Page 1/127. PRESENTED BY I. CALL TO ORDER/ROLL CALL Nandini Tandon, Chair Executive Compensation Committee. 4:30 p.m.

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1 AGENDA Executive Compensation Committee Meeting of the Board El Camino Hospital Thursday, September 19, 2013, 4:30 p.m. 6:00 p.m. Conference Room B, Ground Floor El Camino Hospital 2500 Grant Road, Mountain View, California and via teleconference: 28 Golden Hind Drive, Hilton Head, South Carolina Purpose: The purpose of the Executive Compensation Committee ( Compensation Committee ) is to assist the El Camino Hospital (ECH) Board of Directors ( Board ) in its responsibilities related to the Hospital s executive compensation philosophy and policies. The Compensation Committee shall advise the Board to meet all applicable legal and regulatory requirements as it relates to executive compensation. A copy of the agenda for the meeting will be posted and distributed at least seventy-two (72) hours prior to the meeting. In observance of the Americans with Disabilities Act, please notify us at forty-eight (48) hours prior to the meeting so that we may provide the agenda in alternative formats or to make disability-related modifications and accommodations. PRESENTED BY I. CALL TO ORDER/ROLL CALL Nandini Tandon, Chair Executive Compensation Committee 4:30 p.m. II. POTENTIAL CONFLICTS OF INTEREST DISCLOSURES Nandini Tandon, Chair Executive Compensation Committee 4:31-4:32 III. CONSENT CALENDAR All items listed on the Consent Calendar are considered to be routine matters or formal documents covering previous Committee instructions. One motion, a second and a vote may enact all of the items listed on the Consent Calendar. There will be no separate discussion of Consent Calendar items unless members of the Committee, Hospital staff or the public request discussion on a specific item at the beginning of the consideration of the Consent Calendar. Approval: Minutes of May 19, 2013 meeting Acceptance: Report on Committee s Achievement toward FY 2013 Goals ATTACHMENT 1 Nandini Tandon, Chair Executive Compensation Committee public comment motion required 4:32-4:33 Page 1/127

2 Agenda: El Camino Hospital Executive Compensation Committee of the Board September 19, 2013 Page 2 IV. PROPOSED CHANGES TO EXECUTIVE COMPENSATION COMMITTEE CHARTER ATTACHMENT 2 Nandini Tandon, Chair Executive Compensation Committee Kathryn Fisk, Interim Chief HR Officer public comment possible motion 4:33 4:38 V. RECONSIDERATION OF EXECUTIVECOMPENSATION COMMITTEE GOALS FOR FY14 ATTACHMENT 3 Kathryn Fisk, Interim Chief HR Officer public comment possible motion 4:38 4:47 VI. ADJOURN TO CLOSED SESSION The Committee will adjourn to a Closed Session, pursuant to the sections of the California codes noted below: 1. Conflict of Interest disclosures relating to items 2-9 on the Closed Session agenda pursuant To the Code provisions listed below. 2. Approval of Closed Session minutes of 5/19/13 of the Executive Compensation Committee motion required of the Board Govt. Code Section Report involving Gov t Code Sections for report and discussion on personnel matters -- FY13 Organizational Goals for Executive Performance Incentive Plan motion required 4. Report involving Gov t Code Sections for report and discussion on personnel matters -- Proposed Scoring of FY13 Individual goals for Executive Performance Incentive Plan motion required 5. Report involving Gov t Code Sections for report and discussion on personnel matters -- Proposed FY13 Executive Performance Incentive Plan Payouts motion required 6. Report involving Gov t Code Sections for report and discussion on personnel matters and Health and Safety Code Section 32106(b) for a report involving health care facility trade secrets -- Proposed Measurements for FY 14 Organizational and Executive s Individual Performance motion required Incentive Goals 7. Report involving Gov t Code Sections for report and discussion on personnel matters -- Discussion on Executive Benefits and Severance Practices possible motion 8. Report involving Gov t Code Sections for report and discussion on personnel matters -- Proposed Scoring of FY 13 CEO s Individual Goals for Performance Incentive Plan motion required 9. Report involving Gov t Code Sections for report and discussion on personnel matters -- Proposed FY 13 CEO Performance Incentive Plan Payout possible motion 10. Adjourn to Open Session Page 2/127

