12 Modern Healthcare | August 19, 2019
F
OR SOME HOSPITAL CHAINS and health insur-
ers, CEO departures are anything but a clean break.
Employment agreements outline long, expensive
goodbyes that compensation experts say may be de-
signed in part to enforce noncompete agreements.
Investor-owned companies like HCA Healthcare and
health insurer Anthem have contracts in place with current
and recently departed CEOs outlining the terms of paid con-
sulting gigs they step into once their tenures as the top exec-
utive end. The contracts ensure leadership will continue to
be paid handsomely for scaled-back workloads.
Even though Joseph Swedish retired from Anthem’s top
spot in November 2017, the company still pays him $4.5 mil-
lion per year plus benefits to serve as a consultant and senior
adviser to the CEO, currently Gail Boudreaux. The contract,
which runs until May 2020, doesn’t spell out specific time
commitments, but says he’ll perform duties assigned to him
by the CEO “from time to time.” Anthem didn’t respond to
requests for an explanation about the agreement.
Former HCA CEO R. Milton Johnson, who stepped down
at the end of 2018, will make up to $3 million in
base pay, stock awards and bonus pay in calen-
dar 2019 plus benefits for his role as executive
adviser. He also served as HCA’s board chair-
man through April 26. The agreement requires
he work 20% of his average level of service in the
three years before stepping down.
It’s not clear how common it is for companies
to keep former CEOs on their payrolls as con-
sultants. Modern Healthcare’s analysis was lim-
ited to large publicly traded health systems and
insurers, but the practice could also take place
at private and not-for-profit healthcare compa-By Tara Bannow and Shelby LivingstonSome
healthcare
companies
keep their
exes close
THE TAKEAWAYSome investor-
owned health
insurers and hospital
chains pay former
CEOs to stay on
board as consultants.
Experts say the
practice could be to
enforce noncompete
agreements.nies, whose contracts would not be publicly available.
Such deals may be struck in part to add teeth to noncom-
pete agreements that preclude those CEOs from working at
similar companies in the years immediately following their
employment, said David McMillan, managing principal of
strategy and integration at consultancy PYA. Noncompete
agreements tend to be difficult to enforce, and adding pay
into the mix strengthens them, he said.
“This might be a nice workaround to say, ‘I have
you under contract and I’m compensating you.
As part of that contract, you can’t compete with
me,’ ” McMillan said. “In essence, I’ve just mone-
tized the noncompete and created more enforce-
ability so I don’t lose intellectual property.”
Several of the CEOs with consulting agree-
ments also have noncompete agreements. HCA’s
Johnson, for example, can’t engage in any work
that competes with HCA for two years after his
advisory role ends.
Dallas-based hospital chain Tenet Healthcare
Corp.’s employment agreement with its currentR. Milton Johnson | HCA Healthcare
DATE LEFT ROLE: Dec. 31, 2018
POST-CEO TITLE: Executive adviser (also
chairman through April 26)
START, END DATE: Dec. 31, 2018-
Dec. 31, 2019
TIME COMMITMENT: Maximum of 20% average level
service during 36-month period preceding effective date
BASE PAY IN NEW ROLE: $1.5 million/year
EQUITY AWARDS, BONUS PAY AND OTHER:
n $750,000 in stock
n Bonus of up to $750,
BENEFITS : Eligible for health benefits, pensionRon Rittenmeyer | Tenet Healthcare
Corp.
DATE LEFT ROLE: Current employment
agreement ends June 30, 2021
POST-CEO TITLE: Consultant
START, END DATE: June 30, 2021-June 30, 2023
TIME COMMITMENT: 8 days a month maximum
BASE PAY IN NEW ROLE: $750,000/year
EQUITY AWARDS, BONUS PAY AND OTHER: None
BENEFITS: Eligible for health benefits and other
customary benefits on same basis as other senior
executives.The perks and pay of