Valley Children’s VP ranks ‘striking,’ executive pay ‘pretty hefty,’ hospital expert says

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A review of nonprofit executive salaries for the Fresno region’s largest nonprofit organizations shows that the $5.1 million in total compensation for Valley Children’s Hospital Chief Executive Officer Todd Suntrapak in the 2022 tax year was more than double that of the next-highest-paid chief executive.

The head of a nonpartisan hospital-industry think tank said Suntrapak’s package of salary, bonuses and benefits of more than $10.6 million over the past two years is “pretty hefty” compared to most larger or similar-sized tax-exempt hospitals nationwide. In addition, the number of highly paid senior executives – vice presidents and senior vice presidents – at Valley Children’s is “striking” compared to even larger children’s hospitals in the U.S., he said.

For this report, The Fresno Bee combed through tax returns filed with the Internal Revenue Service for the 2022 tax year – the most recent publicly available documentation – for tax-exempt nonprofit organizations in Fresno, Kings, Madera and Tulare counties. We included organizations with annual revenue of $25 million or more, and examined the reported compensation for each organization’s CEO, president or executive director.

Of about three dozen nonprofits that met the criteria, the 358-bed Valley Children’s Hospital had the second largest revenues at about $1.13 billion. By comparison, total revenue at Fresno-based Community Medical Centers – which operates more than 1,000 beds between Community Regional Medical Center in downtown Fresno and Clovis Community Medical Center in Clovis – came in at almost $2.2 billion.

Even though Community’s revenues were not quite double those of the smaller Valley Children’s Hospital, its tax filings show compensation paid to Community CEO Craig Castro amounted to about $2.4 million – less than half of what Valley Children’s reported to the IRS for Suntrapak’s total compensation, including salary, bonuses and benefits.

In addition to Suntrapak’s multimillion-dollar compensation, Valley Children’s also appears to be top-heavy with vice presidents and senior vice presidents – more than many other tax-exempt children’s hospitals across the country, said Dr. Vikas Saini, a physician and president of the Massachusetts-based Lown Institute, in a recent telephone interview with The Bee. The Lown Institute studies an array of health care issues including executive compensation among nonprofit hospitals.

“When you add it all up, between the CEO compensation, the bonus for some kind of performance metric, and all the other vice presidents, I think these are legitimate questions for the board of that hospital,” Saini said. “The fact pattern raises a lot of questions.”

Out of step with the industry?

Candid, an organization that gathers information on more than 1.9 million U.S. nonprofits, reported in its 2023 Nonprofit Compensation Report that within the sector of nonprofit specialty hospitals – the category that includes Valley Children’s – the average annual compensation for CEOs was just under $1.2 million, with only 10% earning more than $2.3 million.

The pay package provided by Valley Children’s for Suntrapak “is not the highest in the country, but it’s pretty hefty for a hospital of that size,” Saini told The Bee. “We don’t pretend to know the ‘right pay’ for a hospital CEO, but we do think it’s reasonable to ask, what’s it for?”

Valley Children’s recently issued a press statement characterizing concern over Suntrapak’s compensation by some critics including Fresno City Councilmembers Garry Bredefeld and Miguel Arias as “misinformation” and “assumptions … based on an ill-informed reading” of the nonprofit’s tax forms.

The press release stated that Suntrapak’s annual base salary is just over $1.7 million, “which is in line with other health system CEOs with similar levels of responsibility; the remainder of his compensation largely consists of bonuses based on meeting significant performance goals – again, the norm for health system CEOs.”

The release also indicated that Suntrapak’s 2022 compensation was the result of an accounting quirk of bundling two years’ worth of bonuses into one tax year’s report.

“Executive compensation at Valley Children’s is determined through rigorous, independent review processes,” said Michael Hanson, chair of the Valley Children’s Healthcare board of trustees, in the prepared statement. “Our decisions are guided by industry standards and aimed at attracting and retaining top talent necessary to uphold our commitment to excellence in healthcare.”

The statement is the only substantive comment provided by the hospital in recent weeks over the controversy about the pay for its CEO and almost two dozen other senior executives for which compensation added up to another $20.1 million. But the statement did not specify what “significant performance goals” are included in the hospital board’s salary review process or the industry standards to which Hanson referred.

And while the hospital’s statement seeks to explain the compensation reported on the 2022 tax return, it doesn’t appear to address criticism of the $5.5 million in compensation for Suntrapak reported to the IRS on the hospital’s 2021 tax form.

Saini acknowledged that the Valley Children’s 2022 tax form shows that Suntrapak’s compensation reflects about $1.6 million in bonuses. But, he added, “I think there’s a legitimate public interest in (knowing) what that bonus was for.”

“What is it that’s being incentivized?” Saini said. “Is it just for racking up the billings? Is it about other measures or community quality or community service or anything like that?”

An upward spiral for hospital salaries?

Saini pointed to a trend over the past 20 to 30 years of nonprofit hospitals adding more and more private-sector business people to their boards of directors “who are oriented to the bottom line, who think about it like a regular business.”

“There’s no question that there are business aspects to healthcare, but (nonprofits) are fundamentally different in the way that they’re community-oriented, so that’s why they are tax-exempt,” Saini said.

“When you talk to most people in healthcare, they’ll acknowledge – if they’re being honest – that it’s hard to discern much difference in behavior between nonprofit hospitals and for-profits,” he added.

Saini said it’s understandable for a board to want to reward a CEO for good performance. “But in large measure it should be a public conversation. What are the performance metrics, the key performance indicators for a nonprofit that has a social mission?” he said. “I think that’s where the business-mindedness of board members gets a little confused, because for-profits and nonprofits are very different. Quite often it gets fuzzy.”

As a result, when hospitals are on the hunt for a CEO, “they all want to recruit the best one,” Saini told The Bee. Boards typically use consultants to examine the range of pay nationwide for similar organizations. “So when they hire a new CEO, they’re not going to pay below the median; they’re not even going to pay at the median. They’re saying, ‘We’ve got to go higher.’”

“And if everybody does that, it creates an upward spiral, and that’s what we’ve seen for 30 years.”

Top-heavy in leadership?

In its 2022 tax form Valley Children’s listed a roster of key executives including 22 with titles of senior vice president or vice president. Collectively, those executives were paid more than $20.1 million in compensation.

A greater demand for more administrative staff, including senior executives and managers for hospitals, has been driven by a higher degree of complexity in the hospital industry, Saini said. That complexity includes dealing with multiple revenue sources such as Medicaid and a plethora of private and public insurance programs, and an ever-growing increase in investments in cutting-edge medical technology.

Still, Saini said he was struck by the volume of senior executives at Valley Children’s. “If you look at other hospitals, which we’ve done, these numbers are high,” he said.

For example, Saini noted that many larger nonprofit children’s hospitals have far fewer vice presidents or senior vice presidents: 11 each at the 483-bed Boston Children’s Hospital and the 667-bed Children’s Hospital of Philadelphia, and 13 at Children’s Hospital Los Angeles, which operates 413 beds.

“The trend in the last 30 years has been greater administrative complexity, more administrators,” Saini said. “But I, as a doctor who practiced for more than 40 years, and lots of doctor colleagues have been grumbling for a decade or more that the number of vice presidents and administrators has been growing exponentially while everything else has not.”