Last year, when Stanford Hospital & Clinics was considering poaching Dr. David Feinberg from UCLA, where he is the associate vice chancellor and CEO of its public hospital system, the university brass and the powerful UC Board of Regents decided to do whatever was required to keep their golden administrator.
Things were bad at UCLA when the feverish bid to retain Feinberg broke out. It had just been slammed with $60 million in academic program cuts by the deficit-riddled state of California, and faces another $96 million bite on July 1. In a series of recent hikes, the university raised average student tuition 40 percent from about $7,000 to more than $11,000.
More tuition hikes were coming, and the university owed its employees $21.5 billion in future pension payments that it had no clear-cut way to pay.
But the vast Ronald Reagan UCLA Medical Center, a public nonprofit, had experienced a financially robust previous year under Feinberg, and the facility in 2009 enjoyed high patient-satisfaction rankings as usual. Despite California's stubborn recession, UCLA Chancellor Gene Block — like Feinberg, a psychiatry professor at the School of Medicine — decided to make his colleague a staggering offer: He would nearly double Feinberg's $739,695 base salary to $1.33 million.
That included a 22 percent pay raise of $160,300 and an annual “retention bonus” of $250,000 paid every year that Feinberg does not leave for another job. Block also decided to continue Feinberg's “incentive bonus,” which had hit $210,739 in the previous fiscal year.
There was nothing else quite like Block's offer elsewhere in California's university medical schools. The next highest paid is UC San Francisco's CEO Mark Laret. San Francisco, like UCLA, is a top facility, ranked seventh in the nation by U.S. News & World Report, close behind No. 5 UCLA.
In 2010, Laret's $739,700 pay was reduced as a result of the systemwide pay cuts. But with an “incentive” bonus of $176,912 and a car allowance of $8,916, he earned $876,215. Now, suddenly Feinberg was in line to earn nearly half a million dollars more than Laret.
On June 30, Feinberg will begin getting his annual quarter-million-dollar bonus simply for not leaving for another job.
Feinberg's juicy pay package led to uncomfortable headlines for UCLA on Sept. 17, the day after the Board of Regents approved it.
Then, in late December, Feinberg earned UCLA another round of unwanted media attention. The San Francisco Chronicle obtained a private Dec. 9 letter in which Feinberg and 35 other executives in the UC system lashed out at the Board of Regents. The highly compensated group weren't demanding help for academic programs and students. They were threatening to sue the struggling California universities if the regents didn't boost the executives' long-standing $245,000 salary caps used to calculate their pensions.
The change would create a sizable pension boost, costing the universities $5.1 million per year — for just 36 government employees. In addition, the 36 executives insisted the new pension deal be retroactive to 2007, taking from the universities an additional bite of $51 million.
In the letter, Feinberg and the others wrote that it was “the University's legal, moral and ethical obligation” to hand over the pension boosts. They also threatened, “Failure to do so will likely result in a costly and unsuccessful legal confrontation,” and emphasized that they were writing “URGENTLY.”
The letter, which proved to be deeply embarrassing to UC officials and the regents, was widely assumed to have been leaked by a UC university system insider disgusted by the demands.
The demands from the 36 were a direct political challenge to UC President Mark Yudof, who had publicly opposed bigger pensions for university executives. The University of California system owes $21.6 billion in future pension payments to all its retirees — but it hasn't got the money, and doesn't know where it's going to get it. Yudof is pursuing fiscal reforms to raise the missing billions, including upping the retirement age for future employees from age 60 to 65 for maximum pension benefits — and, once again, raising student tuition and fees.
The leaked letter enraged students, critics of cushy government pensions and salaries and incoming Gov. Jerry Brown, who is a nonvoting member of the Board of Regents.
Brown opined in the Chronicle in December: “These executives seem very out of touch at a time when the state is contemplating billions of dollars in reductions that will affect people who are far less advantaged.”
In early January, under a media spotlight, Block opposed the pension boosts, and the demand was not approved by the regents.
But three weeks later, without a formal vote, the regents — who include such notables as investment banker Richard C. Blum, husband of Sen. Dianne Feinstein, and Sherry L. Lansing, former chair/CEO of Paramount Pictures — found a way to give Feinberg and other UC system medical center executives statewide a different costly reward: “incentive” bonuses totaling $2.6 million that had been deferred from 2009.
Feinberg topped the bonus recipient list, raking in $218,728.
The popular doctor now has critics aplenty. Students, facing further tuition hikes as Gov. Brown struggles with a massive deficit, are flabbergasted at the Wall Street–like disparity between how the UC system treats its highfliers versus its students.
