Compensation for Nonprofit Health Care Board Members. the Right Path or a Minefield?

Article excerpt

In summer 2011, Massachusetts Attorney General Martha Coakley publicly challenged the appropriateness of the board compensation practices of the state's four major nonprofit health plans, and promised to seek legislation that would grant her the authority to approve or deny future board compensation practices of these plans. In response, the board of one of those plans, Blue Cross Blue Shield of Massachusetts, considered seeking a change in its ownership status from a public charity to a member-owned mutual company to avoid such regulatory intervention in the future. It ultimately decided against seeking such a change because of more pressing issues, and it indefinitely suspended board compensation. At about this same time, down the Atlantic Coast, local media were questioning the board compensation practices of the nonprofit Blue Cross Blue Shield of South Carolina.

In fall 2011, the Governance Institute released the results of its most recent compensation survey showing that 15% of the 660 nonprofit hospital and system respondents were compensating some or all of their board members, up from 10% in 2009. Government-sponsored respondents were found to be the most likely to compensate some or all of their board members; nonprofit health system respondents were found to compensate their board chairs more than others (25% at $30,000 to $50,000 and 25% at more than $50,000).

Are there circumstances under which it is appropriate for a nonprofit health care organization to compensate, or to consider compensating, some or all of its board members? Would board members receiving some level of compensation tend to take their board assignments more seriously? If compensation is deemed appropriate for some board members, should all be compensated to at least some degree? Where a board decides that all its members should receive some compensation, should individual board members be permitted to opt out?

These are among the issues explored in the following discussion, another in Inquiry's ongoing Dialogue series, co-sponsored by the Alliance for Advancing Nonprofit Health Care to provide a variety of voices on important nonprofit health care issues. The panelists for this discussion, held on September 27, 2011, were: Kenneth (Ken) Ackerman, chairman of Integrated Healthcare Strategies in Minneapolis, Minn.; Douglas (Doug) Clark, retired president and CEO of Excela Health (Pennsylvania), now residing in Greensburg, Penn.; Michael (Mike) Cascone, retired president and CEO of Blue Cross Blue Shield of Florida, now residing in Jacksonville, Fla.; and William (Bill) Kreykes, former board chair of the Trinity Health System (Michigan) and retired president and CEO of the Lifespan Health System (Rhode Island), now residing on Cape Cod in Massachusetts. Bruce McPherson, president and CEO of the Alliance for Advancing Nonprofit Health Care in Washington, D.C., moderated the discussion.

Bruce McPherson: Under what circumstances, if any, do you feel it is appropriate for a nonprofit health organization to compensate--or at least to consider compensating--some or all of its board members? Let's assume that the organization has the financial resources to do so.

Bill Kreykes: I think it depends very much on the nature of the organization and what that organization is trying to accomplish with its board. If it is a large health care system, for example, with hospitals across the country and with a well-developed plan and formal search process to recruit on a national basis board members with different types of expertise or other talents, then I think it is very appropriate for that kind of a board to fully consider compensating all of its members.

Another factor to be considered is the amount of time that a board member needs to spend to be fully and effectively performing in his or her role. I've been on a board that met quarterly, in the central part of the country, with meetings generally lasting a day and a half each, starting in the afternoon and going through the next day. …