Mountain View, CA - April 12, 2009 - As part of our commitment to ongoing transparency, these documents explain the philosophy and practices that El Camino Hospital’s Board of Directors follow in setting annual executive compensation. We also encourage you to read the guest editorial from Board Chairman Wes Alles, which provides context for this year’s compensation decisions.
A few facts to consider when reviewing El Camino Hospital’s compensation information:
- At a time when many hospitals have experienced operating losses, El Camino Hospital is among less than 10% of hospitals nationally rated an A+ by Standard & Poors as a result of years of conservative fiscal management.
- El Camino Hospital leads in quality care along with sound financial management. For the past five consecutive years, HealthGrades, a leading independent rating agency, has named El Camino Hospital a Distinguished Hospital for Clinical Excellence, ranking it among the top 5% hospitals nationally for overall clinical performance.
- Because of the hospital’s strong financial position, it continues to expand services to the community--this year by 16%--and reinvest in needed services and equipment. See a full description in the FY09-10 El Camino Hospital District budget. You may also examine our most recent audit of financial operations.
- El Camino Hospital is providing these benefits without having made any increases in our patient care rates for the coming year.
- This year, along with 80% of U.S. hospitals, according to consulting firm Integrated Healthcare Strategies, the organization reasonably compensated all of its employees, including the executive team, with raises between 4 and 6%.
- Total compensation, including base salaries and incentive opportunities, are determined according to the El Camino Hospital executive compensation philosophy, which calls for benchmarking executive compensation with hospitals of similar size and operations in comparable communities.
- As prudent trustees of this community asset, the board has chosen this year to set executive salaries at the benchmark median--a comfortable and fair level, even in this economic downturn.
- Along with 85% of peer group organizations, El Camino Hospital maintains an annual incentive plan for its executives. The plan's principle goals are to focus leadership’s attention on critical performance goals and measures; encourage and reward superior performance; link the incentive program as closely as possible to business results; attract and retain performance-oriented leadership; and maintain the competitiveness of El Camino Hospital’s total compensation program.
- Using market analysis provided by the independent compensation consulting firm, the Board has set the target incentive opportunity for the executive team, including the chief executive officer, at 20% of base salary, and a maximum incentive opportunity of 30%. (The market analysis indicated that chief executive officers in the benchmark group have a maximum incentive opportunity of 45%.)
- Incentive compensation is a combination of organizational and individual goals. For members of the executive team, the ratio is 70% organizational goals to 30% individual goals. For the chief executive officer, the ratio is 80% organizational goals to 20 percent individual goals.
- Last year, although the hospital was delivering record financial performance, the Board foresaw that the economic climate might change, and it took steps to prepare for difficult external financial conditions. Those steps included controlling compensation costs. As a result, executive salaries were increased only 3.8% versus between 5-10% in our benchmark group. And, a number of additional benefits for executives were eliminated.