New 2016 documents also show past financial troubles, spending cuts and salaries at CMMC parent.
LEWISTON — When longtime CEO Peter Chalke retired in 2016 from Central Maine Healthcare, its flagship hospital was millions of dollars in the red and Medicare penalized it for the first time for having infection and complication rates that were too high.
As his hospital system struggled, including losing $12 million in 2016, recently obtained tax documents show that Chalke received an extra $169,000 for a job well-done.
CMHC’s financial problems have not been a secret. But how its leaders responded during that time — including giving Chalke a bonus equal to about 30 percent of his base salary — has been private.
Until now.
For years, the Sun Journal has examined executive pay, perks and certain expenditures in nonprofit hospitals in Maine. This year it focused on Central Maine Healthcare, a hospital system that saw a major shift in leadership.
Chalke’s bonus was one bit of information within the tax documents. Other findings:
How the former CEO left the place, what the new leaders walked into, and some hints of what they have done since.
‘WORKING LIKE HELL’
Chalke worked for the hospital system for 33 years, starting at Central Maine Medical Center in Lewiston in 1983 as vice president for ancillary services. By 1995, a series of promotions had led him to become chief operating officer of Central Maine Healthcare, which is now the parent of CMMC, Bridgton Hospital and Rumford Hospital.
He became CEO in the early 2000s and remained for about 14 years.
During his years with the system, Chalke helped develop CMMC’s heart center and expand the system’s network of primary care doctors and specialists. He was also involved in the start of LifeFlight of Maine, the establishment of what was then The Patrick Dempsey Center for Cancer Hope and Healing, and the partnership between Central Maine Healthcare and Massachusetts General Hospital.
For his work, Chalke was generally paid in the upper six figures. Some years he earned more, such as the $2 million he received in fiscal year 2006-07 and the $1.2 million he got in fiscal year 2007-08, when the board said it was beefing up his retirement account to make up for a past lack of contributions.
He also received a large life insurance policy that named Central Maine Healthcare as beneficiary but that Chalke, for at least some period, could borrow against.
In early 2016, Chalke announced plans to step down as CEO. He was about to turn 67 and said he mostly wanted to retire because of his age.
By fall he was gone. CMHC’s board of directors hired Jeff Brickman to be the new CEO.
Brickman almost immediately made public that Central Maine Healthcare had lost a “significant” amount of money that fiscal year. It needed, he said, a “transformational” plan for its future, including its financial future.
“I am working like hell to make sure that we can sustain this organization for the long term because of the community dependence on what we do for them,” Brickman told the Sun Journal that December.
Chalke could not be reached for comment for this story. He did not return messages left at two numbers listed to him and his wife. Two other numbers belonging to the couple have been disconnected.
Central Maine Healthcare’s spokeswoman said the system’s human resources department typically does not share retiree information and she was unable to find anyone who has Chalke’s current contact information.
PROBLEMS
Central Maine Healthcare was not the only hospital system losing money during that time. About half of Maine’s hospitals were in the red for various reasons.
Some blamed low Medicaid and Medicare rates or private insurance plans with deductibles that were so high that patients couldn’t afford to pay their share of medical bills. Other hospitals, particularly midsized ones, said they saw fewer surgeries as people put off care or shifted to major medical centers.
Brickman said Central Maine Healthcare’s three hospitals lost a combined $12 million in 2016, mostly because the nonprofit hospital system hadn’t been serving enough poor people and so had become ineligible for a federal program that paid hospitals to provide medication to those patients.
“When that went away, it underscored that we had a number of issues we had to address and had to address very quickly,” he said at the time.
The system laid off 28 people and partnered with the local YMCA to take over CMMC’s fitness and wellness center. Brickman also dropped a Chalke-administration plan to become an anchor tenant at Bates Mill No. 5.
Soon after Brickman took over in late 2016, he found that Central Maine Healthcare had 39 days of cash on hand, not the 117 days its current chief financial officer says would have been typical for a system its size.
“The organization was definitely headed in the wrong direction,” CFO David Thompson said.
In addition to its financial issues, Central Maine Healthcare was dealing with some patient safety problems.
In fiscal year 2016, Medicare penalized CMMC for the first time for having too many infections and complications between 2012 and 2014. It penalized CMMC again the following year for infections and complications that occurred between 2013 and 2015. It penalized CMMC again the year after that for problems that occurred between 2014 and 2016.
In April 2018, The Leapfrog Group, a Washington, D.C.-based nonprofit that tracks health-care safety, quality and value at hospitals, graded CMMC a C for infections reported between 2016 and 2017 and for bed sores and treatable complication deaths reported between 2014 and 2015.
That C made it one of the lowest-rated hospitals in the state at the time. It has since rebounded.
