Citing 'exemplary' year, Sarasota Memorial rewards its CEO

David Gulliver - posted 12:30 p.m. Wednesday, Dec. 2; updated 2:50 p.m. with more information.

The Sarasota Memorial Hospital board plans to give Chief Executive Officer Gwen MacKenzie merit raises and a cash bonus totaling about $91,000 after what members termed an “exemplary” and “extraordinary” performance in 2009.

The package would increase MacKenzie’s total compensation to $670,981 in 2010, which is nearly 16 percent more than the current $579,500.

After a 50-minute discussion Tuesday, the hospital’s board human resources committee approved the amount by a unanimous vote. The recommendation now goes to the full board. All board members serve on the committee, and the board almost always ratifies committee decisions.

The board considered three salary packages and selected the most generous, one that brings MacKenzie’s salary to the midpoint for hospital executives nationwide.

New hospital board Chairman Greg Carter said the raise reflected the board’s high opinion of MacKenzie’s work and its continuing effort to bring all hospital salaries to national and regional averages.

“We need to reward Gwen for what she’s done. To get her to that 50th percentile, I think that’s what the board was comfortable with,” he said. “I think that’s just the right thing for an extremely strong performance.”

Past board chairwoman Dr. Marguerite Malone agreed. “When you think about this past year and the extraordinary accomplishments of this organization, I feel that anything less than what would bring her up to 50 percent would be unfair,” she said.

MacKenzie’s current salary is $574,500; she also receives $5,000 a year in deferred compensation, which would continue. She was hired in May 2005 at a salary of $500,000 and a $12,500 signing bonus, and received a three-year contract extension in May 2008.

The board used a study by the international consulting firm Mercer to define the mid-level salary. The average base pay of 426 hospital executives, most of them at non-profit facilities, is about $587,000 a year, according to a copy of the report.

But when considering incentive and bonus pay -- common in the profession, but not part of Sarasota Memorial’s standard pay plan -- the typical total cash compensation was $670,981.

The board boosts her pay to that mark with a raise that has three main components.

It awarded her a merit raise of $23,899 for her 2009 performance. MacKenzie scored a 4.1 out of 5 possible points on her evaluation, qualifying her for a 4 percent merit raise. The maximum is 4.5 percent. About 62 percent of hospital staff, and 66 percent of administrators, qualify for a 4 percent merit raise.

Board members pointed to the hospital’s 5.1 percent profit margin, which far exceeded the target of 3.2 percent. That margin includes income from the hospital's share of county property tax.

Committee member Donna Barcomb, a former board chairwoman, noted that the profit margin contributed to another major success: Bond rating upgrades from the two firms that evaluate the hospital system’s creditworthiness. Sarasota Memorial is one of a handful of hospitals to get an upgrade this year, as most hospitals have suffered from declining revenue and investment failures. Those upgrades should save the hospital millions of dollars in interest costs over the life of its recent bond issues.

MacKenzie also beat performance targets for increasing outpatient caseload and patient satisfaction, minimizing employee turnover, and meeting federal quality-of-care standards. She fell short on targets for inpatient growth -- a problem for hospitals nationwide -- and inpatient satisfaction.

In the second component of the raise, the board also reinstated MacKenzie’s $22,980 merit raise from 2008. MacKenzie quietly declined to accept it last year, and instead asked board members to consider deferring until this year.

Most of the committee discussion centered on the third component, whether to award a $44,602 bonus to bring MacKenzie’s salary to the national midpoint, and if so, how to structure it.

Dr. Thomas Kelly, a heart surgeon and the board’s most stringent fiscal conservative, said her performance deserved the two merit raises. But he questioned how a how a double-digit raise in one year would appear to staff. “I think you are going to have hard time explaining, to people who work at this hospital, a 14 percent increase,” he said.

The presentation on compensation packages initially listed the salary package as a 14.3 percent increase. Hospital staff later corrected that to 15.9 percent.

Kelly and other board members also said they were concerned that a sub-par salary could lead MacKenzie to resign for a better offer. Roger A. Quick, the executive recruiter who connected MacKenzie to Sarasota, told the committee via telephone that a new chief executive probably would command a minimum $700,000 salary and a search could cost another $250,000.

Laurie Bennett, the hospital’s human resources director, said perhaps the closest comparable position was the chief executive of Tampa General, who earned $1.3 million in 2006. Board members asked for the salary of the CEO of the Lee Memorial hospital system in Fort Myers, but Bennett said the hospital would not release the salary.

The Fort Myers News-Press reported that the Lee Memorial CEO salary was $627,534 in 2008, when MacKenzie earned $530,436.

Board members settled on a compromise of putting the bonus in a deferred compensation plan, payable only if MacKenzie remains at Sarasota Memorial through her current contract. They directed their attorneys to work out those conditions for approval at a later meeting.

It was unclear how important a competitive salary is, or whether the board’s proposal would be sufficient.

Board member Gerry Phillips, a former chairman of the human resources committee, said in past discussions MacKenzie “was not real receptive” to a deferred compensation plan. Phillips said there is widespread speculation among hospital staff that MacKenzie is planning to leave Sarasota.

Carter, the board chairman, said members have had no indications that MacKenzie has received offers or is leaving anytime soon. But they expect there is outside interest.

“It’s something that’s on each and every board member’s mind,” he said. “People out there see what she’s doing here. We’ve got a superior CEO and other hospitals systems may have made offers. I don’t think it’s a danger, but it’s a possibility.”

He said the $44,000 boost to an average salary could be enough to keep MacKenzie here, even if she were offered a seven-figure salary like that of the Tampa General executive.

“I would like to think so. I don’t think Gwen is here to see how much money she can make. I think she’s here because of her dedication.”

Committee members voted 10-0 for the salary package, with Dr. Kelly not voting after leaving the meeting in response to being paged. MacKenzie was not present for the discussion and vote.