Former CEO of University of Maryland Medical System got $7.8 million

Former University of Maryland Medical System CEO Edmond F. Notebaert, who resigned two years ago during a tumultuous time that included infighting and a board shakeup, is again the subject of controversy over his $7.8 million pay package.

Notebaert walked away with the compensation — details of which weren't disclosed in filings with the Internal Revenue Service until this week — after he announced his retirement in July 2008. Tensions had arisen between him and physicians over how the system was run. Shortly after his departure, one-third of the board resigned, including the chairman and vice chairman.

The package included $2.4 million in severance, about $639,000 in salary for seven months, deferred bonuses and contributions to a retirement plan that instantly vested when he left. Notebaert headed the medical system for five years, and officials said the medical system prospered during his tenure.

The system's protocol for deciding compensation came under fire in the months after Notebaert's retirement because the pay was awarded without full board approval. Now, the recently detailed pay package is drawing criticism anew.

"This is an outrageous case of excessive executive compensation in a public institution," Gov. Martin O'Malley said Wednesday in an e-mailed statement. "This sort of 'golden parachute' has no place in the public sector."

A spokeswoman for Temple University, where Notebaert now heads the health system, said he was not available for comment.

Board members said they are looking to the future of the private, nonprofit medical system, which they say is on more stable footing. The board has created a more open process for compensation decisions, hired a new chief executive, Robert A. Chrencik, and appointed several new board members. That has renewed confidence among physicians, members said.

Board Chairman Stephen A. Burch said the changes have created a more harmonious environment at the medical system.

"Positive alignment between a hospital system and its physician partners is essential to the success of all parties," Burch said in an e-mail response to questions. "Doctors and staff frequently comment to me on the improved relations between the Medical System and the School of Medicine and how the environment is refreshing and clearly helpful to us all."

Physicians, too, say the environment has improved.

"The current CEO of the medical system has established a very positive relationship with the School of Medicine and our faculty," said E. Albert Reece, acting president of the University of Maryland, Baltimore and dean of the University of Maryland medical school. "The results of this cooperative and collaborative spirit have been evident in the success of both organizations."

Under Notebaert, physicians had complained that relations between the medical system and the medical school had deteriorated to a point that jeopardized both institutions. Critics said the system was becoming too focused on profits and less on medicine and research. All doctors at the University of Maryland Medical Center, a teaching hospital that's part of the system, are faculty members at the university's medical school.

Burch acknowledged that Notebaert's compensation was large but said it was justified because of Notebaert's experience and accomplishments while working at the medical system. The system added Shore Health System and Chester River Health System to its roster of institutions under Notebaert's tenure.

Total profit reached $301 million during Notebaert's tenure, compared with $49 million during the prior five-years, according to the medical system. Revenue was $2.1 billion when Notebaert left in fiscal 2009, Burch said.

"Mr. Notebaert's salary reflected his many years of successful and significant experience at large, complex health systems and was well within the range of comparable executives," Burch said.

Still, the compensation caused enough pause among board members that they conducted an audit of the process and hired an outside consultant to investigate whether the severance was fair. The system compared Notebaert's compensation to that at 60 other similar-size hospitals, including MedStar Health in Columbia and Johns Hopkins Medicine, and found similar pay packages, Burch said.

When John P. McDaniel retired from his position of CEO at MedStar Health Inc. a few years ago, he received $7.1 million in compensation, including nearly $5 million for 20 years of retirement benefit payments. The next year he got an additional $3.9 million, mostly in retirement benefits.

Maryland's House Speaker, Michael E. Busch, who serves on the medical system board, said there is little legal recourse to try to recoup any of the compensation and that he thought the severance package was excessive given the dysfunction at the medical system when Notebaert left.

"I think a lot of the members of the board disagree with the payment, considering how he left," Busch said. "It's not like he left being hailed by the institution. He didn't leave under great circumstances."

Busch served as interim chairman of the board after Chairman John P. Erickson resigned amid the controversy. Busch said the compensation committee at the time left the rest of the board in the dark about Notebaert's payout.

The local union that represents hospital workers under the medical system also said the compensation was excessive but expressed hope for the new board and president.

"This decision reflects the failed priorities of the past at UMMS," John Reid, executive vice president of Local 1199 of the Service Employees International Union, said in an e-mail. "The board chair and the compensation committee that made the decision have been replaced, so that's a hopeful sign for the future. We're hopeful that the new board members at UMMS will work with us to ensure that quality patient care is the top priority so we can build a better a future for patients, caregivers and the community."

Members of the compensation committee declined to comment or did not return phone calls seeking comment for this article.

The medical system board now requires that the full executive committee, which has three times as many members as the compensation committee, participate in executive compensation decisions. All board members may attend executive committee meetings as long as there is no conflict of interest.

O'Malley, who appointed several of the new board members, said he has confidence in the new leadership.

"There were quite a few messes that had to be cleaned up over the last four years and leadership dysfunction at UMMS was one of them," O'Malley said in an e-mail. "There is now new leadership and a largely new board in place."

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