Student Matt Margolis, president of the Bruin Democrats, says thousands of UC, California State University and community college students “have to take quarters off, drop classes, get kicked out of their housing.” For UC leaders “to respond to the need to scale back by cutting the budget and raising tuition — I don't see how that sits well with the CEO of the medical center having his salary doubled.
“The resources are going somewhere,” Margolis continues, “but they're not going to the students.”
Lakesha Harrison, president of the American Federation of State, County & Municipal Employees Local 3299, which represents some 20,000 UC system workers, finds it galling that administrators grow wealthy while some workers make $13 an hour.
She represents hospital employees who clean bathrooms, sanitize equipment and surgery rooms, guard the premises and prepare food while absorbing furloughs and bracing for possible healthcare and pension reductions and layoffs.
“Dr. Feinberg doesn't actually make the pieces move,” Harrison says. “It's my workforce that makes the pieces move. They can't pay $25,000 a year to [workers] who keep the hospitals sanitized and clean, and they pay this man double his salary to sit in his office — and do what?”
And that has become the question. Is the job done by Feinberg, who has surprisingly little executive experience, so unusual that a government system needs to assure that he's a wealthy man? While Block brags that UCLA's medical system was rated fifth in the nation under Feinberg, the fact is that UCLA has been among the top five under various CEOs for most of the past 20 years. Under the previous CEO, it ranked third in 2007.
Feinberg, Block and Yudof declined to be interviewed by the Weekly.
Harrison says Block and other UC officials like to quote top salaries in the private sector when insisting on top pay for Feinberg and others. But not when it comes to the lower-paid medical center workers, who, she says, lag behind the private sector.
“They let the market guide them — when they want to,” she declares.
The hiked salaries for Feinberg and others don't come from the same state general-fund pot that pays for university academic programs but are taken instead from hospital revenues. UCLA Medical Center revenues come almost entirely from private health plans, Medicare and Medi-Cal payments.
And now, UCLA donors are raising $10 million in an endowment fund — created solely to pay the increased cost of hanging on to David Feinberg.
Even so, if freed, the cash spent on huge UCLA salaries at the top would go elsewhere in the medical center system — and would be welcomed by doctors, nurses, researchers and others.
So when the Board of Regents privately debated last Sept. 16 before giving Feinberg an unprecedented pay hike, their key issue was not the disastrous California budget. A core debate was instead over whether Feinberg's $1.3 million bonanza would demoralize thousands of state workers and UC medical directors up and down California.
The regents gave far less attention to the specter of paying more than $1 million to an executive after they had repeatedly and controversially hiked student fees.
Several members of the Board of Regents demanded to know “why they should pay so much” to Feinberg, a source with knowledge of the private discussions says.
Among their biggest concerns: “the precedent” of giving others a wedge to press for $1 million paychecks, creating salary inflation throughout the public system.
The regents had before them a report in which Block urged Feinberg's pay increase, touting UCLA Medical Center's fiscal performance as exceeding industry standards, and its lofty ranking by U.S. News & World Report and others. He said that during the 2009 fiscal year, the UCLA system “completed the most successful year in its history” when measuring patient care and satisfaction as well as financial performance.
Although good news, it wasn't a major change.
UCLA Medical Center for more than half a century has been one of the nation's premier hospitals, with accomplishments dating back to 1956, when its surgeons performed the first open-heart surgery in the western United States.
But Block had another concern: He warned the regents that Feinberg was being courted by “a major academic medical center.”
Feinberg's salary boost almost certainly has less to do with his specific performance than with the fact that the regents were more skittish than usual about losing a prominent administrator. A year earlier, they'd lost superstar UCLA Law School Dean Michael H. Schill, who left to head the University of Chicago Law School.
UCLA had not preemptively raised Schill's salary to keep him from looking around.
Also on their minds: a fervent donor community that promised to raise $10 million to help hang on to Feinberg.
Christopher Santos, a vice president of UCLA's undergraduate student body who lobbies on behalf of students in Sacramento and Washington, D.C., says students are put off by faculty and administrators who focus on the “monetary” over the “intrinsic value” of working at a prestigious public university.
Santos says whenever students mention the big salary packages — as they frequently do — they're told it's necessary to reward talent, or that the money can't be spent any other way.
“I think when they say the money can't go anywhere else, it points to an even greater problem with the structure and foundation of the university,” Santos says. “If millions and millions of dollars that come to the university can only go to compensation … we might look at how the university is running.”
