Most Arizona hospital CEOs got raises, made millions, during pandemic, IRS filings say

More than half the top executives at Arizona's largest nonprofit and public health systems who were leading their organizations during the deadly worldwide COVID-19 pandemic got pay hikes during those tumultuous years.

Peter Fine, who has headed Phoenix-based Banner Health since 2000, was the highest paid nonprofit hospital CEO in Arizona in 2021, according to IRS records. Banner Health is the state's largest private employer and one of the country's largest health systems.

Fine's total reported pay package that year was $12.4 million, a 10% increase from 2019, IRS records show. Banner officials said the amount includes $4.4 million in retirement pay that was accrued but not paid out.

Six CEOS of Arizona's 10 largest hospitals and hospital systems saw increases in their total reported compensation between 2019, 2020 and 2021. Three did not. One did not start his job until the 2021 fiscal year.

Some of those who got raises had double-digit percentage pay bumps.

U.S. hospitals faced an overwhelming and unprecedented crisis situation during the pandemic. Yet critics question whether hospital CEO pay is too high at a time when many front-line health care workers have quit from burnout and when many patients struggle to pay medical bills and find affordable care.

Adding to public interest in hospital CEO salaries, 75,000 health care workers employed by the nonprofit Kaiser Permanente health care system walked off the job Oct. 4 because of what they called inadequate pay and short staffing. Several national media reports have called the three-day walkout the largest U.S. health care strike in recent history. The strike involved workers in multiple states, including California, but none in Arizona.

Nonprofit hospital CEOs are outliers in the nonprofit world, according to an Aug. 11 blog post by Judith Garber, a senior policy analyst at The Lown Institute, a nonprofit public policy think tank that advocates for an improved health care system.

While most nonprofit CEOs earn between $90,000 and $250,000 on average, the average nonprofit hospital CEO gets paid nearly $700,000, Garber wrote.

"Even presidents of universities, the next-highest paid in the nonprofit sector, make about $300,000 less on average than the leaders of nonprofit hospitals," she wrote.

Total compensation calculated using Schedule J on 990 forms

The total reported compensation for Arizona nonprofit CEOs is on Schedule J of the 990 IRS form, which includes base compensation, bonuses and incentives, "other reportable compensation," retirement and other deferred compensation, and nontaxable benefits.

Here is a list of top CEO compensation for Arizona's largest nonprofit and public hospital and health systems for 2021. Hospital systems that operate on a fiscal year are designated with a single asterisk. All others operate on a calendar year.

• Banner Health CEO Peter Fine: $12.4 million in 2021, up 10% from 2019.

• Phoenix Children's Hospital CEO Bob Meyer: $3.3 million in 2021, up 13% from 2019.

• Yuma Regional Medical Center CEO Dr. Robert Trenschel: $2.6 million in 2021, up by 94% from 2019.*

• Former Dignity Health in Arizona CEO Linda Hunt: $2.1 million in 2021, up by 13% from 2019.* Hunt stepped down in January 2022.

• HonorHealth CEO Todd LaPorte: $1.9 million in 2021, down 1% from 2019.

• Mayo Clinic in Arizona CEO Dr. Richard Gray: $1.8 million in 2021, up by 26% from 2020. Since Gray did not become CEO until midway through 2019, The Republic calculated his total compensation increase from 2020 to 2021.

• TMC Health CEO Judy Rich: $1.5 million in 2021, down 2% from 2019. TMC Health operates Tucson Medical Center. The TMC Healthcare 990 says Rich earned $1.9 million in 2021, but health system officials say that amount was an error and they're filing an amended 990.

• Valleywise Health CEO Steve Purves: $897,896 in 2021, up by 29% from 2019.

• Former Northern Arizona Healthcare CEO Florence Spyrow: $796,381 in 2021, a 5% decrease from 2020.* Spyrow stepped down in August 2022. Since Spyrow did not become the health system's permanent CEO until midway through the 2019 fiscal year, The Republic calculated her total compensation increase between the 2020 and 2021 fiscal years.

