MSNBC has published a list of the 10 highest paid CEOs in America for 2011. While going through the list, a couple of names really stuck out:
9. Ronald A. Williams
- Company: Aetna
- Total 2010 compensation: $57.8 million
Shares of Aetna, a major health insurer, were down 7 percent in 2010, underperforming the S&P 500 by a large margin. Williams’ pay was based on several factors, none of which was stock price. EPS, pre-tax operating margins and an increase in the dividend were the major measures of his performance, according to the board. The board can make the case, persuasively, that the insurance firm had a good year financially in 2010. The company’s EPS rose from $2.84 in 2009 to $4.18 last year, even though revenue fell slightly from $28.3 billion to $27.6 billion. Williams retired in 2011. The board gave Williams a relatively reasonable gift as he left, at least based on 2010 performance.
How many Americans could be insured with say only half this man’s salary? A lot!
When you first glance at those numbers, it doesn’t appear to be that great of a year for the insurer. I mean they ended up earning almost $750 million less than the year before, but there are other factors that go into that, like the number of American’s who are unemployed and uninsured and people having to take lower policies to save money.
But the healthcare bill, that many on the right said would hurt the insurance giants, appears to not be having that affect when they can pay salaries like this.
Coming in at second we have this one:
2. Joel F. Gemunder
- Company: Omnicare
- Total 2010 compensation: $98.3 million
Gemunder’s 2010 pay package cannot be justified based on shareholder returns. The firm’s stock was up only 2 percent for the period. It is not any wonder. The pharmaceutical provider’s EPS fell from $1.81 in 2009 to a loss of $0.91 in 2010. Revenue fell from $6.2 billion to $6.1 billion.
How much would we save on life saving drugs if it wasn’t for this obscene pay? Our country has the highest pharmaceutical prices in the world, yet the CEO of one of the biggest providers is raking it in. I wonder how much smaller his pay would have been if Congress actually let us do things like negotiate for lower drug prices on Medicare D or order our drugs from Canada, where they generally run 4-5 times cheaper than here in the U.S.?
Then we have the number one earner:
1. John H. Hammergren
- Company: McKesson
- Total 2010 compensation: $145.3 million
Health care giants McKesson’s shares were up 13 percent in 2010, underperforming the S&P 500. In that light, it is hard to imagine how the board of McKesson’s could have given Hammergen such an extraordinary award. McKesson’s revenue was $112 billion in 2010, up from $108.7 billion in 2009. EPS, however, fell to $4.62 to $4.29.
A lot of people haven’t heard of McKesson, which makes this number even more disturbing. I even remember when a similar story come out a few weeks ago and a lot on the left pointed to it as a problem in the U.S., which is true. Unfortunately though a lot of these people also don’t know what McKesson does and what helped give them such a profitable year.
McKesson is the nation’s number one provider of IT to the healthcare field. They provide things like billing software, network infrastructure and the biggie – electronic medical records (EMR) software. That last one is a biggie because it was something pushed by President Obama. And many on the right have blasted this plan, but they fail to realize that the plan wasn’t really President Obama’s, but rather came from President Bush. All President Obama did was keep the ball rolling.
EMR/EHR is very important. It means if you live in Ohio and fall ill in California the doctors there can instantly access your medical records. The problem though is the extreme costs associated with it and that is from companies like McKesson.
I have a friend who happens to also be a cardiologist. Last year he started his EMR transition, but it came at no small price. For his little practice he spent over $20,000 for the computers and software. The costs didn’t stop their either. Now that he has that software and hardware he has to pay someone to sit there and enter all the records into the system, adding tens of thousands more to the cost.
This is something I blame on the past and present President. They pushed out a plan, that while good, was ill-conceived. Not many companies were out there that had the technology to handle this kind of data, so companies like McKesson have profited greatly. Instead a little time should have been taken to develop a decent system and give companies a chance to develop upon it and offer it at a competitive price. Instead it turned into a system where only a couple of companies offer the software to handle the system and that has turned into a CEO receiving pay of almost $150 million last year.
So how much less would doctors have to charge if they didn’t have to pay outrageous prices to companies like McKesson to adhere to the law?