Study suggests hospital CEO was paid too much

A recent analysis of CEO salaries at not-for-profit hospitals in the peer-reviewed journal Health Affairs suggests that WhidbeyHealth has been paying its top employee far above the average for the size of the hospital.

The article, “Nonprofit Hospital CEO Compensation: How Much Is Enough?”, appeared in Health Affairs Forefront on Feb. 10. The story also discussed the disparity of salaries between CEOs and average hourly workers’ pay.

Ron Telles, who was fired from the WhidbeyHealth CEO position last week, earned $430,000 a year, or about $207 an hour, plus full benefits and other expenses.

The study found that the average CEO compensation for nonprofit hospitals with fewer than 50 beds is $130 an hour. Publicly owned WhidbeyHealth currently staffs 18 beds but has the potential to increase that to 25.

CEO compensation at the hospital district has ballooned over the years.

In 2004, CEO Scott Rhine signed a contract for $130,000 a year after five years on the job. In 2009, Tom Tomasino was hired at $230,000 a year. A 2009 editorial by the Whidbey News-Times pointed out that his salary was far above the average pay for CEOs at critical access hospitals and that the board was basing his salary on other hospital CEOs who had decades more experience that he had.

After Tomasino, Geri Forbes was hired at $279,000 a year in 2015, but her contract included board-approved performance bonuses equal to 25 percent of her salary. She announced her retirement in 2019, following construction cost overruns and other missteps.

Telles was the hospital’s chief financial officer before he was promoted to CEO in 2019. His one-year contract was for $330,000 a year with no bonuses, meeting minutes show.

The hospital board increased his salary to $430,000 in a renewed contract in the midst of the COVID-19 pandemic in November 2020. At the time, employees were being laid off and the hospital was operating with very little cash on hand; the nurses’ union complained that nurses were being paid well below the market rate.

Ron Wallin, the president of the hospital board, said Telles’ salary was increased to compensate for his dual roles of chief executive officer and chief financial officer.

“Mistakes were made,” he said, “but the board is trying to move past them.”

Wallin said the board decided to do away with the system of giving executives bonuses, which he said can hide the true salaries of CEOs. When they are taken into account, the salaries of CEOs at other hospitals are higher than people realize, he said.

Right now, hospitals across the nation are searching for CEOs, he said, which might increase the salary of a new CEO.

In prior years, board members also argued that the CEO pay is high because WhidbeyHealth is more than just a hospital but includes clinics across the island.

During the hospital levy campaign, Telles said executive team compensation was temporarily reduced by 10% for several months in 2020 to help with the financial problems associated with the pandemic.

HealthTechS3, a management services firm, proposed that the interim CEO receive an annualized salary of $370,000, with no additional cost of benefits beyond travel.

The hospital hired a new chief financial officer in the beginning of the year as concerns grew about the hospital’s books. He quickly raised alarms about the health of the hospital’s finances.

Telles’ salary wasn’t reduced when the hospital hired the interim CFO. Telles was fired without cause, and he will receive severance pay based on nine months of his $430,000-a-year pay, according to his contract.

The Health Affairs study states that the ratio of average CEO pay to average hourly worker wage for hospital with fewer than 50 beds is 6:1.

A recent report by the Whidbey News-Times found that the hospital district is the only public entity on Whidbey Island that has a significant number of employees who are paid significantly less than $20 an hour. Last year the board started making efforts to pay staff at least $18 an hour.

The gap between CEO pay and hourly employee wages is greater in larger hospitals, growing to 14:1 for facilities with more than 400 beds.

An ABC News story last year about the massive gap between CEO pay and average worker pay in different industries cited an example from a hospital in Missouri. A technician making $13.77 an hour contracted COVID while working in the ER. Upon his return he was given a $6 gift card for the hospital cafeteria and named the employee of the month.

The CEO of that hospital system received $30.4 million in pay, which was a 13% increase.