailey, $1.3 million, including a $908,000 reward for staying at the helm of the nonprofit for a decade.
Dailey collected the “deferred compensation” payout — disclosed in recently released tax forms — upon her retirement at the end of 2010. She served the first eight months of that year as president and CEO, then served out the rest of the year as a consultant to her successor, Kent Anderson.
In addition to her incentive payment, she received base pay totaling $318,246 and a bonus of $62,447.
Dailey has been applauded for shoring up the finances of Hospice of Dayton while fending off growing competition from for-profit hospices. By the time she retired, Hospice of Dayton had nearly $59 million in net assets.
“From where the organization was in 2000 to the way she left it was a phenomenal difference,” said Tom Mann, a Hospice of Dayton board member who helped recruit Dailey and sat on the executive committee that set her pay.
“The way I viewed it, she was a very talented executive, so she deserves to be paid what the market says she should be paid.”
Dailey’s compensation for her work stood out, even without the $908,100 retention payment she received, according to a Dayton Daily News analysis of her pay and that of the leaders at hospices of similar and larger size.
Of seven hospices examined by the newspaper, Hospice of Dayton’s revenues ranked fifth, but Dailey’s combined base pay and bonus ranked second, the analysis found.
Hospice of Dayton officials noted that Dailey’s base pay in 2010 included $55,700 in paid time off that she cashed out, as well as 54 weeks of pay instead of the typical 52. Accounting for those one-time adjustments, they said, her 2010 base pay was comparable to her 2009 base pay of $246,162. That, combined with her bonus, would rank her compensation third out of the seven hospices analyzed by the newspaper.
Even adjusting for those one-time payments, however, the sum of Dailey’s salary and bonus rivaled that of David A. Simpson, CEO of the Hospice of the Western Reserve, an organization with double the revenues of Hospice of Dayton.
A Hospice of Dayton spokeswoman said Dailey, who now lives in the Lexington, Ky., area, declined to comment for this story.
Deferred compensation such as Dailey’s $908,100 lump sum has become more common at nonprofits in recent years, said Deborah Davidson, vice president for governance education and research at BoardSource, a nonprofit dedicated to building better nonprofit boards of directors.
Data on deferred compensation are hard to come by since the Internal Revenue Service didn’t require nonprofits to disclose such incentives until 2008. Two studies that year found that about half of the CEOs at nonprofits had a deferred compensation or supplemental retirement plan.
“If deferred compensation is commonplace in for-profit firms of similar size and scope as the Hospice center, then that might justify such a big pay day,” BoardSource said in a prepared statement.
But BoardSource also said such perks should be tied to performance goals.
Dailey’s deferred compensation hinged on whether or not she remained with Hospice of Dayton for a decade. Hospice officials, however, noted that the board had the power to terminate her for cause or poor performance.
Hospice of Dayton declined to provide a copy of its contract with Dailey.
BoardSource’s Davidson said pay for the leaders of nonprofit organizations is increasingly comparable to their for-profit peers as nonprofits seek to attract top talent. And rightfully so, she said.
But Cathy Levine, executive director of the Universal Health Care Action Network of Ohio, said nonprofits who receive tax breaks in exchage for providing a community benefit should be held to a different standard. Nonprofits should be subject to better rules that ensure executive compensation is proportionate, she said.
“At what point does the nonprofit executive’s compensation reach a level where they’re out of touch with the people they’re trying to serve?” Levine said. “I think we need more specific standards.”
Bottom-line focus; concerns about care
Dailey came to Hospice of Dayton when the organization — founded on the principle of caring for instead of curing the terminally ill — was at a crossroads.
In the late 1990s, community contributions had kept Hospice of Dayton from operating in the red, Mann recalled. Its daily census — the number of patients cared for — had slipped to little more than 200.
“We needed a new person with a new view who could take us to the next level,” Mann said. “One of the charges we gave Deborah was, from a strategic standpoint, you have to turn our operating loss into operating income and do it pretty quickly.”
Dailey at the time had 23 years of experience in the hospice industry, heading up a regional network of hospices in Dallas for the for-profit VistaCare, and previously leading a nonprofit hospice in Florida’s Palm Beach County. At the time she joined Hospice of Dayton in the fall of 2000, she was looking for a hospice job closer to family in Kentucky.
Dailey quickly transformed Hospice of Dayton, even as for-profit hospices were cropping up across the region and nationwide. At the time Dailey came to Dayton, for-profit hospices made up 27 percent of all hospices, but became a majority by 2007.
Under Dailey’s direction, Hospice of Dayton more than held its own against the for-profits, running a lean operation and even handling duties typically handled by a chief financial officer for a time. The nonprofit’s board, pleased with her performance, had concerns that she could be wooed away to lead another organization.