3 Agenda: El Camino Hospital Executive Compensation Committee of the Board September 19, 2013 Page 3 VII. RECONVENE OPEN SESSION Nandini Tandon, Chair 5:42 5:43 Executive Compensation Committee VIII. REPORTS ON GEOGRAPHIC DATA Mike Stewart information AND FORM 990 CA HOSPITALS Sullivan Cotter & Associates 5:43 5:57 ATTACHMENT 12 IX. CLOSING COMMENTS Nandini Tandon, Chair 5:57 5:59 Executive Compensation Committee X. ADJOURNMENT Nandini Tandon, Chair 6:00 p.m. Executive Compensation Committee PLEASE NOTE: The CLOSED SESSION is for Executive Compensation Committee Members and Staff or persons required for a particular agenda item only. Page 3/127

4 Separator Page Attachment 1a - Exec Comp Committee Minutes open draft.doc Page 6/127

5 EL CAMINO HOSPITAL BOARD OF DIRECTORS Executive Compensation Committee Meeting May 16, 2013 MINUTES The Executive Compensation Committee Meeting of the Board of Directors of El Camino Hospital (the Hospital ) was called to order by Nandini Tandon, Committee Chairperson, at 4:40 p.m. on Thursday, May 16, 2013 in the Conference Room B, Ground Floor, El Camino Hospital, 2500 Grant Road, Mountain View, California. Roll call was taken. The Committee Members present were Directors Nandini Tandon, David Reeder and Julia Miller and Members Teri Eyre, Jing Liao, Bob Miller, and Prasad Setty. POTENTIAL CONFLICT OF INTEREST DISCLOSURES Director Tandon asked if any Committee member or anyone in the audience believes that a Committee member may have a conflict of interest on any of the items on the agenda. No conflict was stated. CONSENT CALENDAR MINUTES OF MARCH 21, 2012 UPDATE ON SUCCESSION PLANNING/LEADERSHIP DEVELOPMENT Action: Upon motion duly made by Director Reeder and seconded by Director J. Miller, the Committee approved the minutes from the Committee meeting of March 21, 2012 and accepted the update with all members in favor. ADJOURN TO CLOSED SESSION Upon motion duly made by Director Reeder, seconded by Member B. Miller, and approved by a vote of all Members in favor, the Open Session of the meeting was adjourned to Closed Session at 4:48 p.m. pursuant to the Gov t Code Section for approval of closed session minutes and Gov t Code Sections and for discussion and reports on Executive Compensation Analysis, Executive Salary Ranges, Executive Base Salaries, CEO Compensation Analysis Report, CEO Salary Range, CEO Compensation, Proposed Organizational, CEO and executive individual goals, Committee s Governance Effectiveness in Achieving its Strategy, and FY 14 Committee Goals and Pacing Plan. CLOSED SESSION The Committee completed the Closed Session at 7:14 p.m. RECONVENE OPEN SESSION The Compensation Committee Meeting reconvened to Open Session at 7:15 p.m. CLOSED SESSION REPORTS: Director Tandon reported that the Committee approved the March 21, 2013 closed session minutes and FY 14 Base Salary Ranges for the executive team. In addition, the Committee determined recommendations they will make to the Board for approval including FY 14 executive base salaries, FY 14 CEO compensation, FY 14 performance incentive organizational and individual goals, and FY 14 Committee goals. Page 7/127

6 Minutes: El Camino Hospital Board of Directors Executive Compensation Committee Meeting of May 16, 2013 COMMITTEE CHARTER The Committee reviewed the Charter and suggested that the Board consider adding effective date, names of members, and signature to Charters. Action: Upon motion duly made by Director J. Miller and seconded by Member B. Miller, the Committee recommended no changes to the Charter. There being no further business, the meeting was adjourned at 7:20 p.m. Attest as to the approval of the foregoing minutes by the Board of Directors of El Camino Hospital: Nandini Tandon, Chair Executive Compensation Committee Patricia A. Einarson, MD, MBA Secretary/Treasurer ECH Board of Directors Page 8/127