• Former Kingman Healthcare Inc./Kingman Regional Medical Center CEO William "Will" McConnell: $524,215 in 2021, down 32% from the $773,113 that former CEO Brian Turney earned in 2019.* McConnell started the job in June 2020 and left in June 2022. Turney earned $993,473 in total compensation in 2021, though he wasn't CEO. The compensation was for advisory work as well the remainder of his benefits, which included a payout of accrued PTO hours, medical center leaders said.

Public reporting of 990 tax forms often lags by a year or two, but filings were significantly delayed during and after the COVID-19 pandemic. The 2021 income is the most recently available, although some 2022 filings from organizations on a fiscal year are becoming available and are expected to be fully available for all nonprofits in 2024.

The Arizona Republic got the compensation information from three sources − Guidestar, an information service specializing in U.S. nonprofit companies, a nonprofit database maintained by ProPublica, which is an independent investigative journalism news outlet, and for Phoenix-based Valleywise Health, a public records request. Valleywise Health is the public health care system for Maricopa County.

Dissecting Banner Health CEO's pay

Banner CEO Peter Fine's base compensation was $1.6 million in 2021. He also received $6 million in bonus and incentive compensation, and when other reportable pay was added in the total reported was $12.4 million for 2021, the deadliest year for the COVID-19 pandemic in Arizona.

His 2021 pay package was up by 10% from a pre-pandemic total compensation of $11.2 million 2019, Banner's tax return indicates.

Banner Health employs 53,000 people across six states. The nonprofit health system operates 33 hospitals, plus urgent care centers, an academic medicine division and an insurance division, among other entities. No other local health system is similar in size and complexity, company officials said in a statement.

The compensation for Fine, the CEO of Banner Health for 23 years, is established annually by a committee of the Banner Health Board of Directors, which considers several benchmarks, including the compensation of peers at comparable nonprofit health care systems in the U.S. , Banner officials said.

The IRS Form 990 report for Fine's income includes deferred compensation that was accrued but not paid out. Counting it as part of Fine's total compensation is like "double counting," since it will be paid out in future years, Banner officials said.

"For this reason, the annual cash compensation for Banner's CEO in 2021 is approximately $4.4 million less than the total on Form 990," Banner spokesperson Becky Armendariz wrote in an email.

Using those calculations, Fine's 2021 total compensation was $8 million in 2021 and not $12.4 million. Fine's accrued deferred compensation in 2019 was $4.1 million, which would have put his total compensation that year at $7.1 million. Using those adjusted amounts, Fine's compensation still increased by 10% between pre-pandemic 2019 and 2021.

While Fine is the CEO and top executive at Banner Health, the company employs numerous other highly paid leaders, tax returns show, including 14 who earned $1 million or more in total reported compensation in 2021.

Competitive pay 'imperative' in rural areas, Yuma hospital leaders say

The total compensation of Dr. Robert Trenschel, the CEO of Yuma Regional Medical Center, jumped the most of any of the Arizona nonprofit CEOs over two years − by 94% between the 2019 and 2021 fiscal years, IRS records show.

In 2021, Trenschel earned $2.6 million, according to the 990 tax forms the hospital submitted to the federal agency.

Yuma Regional Medical Center officials said the increase was tied to an executive retention program that provides financial credits to an executive every year. At the end of five years, if the executive is still employed, the executive is paid the accumulated value of those credits.

Trenschel began his job in Yuma in 2015, and the executive retention program paid him $1 million in 2020, Yuma officials said. His total compensation for the 2022 fiscal year (ending Sept. 9, 2022) is already publicly available and is listed as $1.7 million, nearly $1 million less than the 2021 amount.

