Though IU Health’s nonprofit status means no individual or group can pocket profits from the health system, it doesn’t mean executives and even board members aren’t receiving decent pay checks for work done.
The Internal Revenue Service oversees how such pay is set for nonprofits. According to the National Council on Nonprofits, the IRS says an independent body such as a compensation committee should be established to prevent interested persons from making pay and benefit decisions.
That body must conduct a comparability review to determine the market rate for setting executive salaries, and the process must be documented in the minutes of a board meeting.
IU Health’s top employee, President and CEO Dennis Murphy, received total compensation of $2,518,861 in 2017, according to Guidestar, an organization that collects information on U.S. nonprofits.
Nonprofits must report executive and leadership pay on Tax Form 990. IU Health’s Form 990 for 2016 showed his compensation as $1,572,382. The same year, compensation of $1,523,416 was reported for outgoing CEO Daniel Evans, who left the organization in May.
Evans’ compensation was $3,453,323 in 2015.
IU Health also pays board members. While the practice is common for corporations, it’s highly unusual in the nonprofit sector, according to Beth Gazley, professor in the O’Neill School of Public and Environmental Affairs who specializes in nonprofit management.
“Generally, paying board members is rare among public charities of any size,” she said.
According to the 2016 Form 990, 13 individuals who served on the board for all or part of that year received pay that totaled $492,788 for what was estimated at six hours work per week each. The top earners made $46,500, $46,250 and $45,000 for their efforts; the bottom earners made $20,500, 19,250 and $15,250.
A figure of $22,750 was listed for IU President Michael McRobbie for his board work. IU School of Medicine Dean Jay Hess earned $39,750 for his work on the board.
The two board members who received no pay were U.S. Southern District Senior Judge Sarah Evans Barker and United Methodist Church Bishop Michael J. Coyner.
Kevin Armstrong, executive vice president for mission and values and chief of staff for IU Health, said other not-for-profit hospitals/health systems do pay board members and the pay of IU board members reflects the time commitment and expertise required for board service.
“The demands on IU Health board members are significant due to our size and complexity ($6.5 billion in revenue, 34,000 team members),” he said in an email. “Our compensation is set to reflect the service and expertise required of board members and to be in line with other not-for-profit health care organizations that compensate board members.”
A review of 2016 tax forms for 10 similarly sized and university-linked health care systems listed no pay for board members. An expanded search through 990 forms for 82 of the nation’s top nonprofit hospitals showed /health care systems showed 55, or 67 percent, don’t pay board members. About half the systems that do pay for board service either pay a small minority of board members or pay salaries well below what IUHealth pays.
Fifteen of those 82 systems, or about 18 percent, paid board members a range similar to IU Health.
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