7 Separator Page Attachment 1b - Cover FY 2013 Goal Achievement09013.pdf Page 9/127

8 Administration DATE: ECH ECC September 19, 2013 TO: Executive Compensation Committee, El Camino Hospital FROM: Julie Johnston, Director Compensation and Benefits SUBJECT: COMMITTEE ACTION: Report on Committee s Achievement toward FY 2013 Goals Motion Required Motion Required: To accept the report. Executive Summary: The Committee established seven goals at the beginning of FY Four additional goals were added during the first half of the fiscal year. The Committee met five times including onboarding of new members in August The Committee achieved most goals and metrics. Progress has been made on executive development and succession planning. The Board deferred decisions on executive base salaries and CEO compensation until October 9, Next Steps: The Committee will submit the report to the Board for acceptance. Work will continue on executive development and succession planning in FY 14. Page 10/127

9 Separator Page Attachment 1c ECC FY 13 GOAL Update doc Page 11/127

10 Executive Compensation Committee Goals FY 2013 Rev. 9/9/13 Status Update Purpose The purpose of the Executive Compensation Committee ( Compensation Committee ) is to assist the El Camino Hospital (ECH) Hospital Board of Directors ( Board ) in its responsibilities related to the Hospital s executive compensation philosophy and policies. The Compensation Committee shall ensure that the Board meets all applicable legal and regulatory requirements as it relates to executive compensation. Staff: Julie Johnston, Director HR Compensation and Benefits The Director HR Compensation and Benefits shall serve as the primary staff support to the Committee and is responsible for drafting the committee meeting agenda for the Committee Chair s consideration. The CEO, and other staff members as appropriate, may serve as a nonvoting liaison to the Committee and may attend meetings at the discretion of the Committee Chair. These individuals shall be recused when the Committee is reviewing his/her compensation. The CEO is an ex-officio of this Committee. Goals Timeline by Fiscal Year (Timeframe applies to when the Board approves the recommended action from the Committee, if applicable.) Metrics 1. Review and approve the executive compensation work plan and cycle/cadence for FY 2013 Q1 The Executive Compensation work plan is approved by the Committee Completed 9/ On-board new executive compensation committee members Q1 Orient new members to executive compensation and benefits policies, plans, and governance Completed 8/12 and 2/13. Page 12/127 1 P a g e

11 Goals Timeline by Fiscal Year (Timeframe applies to when the Board approves the recommended action from the Committee, if applicable.) Metrics 3. Develop contingency plan for Ballot Initiative in support or non-support of the voters. Q1 Contingency plan is reviewed and approved Reviewed 9/12. Board approved 10/ Recommend approval of FY 2012 organizational goal scoring, CEO individual score, and performance incentive payouts Q2 CEO reports results of own FY 12 individual goals in August Completed 8/12. CEO recommends FY 12 organizational score and performance incentive payouts to committee in September (for October board meeting) Committee reviewed 9/12. Board approved 11/12. Committee recommends FY 12 performance payout for CEO in September (for October board meeting) - Committee reviewed 9/12. Board approved 11/12. Board approves FY 12 organizational score, CEO and executive incentive payouts 10/10/12 Approved 11/ Complete CEO performance review and CEO 360 feedback/development plan in conjunction with Board Chairman Q2 (FY 12 review) Q3 (360) CEO completes self-review in August - - Completed 8/12. Committee chair obtains board feedback and completes FY 12 review in September - Completed 10/12. Independent consultant starts 360 feedback in Q Started 10/12. Committee and Board chairs conduct 360 feedback/developmental plan with CEO in Q Completed 2/13. Board and Committee received reports 3/13. Page 13/127 2 P a g e

12 Goals Timeline by Fiscal Year (Timeframe applies to when the Board approves the recommended action from the Committee, if applicable.) Metrics 6. Recommend approval of letter of rebuttable presumption of reasonableness. 7. Recommend executive benefit and severance plan design 8. Review and approve committee charter and goals Q3 Committee reviews letter and recommends Board accept letter Reviewed 11/12. Committee reviews consultant best practice/ governance Reviewed 11/12. Shared report with Board 12/12. Board accepts letter of rebuttable presumption at 2/13/13 meeting Completed 2/13. Q2 Sullivan Cotter reviews findings with committee in July Reviewed 8/13. Sullivan Cotter presents data and recommendations to Board at the September or October Study Sessions Data presented to Board with no changes recommended 10/12. Board approves recommendations by 11/12 Not applicable Q2 To be completed by December, 2012 Completed 9/12. Page 14/127 3 P a g e

