Name: Scripps Health executive compensation, use of hospice donations called into question
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Scripps Health executive compensation, use of hospice donations called into question

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Copyright © 2022, The San Diego Union-Tribune | | AdvertisementAdvertisement Sometimes nonprofit work is personally profitable. Scripps Health chief executive Chris Van Gorder was paid more than $16 million in the three most recent years for which public information is available — a salary and benefits package that far exceeds what other San Diego area hospital officials collected, records show.For the record:Van Gorder, who decades ago turned an injury he suffered as a Monterey Park police officer into a career in hospital administration, also received a $10 million life insurance policy purchased by the nonprofit healthcare provider.AdvertisementScripps officials say his executive compensation is appropriate and market-based. The three-year snapshot of funds paid to Van Gorder includes millions of dollars in retirement benefits he earned over decades of service, they said.The nonprofit — which operates five hospitals, 14 health clinics and dozens of other medical facilities and generated $3.2 billion in revenues in 2017 — also said Van Gorder’s earnings were validated by studies performed by an independent consultant.“The Scripps Health board of trustees follows the IRS and legislative best practices to determine executive compensation,” spokeswoman Janice Collins said in an email.“Outside nationally recognized executive compensation experts work with the board to determine an appropriate peer group of not-for-profit health systems similar in size, complexity and performance to determine compensation levels for the chief executive officer and other senior executives,” she said.The payments to Van Gorder, who declined to be interviewed, rose significantly in recent years. They came as Scripps cut services and laid off workers in a reorganization the chief executive said was needed to stay competitive.The financial practices at Scripps Health recently drew the attention of county Supervisor Dianne Jacob, who is asking state and federal regulators to investigate not only the salaries paid to Van Gorder and other top executives but also the charity’s handling of donations. “The Scripps board needs to take a hard look at their business practices and the incredibly high and complex compensation packages for their top executives and then take corrective action,” said Jacob, who has no official oversight role or authority over the nonprofit.“If the Scripps board fails to take action, then an investigation by the state attorney general and the IRS is definitely warranted to determine if there have been violations of the law,” she said in an interview Thursday. Jacob filed formal complaints to both the state attorney general and the IRS. Both agencies have said they do not publicly comment on investigations.According to its most recently filed tax return, Scripps paid Van Gorder $8.7 million in the 12 months ending September 2018, including $6.4 million he qualified for when he turned 65. The tax return for the year ending Sept. 30, 2019 has yet to be filed, Collins said.Van Gorder received about $2 million in base pay in both 2015 and 2016. In addition, he was awarded more than $3.6 million in deferred and retirement compensation over the three years.By comparison, the president and chief executive at Sharp HealthCare, another of San Diego’s major nonprofit medical providers, was paid just over $1.5 million in 2017, also the most recent year for which records are available. Sharp HealthCare promotes itself as the region’s largest network, with seven hospitals, 30 urgent care clinics and a host of other services. Sharp’s annual revenue is $3.8 billion. Its tax documents had a higher total, but they included duplicated revenues that are eliminated during a final audit, company officials said.The CEO of Rady Children’s Hospital was paid just over $1.4 million in the 2017 fiscal year, including cash and retirement benefits, according to that organization’s most recent tax filing.And the leaders of Palomar Health and Tri-City Medical Center, two public hospital districts in San Diego County, were paid $910,000 and $760,000 a year, respectively, the latest records from those agencies show. ‘A friend. A partner’Founded in 1924 by the famed philanthropist Ellen Browning Scripps, Scripps Health has grown into one of the most-respected healthcare providers in the country.Van Gorder joined the organization two decades ago.After recovering from an on-duty injury he suffered on police duty in the late 1970s, he earned a master’s degree in hospital services administration from the University of Southern California. Now he is credited with turning around a hospital system that had been losing millions of dollars a year, and he has overseen a broad capital improvement program that built and upgraded facilities and equipment across the region.Today Scripps Health bills itself as a $3.2 billion system dedicated to quality, safe, cost-efficient, socially responsible health care for everyone it serves. “With Scripps, you get an ally,” the company website states. “A friend. A partner who believes in the healthiest version of you. And we do everything within our power to get you there and keep you there.”But despite assets of $5 billion, the hospital chain has struggled financially. In 2018, the same year he collected more than $8 million in salary and benefits, Van Gorder announced a restructuring plan that called for curtailing some services and laying off an unstated number of its more than 17,000 employees.“We’ve got to shift our organizational structures around to be able to deal with the new world of health care delivery, find ways of lowering our costs significantly,” Van Gorder told The San Diego Union-Tribune in December 2017. “If we don’t, we will not be able to compete.”Recent independent audits show Scripps also is providing fewer low- and no-cost healthcare services to people in need.In the year ending Sept. 30, 2017, for example, the organization estimated its charity care cost at just over $19 million. In the following year, those costs fell to less than $18 million, and for the year ended Sept. 30, 2019 they were $12.6 million.Almost every hospital in the United States is confronting major stresses — and not just due to the coronavirus pandemic.Healthcare administrators must juggle increasing regulation, continuing cuts in Medicare and private-insurance reimbursements, the need to upgrade record-keeping systems and other technology and a population that is both aging and growing sicker.One physician who practiced at Scripps Health for years said those factors help explain why hospitals are cost-conscious, but they do not address salaries that rise to multiple millions of dollars.