Health care executives reaping millions, returns show
Former chief executive Christopher Olivia did not go empty-handed when he left the struggling West Penn Allegheny Health System in June. He walked away with $7.4 million, newly released filings from the Internal Revenue Service show.
The compensation -- almost four times the $1.9 million he took home a year earlier -- even topped the pay of rival UPMC boss Jeffrey Romoff, whose compensation jumped 50 percent to $6 million last year, tax returns show.
"Unfortunately, leadership turnover is expensive," West Penn Allegheny Chairman Jack Isherwood wrote in a memo to employees. "Our board of directors met its obligation to honor their employment contracts, and as such, we had to account for several million dollars in severance expenses."
Olivia's compensation included $5.4 million in severance, retirement payments and deferred compensation. He joined the system in March 2008. He could not be reached for comment.
"An individual at that level would have a contract with the organization, and it was probably signed during the honeymoon phase," said consultant Jan Jennings, president of American Healthcare Solutions, Downtown. "It looks bad, but it happens, and it's legally binding. I can't second-guess the people who made the decision (to hire Olivia), but for the employees who lost their jobs at West Penn (Allegheny Health System), it will be perceived poorly."
The $2 million raise for Romoff, who leads the region's largest employer, should come as no surprise.
"You can't take away from the fact that he is a strategic genius and has done terrific things for UPMC," Jennings said.
The federal government requires tax-exempt organizations, such as UPMC and West Penn Allegheny, to file public tax returns. The filings disclosed on Friday cover the financial year that ran from July 1, 2010, to June 30, 2011. But base salary, bonus and other compensation figures for top-paid employees are for the 2010 calendar year. Retirement payments, deferred compensation and other benefits are reported for the financial year.
Romoff, 66, earned a base salary of $959,210, a bonus of $3.7 million and other compensation of $833,000. He also received retirement and deferred compensation of $427,500 and other benefits worth $22,300 during the 12 months ended June 30, the tax return shows.
UPMC spokeswoman Susan Manko said Romoff's higher compensation came from a larger bonus and nearly $800,000 in a lump-sum payment when the CEO fully vested in the organization's pension plan.
"It's not uncommon for successful executives," Manko said. "That's just how they're compensated."
Not everyone shared in Romoff's good fortune, particularly in Braddock. UPMC closed its hospital there in 2010 despite public outcry.
"Shuttering a hospital in the poorest community in the region while accepting a $2 million pay raise is regrettable," said Braddock Mayor John Fetterman. "Fortunately, we have Highmark and MedExpress and a new redevelopment now, so the divorce is final."
Construction on a MedExpress urgent care center in Braddock is set to begin in September.
Highmark Inc. is attempting to acquire West Penn Allegheny for $475 million. Olivia received a base salary of $1.2 million, a bonus of $678,000 and other compensation of $86,700. He was paid $1.8 million in salary and bonus in 2009.
The hospital system yesterday reported a net loss of $19.8 million for the first three months of this year. It lost $51.8 million from operations in the fiscal year that ended June 30.
Steep severances boosted the pay of two other departing West Penn executives. Roy Santarella, who had been chief administrative officer, was paid $2.9 million, including $1.4 million in retirement, severance and deferred compensation. Former Chief Medical Officer Sanford Kurtz received $1.7 million, including $684,200 in severance.
Keith Ghezzi is the health system's interim CEO, but his pay will remain a secret, said Kelly Sorice, a spokeswoman for West Penn Allegheny. He is an employee of Washington consulting firm Alvarez & Marsal, which was hired to aid its turnaround.