CEO Bea is Mercy's $8 million man

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Neil Johnson
Thursday, March 9, 2017

JANESVILLE—Federal tax filings show Mercy Health System CEO Javon Bea received a $2.75 million raise in 2014.

Bea was an $8 million man for Janesville-based Mercy in 2014, according to the most recent Internal Revenue Service filings available.

Bea's pay—to be exact, it was $8,043,977, according to a June 2015 IRS filing by Mercy —shot up after Mercy merged with Rockford Health System in 2014.

Bea's paycheck had been climbing steadily in the years prior. In 2013, Bea's total compensation totaled $5.25 million, according to IRS filings. That's compared to $3.6 million the Mercy CEO and president received in total compensation in 2009, according to a 2011 Gazette report.

Bea's most recently reported earnings were far and away the highest of any CEO or upper-level leader among all major not-for-profit hospitals and major not-for-profit health care groups serving southern Wisconsin, according to a Gazette analysis of IRS filings.

The second-highest pay for a nonprofit health care CEO with operations in Wisconsin was for SSM Health CEO William Thompson, who earned $5.5 million in 2014, according to IRS filings.

St. Louis-based SSM is the health care group that operates in an affiliation with the network of St. Mary's hospitals and Dean—providers that are all part of SSM Health St. Mary's Janesville Hospital and other St. Mary's affiliated hospitals in Wisconsin and Illinois.

Some national media outlets, including the Wall Street Journal, this week singled out Bea's most recently known pay as an outlier for leaders in nonprofit hospital groups. Bea's pay jumped out at Wall Street Journal reporters who had spent months analyzing CEO pay for thousands of nonprofit groups.

The report showed how CEO pay for nonprofits including health care groups has begun to grow at an accelerated clip in the last few years.

Bea personally defended his pay to The Gazette in 2011, telling a reporter then that his 2009 paycheck of $3.6 million had “no effect on health care costs,” and he pointed out that he'd put the nonprofit hospital group on a tremendous track of revenue growth.

Bea did not grant an interview with The Gazette to talk about his latest reported payday.

Rollie McClellan, longtime chairman of Mercy's board of directors, told The Gazette in an interview Wednesday that Bea's $8 million paycheck was the highest he's aware of for Bea compared to years prior to 2014.

He acknowledged Bea's salary is “eye-opening for sure.”

McClellan said he's not surprised national and local media outlets would want to scrutinize Bea's compensation, which according to the 2014 IRS filings was eight times more than the highest-paid neurosurgeon on Mercy's payroll.

McClellan defended Bea's earnings, telling The Gazette that Bea wears the hat of CEO and chief operating officer of five hospitals, and he's essentially the CEO and chief operating officer over 600 physicians, plus he's the CEO of Mercy's health insurance arm.   

He said other hospital groups of comparable size don't have CEOs who'd don the growing number of hats he says Bea wears.

“Most would have a CEO and a chief operating officer of all those entities. He's taken on all of that," McClellan said.

Mercy's board determines Bea's annual pay using a tax-exempt executive compensation consultant that Mercy keeps on retainer, McClellan said. The consultant meets monthly with a subcommittee of Mercy's board of directors to plan and recommend Bea's annual pay based on the complexities of Bea's responsibilities and the fruits of his work as CEO.

The consultant works with a Chicago tax attorney contracted by Mercy to ensure Bea is earning a “competitive” paycheck and not being overpaid based on laws that regulate how much not-for-profit hospital groups can pay their top officers, McClellan said.

The consultant method is a growing trend among nonprofit hospital groups.

McClellan said the consultant has indicated there are few if any comparable CEOs that undertake the number and scope of tasks he said Bea deals with.

McClellan said Bea's had a track record of delivering “extraordinary” results, and much of his pay is based on bonuses, which he said means it's compensation "at risk" every year, depending on the result of Bea's work.

Mercy's most recent IRS documents on file estimate Bea works 55 hours a week. McClellan said the estimate is nothing more than a number filled in on a tax form.  

“That's an under-representation of the time he puts in,” McClellan said. “I don't know when Javon is not at work, to tell you the truth. I don't know when he sleeps.”

McClellan's explanation is one that Mercy, and even Bea himself, have used before to justify Bea's level of pay.

Mercy has outgrown an image that many local residents might still hold of Mercy as a small-town, not-for-profit hospital in Janesville.

Mercy now has about $2.6 billion in gross revenue, Mercy reports. Under Bea's leadership over the last 30 years, Mercy has grown from a $33 million-a-year local hospital to a health care company with five hospitals in Wisconsin and Illinois and dozens of clinics that employ more than 600 doctors, Mercy reports.

A key portion of recent growth for Mercy came after Mercy's 2014 merger with Rockford Health System. Last year, the group as a whole, which Mercy now calls Mercyhealth, broke ground on a new hospital in Rockford.      

After that merger, Bea saw a significant increase in pay—an increase to the tune of $2.75 million dollars compared to the year prior, or a pay raise of 53 percent.

McClellan said part of Bea's pay increase was based on a “one-time” bonus he was awarded for successfully completing the 2014 merger with the Rockford hospital group—a merger that effectively made Bea also CEO of Rockford Health System.

The bump in pay also came as Bea played a lead role in successfully funding construction of a new, $500 million hospital in Rockford, a keynote achievement that came out of the merger, McClellan said.

When asked by The Gazette, Mercy declined to reveal Bea's current pay, saying it does not reveal tax information until it is publicly available.

When pressed, McClellan acknowledged that people could have a hard time wrapping their heads around the magnitude Bea's $8 million paycheck, regardless of what justification Mercy might offer.

“There's no question about it that people could feel that way if they're looking at it in terms of a totally local situation. But he could run any health care organization—profit or nonprofit. And he would be a handsome acquisition for somebody looking for a new CEO,” McClellan said. ”So, I don't care how people think about it.”

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