"Competitive pay, especially in rural regions, is imperative to attracting and retaining top leadership," Yuma Regional Medical Center spokesperson Machele Headington wrote in an email. "And with eight years as CEO of YRMC, Dr. Trenschel has been a consummate leader during a time of transformation."

With about 2,800 employees, Yuma Regional Medical Center is the 65th-largest private employer in Arizona, tied with Vanguard Group, an investment company, according to The Republic's annual survey of the state's largest employers for 2023.

Linda Hunt, who was CEO of Dignity Health in Arizona during the pandemic, had a 13% bump in total compensation between 2019 and 2021, when she earned $2.1 million.

Dignity officials say Hunt took on additional duties during the pandemic, overseeing the Nevada division of Dignity Health and also Yavapai Regional Medical Center, which became affiliated with Dignity Health in 2020.

"The rate of increase was related to this and also the annual merit increase consistent with all employees," Dignity spokesperson Carmelle Malkovich wrote in an email.

San Francisco-based Dignity Health has 13,844 employees in Arizona and is Arizona's 10th largest private employer, The Republic's survey says.

Initiative would cap hospital CEO pay at US president's salary

Voters in Los Angeles will go to the polls in 2024 to decide whether the total compensation for hospital executives in the city should be capped at $450,000, the salary of the president of the United States.

Health care workers in California are are traumatized and burned out after the pandemic, and at the same time, hospital executives, who are not the ones directly taking care of patients, are getting huge raises and bonuses, said Renée Saldaña, who is a spokesperson for the SEIU-United Healthcare Workers West union, which spearheaded the proposal.

The salary cap would apply to top executives, administrators and managers of privately owned nonprofit and for-profit hospitals, union officials say. Critics say the measure would hurt recruitment and retention of hospital leaders, arguing that hospitals are complex entities that are responsible for the 24/7 care of patients and the communities where they serve.

It's not just hospital CEOs who are making high salaries. CEO pay is high across multiple U.S. sectors. Top U.S. CEO pay increased by 1,209.2% between 1978 and 2022, compared with a 15.3% increase in a typical worker’s compensation, according to the nonprofit Washington D.C.-based Economic Policy Institute.

The Washington D.C.-based AFL-CIO (American Federation of Labor and Congress of Industrial Organizations), which tracks CEO pay, says that in 2022 the American CEOs earned, on average, $16 million per year in total compensation, which is higher than any amount the nonprofit health systems leaders in Arizona earned in 2021. In 2022, the average CEO-to-worker pay ratio in the U.S. was 272-to-1 for S&P 500 Index companies, the AFL-CIO found.

The median household income in Arizona between 2017 and 2021 was $65,913, U.S. Census Bureau data shows.

Sen. Bernie Sanders, an independent from Vermont, on Oct. 10 announced he'd released a report that says many nonprofit hospital systems across the U.S. are failing to provide low-income Americans with the affordable medical care required by their nonprofit status, "despite receiving billions in tax benefits and providing exorbitant compensation packages to their senior executives."

Internal Revenue Service code says nonprofits must pay their executives at a level that is in line with "like institutions," which means they potentially risk their tax-exempt status for paying compensation that exceeds the market level, said Alexander Yaffe, a managing director at the executive compensation consulting firm Pearl Meyer.

A number of factors should be considered when looking at nonprofit health system CEO pay, including that health care is a complex industry and "there are a whole variety of things at play that make managing and growing a health system rather difficult," Yaffe said.

Some CEO pay may have increased during the pandemic because of growth in the organization or because of retention pay at a time when health system leadership was working harder and burnout was high, he said.

In his experience working with nonprofits, Yaffe said boards are typically "very focused on their tax-exempt mission and want to make sure that they are paying competitively and not excessively."

Reach health care reporter at Stephanie.Innes@gannett.com or at 602-444-8369. Follow her on X, formerly known as Twitter @stephanieinnes.

This article originally appeared on Arizona Republic: Here's what Arizona hospital CEOs earned during the COVID-19 pandemic