LMH Health Board of Trustees opts against CEO raise as hospital faces roughly $6 million in 2022 budget deficit
photo by: LMH Health
Updated at 3:21 p.m. Wednesday, Jan. 25, 2023
The top executive at LMH Health won’t be receiving a salary increase in 2023 as the hospital looks to bounce back from ending 2022 with a roughly $6 million budget deficit.
While LMH Health president and CEO Russ Johnson won’t be getting a raise, part of his 2022 salary — 35% of it — is considered “variable,” meaning it’s only awarded when established metrics have been met or surpassed. During a meeting Wednesday morning, the hospital’s Board of Trustees reviewed the performance goals it set for Johnson in early 2022 and decided to grant him 45% of that variable compensation, or $68,666.
The board opted against increasing Johnson’s base salary for the third year in a row, though, citing that his current salary aligns with the market for CEOs working in similarly sized health care systems. Johnson’s base salary for 2023 will remain steady at $550,000; the board gave him a $55,000 raise at the start of 2022.
“Health care systems across the country are facing an extraordinarily challenging financial landscape,” LMH Health board of trustees chair Tom Sloan said in a news release about the decision. “More than 40% of systems will end 2022 in the red — a figure that’s projected to increase in 2023. While LMH Health isn’t immune to these concerns, the board of trustees recognizes that Russ — along with the hospital’s leadership team and our physicians, providers and employees — has worked hard to ensure that our system is in a better financial condition than many of our peer institutions.”
Earlier during the meeting, Johnson told the board that 2022 was indeed challenging for Lawrence’s hospital system, and that could be attributed to an “intersection” of supply chain, inflation and workforce struggles that together resulted in about $14 million in expenses.
Adding to that burden, he said, was the fact that LMH Health wasn’t really granted any federal support in 2022, after getting a hand with $14 million in such aid in 2020 and roughly $4 million in 2021.
“Every hospital in the country is feeling that,” Johnson said.
All told, the hospital is ending 2022 with about a $2.7 million loss in operations pending a final audit, LMH Health Chief Financial Officer Deb Cartwright added later in the meeting. If you compare that figure to the anticipated 1% revenue over earnings the hospital budgeted for, it results in a $6.1 million budget deficit. Though Cartwright echoed the lack of federal support in 2022, she said the hospital does anticipate being granted some federal funding from the Federal Emergency Management Agency this year, though she didn’t mention a specific dollar amount.
Cartwright also went into further detail about some of the costs that contributed to 2022’s budget deficit. For example, COVID-19 testing supplies used for monitoring for the virus before patients underwent surgeries or were admitted to beds and taking care of LMH employees with the virus cost the hospital nearly $900,000 in six months.
“That is only one dimension of the cost of the pandemic — it’s embedded in the cost of supplies and drugs and operations here, let alone lost time, which at the beginning of 2022 we had substantial lost time due to (the omicron variant of COVID-19),” Cartwright said.
Another huge contributor to the deficit budget, Cartwright said, was the more than $7 million in additional spending on pharmaceutical costs last year. That was due to inflationary pressures that Cartwright described as “staggering.”
Editor’s note: This story and headline have been updated to reflect LMH Health’s actual 2022 budget deficit. According to hospital spokesperson Rebecca Smith, that deficit should be $6.1 million when comparing its $2.7 million loss in operations to the hospital’s budgeted earnings of 1%.