Ethics professor on Valley Children’s CEO pay: ‘Acknowledge mistakes and apologize’

When sjvsun.com published an article revealing that the CEO of Valley Children’s Hospital earned more than twice the compensation of the CEO of St. Jude, one of the largest and most well-known children’s hospitals in the nation, the response from the public and local community leaders was that of resounding displeasure.

Valley Children’s Hospital CEO Todd Suntrapak, according to IRS tax filings, took home more than $5.5 million in total compensation in 2022. Additionally, the hospital’s top executives took home nearly $30 million in combined pay, with five other executives raking in over $1 million that year.

Valley Children’s Hospital operates as a nonprofit hospital, exempt from income or property taxes at all levels.

Being a nonprofit, however, the hospital is required to source its income through borrowing or — primarily — through direct earned revenue.

In Valley Children’s case, more than 70% of the hospital’s patients are low-income, relying on government assistance programs to pay their medical bills.

The concept of nonprofit hospitals is an ethically ideal concept. Dr. Andrew Fiala, philosophy and ethics professor at Fresno State, said that if health care truly is a social priority, a for-profit model is misplaced in the health care industry.

“There is probably wide agreement that when people are suffering and in need, they ought to be cared for,” Fiala said. “A ‘nonprofit’ model would seem to capture the spirit of that kind of caring idea, i.e., that profit should not be the primary motive.”

With that in mind, Fiala added that a difficult ethical question is raised regarding compensation of health care employees. He said, in many instances, the compensation in “helping/caring professions” including clergy, health care workers and even soldiers, can be viewed as too high, adding that, while an odd idea in a capitalist, profit-driven economy, it bares the question he raised:

“Are healthcare workers (and hospitals and clinics) in it for the money — or are there other values at stake?”

This question, in a roundabout way, has been posed to the public by two sources typically at odds with one another behind the desk at Fresno City Council meetings. While their politics, policies and values often differ, both District 3 representative Miguel Arias and District 6 representative Garry Bredefeld agree the compensation for Suntrapak and other executives at Valley Children’s Hospital is too high.

“The truth is those who are responsible for our health care system have prioritized corporate profits — their personal pocketbooks — instead of serving those they were established to serve,” Arias said last month.

Both councilmembers and numerous community members have asked why a hospital that compensates its top level executives at such a high level continues to ask for donations, each year hosting highly publicized fundraisers and sponsoring large projects in the city including Valley Children’s Stadium — home of the Fresno State Bulldogs.

Fiala said that, as a nonprofit entity, donors want to know that the dollars they spend are going to a good cause.

“Members of the public are certainly entitled to ask critical questions of organizations that claim to benefit the public,” Fiala said. “One obvious ‘how’ issue has to do with where people choose to donate their money or spend their healthcare dollars.”

In the case of Valley Children’s Hospital, the exposure of its top-level executive salaries has led to local businesses and individuals, many of whom were staunch financial supporters of the hospital in the past, to question or even pull their support.

Both Bredefeld and Arias have committed to stop donating to the hospital and several local businesses, including Hedrick’s Chevrolet in Clovis, have publicly pulled their support for the hospital.

To put the monetary donations into direct context, the hospital generated 4.3% of its revenue from donations in 2022, according to the nonprofit’s 2022 IRS Form 990. In 2021, donations accounted for more than 10% of the hospitals’ revenue.

Despite ongoing criticism of executive pay and rising questions about quality of care, Children’s Hospital stands by its compensation package, stating that a national scale was used to determine salary.

“Executive compensation at Valley Children’s is determined through rigorous, independent review processes,” said Valley Children’s Healthcare Board of Trustees Chair Michael Hanson. “Our decisions are guided by industry standards and aimed at attracting and retaining top talent necessary to uphold our commitment to excellence in healthcare.”

Many, however, including Fiala believe that the continued back-and-forth, however, will only garner negative press for the nonprofit hospital. Fiala added that while superficial moves can be made to smooth over public reaction, long-run institution-level responses need to also be considered in order to regain public trust and approval.

“I think it is important for institutions to avoid becoming overly defensive when ethical scandals erupt,” Fiala said. “Much better to acknowledge mistakes and apologize.”