Hartford Business Journal

6 Hartford Business Journal • March 18, 2019 • www.HartfordBusiness.com By Matt Pilon mpilon@hartfordbusiness.com I t's not often you'll find well-paid executives comfortable talking about how much they make. Bristol Hospital CEO Kurt Bar- wis, who's earned upwards of $1 million in annual wages and benefits in several recent years, depending on how you measure it, is an exception. Frustrated by Gov. Ned Lamont's recent proposal to increase the state's tax burden on hospitals in the coming biennium, and the past administra- tion's criticism of executive salaries, Barwis and several of his board mem- bers sat down with Hartford Business Journal to defend and explain Bristol Hospital and Health Care Group's ro- bust C-suite pay packages, which are common across the country as well as in Connecticut, where nearly 40 hospital execs and physicians make $1 million or more in annual compensa- tion, according to the latest state data. Unlike his predecessor, Lamont hasn't uttered a word about hospital pay, but Barwis said the topic is always in the background, whether spoken or not. "I think it's used as part of the lever- age," Barwis said of the way his and other executives' salaries are publi- cized by the state. As a not-for-profit executive, Barwis said he knows his pay is public record. His gripe is with how he thinks the figures are perceived. "People look at it and think it's just a big number, and they don't under- stand what it takes to actually get into this role, how much education and training, how much responsibil- ity there is," he said. "There's not an executive in any of these organizations who's not on a 24-7-365 [schedule]." It's clear that a tense relationship with Gov. Dan- nel P. Malloy's administration, which brought back the hospital tax in 2012 — a decade after an earlier version of it was phased out — still sticks in the craws of hospital leaders. They're wor- ried that Lamont, even if he's been diplomatic in his approach, is returning to his predecessor's pol- icy prescriptions for their industry. The two sides have been in talks over Lamont's tax proposal, which is overshadowed by an ongoing lawsuit hospitals filed in 2016 challenging the hospital tax as unconstitutional. The stakes are high. Late last year, just prior to departing his role as Mal- loy's long-time budget chief to become CFO of the state's university and col- lege system, Ben Barnes said the state could be on the hook for as much as $4 billion if it loses in court. Next year, Lamont's budget would take $516 million more in tax rev- enue than hospitals expected. While the net impact on hospitals, after a series of corre- sponding state reimbursements, would only be an additional $43 million above ex- pectations, those losses would hurt hospitals' ability to recruit needed specialists and whittle down deferred mainte- nance backlogs, said Bristol Hos- pital CFO Richard Braam. In addition, hospitals were hit in October by a seemingly unintended drop in inpatient reimbursements, stemming from a tweak to how the state weights Medicaid rates. That's cost Bristol Hospital over $2 million and counting, forcing it to tap an additional line of credit, and delay a plan to annui- tize its $25 million pension liability and refund $22 million worth of debt. Tone shift In early 2015, a wry remark from Barnes kicked off a particularly acri- monious year. In a moment enshrined on YouTube, a Republican senator asked Barnes during a committee hearing why Malloy's budget that year called for a higher tax on the "virtuous activity" undertaken by hospitals. Barnes replied: "It's like why do you rob banks? It's where the money is." Many in the room laughed, but hos- pital leaders didn't find his comments funny. "I wasn't happy about them, I didn't think they were appropriate," said Mark Blum, a Bristol Hospital board member who chairs its compensation subcommittee and recently retired as CFO of Thomaston Savings Bank. Shortly after Barnes' infamous remark, a fight over Medicaid cuts followed, which led hospitals to attack Malloy in an ad campaign. The Demo- cratic governor doubled down on his rhetoric, mocking hospital's not-for- profit status. He also called hospital CEOs "fat cats" with "outrageous" pay packages and referred to the indus- try as having a "hospital industrial complex" that was collectively posting a nearly $1 billion surplus. Lamont knows the history and hopes for a better working relationship with hospitals, a goal that will be harder to accomplish after he proposed to renege on the final year of a 2017 deal that es- sentially cut in half (from $438 million to $229 million) the annual tax burden on hospitals. As was originally intended, the tax in 2012 leveraged higher federal reimbursements to the benefit of both the state budget and hospitals. But the state quickly began taking more of the money to help balance its budgets, Broken Promise Amid hospital-tax debate, frustrated CEO defends his and other healthcare executives' pay Bristol Hospital CEO Kurt Barwis (right) with board Chairman Glenn Heiser. Both are frustrated with Connecticut's controversial hospital tax, which they say is hurting their hospital's finances. "People look at (CEO pay) and think it's just a big number, and they don't understand what it takes to actually get into this role, how much education and training, how much responsibility there is. There's not an executive in any of these organizations who's not on a 24-7-365 [schedule]." Kurt Barwis , CEO, Bristol Hospital HBJ PHOTO | MATT PILON

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