Recent changes to policies and by-laws by the John C. Fremont Healthcare District Board of Directors are raising concerns from former board members that the governing body is relinquishing too much financial oversight to its CEO Stacey Kuzak.
Last month the board approved a new, four-year CEO contract for Kuzak with a base pay of $410,000 that with bonuses and retention pay could see her total compensation reach $476,000 a year.
At the same time, the JCF board changed how frequently it would review contracts, from monthly to quarterly, and raised the threshold for Kuzak to seek board approval before signing a contract from $25,000 to $100,000.
In an interview with the Mariposa Gazette, former board chair Wendy Ryder-Priola said a $100,000 spending authority is an unusually high threshold.
“The $25,000 limit is a pretty standard for critical access hospitals,” said Ryder-Priola.
Ryder-Priola said her concerns were not a reflection of her confidence in Kuzak. Rather, she said, it was about the JCF Board of Directors honoring its fiduciary role and its commitment to voters.
“That is taking too much financial oversight away from the board. And who knows, a few years from now, it may be a different CEO in there,” Ryder-Priola said.
Former board member Suzette Prue, a tenacious watchdog of the district’s finances, said it was “really concerning” that the board would be reviewing contracts on a quarterly basis instead of a monthly review.
“I’ve been watching districts in California for several decades now,” Prue told the board during its meeting last month.
“And I found over the years that the hospitals that go out of business are the ones where the board did not have proper oversight of the finances. So I’d like you to think about that,” Prue said.
Board Chair Rose Fluharty said the changes were “something we’ve been talking about for years.”
Fluharty said it was part of a broader assessment of who on the executive team had various signing authorities, with a drawn-out matrix for clarity.
“What we want to do is actually increase the oversight of the board. We didn’t know who was allowed to do what before: A wire transfer, a contract under $10,000, a contract not under $10,000,” Fluharty elaborated.
“It wasn’t enough information for our board,” she said.
Kuzak added that the matrix helps internally to understand who has spending authority.
“So it kind of helps everyone know where their threshold is or what we need to escalate, and then what is reported to the board and when,” Kuzak explained.
Ryder-Priola said she appreciates clarifying signing authority, but doesn’t understand how it increases board oversight, especially with two new board members.
“I think that everyone is too new to be able to let go of that type of control. It doesn’t make sense to me,” she said.
“Potentially three months have gone by where a contract is already in place. What are the terms of getting out of that contract if the board were to disagree? Sometimes there’s some pretty stiff penalties and potential for lawsuits.”
A remote CFO
Ryder-Priola, who left the board for health reasons after personality clashes with a fellow board member, said she is concerned that the new chief financial officer, Jennifer Mitchell, is a consultant working remotely from Alaska.
“I think we need to have a CFO who is a regular employee of the district and comes to work every day, just like everybody else in the finance department,” she said. “Not a consultant that is going to change what the last consultant did.”
CEO pay questioned
Kuzak’s new contract — and it nearly half-million dollar potential compensation — has raised eyebrows on social media.
On Facebook there were more than 140 comments on the Gazette story about her contract. Some praised Kuzak, but many others were critical of the high compensation for a financially struggling healthcare district.
Kuzak had been CEO since October and before her new contract, which begins, Aug. 1, she was making $380,000.
The board discussed the contract in closed session and has not provided the comparable salaries used to determine the salary range to the Mariposa Gazette.
CEO pay can vary dramatically among the 400 hospitals in California, where about half are nonprofits, one-third are for-profits and the rest are operated by counties, or like JCF, special health care districts.
The Legislative Analyst’s Office (LAO), the California Legislature’s non-partisan fiscal and policy advisor, recently proposed capping public and private hospital CEO pay at $450,000.
Public data from the California State Controller shows Kuzak’s salary may be extremely generous when compared to healthcare districts of similar size.
Among the CEO’s making less than Kuzak: Southern Humboldt Health/Jerold Phelps Community Hospital ($372,775), Eastern Plumas Health Care ($301,000), Plumas District Hospital ($386,000), Mayers Memorial ($350,045) and Mark Twain Medical Center in San Andreas ($268,174).
A notable exception is Mammoth Hospital, part of the Southern Mono Healthcare District, where the new CEO Melanie Van Winkle signed a contract in April with a salary of $539,685.
But Van Winkle has 17 years of experience as the hospital’s CFO and Mammoth Hospital is considered by many to be in exceptional financial health.
Baptism by fire
Ryder-Priola was surprised by Kuzak’s contract, which includes two months of paid time off.
“She’s making more money than the Southern Humboldt CEO who has been there for 20 years,” she said.
“For a 10 month CEO, it’s too much. And the annual retention bonus of $25,0000 is not something we, or other critical access hospitals, have ever done.”
Ryder-Priola said she imagines the other C-suite executives will now ask for salary increases.
But she wonders about the impact on the morale of nonunion employees, who earlier this year received only a 3 percent raise, plus their medical insurance premiums went up.
Ryder-Priola said her comments are not a criticism of Kuzak, and claimed she was the only board member to initially support putting Kuzak in the CEO position with her limited experience in management.
“I do have a lot of faith in Stacy. And I think she’s getting a baptism by fire,” she said.
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