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A Healthy Paycheck

These are not good times for patients who depend on Denver Health Medical Center. Because of bad economic times, more people are without insurance, which means more people rely on Denver Health, whose primary responsibility is to provide health care to Denver's poor and uninsured residents. But because of increased...
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These are not good times for patients who depend on Denver Health Medical Center. Because of bad economic times, more people are without insurance, which means more people rely on Denver Health, whose primary responsibility is to provide health care to Denver's poor and uninsured residents. But because of increased demands, Denver Health is now losing $1 million a month and may have to slash some services.

"I lose a lot of sleep over this," Dr. Patricia Gabow, Denver Health's CEO and medical director, told the media last month.

Gabow and other Denver Health executives won't need to worry about their own financial health, however. Their salaries have escalated dramatically since 1996, when the Denver Department of Health and Hospitals was spun off from the City of Denver and turned into Denver Health, a quasi-independent public agency. Gabow's paycheck, for example, increased from $218,026 in 1996 to $426,030 this year.

Almost all of the dozen executives running Denver Health have held the same job for several years -- and like Gabow, almost all of them have enjoyed huge wage hikes over the past five years. Stephanie Thomas, Denver Health's chief operating officer, saw her salary jump from $85,321 in 1996 to $264,597 today. Frank Barrett, the chief financial officer, went from $134,676 to $208,389. Human resources chief Steve Adriaanse -- whose department conducts the surveys Denver Health now uses to set salaries -- watched his compensation rise from $94,808 in 1996 to $161,470. Over the same period, Chief Nursing Officer Tom Drury's salary shot up to $167,906 from a modest $72,188.

Several other Denver Health executives now enjoy salaries well above those of public officials with higher-profile positions. Denver Health's general counsel, Darlene Ebert, makes $187,209 supervising a staff of about a half-dozen lawyers. In contrast, Denver City Attorney Wallace Wortham Jr. makes $120,780 and supervises over 200 employees. Franklyn Judson, who is in charge of the department of public health, makes $250,605; his counterpart with the State of Colorado, Ned Calonge, makes just $170,000.

Mayor Wellington Webb is paid $110,000 per year, while Governor Bill Owens collects a paltry $90,000.

When Denver Health was a city department, the Denver Career Service Authority set its salaries based on annual wage surveys. Now Denver Health conducts its own salary survey to determine top executives' wages, which officials insist reflect the going rate for medical-center execs at comparable institutions.

"We adhere to a market-based compensation philosophy," says Adriaanse. "We look at like positions in like institutions."

According to Adriaanse, Denver Health sets salaries after collecting data on wages at a variety of similar institutions, determining the lowest and highest salaries typically offered for each position and then setting a salary level in the middle of that range. "We survey the fiftieth percentile, which is where we want our salaries to be," he says.

Gabow's salary is below average for someone who serves as both CEO and medical director, Adriaanse notes. Stephanie Thomas was promoted and given additional duties after Denver Health was spun off from the city, he adds, and executives like Judson are also doctors on the medical staff, meaning they are paid a physician's salary in addition to a manager's.

Salaries for health-care executives vary widely, depending on the size of the hospital; whether it serves an urban or rural area; and whether it's for profit, a nonprofit or a public system. Denver Health includes a major medical center and a system of about twenty clinics around the city.

But no matter what the size of their institutions, most top hospital officials have seen their salaries soar. "Health-care executives are enjoying more robust salary increases than the average corporate executive," reported Modern Healthcare magazine in July 2001. According to the publication, the average compensation for a hospital CEO was $270,000, although that figure included small rural hospitals that pulled down the average. (It is not unusual for CEOs of large, multi-hospital systems to make as much as $700,000.) This past January, Healthcare Financial Management Magazine reported that the average annual salary for a hospital's chief financial officer was $186,118.

The University of Colorado Health Sciences Center is charged with caring for uninsured patients who live outside of Denver; University Hospital is the only local hospital that would be comparable to Denver Health, since it's publicly owned and has a similar mission. Dennis Brimhall, University's CEO, earns $404,000 per year. University pays its vice president and general counsel, Allen Staver, $177,000; the vice president for human resources, Donna Koeppel, pulls down $165,000; and Forrest Cason, vice president for finance, makes $231,000.

Denver Health has told city officials that the hospital will need to expand as the number of hospital beds in Denver shrinks, due to the impending departure of University Hospital and Children's Hospital to the Fitzsimons campus in Aurora. While Denver Health is now a public authority and not directly tied to the city, Denver still provides 8 percent of its $400 million operating budget, as well as funding much of the construction of its facilities. In fact, Denver officials are now evaluating a possible $150 million bond issue to expand Denver Health's hospital at Speer Boulevard and Eighth Avenue.

The big money being handed out to Denver Health executives has raised the temperature of at least one Denver City Council member. "Those are stratospheric salaries that are so far out of my league I can't comprehend it," says Ed Thomas. "How could there possibly be any justification for quadrupling a person's salary? I'm dumbfounded."

Councilwoman Susan Barnes-Gelt played a key role in helping Denver Health become a semi-independent agency. According to Barnes-Gelt, the idea was to free Denver Health from the city's cumbersome rules on purchasing so that it could form alliances with other health providers and cut costs. The key question now, she says, is whether executive salaries at Denver Health are higher than those at other hospital systems.

"You need to be competitive to keep top people," she says. "But if these salaries are out of whack with other institutions, then questions need to be answered."

One of the other arguments made for removing Denver Health from city control was that the hospital could save money by operating its own personnel system -- but given current salary levels, the city may one day regret cutting those ties, Thomas says.

"There's no oversight as far as those salaries are concerned," he adds. "They wanted to get out from under Career Services so they could manage their employees differently -- and I can see why."

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