Area hospital leaders make hundreds of thousands of dollars a year, and their health network executive bosses all make more than $1 million, according to the latest tax forms filed by the health systems.

Although these are leaders of nonprofit organizations in an industry struggling to contain costs, the organizations say the compensation levels are necessary to recruit and retain talent in a highly competitive field.

More than 20,000 people in Butler County work in health care, the county’s second largest industry.

The size of health organizations, competition, and the executives’ talent, tenure and performance on key goals are factors in the level of compensation that hospital chief executive officers receive, said Thomas Cody, chairman of the board of trustees of Cincinnati Children’s Hospital Medical Center.

“You’ve got to have the absolute best person available to be your leader,” Cody said.

Total compensation in 2010 for seven area hospital presidents and chief executive officers ranged from about $238,000 for Bryan Hehemann, of the independent McCullough-Hyde Memorial Hospital in Oxford, to $4.2 million for Michael Anderson, who retired at the end of 2009 as CEO of Cincinnati Children’s Hospital. Cincinnati Children’s opened a campus in Liberty Twp. in 2008.

“Mr. Anderson, with board approval, had simply set aside a significant portion of his compensation from the years 2000-2007 into a deferred compensation account that would be available to him after he stepped down as CEO,” according to hospital spokesman Terry Loftus.

Anderson in his 13-year tenure led Cincinnati Children’s from a hospital with 3,500 employees and $292 million in operating revenues to a nationally ranked organization with almost 11,600 employees and operating revenues of $1.5 billion. His compensation grew with the organization’s importance, Cody said.

“I don’t have any problem in saying what he received was appropriate, no question,” Cody said.

The pay of health network leaders — leaders of systems with multiple hospitals — ranged from about $1.1 million for James May of Mercy Health to $2.3 million for Michael Connelly of Catholic Health Partners. Catholic Health is the parent of Mercy Health and one of the largest employers in the state. Mercy Health operates Mercy Health-Fairfield Hospital.

James Kingsbury became CEO of UC Health during 2010, so his reported $321,433 of compensation doesn’t reflect a full year.

UC Health, Cincinnati Children’s and TriHealth filed their latest tax forms for 2010 in May, allowing a more full comparison of hospital executive compensation in 2010 among the seven nonprofit health systems operating in Butler County.

Health systems on a regular calendar budget year — Kettering Health Network, Premier Health Partners, Mercy Health and McCullough-Hyde — filed their 2010 tax forms at the end of last year.

UC Health and TriHealth declined comment.

Average pay increases

Health care costs are rising, but costs are not growing as fast in the past. PricewaterhouseCoopers Health Research Institute said Thursday it projects medical costs to increase 7.5 percent in 2013, a historically low rate, the organization said.

Nationally, executives are receiving overall base pay increases in the 3 percent to 4 percent range year-over-year, said Ron Seifert, vice president and executive compensation practice leader for Hay Group’s health care sector. Seifert is a compensation consultant to hospital boards, including boards in Cincinnati.

The salaries evaluated for 11 area hospital and health system leaders increased on average 3.9 percent from 2009 to 2010, based on a Journal analysis of the organizations’ tax records.

“There is a competitive landscape and market for talented executives,” Seifert said. “I think that the issue here is not finding somebody to take the job, but finding the right person.”

Three new presidents of hospitals in Butler County were named in 2010.

As newcomers, these leaders typically earned less than the executives they replaced or their counterparts at other hospitals who had been in their positions longer.

Dr. Kevin Joseph was named president and CEO of West Chester Hospital in September of that year, earning $259,605 in 2010, according to the newly filed tax form of UC Health, the parent health system of the hospital in West Chester Twp.

Jennifer Swenson was named the president of Fort Hamilton in November 2010 to replace Lynne Oswald. Oswald announced earlier that year that she would step down.

Before joining Kettering Health Network, Fort Hamilton was part of the Health Alliance of Greater Cincinnati, now UC Health. Oswald’s 2010 compensation was $435,000, according to the tax filings.

Doug McNeill was president and CEO of Atrium Medical Center nearly 20 years when his retirement was announced at the end of 2010. His pay that year, $2.6 million, included $1.2 million in retirement and other deferred compensation, according to tax forms of Premier Health Partners, the parent health system of Atrium. Carol Turner is now the top leader of Atrium.

By comparison, Thomas Urban, president and CEO of Mercy Health-Fairfield Hospital, earned $613,098 the same year. He has been with Mercy Health more than 15 years.

“There is a cadre of aging executives,” Seifert, the compensation consultant, said. “Executives leave sometimes voluntarily, or they don’t want to do the work anymore. Sometimes they leave involuntarily because the board wants to make a change.”

Compensation figures are a total of base pay, bonuses and incentives, and deferred compensation, vested retirement or severance pay reported on tax Form 990 by the nonprofits. The nonprofits’ operating years, calendar or fiscal, determine their tax return filing dates, according to the Internal Revenue Service.

Contact this reporter at (513) 705-2551 or clevingston@coxohio.com.