Parkland Memorial Hospital refuses to release costly report on executive compensation

By Sherry Jacobson
Originally posted 7.23.13

Top officials at Parkland Memorial Hospital have been working since last fall on a tough issue related to executive compensation.

The hospital’s board of managers wasn’t sure it was paying top Parkland managers enough money to keep them from leaving for better-paying jobs. The hospital has experienced a sweeping overhaul of top managers since it failed a series of government inspections in 2011.

Last fall, the board approved a $150,000 contract with Sullivan Cotter and Associates, a compensation consultant based in Chicago and Detroit. The firm was asked to produce a report showing how much Parkland was paying its top managers compared to what others in the same positions earned elsewhere in the health care industry.

The report, called the Executive Compensation Review, was completed in April and presented to the board May 22 in executive session. That meant nothing about the report or what the board said in response to it was made public that day.

However, the report suggested a new salary structure for Parkland’s top executives, including possible base pay increases for certain administrators. It also called for implementing incentive pay that was quashed when Parkland got in trouble with government regulators.

Two weeks ago, the existence of the Sullivan Cotter compensation report was revealed to the Dallas County Commissioners Court by Parkland Chairwoman Debbie Branson. Commissioner John Wiley Price asked immediately for a copy as did The Dallas Morning News.

On Monday, Parkland’s legal staff notified the newspaper that it could not release the compensation report because it contained “confidential information” that had been provided to Sullivan Cotter by the hospital. Likewise, the report contained other private information provided by the consultant.

Under the Texas Public Information Act, Parkland did release a copy of the contract between the hospital and Sullivan Cotter as well as the briefing materials that were presented to the hospital board at the private May meeting.

The documents provide a rough outline of the hospital’s “executive compensation philosophy.” Basically, Dallas County’s public hospital wants to “retain the most highly qualified executives [and] pay competitively.”

The summary also notes that executive compensation decisions would be made by the board’s human resources committee, composed of “disinterested and independent members.” Such decisions would be “reported” to the full hospital board.

Executive compensation was defined as the base salary, annual incentive compensation, standard benefits [that all employees get] and supplemental executive benefits.

“Parkland is committed to a philosophy of rewarding executives for performance,” the document stated. “Therefore, total cash compensation, which is made up of base salary plus annual incentives, is the primary component of the total remuneration program.”

According to the outline, base salaries are to be established according to competitive and appropriate market practices. And they are intended to reflect each executive’s “capabilities, experience, tenure and performance in the position.”

Incentive compensation, or “reward opportunities,” also would be implemented based on competitive market practices and the position level of the executive, the board was told. The purpose was to reward executives for “achieving or surpassing specific organization and individual performance objectives, focus executive attention and reinforce the desired executive behaviors.”

The board was told base salaries should be closer to the “50th percentile” but “may be up to the 75th percentile based on facts and circumstances.” The total cash compensation for the hospital’s top managers also should fall between the 50th and 75th percentile.

“The goal would be to pay at the 75th percentile when exceptional performance is achieved,” the board was told. However, the actual payment schedule was not revealed.

Currently, executive compensation and benefits at Parkland are based on those paid at other public hospitals and health systems. The new plan calls for comparing Parkland’s compensation packages to national academic and teaching hospitals and health systems, both public and private.

The county hospial also may restructure its base salaries from the current 47 pay grades to a new 15-grade structure. The exact salaries were not contained in the document.

However, a summary provided to the board estimated a “market adjustment” cost of $41,037 for four employees and as much as $274,078 if 22 employee salaries were adjusted.

The top four administrators at Parkland include the chief executive officer, chief operating officer, chief financial officer and chief medical officer. Currently, all four of the positions are being held on an interim basis.

Parkland’s executive salaries are public information and have been published by The News in recent years.