“As a physician and also as a community member, the fact that there is such rich compensation for these individuals, far and above what’s normal for our region and nationwide, I can’t understand that,” said the doctor, who did not want to be identified because he fears retaliation by hospital administration.Define ‘hospice care’In the tax year that ended in September 2018, the Scripps board of directors bought life insurance policies worth $19.5 million for Van Gorder and three other senior executives. The expenditure, reported in the organization’s public audit as a deferred-compensation plan, called for Scripps to pre-pay the premiums so the executives could collect on the policies between the ages of 65 to 81. They function like no- or very low-interest loans by Scripps to their executives.“Once the insurance contracts mature, Scripps will receive accumulated death benefits less amounts paid to each beneficiary under the agreements,” the audit said.Collins, the Scripps spokeswoman, said the IRS does not consider the life insurance benefits compensation. She also said the charity will eventually recover its investment with interest.However, at the time the policies were purchased, the California Corporations Code prohibited public-benefit charities like Scripps Health from making any loan or guarantee to any director or officer without permission from the state attorney general.That law was amended beginning this year to allow charities to invest in so-called split-dollar policies as long as repayment is secured by death benefits or what’s known as a cash-surrender value.Collins said the policies were reviewed by outside experts before the board approved them.“This was fully vetted by two law firms representing Scripps and this structure is allowable,” she said.Nonetheless, the arrangement was included in a complaint Jacob filed with state prosecutors last week. She said she started researching Scripps and asking questions over the summer, after receiving complaints about hospice donations and the compensation packages.“As a public official, I felt a responsibility to follow up on it; I couldn’t just sit on the information,” Jacob said. “Besides, I care a lot about the doctors and the nurses and the other people that work there.”The county supervisor requested the attorney general examine how Scripps handled charitable donations intended to pay for hospice care after it had suspended its end-of-life program in 2017.“The donations were accepted about three years after Scripps went out of the hospice care business, which appears to be a clear violation of CA Business and Professions Code Section 17510.8,” Jacob wrote to the supervising deputy attorney general.Scripps, which took over operation of the San Diego Hospice after that organization went bankrupt in 2013 and later sold the property for a profit, said it could not discuss donors or contributions due to privacy concerns.But a lawyer representing one donor — the Geisel Trust of Dr. Seuss fame — said in an email this summer that Scripps told him it planned to ask a judge to clarify how the money may be spent.“Since ‘hospice care’ is quite a broad term and could encompass different types of services, Scripps Health intends to seek instructions from the San Diego Superior Court regarding the specific uses that fall under the category of ‘hospice care’,” lawyer Andrew Pharies wrote in a June email, responding to Jacob’s concerns.Pharies was the longtime estate planning counsel for the late philanthropist Audrey Geisel and now represents her trust. He did not respond to requests for comment. The amount of the donation was not disclosed. The Scripps audit notes that in 2018 the healthcare provider transferred $7.3 million dollars “to another organization as (Scripps) no longer provided the services for which the monies were donated to support.”But it is not clear what organization received the money and which services the auditor is referring to.Federal penaltiesMark Weiner, a retired lawyer who spent decades enforcing tax law relating to tax-exempt organizations for the IRS, said the Internal Revenue Code is designed to discourage charities from paying what could be considered excessive compensation.Among other things, the U.S. tax code imposes penalties of up to 25 percent of what the IRS deems are deemed excess benefit transactions. And under a section of the Tax Cuts and Jobs Act of 2017 signed by President Donald Trump, charities can also be assessed a 21 percent excise tax on any remuneration over $1 million paid to certain employees.“They are trying to implement Congress’s will in enacting these statutes,” Weiner said of the IRS. “They don’t want people taking money out of charities undeservedly. By law, the compensation must be reasonable.”The career IRS enforcement attorney said cases are evaluated individually because circumstances change from entity to entity. After a brief review of the Scripps case, he said the disparity between executive compensation paid by the charity and other health systems seems notable.“I’m a living, sentient being,” he said. “I can tell that’s a significant difference.” Collins said Scripps did not pay Van Gorder enough to meet the threshold for any federal excise tax until the fiscal year that ended this past September.“At this time, no excise tax has been paid,” she said. Get our essential investigative journalism Sign up for the weekly Watchdog newsletter for investigations, data journalism and more. You may occasionally receive promotional content from the San Diego Union-Tribune. Show Comments Load More For the record: Advertisement Get our essential investigative journalism Sign up for the weekly Watchdog newsletter for investigations, data journalism and more. You may occasionally receive promotional content from the San Diego Union-Tribune. Advertisement Advertisement STORY TIPS Blow the whistle Are San Diego County institutions, and people in positions of trust, living up to their duties, their promises, the law and the expectations of the public? Advertisement AdvertisementAdvertisement

Copyright © 2022, The San Diego Union-Tribune | | AdvertisementAdvertisement Sometimes nonprofit work is personally profitable. Scripps Health chief executive Chris Van Gorder was paid more than $16 million in the three most recent years for which public information is available — a salary and benefits package that far exceeds what other San Diego area hospital officials collected, records show.For the record:Van Gorder, who decades ago turned an injury he suffered as a Monterey Park police officer into a career in hospital administration, also received a $10 million life insurance policy...

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Scripps Health executive compensation, use of hospice donations called into question

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