Parting is such sweet sorrow — especially when it means you get $2.33 million in cash from the troubled nonprofit hospital system you have left behind.
According to newly released financial disclosures, Nashville-based St. Thomas Health Services paid that much to Tom Beeman, president and CEO from 2000 until his departure in early 2005, in the fiscal year after he left the job.
Some of the money was additional salary that Beeman and the Catholic healthcare provider were able to hold back from public view during his tenure, while much of the rest came from pension benefits he earned in fewer than six years on the job.
Beeman received $1,647,308 in direct compensation, along with some $684,000 in employee benefits, deferred compensation and expenses, in the July 2005-June 2006 fiscal year. Information on executive compensation is included in Form 990, a publicly available filing that nonprofits make annually with the Internal Revenue Service. The 2005-06 Form 990 of STHS, filed in May 2007 and made public recently (available at this link), contains details of Beeman's post-employment payment.
STHS spokesperson Rebecca Climer explained on Thursday that part of Beeman's payment reflected a lump-sum distribution of retirement benefits he had earned from the hospital system. The remainder, she said, represented "multiple years of deferred compensation that Tom accrued over the six years he was here."
Beeman confirmed Climer's explanation in an interview late Thursday, noting that STHS had a policy of allowing lump-sum pension payouts because federal income tax on the deferred compensation came due after his employment ended, whether he took the money then or not. The former CEO, who now holds the same post at nonprofit Lancaster (Pa.) General Hospital, acknowledged that the effect of the payroll arrangements was that the amounts STHS publicly disclosed as having been paid to him each year while he was still in the top job were lower than what he actually earned.
The compensation committee of St. Thomas Health Services' board decided on Beeman's remuneration. "They determine what's appropriate for the CEO of a $1 billion-plus company," Beeman said. "They set it. You don't have anything to do with it." And STHS parent Ascension Health, the nation's largest not-for-profit hospital group, had to approve the pay deal, he noted. Everything was done "as required by the IRS," Beeman emphasized.
Tax filings from St. Thomas showed Beeman with compensation of $847,000 in a partial year of service in the hospital system's 2004-05 fiscal year. He made $624,000 in the year before that.
The most recent Form 990 also sheds some light on the performance of STHS and its component hospitals, the largest of which are St. Thomas and Baptist in Nashville. Complete information will not be available until the individual hospitals make their own annual filings, but the STHS 990 shows it running a deficit of $2.49 million in 2005-06 after posting a surplus of $657,000 the year before.
Since the end of the period covered in that return, there has been a significant defection of cardiologists from the system's flagship hospital, and many of the remaining heart docs were retained only after a bidding war with other local hospitals. Baptist, meanwhile, has undertaken stringent cost-cutting measures, causing such concern among its physicians at one point that hospital CEO Bernie Sherry felt the need to reassure them in an open letter. Baptist posted deficits of more than $50 million in each of the two most recent fiscal years on record, through June 30, 2005.
As to the current performance of STHS, Beeman remarked: "Well, it was doing okay when I was down there."
One expert who has been on the inside of boardroom discussions of exec pay at nonprofit hospitals is not surprised at the largess Beeman raked in. "It is not at all uncommon for CEOs of nonprofit hospitals to retire with lump-sum payments of that size and bigger," said David Bjork, a senior vice president for Integrated Healthcare Strategies (formerly Clark Consulting), a Minneapolis-based firm that specializes in executive compensation for hospitals, "I know of one in the process of being paid out that is, believe it or not, way over $10 million."
Bjork noted that federal legislation controls the amounts of retirement benefits that nonprofit executives can be paid. Nonprofits wanting to pay above a certain amount, he explained, must resort to a supplemental retirement plan "to deal with that legislative cap on what you can do in a standard plan" — a common practice, he said, and one that does not circumvent IRS rules on excessive compensation because it is so widespread and accepted.
But Bjork made clear he was talking about what execs might reap in deferred comp and pension "if they go through a full career with the organization." Without knowing the particulars of Beeman's situation, the consultant spoke in generalities about compensation norms in the hospital business.
"If he got that much money, he was probably within Ascension for a longer period of time," the comp consultant speculated of Beeman. "If, for example, he had been with Ascension for 15 or 20 years, then it would be easy to rationalize. If he had only joined Ascension and St. Thomas and put in six years, then it would look like a lot of money."
Beeman, however, was not a lifer at Ascension or its predecessor ministries. He held positions at Catholic hospitals in Delaware and Pennsylvania, as well as other institutions, before joining the University of Pennsylvania Health System in Philadelphia in the late 1990s, prior to his St. Thomas appointment.
The mission statement of St. Thomas Health Services commits the Roman Catholic-based organization to "serving all persons with special attention to those who are poor and vulnerable." It has enjoyed broad community support over the years in aspiring to fulfill that mission. In the same year Beeman received his payout, 4,761 different donors gave the hospital system $6.35 million in contributions, of which $1.77 million was spent on "programs that target the poor, both within Saint Thomas Health Services and in the wider community," according to the 2006 annual report of the Saint Thomas Health Services Fund.
The payment to Beeman, thus, ate up more than a third of all donations received for the year and exceeded the amount spent on programs meant to help the poor. STHS did provide a total of almost $40 million in overall charity care during the year, counting uncompensated services for the uninsured and other concessions — an amount comparable to what many for-profit and academic hospitals, without a specific mission of aiding the poor, provide in unpaid care annually.
While inquiring about Beeman's payout, NashvillePost.com has learned of an even more generous sendoff given to former Baptist Hospital CEO C. David Stringfield after his highly controversial tenure ended in 1998, three years before STHS purchased Baptist.
In addition to a lifetime monthly pension of $4,820, Baptist paid Stringfield about $14,600 a month for three years after its board forced him from his position in November 1998. The hospital then paid him a lump sum of $3.5 million, making the severance deal worth roughly $4 million in total. Those payments are detailed in the 2001 divorce decree of David and Ruth Stringfield, an excerpt from which is available at this link.
Board members and outside observers blamed Stringfield's strategic decisions for the massive financial losses Baptist began to suffer in the 1990s. As detailed in an exhaustive 1997 investigation and a subsequent follow-up by reporter Willy Stern of the Nashville Scene, Stringfield also faced accusations of financial and personal improprieties.
The Baptist board, consultant Bjork speculated, "probably put that plan in place as a contractual agreement back in the years when Baptist was rolling in money. It was extraordinarily successful for a while, and he was nationally prominent, a big shot. Everybody thought he was fabulous. Then things crumbled."
Baptist was faced with the choice of honoring the contract or getting into a legal battle with Stringfield, Bjork said. "Usually, organizations swallow hard, and regret it, but end up paying."