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Oct 11, 2013

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Havre de Grace, MD

UCH Hospital Loses 61 Million, Still Pays Lyle Sheldon Ne...

As we have quoted many times, sunlight is the best disinfectant. New US Internal Revenue Service requirements for reporting by not-for-profit organizations has resulted in more transparency about the finances of many health care organizations, and this transparency has shown that the culture of perverse incentives and management privilege has spread far and wide. How far and wide? Consider this story in the (Harford County, Maryland) Aegis: Harford County¬ís Upper Chesapeake Health lost $70 million because of bad bets in the derivatives markets two years ago, but still paid its chief executive more than $900,000 in annual salary and bonuses. We see that now CEOs of even the smallest community hospital systems like Lyle Sheldon seem entitled to make nearly a million dollars a year. We see that even CEOs whose institutions lose millions due to risky investments still receive such compensation. We see that the executives who seem directly responsible for making such money losing investments still earn hundreds of thousands of dollars. This is an extreme illustration of how perverse incentives permeate health care, how CEOs like Lyle Sheldon command pay beyond the dreams of ordinary people, even when their leadership is financially calamitous, and how little health care leaders support their organizations' idealistic values. Are leaders who are not held accountable for easily measured financial performance likely to be good stewards of clinical performance, which is much harder to measure? If we do not hold health care leaders accountable, if we do not provide them with incentives that are proportional to their actual performance, why should we expect Upper Cheseapeake Health to do any more than satisfy Lyle Sheldon's self-interest and personal gain?  (Oct 11, 2013 | post #1)