SDA Healthcare Administrative Compensation

The flint for the fiery debate about the income of denominationally affiliated healthcare executives that flared among Seventh-day Adventists at the turn of the millennium was a series of Washington Post stories that reported on executive pay at Shady Grove Adventist Hospital and its parent corporation, Adventist HealthCare, Inc.[1]

Until the middle 1960s, Seventh-day Adventist Church employee wages were based on the concept of a living wage. Then in 1968, “to avert a nursing shortage crisis in Adventist hospitals, [church] leadership agreed that nurses should be paid at community rates.”[2]

Five years later (1973), General Conference and North American Division leaders “adopted the denomination’s first formal statement on Adventist pay,”[3] predicated on the notion that “a spirit of sacrifice and dedication should mark all denominational employees irrespective of the position they hold or the department or service they represent.”[4]

Because by 1978 some nurses were making more money than their supervisors, The General Conference Committee in Annual Council voted a formula for hospital administrative personnel compensation that was “tied to nurses’ salaries” in such a way that “administrators would always be a step ahead—but still not on a full community rate” enjoyed by their secular peers. [5]

A decade later, at its 1989 Spring Meeting, the General Conference Committee voted salary increases for Adventist health system executives that were more than half again what they were already making. In fact, what had evolved into common practice was now more or less formalized as a “‘market-sensitive’ wage scale.”[6]

David Dennis, then director of the General Conference Auditing Service, was scandalized by the decision. He soon laid out his frustrations to General Conference president Neal Wilson (also chairman of the General Conference Committee) in a five-page letter.

The world church’s chief auditor found it “strange that, after admitting to serious financial failures and mounting [Adventist Health Systems] debt far beyond accepted norms in the United States, these [healthcare] leaders should now ask for higher pay.” Dennis doubted “the assumption that if a manager is ineffective while earning an annual salary of $75,000 he will somehow be successful if his salary is raised to $140,000.”

Having served in overseas missions under the sacrificial wage philosophy that he believed was based on Scripture and the Spirit of Prophecy, Dennis wrote Wilson that he found “repulsive” the argument that Adventist hospital administrator salaries should be “market sensitive.” He considered the new policy “a selfish and worldly scheme that flies in the face of Adventist history and principles.”

“Even more troubling,” to the GC auditor “was the way the recommendation was advanced to a final vote.” The General Conference Committee had spent most of Wednesday, April 5, 1989, discussing the merits of massive pay raises for Adventist healthcare executives. So with his “personal conviction that politics has no place in the work of the Lord,” Dennis found it “hard to understand why a vote was not taken at the conclusion of the day-long discussion on Wednesday.”[7] Instead, according to Ministry magazine editors Robert Spangler and David Newman, Wilson managed to table the motion by arguing that “emotions were too high to vote” on the inflated compensation formula.[8] “Then, late Thursday,” Dennis reminded the GC president, “the matter was brought back for consideration after much of the opposition had dispersed.” He told Wilson that “some leaders who were present concluded that the only purpose for the overnight delay in taking the vote was to permit the political process to take its course. This procedure accomplished its purpose,” he wrote, “but it failed to obtain general support for the recommendation.”[9]

The Ministry editors cited Wilson as saying that after tabling the motion “he had counseled with various individuals and” as a result wanted “to suggest seven safeguards . . . to the motion [that] might make it more acceptable.”[10]

Writing to Wilson almost in the voice of Nathan the prophet, Dennis continued, “This is not the first time that delays, tablings, straw votes, and similar strategies have been used in our convocations to push through an unpopular recommendation,” adding, such methods “do not enhance the credibility of church leaders.”[11]

But the auditor’s “greatest objection to the action last week was that the General Conference in Spring Meeting session was called upon to cast a vote on an item not previously presented and without crucial background information that is available.”[12]

Dennis referred to two things, both of which Wilson was well aware: first, a report by the Financial Review Committee established after the loss of Harris Pine Mills, and, second, the bankruptcy of Adventist Health System North.

