Approach to CEO Compensation

Approach to CEO Compensation

The Chief Executive Officer (CEO) is the only employee of the District who is hired directly by the Washington Township Health Care District Board of Directors.

The District has a long-standing philosophy of wage parity for all employees, which includes the CEO. Wage parity means the CEO is not paid at the top of the scale nor compensated towards the bottom. The District’s compensation philosophy of marketplace parity establishes a base salary for the CEO at around the 65th percentile of the CEO’s peer group, with a possible incentive award of up to 25% of the base salary. Benchmarking executive compensation based on peer group data is standard practice for establishing reasonable compensation for executives working for non-profits.

On March 12, 2025, at the Board’s regular meeting, the Board considered a base salary adjustment and an incentive award based on the CEO’s performance. Prior to taking any action, the Board reviewed a report from Arthur J. Gallagher & Company. Gallagher is a leading healthcare compensation consultant in the United States. Hundreds of healthcare systems use Gallagher’s services as an independent consultant to satisfy Internal Revenue regulations for determining the range of reasonable compensation.

The Gallagher Report assesses the competitiveness of cash compensation for the Chief Executive Officer. Appendix A of the Gallagher Report includes a list of similarly situated California organizations in Gallagher’s proprietary database, regressed for size. The Gallagher Report for the current fiscal year, dated February 2025, was posted on the District’s website for this agenda item.

The Gallagher Report provides the Board with appropriate comparability data in accordance with IRS regulations. In its report, Gallagher reviewed background data on the District for the prior fiscal year. Gallagher then compiled data on compensation levels for California healthcare systems regressed for size using data from Gallagher’s proprietary database and salary surveys. Based on the foregoing, Gallagher prepared market charts summarizing compensation survey data at the 25th, 50th, and 65th percentiles for the California peer group. The charts are prepared for both base salary and total cash compensation.

The Board noted that when they hired Ms. Hartz as the CEO in June 2019, they set her base salary at 80% of the 65^th percentile in recognition that, although she had many years of experience as an administrator, she did not have any experience as a Chief Executive Officer. The Board expected that as Ms. Hartz gained experience and met the Board’s performance expectations, the Board would adjust her base salary in increments so that the Board could move her closer to the 65^th percentile, which is consistent with the Board’s compensation philosophy and following the guidance in the Gallagher report.

The Board noted that Ms. Hartz has served as the District’s Chief Executive Officer for five years and was now within Gallagher’s suggested range for setting compensation at the full 65^th percentile of the peer group.

During the meeting Board members indicated that the CEO’s performance was outstanding.

The Board highlighted the following achievements:

Expansion of the District’s world-class cancer care through our continued growing affiliation with UCSF. A cancer diagnosis can be devastating and the treatment can be both complex and difficult. It is wonderful that the District can offer the best cancer care available to our community.
Significant improvement of the District’s financial picture. Although the District did not achieve its budget target, the CEO led the District to generate a positive EBIDA of $17.1 million. This is especially noteworthy given the continued pressure on reimbursement rates and significant cost increases associated with the Bay Area.
Most importantly, achieving the District’s designation as a Trauma Center. This was no small accomplishment. The CEO and her team deserve the highest praise. As a result, the Trauma Center has already saved dozens of lives, lives that no doubt would have ended had those patients required transport to a distant trauma center. Whether someone is already a patient of Washington Health, or a Kaiser member, or someone without insurance, the Trauma Center is available to save their life or the life of a loved one.

After noting the above accomplishments, the Board enthusiastically and unanimously agreed to increase the CEO’s base salary, as specified in the Gallagher Report, to the 65^th percentile of the peer group or $1,062,000.

The Board also considered whether or not to grant the CEO an incentive award of between 0% to 25% of base salary as specified in the Employment Agreement. Prior to the start of that discussion, Ms. Hartz asked the Board to defer the incentive award in light of the continuing fiscal challenges of the District as previously noted.

The Board indicated that, based on her performance, Ms. Hartz deserved an incentive award but agreed with her request to defer consideration of an award.

To review the CEO's contract, click on the link below:

CURRENT CEO CONTRACT AND AMENDMENTS