Sonoma Valley Hospital CEO gets raise, bonus, contract extension

Kelly Mather had a good year.

That's the summation of three reports from an ad hoc committee at Sonoma Valley Hospital that was expected to come before the board of directors Thursday night, to endorse a three-year extension to the CEO's employment contract, a 3 percent salary increase, and a performance bonus of almost $35,000.

Peter Hohorst and Joshua Rymer, two members of the Sonoma Valley Health Care District's five-member board, wrote the reports. Their reports were accompanied in the meeting packet by a chart of CEO compensation at other single facility hospital districts in the state, the 2016 Allied for Health Executive Compensation Report.

The health care district board scheduled the performance review during closed session on Thursday, Oct. 5, at 5 p.m., and planned to report on it during the regular board meeting at 6 p.m. 'While of course there will be discussion, I'm not anticipating any significant changes to these recommendations,' said Jane Hirsch, chair of Healthcare District board. Results of final action were not available at press time.

The only board member expected to contest the performance review might be Bill Boerum, who has found himself on the short end of several 4-1 votes recently. But even Boerum had little doubt the endorsements would be approved, and prior to the meeting expressed that his response would be 'to express a lot of reluctance (and facts) and accede to the recommendations.'

As it turned out, Boerum missed the closed session and two of the three votes on Mather's new terms, due to a business conflict, though he voted with some hesitation in favor of the three-year extension.

In subsequent comments, however, he did express disapproval of an increase in salary, given "worsening" losses in operating margin.

"I would not have approved an increase in the salary... I don't see how we can keep raising the CEO's salary when the losses are increasing," he said, and affirmed that he would have been a No vote on that point.

Mather's current base salary is $350,085. The 3 percent increase would bring it to $360,587, which Hohorst and Rymer say would 'place the CEO's salary above the 2016 survey midpoint for comparable hospitals in Northern California, but below the 75th percentile,' according to the AHEC report.

Those comparisons are accurate for a hospital with 75 to 200 occupied beds, between 300 and 800 full time employees, and with a total operating expenses of $25 to $100 million. Sonoma Valley Hospitals has 75 beds, 467 employees (including nurses and staff, not including affiliated physicians), with total operating expenses of over $61 million, according to Lynn McKissock, the hospital's director of human resources.

The report notes that the salary increase, to become effective Jan. 1, coincides 'with the timing of the budgeted increase of the same percentage for all employees.' Those increases, including Mather's, are contingent 'on the financial performance of the hospital permitting the increase for all employees.'

In other words, Mather won't be the only hospital employee who might get a raise next year.

'This year, the board hired an executive compensation firm, Veritas, to evaluate our senior leadership compensation and they largely confirmed our CEO pay practice/level,' said Rymer. 'For total compensation, Veritas recommends creating a base salary plus incentive payments that total between the 60th to 75th percentile of peer group packages. They rated Kelly's total compensation against their curated peer group at the 72nd percentile (again, well within the range).'

The performance bonus, or 'performance incentive payment,' is based on ratings of high emergency department satisfaction, excellent patient outcomes and financial viability. Incentive calculations were earned in each of these categories, totaling $34,791.

She earned no incentives in other categories, including in-patient satisfaction, engaged and satisfied staff, and healthy community.

Since the incentive schedule was written into Mather's contract as six CEO objectives for the 2017 fiscal year, note Hohorst and Rymer, 'failure to approve the incentive award as calculated would be a breach of contract.'

The final piece of the compensation puzzle coming to Mather for next year is the three-year extension to her CEO employment contract. Mather began as CEO and President of the Sonoma Valley Health Care District in July of 2011, and had received an earlier three-year extension that is due to expire on July 11, 2018.

The arguments given for extending the contract another three years cite her 'leadership… in transforming the Sonoma Valley Hospital into a regional leader in patient satisfaction and safety,' as evidenced by the hospital's Four-Star rating according to the Center for Medicare and Medicaid Services. CMS uses a Five-Star quality rating system.

Other hospital evaluation systems are not as generous in their ratings, but they are not cited in the reports.

Net patient revenue was also noted to have increased by over 38 percent, while what it called 'people cost' of staff operations increased only 27 percent, and cash generated from operations during the past two years exceeded the budgeted amount.

Additional pluses were the overall decrease in the percent of net patient revenue coming from the Parcel Tax, from 2010 to present. The recently passed Parcel Tax will bring in additional revenue, but still represents a lower percentage than from 2011.

'With this record of performance and her contributions to our community,' write Hohorst and Rymer, 'we feel that it is imperative for the Board to extend Kelly Mather's contract at this time to assure that SVH will continue to benefit from her leadership.'

They then add a coda: 'With apologies to the use of jargon from the sporting world, this is not the time to suggest that Kelly Mather test free agency.'

For her part, Mather said she was honored to serve the hospital for the last seven years, adding she was looking forward to continue working with 'our wonderful board, amazing physicians and the most compassionate team I have ever had the pleasure to lead.'

Email Christian at christian.kallen@sonomanews.com.