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KershawHealth CEO's contract extended to 2016

Posted: December 10, 2010 3:55 p.m.
Updated: December 13, 2010 5:00 a.m.

For each of the past several years, KershawHealth President and CEO Donnie Weeks has enjoyed knowing that his contract would be automatically extended by a year.

“It’s a rather common feature,” George Corbin, a member of the KershawHealth Board of Trustees, chairman of its finance committee and a member of its compensation committee, said of automatic contract rollovers.

At the board’s most recent meeting, held Dec. 6, trustees voted unanimously to amend Weeks’ “employment agreement and supplemental executive retirement plan and extend the contract to Jan. 4, 2016.”

Prior to July 2008, Weeks’ contract was set to expire at the end of 2009. The board then extended it by three years through 2013 and added the automatic extension clause.

“It’s fair and reasonable to both parties, particularly the hospital,” said Trustee Tallulah Holmstrom just ahead of the vote.

Weeks then said he appreciated the board’s consideration but felt the 2008 contract was also “fairly vetted” and good for both himself and the hospital.

In a joint interview Thursday, Corbin and Board Chairman Jody Brazell -- also a member of the compensation committee -- explained that it was important to both the board and to Weeks that while Monday night’s action extends the contract again, it provides a definitive end date. They declined to discuss specifics of Weeks’ contract, but said a lot of the board’s reasoning behind extending it has to do with health care reform.

“As we sat in review of our arrangement with (Weeks) this year under the dark cloud of impending health care reform, we recognized the importance of maintaining good leadership,” Brazell said. “A strong, experienced, highly skilled, mission-minded CEO with a vision for locally controlled health care would be imperative to successfully navigate the most dynamic and challenging period for health care in the country’s history.”

Brazell said the board’s goal was to have a contract that would reflect fair compensation from both the board and Weeks’ perspectives in light of what Weeks is being asked to accomplish in the coming years.

Brazell said the public should consider the following points to understand why Weeks’ position is so important:

• KershawHealth is a $110 million-per-year business that requires sound business principles in its leader.

• Health care is a very complicated, highly regulated, dynamic industry, requiring many skilled people.

• KershawHealth is an economic driver for the county with approximately 1,200 employees.

• While chartered as a public hospital, KershawHealth is fully self-sustaining financially, receiving no tax support from the county, providing instead nearly $11 million in charity and unreimbursed care to the citizens of the community in 2009.

“Due to our governmental status, we could (ask for taxes), but we don’t,” added Brazell. “I don’t think people don’t know that, but it’s good for them to be reminded.”

Brazell said when Weeks was hired in 1998, the board had a clear vision for needed changes, including updating and expanding an aging facility, and increasing the number of specialty and primary care physician practices in the county.

“Also, since his recruitment, the rapid growth in the western part of the county has demanded better access to our health care system,” said Brazell. “Furthermore, limited and aged facilities hindered the best patient care and made physician recruitment even more difficult. Donnie was chosen to deliver the board’s clear sense of what needed to be accomplished.”

Brazell then listed a number of accomplishments under Weeks’ leadership, including increasing the number of primary care physicians in a variety of practices; expanding specialty practices, especially ENT, cardiology, urology, orthopedics and pulmonology; constructing, equipping and staffing a new wing on the main campus with more operating rooms; constructing the Elgin outpatient/urgent care center to serve Elgin and the growing western portion of the county; and effecting the transformative use of technology to enhance patient care, especially through digital imaging improving physician access to quality images.

Brazell also spoke to what he considered Weeks and the board’s “sound financial management.”

“We have been able to finish in the black every year except 2006 when a successful turnaround plan returned the organization to the positive the next year,” he said.

Corbin also said the hospital has enjoyed a modest 21 percent debt-to-capitalization ratio compared to a Standard & Poor’s benchmark of 40 percent while maintaining an investment grade bond rating during the current poor economic climate.

“That has been a real challenge,” said Corbin, “but it’s the best indicator of success. Nobody knows what health care reform is going to be like. In carrying out the board’s instructions, Donnie has tried to maintain (the hospital) in the best position.”

The two board members said those past accomplishments provide KershawHealth the best opportunity to remain locally controlled while navigating through upcoming health care reform changes.

“If we are not proactive in how we respond to the coming changes, and if our medical staff and our hospital are not fully united in moving forward, we run the very real risk that the people of Kershaw County will find themselves having to go to Columbia for many of their health care needs,” said Brazell.

He said future challenges include a possible shortage of primary care physicians as health care coverage is increased. That, Brazell said, could result in increased pressure on the hospital’s emergency department. He also said the “reinvention of health care” could move KershawHealth away from a “pay for service” model to “health care value.”

That, he suggested, could allow the hospital to increase quality while decreasing costs while at the same time increasing the public’s use of health care services as more people have insurance. Brazell also said bundled payment options will require a “complete integration of all providers,” especially physicians and hospitals as the system shifts from sick care to wellness care.

“That’s the big question,” Corbin said. “If more people are covered, will the hospital be enjoying more revenue or will there be a cutback on all programs that would result in a real struggle?”

All of this, he and Brazell said, played into the board’s decision to ensure Weeks would continue to be KershawHealth’s CEO for the next five years.

“The board having a long-standing relationship with an experienced CEO is critical. It helps us to know how he will handle these situations,” Brazell said.