13 Goals Timeline by Fiscal Year (Timeframe applies to when the Board approves the recommended action from the Committee, if applicable.) Metrics 9. Review and evaluate a plan for executive development and succession 10. Provide education to the new Committee members regarding governance, trends, and best practice in non-profit healthcare, and ECH executive compensation and benefit policies. Q4 Select Consultant and approve approach Approved approach and authorized Chief HR Officer to select consultant 3/13. Q3 NEW GOAL Design and implement an executive development plan Completed 5/13. Complete succession plan for selected executive positions including identifying key talent - In progress. Will update the Committee in November. Receive CEO report on development plans for key talent in succession plan - In progress. Will update Committee in September. Executive Compensation Compliance, Trends and Best Practices at non-profit healthcare organizations Completed 11/12. Report shared with Board 12/12. El Camino Hospital s policies regarding executive compensation and benefits Completed 12/12. Board approved policies 2/13. Executive Performance Goals and Measurements: Aligning design with strategy - Completed 3/13. Report shared with Board 4/13. Page 15/127 4 P a g e

14 Goals 11. Complete annual cycle of market review and determine salary ranges for FY 14. Recommend base salaries, organizational, and CEO individual goals for FY 14 for Board approval. Timeline by Fiscal Year (Timeframe applies to when the Board approves the recommended action from the Committee, if applicable.) Q4 NEW GOAL Metrics Board to take action on the following items: 1. FY 14 CEO base salary Recommendation presented 6/13 and 7/13. Decision deferred until 10/9/13r 2. FY 14 executive base salaries - Recommendation presented 6/13 and 7/13. Decision deferred until 10/9/13 3. FY 14 organizational goals Board approved 7/ FY 14 CEO individual goals - Board approved 7/ FY 14 Performance Incentive Plan design (if changes recommended) - no changes recommended Page 16/127 5 P a g e

15 Separator Page Attachment 2- Revised Committee Charter pdf Page 17/127

16 Administration DATE: ECH ECC September 19, 2013 TO: FROM: SUBJECT: COMMITTEE ACTION: Executive Compensation Committee, El Camino Hospital Nandini Tandon, Chair Executive Compensation Committee Proposed Changes to Executive Compensation Committee Charter Possible Motion Possible Motion: To approve Alternate 1, 2, or 3 with or without modifications. Executive Summary: All current members of the Executive Compensation Committee were reappointed to serve by the Board on July 10, Hospital Board members Dennis Chiu, JD and Jeffrey Davis, MD expressed an interest in joining the Committee. The Board appointed the two new members as alternate Committee members and instructed legal counsel to prepare revised Charter for the Committee s review. Committee Staff reviewed the Charter and sought advice on how to effectively work with alternate members. No more than four Hospital directors may attend any Committee meeting. Under the Charter, alternates will have full voting rights at each meeting they attend. They will be expected to review the agenda, materials, and minutes for all Committee meetings, whether in attendance or not. Next Steps: Committee to determine whether it will recommend any of the three alternatives with or without modifications to proposed changes. Committee s recommendation will be reviewed by the Governance Committee who will recommend changes to the Board for approval. NT/jj Page 18/127