Jasmine Hill, president of UCLA's undergraduate student body, says huge salaries and benefits like Feinberg's send “a very strong message that the university's priority is what they perceive as 'quality' — over access for students. It means … accessibility decreases for low- and middle-income students.”
Margolis, the Bruin Democrat, says, “The real problem with the high salaries for UC administrators like Dr. Feinberg is that they're coming at a time in a decade where students have been going to school every fall and finding out they have to pay more money to get less and less allocated to their education.”
UC officials declined to discuss Feinberg's compensation, or specifics of his performance.
Steve Montiel, spokesman for the UC Office of the President, wrote very broadly, in a prepared statement: “We wouldn't have world-class medical schools without world-class medical centers — and vice versa. … All of this is made possible by great staff and leadership.”
Feinberg was plucked three and a half years ago from UCLA's Resnick Neuropsychiatric Hospital, where he was medical director, to become acting head of the entire hospital system. When Block became chancellor a month later, he approved the appointment of his medical school psychiatrist colleague, Feinberg.
Are public medical executives such as Feinberg hard to replace? Stanford University easily found another executive when it didn't get Feinberg, poaching UCLA's hospital system chief operating officer, Amir Dan Rubin, who was making a mere $547,600 for overseeing operations at UCLA's four hospitals and outpatient centers.
Rubin's résumé is far weightier than Feinberg's. Previously, Rubin was chief operating officer at Stony Brook University Hospital, in New York. He oversaw operations at the Resnick Neuropsychiatric Hospital while Feinberg was medical director.
Looking at the two men's histories at UCLA, it's hard to identify what about the hospital system's strengths can be attributed to Feinberg as opposed to Rubin — or to other factors altogether. Rubin declined an interview request from the Weekly.
Feinberg is something of a PR wizard, who tries to get to know as many people in the health care system as possible, and he has proved a popular boss who makes a point of looking out for the welfare of employees.
“I invite 10 people to lunch once a week randomly from different departments,” he said in an online 2008 interview with Mike Cottrill in Smart Business Los Angeles. “I attend as many ceremonies as possible, I attend memorial services — any of the things where the staff is coming together. … I try to be out of my office as much as possible because I'm 100 percent about the relationships.”
The Weekly filed a California Public Records Act Request on Jan. 31, seeking Feinberg's performance reviews, calendar and recent professional emails — all public information.
UCLA has failed to provide most of it. Frances Thompson, UCLA's public records coordinator, says in an email: “Due to the sensitive nature of Dr. Feinberg's position, it is difficult to predict when this [request] will be completed.”
But it is known that Feinberg's peers in California — and at many top Pac-10 schools — are paid significantly less than Feinberg, not just at UC San Francisco.
At the University of Washington Medical Center, ranked 12th by U.S. News & World Report, executive director Stephen Zie-niewicz makes just $477,372 per year plus standard benefits.
He gets no “incentive” bonuses or “retention” bonuses. He is far more experienced than Feinberg. Before joining UW, Zieniewicz had 24 years of health care management experience, including stints as chief operating officer at Saint Louis University Hospital and Tenet Healthcare Corp.
In 2009, UC Davis Medical Center CEO Ann Madden Rice made $584,300; UC Irvine's associate vice chancellor for health affairs and CEO Terry Belmont earned $659,000; and UC San Diego's associate vice chancellor and CEO Thomas Jackiewicz earned $600,000. Feinberg got $210,739 in “incentive” pay, Laret got $176,739, Rice got $165,415, Belmont got $147,021, and Jackiewicz got $146,039.
Yet aside from Feinberg, none of these highfliers will get $250,000 a year from his or her nonprofit, public medical centers — or from an affiliated donor community — simply to stay on the job.
Now, Jerry Brown is about to cut another $1 billion from higher education, and UCLA will take a major hit.
Hill, the undergraduate student body president, says the regents' and Block's focus on executive compensation threatens UC's other missions, including its role as a vehicle for social mobility for students from lower-income families.
“It's much easier to focus on [perceived] quality, versus the hard questions of how to maintain open doors,” Hill says.
Adds Santos: “At the end of the day, we need to ask ourselves what the purpose of the university is.”
Block and other UCLA leaders say “they want to keep the purpose of the university for research, teaching and service — and use that to justify higher fees” and tuition, Santos says.
But when criticized for skyrocketing executive compensation, he says, the administrators struggle to rationally justify it.
As long as the double standard continues, he says, “Whether [the administration] likes it or not, students are not going to be happy.”