Executive Compensation at the Greater New York Hospital Association

Listening to Andrew Cuomo, the governor of New York, talk about the logistic nightmare of working with hospitals in the greater New York area made me curious to know more.

At the core of the problem is a hospital system where there are 2 types of hospitals:  public (which tend to be more overwhelmed right now) and private. These two separate hospital systems don’t generally work together since public hospitals are tax-exempt while private hospitals are driven by profitability.

Although public hospitals are usually referred to as non-profit hospitals, the words “non-profit” refer to their tax exempt status, not a propensity to avoid making a profit. A non-profit can report a profit; they just don’t pay taxes on the profit. Instead, the profit is treated as an addition to the general fund or what many people refer to as the endowment. In a non-profit, the wealth stays in the organization for the ultimate benefit of those served while in a for-profit, the wealth is shared by the owners or shareholders.

To make things even more difficult, hospitals are also segmented by geographic location (i.e. upstate hospitals, Long Island hospitals, Westchester hospitals, etc). Trying to get them all to work together for the public good is like asking food banks to work with private food manufacturers to feed the state. Bound by different rules, management of each organization has little motivation to work together unless forced to in an emergency situation.

In Cuomo’s daily update yesterday, the governor referred to the Greater New York Hospital Association (GNYHA), a New York City-based non-profit, tax-exempt 501 (c) (6) who represents 160-250 (both numbers are reported on the organization’s website) not-for-profit hospitals and continuing care facilities in New York, New Jersey, Connecticut, and Rhode Island.  This organization appears to be a key player in obtaining supplies (PPE or Personal Protection Equipment) for the non-profit hospitals (not the for-profit hospitals) in the greater New York area. The point being:   services need to be streamlined to serve all hospitals in the greater New York area, not just the non-profit hospitals in order to obtain efficiencies and serve the public good.

That said, key information about GNYHA includes:

• GNYHA generates about $27 million annually (2016 and 2107) but spends significantly less (about $10 million on compensation for the 5 employees, lobbying, and advertising), allowing the organization to build its endowment to $128 million at year-end 2017.
• GNYHA is the direct controlling entity of the Greater New York Hospital Foundation, Inc., a 501 (c) (3) that generated $11 million in 2017 and had $2.3 million in net fund assets.
• GNYHA owns 100% of Acurity, Inc., a for-profit corporation that provides supply chain performance to reduce operating costs for hospitals in the greater New York area. GNYHA Ventures is the direct controlling entity. GNYHA’s share of total income in 2017 was $134 million.
• GNYHA owns 100% of GNYHA Ventures, a for-profit corporation also based in New York. According to Crunchbase,  the “Greater New York Hospital Association operates the largest business enterprise of any trade association in the US through its for-profit arm, GNYHA Ventures, Inc. GNYHA Ventures generates billions in commerce while delivering tremendous value for their members. Working with the Association, GNYHA Ventures navigates the world of business advocacy to help improve hospital operations and provide industry-leading transparency and cost reduction.”  I have no idea what that means.
• GNYHA owns 100% of Nexera, Inc., a for-profit corporation based in New York that is advertised as a health care consulting firm. GNYHA’s share of total income in 2017 was $15 million. GNYHA Ventures is the direct controlling entity.
• GNYHA owns 100% of Mobile Health, Inc., a for-profit corporation based in New York whose primary activity is media technology.  GNYHA Ventures is the direct controlling entity.
• GNYHA Purchasing Alliance LLC is a related entity whose primary activity is investing. GNYHA has a 39.144% interest in this entity. GYNHA’s share of total income in 2017 was $6 million while their share of year-end assets is $41 million.
• GNYHA owns 100% of GNYHA Management Corporation, a for-profit corporation based in New York that appears to be the overall management organization and from where most of the executive compensation is paid. GNYHA’s share of total income was nearly $16 million in 2017.
• According to the IRS Form 990 (2017) of GNYHA has 5 employees who were compensated $3.8 million (an average compensation of $760,000).  The following 7 employees were reported to be the most highly compensated:

$1,728,818:  David C Rich, EVP, Gov’t Affairs, Comm, Public Policy

$1,370,461:  Susan C Waltman, EVP, Legal, Reg, and General Counsel

$1,129,269:  Kenneth E Raske, President

$  926,739:  Lee H Perlman, EVP, Administration, CFO

$  743,949:  Karen S Heller, EVP, Health Econ & Finance

$  416,341:  Jonathan Cooper, SVP, Gov’t Affairs

$  297,706:  Lloyd Bishop, SVP, Comm, Health, Init, Gov’t Affairs

Collectively, the 7 employees listed above were compensated $5.6 million, which equates to an average compensation of $800,000.  Rich, Waltman, Raske, Perlman, and Heller appear to have received their compensation from GNYHA Management Corporation while Cooper and Bishop received their compensation from GNYHA. If Cooper and Bishop are two of the five employees of GNYHA, then it is unclear who the other three employees are. Cooper and Bishop received total compensation of about $700,000 which means $3.1 million ($3.8 million – $0.7 million) in compensation was earned by 3 other employees (who those employees are is unclear).

GNYHA paid for first class or charter travel. Specifically, the president traveled in first class.

GNYHA paid for companion travel. Specifically, the President’s spouse accompanied him on business trips.

GNYHA paid for personal services. Specifically, the President and two officers had a car and driver at their disposal.

If GNYHA is all about efficiency and reducing operating costs for member non-profit hospitals, how can the organization justify paying the high salaries AND first class travel, companion travel, and for cars and drivers?

GNYHA paid more than $100,000 to seven independent contractors (most of which appear to be lobbyists), the five highest of which are listed below:

• $484,724:  Pirro Group, LLC (lawyers) of White Plains, NY for consulting
• $360,588:  Mirram Group, LLC (political) of New York, NY for consulting
• $300,867:  The Ickes Enright Group (political strategy) of Washington, DC for consulting
• $239,029:  Thorn Run Partners LLC (gov’t affairs) of Washington, CD for consulting
• $180,623:  Card and Associates LLC (public policy) of St Mary, GA for consulting

To read the IRS Form 990 (2017) for GNYHA, click here.