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The package received by Dr. Ed Murphy included a severance payment and deferred compensation.
Dr. Ed Murphy
Saturday, August 24, 2013
When Dr. Ed Murphy left Carilion Clinic as its president and CEO in 2011, his final compensation package amounted to $6.2 million, tax documents show.
Of that amount, $2,561,000 is listed as a severance payment in a report that Carilion filed this month with the Internal Revenue Service, which it is required to do as a nonprofit organization.
Carilion spokesman Eric Earnhart said that Murphy’s decision to leave was voluntary. However, he declined to say why the severance payment was made.
The reported total of $6,239,118 was not paid to Murphy in a lump sum, and more than one-third of the amount, $2,503,674, was actually deferred compensation from previous years.
As for the severance payment, Earnhart would only say that Murphy’s decision to leave was his own, citing an article published at the time in The Roanoke Times.
The March 2011 article quoted Murphy as saying that it was “a difficult decision for me,” but he had been with the Roanoke-based health care system for a long time and had accomplished most of his goals.
Murphy oversaw Carilion’s conversion to a clinic model, which provides multi-specialty physician services in addition to running eight hospitals in Southwest Virginia. With more than 10,000 employees, Carilion is the region’s largest private employer.
Although the word “severance” might imply a forced departure, there could be another explanation for the payment, said Daniel Borochoff, president of CharityWatch, which monitors nonprofit organizations.
“For regular people, they don’t get a severance unless they’re being forced out,” Borochoff said. “But I suspect this was something that was worked out in advance.”
For example, a previously arranged agreement might have called for Murphy to receive a specific amount of compensation if he decided to leave on a certain date in the future.
“Hopefully, this was all planned well in advance in hopes of retaining him at the hospital,” Borochoff said.
Murphy, who is chairman of Sound Physicians and works in the New York area for the doctor-led consulting and management firm, could not be reached Friday.
Touted by some as a visionary, Murphy was also the subject of controversy. As part of its conversion to a clinic, Carilion purchased or merged with a number of private health providers, fueling anger in both the medical field and the community at large that it was becoming a monopoly that would control the region’s health care.
Since Murphy’s departure — and the promotion of longtime Carilion official Nancy Agee to the top job — those concerns seem to have diminished.
“Nancy Agee is working hard to repair all of the damage created by Ed Murphy. I’d give the $6 million to her,” said Dr. Frank Cotter, an eye surgeon who clashed with Carilion in the past.
Agee’s base salary, bonuses and other compensation totaled $931,949 in 2011, according to tax documents filed with the IRS on Aug. 15. Her total compensation package was $1.48 million, but that included more than $500,000 in retirement and other deferred compensation.
The IRS requires nonprofits to report the present value of each executive’s accrued retirement benefit. As a result, officials with long tenures at Carilion, such as Agee, have larger compensation totals reported in tax documents than what they actually receive in a given year.
According to the documents, $2.7 million of Murphy’s reported compensation for 2011 was in retirement benefits through a pension restoration plan.
That benefit was accrued through Murphy’s 13 years of employment at Carilion. He became vested in those benefits on July 1, 2011, the day of his departure, and the sum became taxable.
Murphy also received $445,000 in base compensation and $348,245 in bonuses in 2011 for his final six months with the health care system.
Some critics have argued that it’s unseemly for a nonprofit hospital — with a charitable mission of providing medical treatment to those who can’t afford it — to pay its top officials so handsomely.
“Do be aware that hospitals and medical clinics tend to have the highest salaries in the nonprofit field, because they have to compete directly with the for-profit organizations,” Borochoff said.
And the $6.2 million final package for Murphy is not without precedent.
Tom Robertson, who retired as Carilion’s top executive in 2001, received $7.4 million nearly four years later. The second of two installments of deferred pay, the money was part of a no-compete clause that Robertson satisfied.
Asked if there might be more money for Murphy in the future, Earnhart wrote in an email that he was “not aware of any additional compensation related to Dr. Murphy’s tenure as CEO.”
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