Hospital executives’ pay may soon be capped at $450,000 a year in Los Angeles if a measure proposed by a local union and approved by the City Council in June is passed in the March 2024 election. The move is part of a larger campaign by the Service Employees International Union-United Healthcare Workers West (SEIU-UHW) to limit compensation for hospital executives, and similar efforts are being made in San Diego, Chula Vista, and La Mesa.
According to recent studies, the union argues that a cap is necessary as hospital executives’ pay increases have far surpassed those of hourly workers, resulting in growing disparities. Critics, however, accuse the union of playing politics. The California Hospital Association, which represents the hospital industry, claims that the proposal will lead to talent drain and is an attempt to pressure hospitals. They argue that the measure will not reduce healthcare costs or improve patient care.
Legal and policy experts warn that the cap could face legal challenges and may be difficult to enforce. Furthermore, the measure does not specify how the funds saved from cutting executive salaries will be used to benefit lower-wage staff or patient care. Healthcare economist Glenn Melnick suggests that other policies may be more effective in improving healthcare delivery and lowering costs.
A study by the Lown Institute reveals that nonprofit hospital executives across the country earn, on average, eight times more than workers without advanced degrees. Some CEOs receive hourly pay that is 60 times higher than that of general workers. The proposed city ordinance aims to cap total executive compensation, including salary, benefits, housing allowances, and bonuses at private healthcare facilities.
The measure, however, has its flaws. It only targets private healthcare facilities and excludes highly paid public hospital executives. Additionally, the proposal is poorly written and raises concerns about ambiguity and potential legal issues. It is unclear who will be responsible for a $1,000-a-day fine, and employees with health benefits included in their compensation may face issues if they exceed the cap due to health-related expenses.
SEIU-UHW acknowledges that the interpretation of the measure is uncertain and that its legality may be questionable in some cases. Ted Seto, a business law professor, believes that while addressing income disparities is important, the approach taken by the union is flawed. He suggests that existing employment contracts may prevent the cap from being applied to current executives. The city attorney’s office claims that it cannot comment on the legality of the measure but states that the issue will be decided by voters.
SEIU has proposed similar caps on executive compensation multiple times in the past, facing opposition from the hospital industry each time. The union denies allegations that the current cap is a negotiating tactic and views it as an opportunity for voters to weigh in on important issues that affect them.
The cap on executive pay will be voted on in the same election as the union’s bill for a $25 minimum hourly wage for healthcare workers in Los Angeles. The hospital association has challenged the minimum wage bill, pushing it to the 2024 ballot for a referendum.
Members of SEIU-UHW, including Datosha Williams, highlight the importance of addressing executive compensation, especially in light of resistance to the $25 minimum wage for health workers. Williams, a Kaiser Permanente service representative, acknowledges that she makes more than $25 an hour but believes that many healthcare workers still struggle to make ends meet and support their families in California. The outcome of the election will determine whether these initiatives become law in Los Angeles.
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