“After the Harris Pine Mills disaster [1986-1987] the General Conference appointed a Financial Review Commission (FRC) to study other areas of church activity,” Dennis reviewed recent history. “In spite of heavy resistance from NAD union presidents, influenced by the businessmen of the AHS, the FRC nonetheless proceeded with an extremely thorough investigation of the system.”[13] [14]

Of course Neal Wilson knew all that Dennis was telling him. He also was very familiar with the FRC report that his chief auditor—a member of that Commission—said was “direct, incisive, and makes positive recommendations for massive change in the AHS.”[15] [16]

Dennis asked Wilson an almost rhetorical question: would “the attendees at the Spring Meeting . . . have voted for higher administrative salaries if the information contained in that [FRC] report had been disclosed.”[17]

The second “lack of disclosure” that so disturbed the auditor was information about “the economic devastation created by the AHS North diversification bankruptcy.”[18] (One GC financial officer guessed the losses at between $100-150 million. GC under treasurer Bill Murrill said it was probably more like $50 million.)[19] Dennis complained to Wilson that “even as director of auditing for the General Conference I have never been made aware of the facts involved in this debacle.” And he went on to question whether “high level leaders of the church, outside the AHS, were personally involved in this scam?”[20]

Compensation rates for Adventist healthcare executives was an issue with a history, and it more or less pitted ministers and educators against healthcare professionals and business executives. Within the church family, the ministers and educators had the better of the argument, if for no other reason than that they ran the denomination’s presses. But after the various committees had deliberated, and after the periodicals had been printed, read and recycled, it was still the healthcare executives who were driving the 7-series Beamers and 8-series Mercedes, funded by benefits that were paid for by church members, patients, and third-party payers. Nevertheless, few church members had any conception of just how enormous executive compensation had become in the Adventist Health Systems—until Paul Goldstein began his reports in the Washington Post about Shady Grove Adventist Hospital and its parent corporation, the Columbia Union’s Adventist HealthCare. Inc.

What, in fact, did the compensation guidelines voted at the 1989 General Conference Spring Meeting actually permit Adventist healthcare executives to be paid?

The 1989 plan established “a maximum base salary for a[n Adventist] hospital executive based on the minimum salary for a hospital president as identified by” a nation-wide healthcare executive compensation study conducted by Hewitt, a human resources outsourcing and consulting firm.

The plan further approved

The current geographic [compensation] differential of up to 10 percent previously adopted . . . and . . . an additional 10 percent differential for the three larges hospitals (Florida Hospital, Kettering Medical Center, Loma Linda University Medical center) and the [Health Systems] corporate offices.[21]

As clear as those directives may have seemed, both the 1999 Washington Post stories, and the subsequent Adventist Review coverage, make clear that the voted policy was simply ignored.

“A series of actions voted by the church [GC Committee] over the years,” Review editor William Johnsson lamented, “has led to the current situation in which top health-care executives may receive as much as 10 times the compensation of employees” paid from church funds.[22]

The Review spent five pages in its April 13, 2000, regular print edition explicating the “Health-Care Pay Scale . . . Controversy.” While presenting the Shady Grove and Adventist HealthCare clinical and compensation issues quite candidly, the church organ rather studiously avoided names and dollar figures.[23] However, in its online edition, the Review took pains to compare (in specific dollar amounts) the compensation variations among the three highest paid executives for each of the eight Adventist-affiliated regional healthcare management corporations—but without naming the corporations or the executives whose compensation figures were provided.[24]

MCA’s more recent investigation, including the triangulation of sometimes-abstruse data, provides the following illuminating table.



Certain changes instituted in 2000 by Adventist HealthCare, Inc. in the aftermath of this interesting episode buttress the evidence that the compensation packages for the executives at AHC were exorbitant. For example, in 1997, the salary of outgoing CEO Bryan Breckenridge was $489,376; and it was accompanied by an annual bonus of $155,780—up $59,000 from 1996.[25] Cory Chambers, who replaced Breckenridge, received total compensation of $815,000 in 1997 and $842,000 in 1998.[26]

After the Post articles and Shady Grove’s board restructuring, William G. Robertson was hired to replace Chambers at a base salary of $350,000 and a bonus ceiling of 20 percent.[27]

Whatever else the tabled figures may suggest, they do illuminate the chasm that the Ministry editors described as the difference between “a sacrificial philosophy built upon Scripture and the Spirit of Prophecy,” and “the hospital system’s remuneration scale . . . built on a market-sensitive concept.”[28]

“This is surely an unhealthy situation,” commented the Adventist Review editor, “that must be addressed.”[29]

This report was excerpted from a more extensive elucidation of Adventist healthcare executive compensation that will be found in MCA’s forthcoming book, Who Watches? Who Cares? Misadventures in Stewardship, in a chapter, entitled, “Evergreen,” that reviews exorbitant executive compensation at Shady Grove Adventist Hospital and its parent corporation, Adventist HealthCare, Inc.