17 Separator Page Attachment 2b Proposed Changes to Exec Comp Committee Charter FINAL.DOC Page 19/127

18 Executive Compensation Committee Charter Purpose The purpose of the Executive Compensation Committee ( Compensation Committee ) is to assist the El Camino Hospital (ECH) Hospital Board of Directors ( Board ) in its responsibilities related to the Hospital s executive compensation philosophy and policies. The Compensation Committee shall advise the Board to meet all applicable legal and regulatory requirements as it relates to executive compensation. Authority All governing authority for ECH resides with the Hospital Board except that which may be lawfully delegated to a specific Board committee. The Committee will report to the full Board at the next scheduled meeting any action or recommendation taken within the Committee s authority. In addition, the Committee has the authority to select, recommend engagement of, and supervise any consultant hired by the Board to advise the Board or Committee on executive compensation issues. Membership The Executive Compensation Committee shall be comprised of two (2) or more Hospital Board members. The Committee may also include 2-4 external (non-director) members with knowledge of executive compensation practices, executive leadership or corporate human resource management. Alternative 1. The Hospital Board may designate up to two Hospital Board members to serve as alternate Committee members. Alternate Committee members shall serve as full members of the Committee when their attendance is permitted, as follows. The alternate Committee members may attend any Committee meeting so long as the number of Hospital Board members who are also serving on the Committee in attendance (including the alternate Committee members attending) is less than five. Should only one of the two alternate Committee members be permitted to attend a particular meeting, and if both alternate Committee members intend to attend the meeting, then the first time that this occurs, the Committee Chair will draw lots to determine which alternate Committee member shall be permitted to attend; thereafter, the alternate Committee members shall rotate their attendance in any such situation. Alternative 2. [Change five to four in the preceding sentence.] Alternative 3. The Hospital Board may designate up to two Hospital Board members to serve as alternate Committee members. Alternate Committee members shall serve as full members of the Committee when their attendance is permitted. If there are two alternates, meeting attendance will rotate with assignments made by the Committee Chair upon appointment or reappointment. If an alternate or Hospital Board member is unable to attend any Page 20/127 Page 1 of 4

19 Committee meeting, the unassigned alternate Committee member may attend any Committee meeting so long as the number of Hospital Board members in attendance is less than five. Compensation consultants may be retained as appropriate and participate as directed. The Chair of the Committee shall be a Hospital Board director. All members of the Committee must be independent directors with no conflict of interest regarding compensation or benefits for the executives whose compensation is reviewed and recommended by the Committee. Should there be a potential conflict, the determination regarding independence shall follow the criteria approved by the Board and as per the Independent Director Policy. Staff Support and Participation The CHRO shall serve as the primary staff support to the Committee and is responsible for drafting the committee meeting agenda for the Committee Chair s consideration. The CEO, and other staff members as appropriate, may serve as a non-voting liaison to the Committee and may attend meetings at the discretion of the Committee Chair. These individuals shall be recused when the Committee is reviewing his/her compensation. General Responsibilities The Committee is responsible for recommending to the full Board policies, processes and procedures related to executive compensation philosophy, operating performance against standards, and succession planning. Specific Duties The specific duties of the Executive Compensation Committee include the following: A. Executive Compensation Develop a compensation philosophy that clearly explains the guiding principles on which executive pay decisions are based. Recommend the philosophy for approval by the Board. Develop executive compensation policies to be approved by the Board. Review and maintain an executive compensation and benefit program consistent with the executive compensation policies, which have been approved by the Board. Recommend any material changes in the program for approval by the Board. Review the CEO s salary range, performance incentive program, benefits, perquisites, and contractual terms. Recommend to the Board any salary changes and/or any performance incentive payouts based on the Committee s evaluation of the CEO s performance. Page 21/127 Page 2 of 4

20 Review the CEO s recommendations regarding salary and performance incentive payouts for the upcoming year for the executives whose compensation is subject to review by the Committee based on the CEO and Committee s evaluation of the executive s performance. Recommend to the Board any salary changes and/or any performance incentive payouts based on the Committee and CEO s evaluation of the executive s performance. Periodically evaluate the executive compensation program, including the charter, policies, and philosophy on which it is based, to assess its effectiveness in meeting the Hospital s needs for recruiting, retaining, developing, and motivating qualified leaders. Periodically review the total value, cost and reasonableness of severance and benefits for executives. Periodically review business travel and entertainment expenses to determine whether any such expenses should be treated as additional compensation for executives. Annually review and present for Board acceptance the letter of rebuttable presumption of reasonableness. Review market analysis and recommendation of the Committee s independent executive compensation consultant. Establish salary ranges for each executive and recommend placement in the range for the CEO and those executives eligible for the plan to the Board. B. Performance Goals and Evaluation Review and provide input into the CEO s recommendations regarding annual organization goals and measures used in the Executive Performance Incentive Plan. Recommend organizational performance incentive goals for approval by the Board. Provide input into establishing the CEO s annual individual performance incentive goals to execute the Hospital s strategic plan. Recommend the CEO s individual annual goals and measures for approval by the Board. Provide input into establishing the executive team s annual performance incentive goals to execute the Hospital s strategic plan. Recommend the annual goals and measures for approval by the Board. Develop the CEO evaluation process in collaboration with the CEO. Conduct an annual appraisal of the CEO s performance with input from the Board. C. Executive Succession and Development Review annually the CEO s own succession plan, including a leadership and professional development plan based on the previous year s performance evaluation. Page 22/127 Page 3 of 4