“There certainly was a risk that we could lose her,” Mann said.
In January 2003, the board entered into a contract with Dailey that guaranteed her significant compensation if she remained with Hospice of Dayton for 10 years, or until she was 62 years old.
But Dailey’s makeover of Hospice fueled perceptions among her staff that she was all about numbers. Dozens of staff members quit or were fired, and Dailey was accused of burning out her staff at the expense of patient care.
“They’re overwhelmed,” one former Hospice nurse who quit told the Dayton Daily News in a July 2005 report.
In a letter to the editor that month, Hospice of Dayton founder Betty Schmoll wrote that the agency needed to strike a better balance.
“Somehow there needs to be a solution that recognizes patient-care needs as equal to the business aspects of Hospice,” she wrote.
Mann acknowledged the problems. “Deborah had to make some tough decisions that upset certain people,” he said. “There’s no doubt about that.”
In dealing with employee discontent, Mann said he and other board members couldn’t just take the word of the organization’s executive leadership.
“We had to execute some fixes as a board,” he said.
The board hired an independent third party to gather employee feedback, then summarize it for the board and for Dailey’s leadership team. Mann said employee morale subsequently improved.
There was no doubt of Dailey’s prowess on financial matters. During her decade of leadership, from 2000-10, Hospice of Dayton’s program service revenues more than tripled, from $13.3 million to $42.7 million. It also opened a second inpatient care center in Franklin in 2009 that serves Warren and Butler counties, and daily patient census more than doubled during her tenure to nearly 600.
Dailey also left a legacy of financial stability. The organization’s net assets, excluding its foundation assets, reached nearly $58.7 million, enough money to run the organization for about 17 months — far longer than the reserves would last at the other six nonprofits reviewed by the newspaper. In addition, the Hospice’s foundation, which receives contributions in memory of loved ones from the community, has about $23.4 million in assets.
But Schmoll said she was bothered by the focus on the size of the foundation’s assets instead of what was being done with the money.
Those reserves have allowed Hospice of Dayton to make $4 million in recent improvements to its main campus at 324 Wilmington Ave. without soliciting money from the community, said the organization’s current president and CEO, Kent Anderson, who was recruited from Hope Hospice in Fort Myers, Fla., to replace Dailey.
Contributions from the community are used to provide services that go beyond those required by Medicare — music, massage and art therapy, for example — that can improve quality of life in a patient’s final days, Anderson said.
“If all we did is provide what Medicare said we had to do, there wouldn’t be any need to have this organization or this mission in the community because you have 20 others doing it,” Anderson said.
Pay comparisons can be tough
The Hospice of Dayton executive board — whose chairwoman, CareSource CEO and President Pamela Morris, was not available last week for comment — looks at the compensation of the leaders of comparably sized nonprofit hospices, Mann said. But Mann said that information is not used to set its CEO’s salary.
“The hospice industry is relatively new and, very unlike acute care, it is very difficult to compare one with the other, even within the for-profit and not-for-profit circles,” he wrote in an email. “So Hospice of Dayton does not benchmark or compare ourselves to those you identified for any significant purpose at the board level or operationally because we know we could end up comparing apples to oranges.”
Mann said that philosophy extends to CEO compensation, citing different operational structures, different competitive environments and “probably most important, we did not and could not have enough knowledge about these other comp arrangements and the contracts behind them. So it is data that, in fact, can be harmful in negotiat(ing) a pay package for any certain CEO.”
Hospice of Dayton instead bases its CEO pay primarily on how the organization performs versus its budget. It also considers family satisfaction surveys, Mann said.
Davidson of BoardSource said an organization’s size certainly must be considered in setting its executive’s pay. But there are several other variables, she said, including availability of potential leaders who have the necessary skill sets. Tenure and competition also influence compensation, she said.
The median compensation, including incentive pay, for CEOs of for-profit hospices with a $50 million budget is $371,345 nationwide, according to ERI Economic Research Institute, a compensation analytics firm that compiles executive compensation data.
At the Dayton Daily News’ request, ERI also compiled a list of 35 nonprofit hospices with revenues between $30 million and $100 million. That database found that Dailey’s pay in 2009 ranked ninth out of those 35 nonprofit hospices, while the organization’s revenues ranked 21st.
Nonprofit boards need to look hard at whether they’re getting sufficient value for what they’re paying, Davidson said. “Too many boards get somewhat intimidated” to address that issue, she said.
Contact this reporter at (937) 225-7457 or bsutherly@ DaytonDailyNews.com.
About the Author