Statement by the Ontario Hospital Association Regarding the Government of Ontario's Proposed Cap of Executive Compensation

TORONTO, Sept. 20, 2012 /CNW/ - "This afternoon, the media reported that the Government of Ontario announced its intention to cap salaries for new employees at Ontario's hospitals, and across the Broader Public Sector (BPS), at double the Premier of Ontario's salary, or approximately $418,000 per year. According to these reports, the proposed cap would not apply to existing employees.

An analysis of the 2010 Public Sector Salary Disclosure (PSSD) showed that only 77 of the 207,000 people employed by Ontario's hospitals reported compensation levels (including benefits) above $418,000. This group - which includes CEOs, senior managers, physician employees, and other clinical staff - represents less than four one-hundredths of one percent of the total number of hospital employees in Ontario. Capping their compensation would save approximately $4.7 million per year; this represented a total of less than three one-hundredths of one percent of hospitals' total expenditures in 2010.

If the media reports are accurate, the Ontario Hospital Association (OHA) is extremely disappointed with the Government of Ontario's proposal.

This is another example of the Government of Ontario and legislators devaluing the work and skills of hospital leaders, and those who lead Ontario's vital BPS organizations. BPS organizations are responsible for managing approximately half of Ontario's annual budget; it is in taxpayers' interests that these organizations be led by the most skilled, most experienced leaders that can be found, not the best that can be found to work within an arbitrary compensation environment which bears no relation to the job market in Ontario, Canada or internationally.

We believe that independent, voluntary hospital boards of directors are best-positioned to recruit, retain and manage the performance of the skilled and experienced individuals who lead Ontario's hospitals and are responsible for approximately 20 percent of the tax dollars spent by the Government of Ontario. They have the history and local context necessary to make sound decisions regarding hospital leadership. This proposal would remove one of the tools that all boards of directors use when making those decisions. It would also make it extremely difficult for the boards of directors of several hospitals - particularly the large community and teaching hospitals, many of which have annual budgets of $500 million or more - to recruit the kind of administrators and medical or research leaders they need to remain the best in Canada. Ontario's hospitals are the most efficient in Canada, and they constantly strive to improve patient care; strong leadership is an absolute necessity in today's environment, which features no increases in operational funding, the implementation of a new funding formula, and new transparency and accountability expectations. This proposal would not strengthen that leadership.

If implemented, this proposal would be the fourth change Ontario legislators have made to hospital executive compensation programs since March 2012, and the eighth since 2010. Some of these changes directly contradict and/or undermine other changes. This indicates that very little, if any, thought has been given by the Government of Ontario and legislators to how BPS executives can be appropriately compensated in a way that combines the needs of their organizations for strong leadership with the goals of taxpayers within the context of a prolonged fiscal challenge. This is demoralizing for current employees. It will also encourage those considering a career in hospital administration to seek employment in outside hospitals or BPS, where the terms of their employment aren't subject to constant revision based on the whims or political imperatives of legislators.

Ontario's hospitals have shown great leadership regarding executive compensation reform. We are willing to work with others, as shown earlier this year when we proposed a package of reforms which would have created an evidence-based compensation framework, increased the amount of executive compensation tied to provincially-articulated outcomes, and frozen executive compensation for a total of 5 years. This package of reforms would have generated significant savings while maintaining hospitals' ability to recruit and retain the leaders they need.

Ontario's hospitals understand the need for fairness and restraint in compensation. It should also be noted that, in June 2012, executive compensation at hospitals was frozen by legislators until Ontario's Budget is again balanced, which raises the questions of why this proposal, which goes much further than a freeze, is fair or necessary.

For these reasons, we strongly encourage legislators to reject these proposals, and ask them to begin approaching BPS compensation issues with the thoughtfulness they deserve.

We are also disappointed that the Government of Ontario chose not to move ahead with needed improvements to the Hospital Labour Disputes Arbitration Act (HLDAA), which governs arbitration in the hospital sector. As the OHA has noted on previous occasions, one of the biggest risks hospitals face is from arbitrators making decisions about collective agreements that do not reflect their ability to pay. The Government of Ontario introduced proposed legislative amendments to HLDAA in their 2012 Ontario Budget bill, Bill 55, but these proposed amendments would likely have made adverse, costly decisions from arbitrators more likely, not less. We call on the Government of Ontario to finally and appropriately address this issue which, unlike today's proposal, would have an immediate, noticeable and positive effect supporting restraint in health system spending."

-- Pat Campbell, President & CEO, OHA

Quick Facts

• According to the 2010 Public Sector Salary Disclosure (PSSD), only 77 of the 207,000 people employed by Ontario's hospitals reported compensation levels (including benefits) above $418,000.
• This group - which includes CEOs, senior managers, physician employees, and other clinical staff - represents less than four one-hundredths of one percent of the total number of hospital employees in Ontario.
• Capping their compensation would save approximately $4.7 million per year; this represented a total of less than three one-hundredths of one percent of hospitals' total expenditures in 2010.
• An analysis of the 2010 PSSD suggests that this cap, if applied to all BPS employers (except hospitals and municipalities) would total approximately $7.3 million.
• These savings, when combined with the expected savings from the hospital sector, would total approximately $12 million.
• In 2011, 3 Ontario hospitals had budgets of over $1 billion; 7 hospitals had budgets over $500 million; 15 hospitals had budgets over $400 million, and; 23 hospitals had budgets over $300 million.
  
  

SOURCE: Ontario Hospital Association

OHA Public Affairs
416-205-1305