He said the board recognizes the importance of having the hospital administration, physicians and board work together to produce the “most efficient and highest quality health care” available. He also praised what he said was Weeks’ ability to carry out the board’s desires effectively and with the board’s full confidence.

“During times of uncertainty, an unexpected or even planned change in leadership can spiral into disruptions and loss of direction that can prove difficult, if not impossible, to recover from,” Brazell said. “The continued commitment between the CEO and board for the next five years will carry us through these times and give us the best chance to remain locally controlled and provide the best possible care to the citizens of this county and those of surrounding communities.”

Brazell said he is especially concerned about any possible loss of local control.

“If we don’t all come together to get through these challenging times, let me give you an idea of what health care in Kershaw County could look like:

“Only the most basic of health care would be available and, as a result, the citizens will end up traveling to Columbia for most of their health care, even to the level of their doctor’s office. This is a very real threat that we face just like every community health care system in our country. It is because of this that every decision we make has to be the right decision. We all have to be united as physicians, trustees, employees and administrators in our mission to provide the best health care for the citizens of our county.”

Brazell said that if KershawHealth were to somehow be bought out by or merged with a private health care entity, decisions about the county’s health care would be made by people outside Kershaw County.

“I don’t think that’s what we want,” he said.

Corbin, who had a lengthy background as a certified public accountant for North Carolina health care systems, said the one commonality he saw in successful hospitals was a strong CEO.

Brazell agreed.

“There are so many issues to keep up with. Most people don’t care about health care until they need it,” said Brazell, adding that it would be financially costly to look for a CEO right now. “If we had to go out and get a new CEO tomorrow, it’s going to be a national search and we’re going to have to come up with compensation based on the national average. It would cost a lot of money. It would also be a distraction. It would take time away from the board for other things that would be important.”

But Brazell and Corbin said replacing Weeks is something the board realizes it will have to do someday -- if Weeks decided to retire, for example.

“It’s really important to solidify our position but to also give him a light to see at the end of the tunnel,” said Corbin. “We have to address the replacement of Donnie -- we can’t assume he’s going to be here forever. With a time limit, we know it has to be addressed and -- from the board’s perspective in my mind -- plan for succession.”

“We have to give ourselves the best opportunity to recruit the best replacement,” added Brazell.

That doesn’t necessarily mean Weeks’ role as president and CEO will end on Jan. 4, 2016, Brazell said, only that the contract’s amendment provides a date at which he could leave.

Friday, Weeks said he is not thinking about retirement at this time.

“The Lord is blessing me with excellent health and high energy level and I’m stimulated by the challenges facing Kershaw Health and the industry,” said Weeks. “So, I’m looking forward to the years to come and realize that, at some point, I may be interested in something else. For now, I’m looking forward to working with others to take KershawHealth where it needs to be to ensure a bright future.”

As for Weeks’ compensation itself, Brazell and Corbin repeated their assertion that the package is “fair and reasonable.”

“The amendment doesn’t change the concept of (Weeks’) compensation, just some of the parameters,” said Corbin. “It more clearly tells him that we’re looking at performance more than anything else, but we did make sure that we treated him fairly.”

Brazell said any additional changes have resulted in what he believes is an improved contract.

“We do a lot of research when we do this,” he said, “and that has meant we have come up with fair compensation for Donnie and that we represented the county well.”

Thursday, KershawHealth provided information about Weeks’ compensation, listing his base salary at $317,000.

“(That) is exactly in the middle of the range of CEOs at … comparable health care systems,” said Brazell. “The CEO’s incentive compensation has the potential, based on his performance and meeting specific goals, to increase his total compensation nearer to the upper range for total compensation, closer to the $400,000 range.”

Brazell said the board has used Yaffe & Company’s annual executive compensation survey -- specifically focusing on data for health care systems comparable to KershawHeath in terms of net patient revenues -- to determine Weeks’ compensation package.

“In this category, there are 103 health care systems (nationwide) with an average net patient revenue of just over $103 million. KershawHealth’s net patient revenue is approximately $110 million,” said Brazell.

According to a chart in the most recent Yaffe & Company report, in May, the national average base salary for CEOs similar to Weeks was $310,000. The chart also included a line concerning South Carolina specifically. However, only four hospitals responded to the survey and the chart listed mean base salaries, not averages.

The national mean of CEO salaries for hospitals such as KershawHealth was listed at just more than $323,000; the South Carolina mean for the four hospitals’ CEO salaries was just more than $259,000.

“Based on this comparable data and its high expectations of what the CEO needs to accomplish, the board has unanimously agreed that this compensation level is both fair and reasonable and that it is consistent with the critical need for leadership stability as KershawHealth navigates what will undoubtedly be the most dynamic and challenging period for health care in this country’s history,” said Brazell.

Brazell said that because the hospital is financially self-sustaining, Weeks’ salary is not paid by taxpayers.

Weeks was hired as KershawHealth’s president and CEO in August 1997 when it was known as Kershaw County Medical Center. According to a September 1997 article, his initial 12-month contract provided for a $170,000 salary. His previous salary as vice president and COO of the Spartanburg Regional Healthcare System was $225,000. Weeks’ predecessor, Dennis Lofe, had been making $103,000 when he resigned earlier that year.

According to the article, the 1998 average total compensation for hospital CEOs in the Southeast was $164,000.

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