The Millionaires of Advocate Aurora

In December, Advocate Aurora Health and Atrium Health merged, becoming the nation’s fifth-largest nonprofit health system. The massive new system, Advocate Health, will generate revenue of more than $27 billion and operate 67 hospitals and more than 1,000 sites of care in six states, with more than 21,000 physicians and nearly 42,000 nurses.

The merger consigns the name of Aurora Health to the ash heap. Aurora was the largest Wisconsin-based health system until it merged with the Chicago-based system Advocate in 2018 and Advocate’s CEO Jim Skogsbergh took over leadership of the new entity. Now, Skogsbergh will retire, leaving Atrium’s CEO Eugene Woods as the sole leader with a home office in Charlotte, North Carolina.

Of course the Atrium press release promised the new health care colossus will maintain “a strong presence in the Chicago and Milwaukee areas, including a planned, new, Milwaukee-based institute for health equity.”

The release also promised the new system would be “delivering the best health outcomes and making care more accessible and affordable,” while “being a force for meaningful social impact.”

These kind of mergers have been going on for many years, always promising to deliver various improvements, but mostly consolidating power and profits. There were more than 500 mergers from 2013 to 2017 and the usual result was that “hospitals add billions of dollars annually to their bottom line, lavishly compensate their CEOs, and spend millions of dollars, which are generated by patient fees, lobbying government to defend the status quo,” as a story by Forbes noted.

The bigger the health care system, the more power they have to dictate prices. “According to an examination of 25 metropolitan areas with the highest rate of consolidation from 2010 through 2013,” the New York Times reported, “the price of an average hospital stay soared, with prices in most areas going up between 11 percent and 54 percent in the years afterward.” The costs are paid for by consumers through higher insurance payments and increased out-of-pocket charges.

Meanwhile the pay for executives rises.

One can see this in the merger of Aurora and Advocate. The federal 990 tax form for Advocate Aurora shows that in 2021 there were 16 staff members whose total compensation ranged from from $1.34 million to $7.7 million (for CEO Skogsbergh) that year. All together the top 16 staff collected $36.75 million.

In 2020 there were 15 top staff, whose compensation ranged from $1.34 million to $6.8 million (for Skogsbergh) and together collected a total of $33 million.

But perhaps nobody made out better than the former CEO of Aurora, Nick Turkal, who was given a wonderful golden parachute for agreeing to the merger whereby Skogsbergh would take over. Turkal transitioned from full time to 30 hours per week in 2019 and collected $12.4 million that year. Thereafter he retired and collected $5.77 million in 2020 and $3,56 million in 2021 for zero hours worked.

But those numbers actually look low compared to what Atrium pays its top executives. Its CEO Eugene Woods collected $9.83 million in 2021, according to a report by the North Carolina state treasurer. “Woods made $4,728 an hour… It would take him just 13 hours to exceed the yearly wages of the average North Carolina household,” a story by Charlotte Axios noted.

But Woods was just warming up for 2022, when he got a 40% increase in pay, bumping his total compensation to $13.9 million, as the Charlotte Business Journal reported.

Below that, the next nine executives at Atrium collected compensation ranging from $1.88 million to $3.65 million. Together the top 10 executives collected $36.6 million, as Becker’s Hospital Review reported.

Next year Skogsbergh will be added to Atrium gravy train, more than likely getting the sort of huge transitional salary Turkal earned, followed by some lucrative multi-million retirement payments, as a reward from handing his health care system over to Woods.

Which is just the latest victory for Woods, who grew his compensation by 473% over six years, which were filled with high-profile mergers, as the North Carolina state treasurer found.

The system of mergers and rising executive pay echoes that found at for-profit companies, except that these health care systems are tax exempt nonprofits. A recent study by the health care analyst KFF estimated the total value of federal, state and local tax exemptions for the nation’s nonprofit hospitals was $28 billion. In essence, America’s taxpayers are helping subsidize these systems and their high-paid executives.

UPDATE: An earlier version of this article understated the size of the estimated tax exemption hospitals receive.