21 Review annually the CEO s succession plan for the executive team members, which shall include the process by which potential executives are identified and developed. Committee Effectiveness The Committee is responsible for establishing its annual goals, objectives and workplan in alignment with the Board and Hospital s strategic goals. The Committee shall be focused on continuous improvement with regard to its processes, procedures, materials, and meetings, and other functions to enhance its contribution to the full Board. Meetings and Minutes The Committee shall meet at least once per quarter. The Committee Chair shall determine the frequency of meetings based on the Committee s annual goals and work plan. Minutes shall be kept by the assigned staff and shall be delivered to all members of the Committee when the agenda for the subsequent meeting is delivered. The approved minutes shall be forwarded to the Board for review and approval. Meetings and actions of all committees of the Board shall be governed by, and held and taken in accordance with, the provisions of Article VI of the Bylaws, concerning meetings and actions of directors. Special meetings of committees may also be called by resolution of the Board and the Committee Chair. Notice of any special meetings of the Committee requires a 24 hour notice. Appointment and Terms The Board shall appoint the members of the Committee. In accord with the nomination/selection and reappointment process established by the Board, the Governance Committee shall recommend to the Board the appointment or reappointment of external (non-director) members to serve on the Committee. The Committee membership term is for one year, renewable annually. Page 23/127 Page 4 of 4

22 Separator Page Attachment 3 - Revised FY 14 Commitee Goals pdf Page 24/127

23 Administration DATE: ECH ECC September 19, 2013 TO: Executive Compensation Committee, El Camino Hospital FROM: Kathryn Fisk, interim Chief HR Officer SUBJECT: COMMITTEE ACTION: Reconsideration of Executive Compensation Committee Goals for FY 2014 Possible Motion Possible Motion: To approve metric changes to the Committee s Goals for FY Executive Summary: The Governance Committee reviewed the proposed goals of all five Advisory Committees on July 2, 2013 and recommended that the Board approve the draft goals with some revisions for the Executive Compensation Committee to consider. The Governance Committee requested clearer metrics for goals #5 and #7. We have drafted proposed metrics for discussion and review. Next Steps: Committee to determine whether it will recommend proposed changes or modifications to proposed changes. Committee s recommendation will be reviewed by the Governance Committee who will recommend changes to the Board for approval. KF/jj Page 25/127

24 Separator Page Attachment 3b Proposed Revisions to FY 14 Committee Goals doc Page 26/127

25 Purpose Executive Compensation Committee Goals FY 2014 Confidential - Draft 9/13/13 The purpose of the Executive Compensation Committee ( Compensation Committee ) is to assist the El Camino Hospital (ECH) Hospital Board of Directors ( Board ) in its responsibilities related to the Hospital s executive compensation philosophy and policies. The Compensation Committee shall ensure that the Board meets all applicable legal and regulatory requirements as it relates to executive compensation. Staff: Kathryn Fisk, Interim Chief Human Resources Officer and Julie Johnston, Director HR Compensation and Benefits The Chief HR Officer and Director HR Compensation and Benefits shall serve as the primary staff support to the Committee and is responsible for drafting the committee meeting agenda for the Committee Chair s consideration. The CEO, and other staff members as appropriate, may serve as a non-voting liaison to the Committee and may attend meetings at the discretion of the Committee Chair. These individuals shall be recused when the Committee is reviewing his/her compensation. The CEO is an ex-officio of this Committee. Goals 1. Recommend approval of FY 2013 organizational goal scoring, CEO individual score, and performance incentive payouts 2. Recommend acceptance of the letter of rebuttable presumption of reasonableness Timeline by Fiscal Year (Timeframe applies to when the Board approves the recommended action from the Committee, if applicable.) Q2 Q2 Metrics Board approves scoring and payouts following acceptance of financial audit Board accepts recommendation Page 27/127 1 P a g e

