CEO pay for senior services

Gail Kass has led NewCourtland Senior Services Inc. through extraordinary changes in strategy, staying focused on aiding Philadelphia's poor elderly.

But where the executive also sets herself apart is in her compensation, according to an Inquirer survey of CEO pay in the Philadelphia region's tax-exempt senior services sector.

Kass' salary in 2013, the latest available, was $1.04 million, twice as much as that of the next-highest-paid executive, John Diffey, CEO of the much larger Kendal Corp., one of the nation's biggest operators of continuing-care retirement communities. Diffey's salary was $504,589.

In total compensation, the gap between Kass, president of NewCourtland, and the number-two executive in the survey was even greater.

Kass' compensation, including benefits, totaled $1.65 million, more than twice the $748,797 paid to Scott R. Stevenson, CEO and chief financial officer of Phoebe Ministries, an Allentown nonprofit with facilities for seniors in Bucks and Montgomery Counties. Phoebe's $109 million in revenue in 2013 was double NewCourtland's.

Kass' pay also topped that granted to leaders of the multibillion Pew Charitable Trusts and Temple University Health System.

In addition, Kass' retirement package was worth $6.3 million in mid-2014, not counting the $2.7 million advanced by her employer to pay federal income taxes. Kass, whose group provides affordable housing, skilled nursing home care, and other home and community services, is supposed to repay the advance as she collects from the fund.

David Bjork, a senior vice president at Integrated Health Strategies, a Minneapolis consulting firm, called Kass' retirement benefit "a lot of money even for a long-service CEO."

To Elizabeth H. Gemmill, chairman of NewCourtland's five-member board, Kass is worth every penny.

"Gail is a transformational leader with a vision whose compensation is commensurate with her accomplishments, duties, and responsibilities," Gemmill e-mailed in response to questions. "Her unwavering commitment and success in improving the lives of our seniors goes way beyond the role of a traditional CEO."

Kass' $1.65 million compensation in 2013 was also substantial compared with Philadelphia-area health-system CEOs.

Her compensation ranked sixth among health-system CEOs, falling between the $1.69 million paid to John J. Lynch III of Main Line Health and the $1.62 million for Larry Kaiser of the Temple health system.

Kass was an anomaly among senior-services executives, many of whom run operations with multiple services, including housing and many levels of medical care.

Only a few are independent nursing homes. For-profit firms owned 61 percent of the region's private-sector nursing home beds in June 2014. Most nonprofit homes are part of retirement communities.

On average, the top executives at 62 senior-services organizations in the Philadelphia region took home $220,113 in salary and $271,428 in total pay, the survey found.

At 21 area health systems, the median salary for CEOs was $675,002 and median total pay was $1.02 million.

Steven M. Altschuler, who recently retired from Children's Hospital of Philadelphia, topped the list, with $3.7 million in total pay.

Compensation at tax-exempt hospitals has been under the microscope since the 1990s, but senior-services executive pay has largely escaped notice. One local executive was made a bit uncomfortable by the attention to her pay.

"It's not about money. This is not why I do what I do," said Luanne B. Fisher, who has been CEO of Liberty Lutheran Services and a predecessor group since 1982. Liberty Lutheran, with nearly $70 million in revenue in fiscal 2014, offers senior housing, personal care, skilled nursing, rehabilitation, and other services.

Fisher's total compensation in 2013 was $429,371.

Her pay falls in the mid-range for CEOs at comparable groups, said the Rev. Fred Hopke, vice chairman of Liberty Lutheran's board. "She is the key employee."

Fisher's pay climbed 30 percent between 2008 and 2013, driven by performance and growth, including the group's 2012 expansion to State College, Pa., where Liberty Lutheran took over a bankrupt continuing-care community.

Nonprofit boards do not have an entirely free hand in setting executive compensation. The IRS can audit their decisions, though it is rare for the agency to crack down.

The organization is responsible for making sure the total compensation is reasonable, based on comparisons in the tax-exempt and taxable worlds, said Frank Giardini, a principal in Grant Thornton L.L.P.'s Philadelphia office, speaking generally.

How did Kass, a 69-year-old native New Yorker, land a pay package that ranks with those of highly paid health system CEOs?

The story, which Kass tells with relish, starts with the 1995 sale of the former Presbyterian Hospital in West Philadelphia to the University of Pennsylvania for $88 million.

"We sold the hospital, so now what we had was money and a mission," which was to follow the example of Christ as a healer to meet the greatest need, said Kass, who had been senior vice president for strategic planning at Presbyterian Hospital.

NewCourtland, based in Center City, sold six of its seven nursing homes in 2011 - it continues to run Germantown Home - and has shifted focus to community-based services and building affordable senior housing, Kass said.

Gemmill said Kass' annual compensation and her retirement package, established in 2007, were meant to make up for earlier shortfalls in pay and "to adequately compensate Gail for her very long and successful service, during which she designed and redesigned the company."

NewCourtland's revenue rose from about $10 million in 1995 to $160 million in 2011 before the nursing homes' sale. Revenue last year was $55 million.

Including $88 million from the sale of Presbyterian Hospital, NewCourtland entities had total assets of $294 million at the end of fiscal 2014, including $220 million of publicly traded investments.

Other long-tenured CEOs who have led their organizations through significant growth have not reached Kass' level of pay and benefits.

John Diffey, for example, has been president and CEO of Kendal, founded by Quakers in the early 1970s, since 1992. During his tenure, Kendal has grown to $1.2 billion in assets from $50 million and to $236 million in revenue from $20 million.

Since 2008, when the IRS expanded reporting requirements for tax-exempt groups, Kendal has awarded Diffey $570,519 in deferred compensation, the group's tax returns show.

For Kass, the comparable figure is $8.6 million.

"She has consistently held several positions at once - CEO, COO, and chief strategic planner - in order to get the job done efficiently and effectively," Gemmill said.

Among the recent considerations by Kass and her board was whether to become a grant-giving organization, given the funds the foundation has.

The idea was ultimately rejected, but invited a comparison to compensation at the Pew Charitable Trusts, which on June 30, 2014, had total assets of $6.2 billion and made $72 million in grants that year.

Pew CEO Rebecca W. Rimel's salary in 2013 was $782,344. Her total pay including a bonus and benefits was $1.09 million. Rimel, Pew's CEO since 1994, also has a supplemental retirement benefit that was worth $3.3 million in 2012, when she was vested in it.

That is $3 million less than the $6.3 million awaiting Kass, who runs a much smaller organization.

Instead of giving grants, Kass and her board decided to use their funds to build "several thousand" more units for low-income seniors in Northwest and Northeast Philadelphia. It now has 177 units, with 60 more expected to open this fall.

NewCourtland is unusual in that it has the money to do whatever it wants.

"The trick for me is to keep thinking of more ways and more ways and more ways to do good, to touch a greater number of people," Kass said.

215-854-4651@InqBrubaker