While those safety issues weren’t noted by an outside group — Medicare and Leapfrog — until 2017 or 2018, hospital leaders regularly discuss safety and quality problems and are aware of issues around the time they happen.
BONUS AND INCENTIVE
The hospital system’s latest tax documents cover fiscal year 2017, which ran from July 2016 through June 2017. Salaries were earned during calendar year 2016.
According to those documents, Chalke made almost $940,000 in 2016, his last year as CEO. About $575,000 of that was his base salary. About $19,000 was earmarked as retirement or other deferred compensation.
More than $175,000 was categorized as “other.” A Central Maine Healthcare spokeswoman said a “huge majority” of that was for unused leave that Chalke had accumulated. Some was also for a car allowance — an executive perk — that had not been previously paid out.
He received $169,000 as “bonus and incentive” compensation. It was almost twice the amount Chalke had received the year before and was his largest bonus since at least 2010, the last year records were immediately available.
That bonus could be considered either a little high or about average compared to current national trends.
A 2018 Hospital Executive Compensation Report by Total Compensation Solutions, a New York-based human resources consulting firm, showed that hospital CEOs who get bonuses see one that is, on average, 13.5 percent of their total compensation package. Chalke’s was 18 percent.
It also showed that bonuses average about 33 percent of CEOs’ base pay. Chalke’s was about 30 percent.
In low-cost areas like Lewiston, CEOs average a base salary of $458,000 and a bonus of just under $145,000. Their average total salary is about $740,000.
Deborah Dunlap Avasthi is the current board chairwoman and was chairwoman when decisions about Chalke’s upcoming 2016 pay were made. She said the board’s compensation committee takes executive compensation seriously and spends a lot of time considering what’s appropriate, what other hospitals pay and how well the executive has done their job.
“A lot of factors go into pay on an annual basis,” she said in a recent interview.
One of those factors: how long Chalke had been with the system.
“In Peter’s case, obviously as a long-term CEO — he had been with the organization upwards of 33 years — his salary obviously would have been more within the range as a seasoned executive,” she said.
While the 2018 Hospital Executive Compensation Report considers the terms “bonus” and “incentive compensation” to be interchangeable, Avasthi said she considers Chalke’s extra pay to be incentive compensation because he had to meet certain performance criteria to get it. She said she couldn’t remember Chalke’s specific criteria, but that it generally involved quality, safety, financial and other goals.
The hospital system declined to provide Chalke’s specific goals or to say which goals were met.
“That falls under the category of HR information/employee performance review and we can’t share that info,” spokeswoman Kate Carlisle said in an email.
Alexander Yaffe, a Maryland-based consultant to the Central Maine Healthcare board, said Chalke could have gotten more money than he did. That $169,000 was about two-thirds of what Chalke was eligible for, he said.
BALANCE
Not every CEO receives a bonus. According to the executive compensation report, about 24 percent of CEOs get nothing.
Down the street at Lewiston’s other hospital system, St. Mary’s former CEO, Lee Myles, received no bonus when he retired in 2015 after 23 years with that hospital system, five as CEO.
His immediate replacement, Christopher Chekouras, earned $413,000 in 2016, his first full year with St. Mary’s. He also received no bonus.
“For the past several years, we have not paid incentives or bonuses because the financial performance of the hospital has not warranted it,” said Karen Sullivan, spokeswoman for Covenant Health, St. Mary’s parent.
There have also been times Chalke got no extra money. Tax records show he received nothing in 2010, 2012, 2013 and 2014.
“There were goals and performance measurements that were created at the beginning of the plan year. At the end of the year, the results were not achieved and there were no bonuses provided,” Avasthi said. “From a consistency standpoint … he had to achieve those goals or there would have been no payment.”
Asked whether she thought Chalke earned the last $169,000 bonus he received, Avasthi said, “It’s something where the compensation committee tries to find the balance.”
She added that while the compensation committee focused on that year’s goals when it gave him that money, members likely also considered Chalke’s career with the system and his past achievements.
“There were a huge amount of accomplishments and things that this institution proudly stands behind, between LifeFlight, the Central Maine Heart and Vascular Institute, a number of initiatives that Peter really helped to push forward as an organization,” she said.
“I’m sure the performance criteria that was established and measured at the end of the year, there was merit in any kind of bonus consideration that was given, but also recognizing that was his final evaluation.”
NEW ADMINISTRATION
When Brickman took over as CEO in late 2016, he immediately began making changes. One of his first moves was to hire Illinois-based consulting firm Kaufman Hall to help develop what he called a “transformational strategic plan” for the system’s future.
Brickman declined to say then how much Kaufman Hall cost. Like Chalke’s pay, that amount was also made public for the first time in recently released tax documents.
The consultant cost $4.3 million.
Thompson, the CFO, said Kaufman Hall was needed “to help turn the organization around.”
