Health Care Executive Severance Packages

Mercer, Witt/Kieffer and Hunton & Williams sponsored a survey of severance packages for chief executive officers of health care organizations.  (Severance Survey)   About 200 health care provider and health plan companies were included in the survey, with 90% being providers of one type or another.  The respondents reflect a variety of revenue sizes, from less than $100 million to over $2 billion.  Over 80% of the organizations had a written severance agreement with the CEO.  These are rationalized as necessary to attract and retain good talent and to ensure management transitions.  The median severance period is 24 months and most of the CEOs also receive health and other benefits during the severance period.  Only one-third reduced the severance by the amounts of other earnings that the CEO might make during the severance period and only two-thirds subjected receipt of severance to a non-compete.  Most are triggered by involuntary termination of employment.  Even when the firing is highly justified, organizations rarely fight the right to severance, meaning that incompetence and even misbehavior is rewarded.  Since many of these organizations, if not the vast majority, are non-profits, it is unclear how giving rich severance packages to already overpaid CEOs is consistent with the mission of serving the communities in which the organizations are located.