Those tax documents also show slashes in spending across all three hospitals and their parent organization. Advertising and promotion, for example, dropped from $1.2 million to $678,000 at CMMC and from $121,000 to $49,000 at Rumford Hospital. Spending on travel dropped from $233,000 to $117,000 at Bridgton Hospital. Office expenses dropped from $5.4 million to $2.6 million at Central Maine Healthcare.
Carlisle, the system’s spokeswoman, said Brickman’s schedule was booked and he did not have time to talk for this story. However, Brickman’s CFO gave the new administration credit for the savings.
“That goes to the whole turnaround,” Thompson said. “Those were areas we could immediately impact.”
The tax documents show there were also areas not immediately affected. While Rumford Hospital and Central Maine Healthcare as a parent organization went from a shortfall to a surplus that year, CMMC’s finances continued to sink. Its shortfall grew from $6.5 million to $9.8 million.
Thompson said things at the hospital were so precarious when Brickman arrived that it’s taking time to turn things around.
The new administration also takes credit for increases in cash on hand. According to Thompson, it’s taken almost two years, but the system now has just over 100 days of cash, up from the 39 he said Brickman found soon after he got there.
Not reflected in the balance sheets: the almost wholesale change in management and ensuing agitation in the ranks.
Since Brickman took over as CEO in late 2016, the hospital system’s leadership team has almost entirely changed, including a new CFO, a new president for CMMC and a new chief nursing officer. (The former nursing leader, Sharron Chalke, Peter Chalke’s wife, resigned the same week as CMMC’s president.)
Among providers, there’s been turmoil. This summer, medical staff at all three hospitals issued votes of no confidence in Brickman. Soon after, the board affirmed its support of him but voted to give doctors more of a say in how things are run. The day after that, the president of the Bridgton and Rumford hospitals resigned.
Not long after, Central Maine Healthcare officials acknowledged that the system’s physician turnover rate stood at about 27 percent. By comparison, health care data company SK&A has said the annual turnover rate for office-based doctors in the U.S. is 8 percent and the average turnover for all hospital employees — doctors, nurses, support staff and others — is 18.6 percent.
Some current and former Central Maine Healthcare staff claimed that doctors were fleeing because working conditions had deteriorated, they were concerned about the quality of patient care and they considered the atmosphere “toxic” under the new administration.
The tax documents do give a first public look at how much Brickman is being paid. He earned $232,000 for the four months he worked as new CEO in 2016. (Tax documents for nonprofits are generally available one to two years after their tax year ends.)
Of Brickman’s pay, $40,000 was a signing bonus.
He won’t see another bonus this year.
“We’re following a rigorous process. There were certain goals and objectives Jeff had established with the executive comp team that were not met this year,” Avasthi said. “We did not pay out any variable pay bonuses.”
That, she said, applied to the whole senior leadership team this year.
Because most of Brickman’s new leadership team didn’t begin until 2017 or 2018, their salaries are not listed in the documents. It’s also unclear how some of the other changes Brickman has made — including the creation of the Topsham Care Center — will affect the hospital system.
That information will appear in future tax documents.
Peter Chalke stands next to a portrait of himself during a 2016 ceremony to rename a wing of Central Maine Medical Center in his honor. Chalke retired as CEO of Central Maine Healthcare that year. (Photo courtesy Central Maine Healthcare)
Central Maine Medical Center in Lewiston, the flagship hospital of Central Maine Healthcare. Newly released tax filings show the hospital was in financial trouble in 2016 even as CEO Peter Chalke, who retired that year, got an extra $169,000 for a job well-done. (Sun Journal file photo)
Central Maine Medical Center in Lewiston, the flagship hospital of Central Maine Healthcare (Sun Journal file photo)
Jeff Brickman stands outside Central Maine Medical Center in Lewiston, Central Maine Healthcare’s flagship hospital in 2016, shortly after taking over as CEO of the hospital system. According to newly released tax documents, Brickman earned $232,000 for the four months he worked as new CEO in 2016. Of that, $40,000 was a signing bonus. (Sun Journal file photo)
Deborah Avasthi, chairwoman of Central Maine Healthcare’s board of directors (Photo courtesy Central Maine Healthcare)
Former CEO Peter Chalke’s compensation package for 2016 (retired September)
Base salary: $574,851
Bonus and incentive compensation: $169,000
Other reportable compensation: $175,646
Retirement/deferred compensation: $19,320
Nontaxable benefits: $752
Total: $939,569
Current CEO Jeff Brickman’s compensation package for 2016 (September through December only)
Base salary: $173,546
Bonus and incentive compensation: $40,000
Other reportable compensation: $13,867
Retirement/deferred compensation: $0
Nontaxable benefits: $4,700
Total: $232,113
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