26 Goals 3. Recommend executive benefit and severance plan design and eligibility for CY 2014 Timeline by Fiscal Year (Timeframe applies to when the Board approves the recommended action from the Committee, if applicable.) Q2 Metrics If changes recommended, Board takes action on design and/or eligibility changes. 4. Review Executive Compensation Philosophy, compensation and benefit policies. 5. Review progress on executive leadership development and succession planning for the CEO and executive team. 6. Complete annual cycle including market review and determine salary ranges for FY 15 and recommendations for FY 15 organizational and executive goals. Q3 Q4 Q4 Review approach to market data, peer group, cost of labor, and core principles upon which decisions, philosophy, and design structures are made. Q1 - Review summary of leadership development plans for 6 executives. Q2 - Review reports that 1) identify successors to CEO and executive team to serve on interim basis and 2) identify gaps and identify potential successors, Q3 - Review general leadership development plan for potential successors. Q4 - Review summary of individualized development plans for potential successors. Recommend base salaries, organizational, and CEO individual goals for FY 15 for Board approval. Page 28/127 2 P a g e

27 Goals 7. Recommend Executive Retention Strategies Timeline by Fiscal Year (Timeframe applies to when the Board approves the recommended action from the Committee, if applicable.) Q4 Metrics Q1 /Q2 Discuss executive benefits and severance practices Q3 Determine if changes to executive benefits and severance packages will be made to the Board Q2 and 3 - Discuss market practices and review possible strategies to retain executives long-term including deferred compensation plans Q4 along with recommendation on Executive Compensation Philosophy for FY 15, recommend strategies for Board approval to retain key executive talent Page 29/127 3 P a g e

28 Separator Page Attachment 12 - Reports on Geographic Data and Form 990 CA Hospitals.pdf Page 30/127

29 Administration DATE: ECH ECC September 19, 2013 TO: Executive Compensation Committee, El Camino Hospital FROM: Julie Johnston, Director Compensation and Benefits SUBJECT: COMMITTEE ACTION: Reports on Geographic Data and Form 990 CA Hospitals For Information Executive Summary: Sullivan Cotter and Associates prepared these reports as requested by the Committee and the Board of Directors. The Geographic Data report shows the cost of living differential at each hospital in the comparator group as a percentage of national data as reported by Economic Research Institute (ERI). The average was 102.5% compared to Mountain View, CA differential of 125.3%. The Form 990 report shows compensation data for Chief Executive Officers of California hospitals and healthcare systems for those non-profit organizations that file the form. Next Steps: The Form 990 report will be shared with the Hospital Board. Page 31/127

30 Separator Page Attachment 12b ECH Market Data Findings letter (3).pdf Page 32/127

31 CONFIDENTIAL July 9, 2013 Dr. Nandini Tandon Chair, Executive Compensation Committee El Camino Hospital 2500 Grant Road Mountain View, CA ADDITIONAL INFORMATION REGARDING MARKET COMPENSATION DATA Dear Dr. Tandon: At its May 16, 2013 meeting, the Executive Compensation Committee (Committee) asked for additional information regarding the market data used in the compensation analysis provided by Sullivan, Cotter and Associates, Inc. (SullivanCotter). This letter presents the highlights of SullivanCotter s additional analysis and specifically addresses two key issues raised by the Committee: The appropriateness of the peer group used to benchmark compensation levels. The appropriateness of the 20% geographical differential applied to national data to account for the higher cost of living and cost of labor in Silicon Valley. Background In May 2012, SullivanCotter presented its 2012 Executive Total Compensation Review to the Committee. SullivanCotter independently determined the most appropriate comparator group, based on standard techniques, and reviewed the responsibilities of each position. SullivanCotter also independently developed the geographic adjustment factor, arriving at the same 20% adjustment that had been used by El Camino Hospital for several years. As requested by El Camino Hospital, SullivanCotter s 2013 review, presented to the Committee in May 2013, trended forward the 2012 market data. As such, the methodology used in 2013 was consistent with that used in 2012, and agreed to by the Committee at that time. The approach of trending data forward is used by many health care organizations nationally, although some organizations perform a full analysis each year. SullivanCotter is scheduled to complete a full review in The Committee expressed a desire to further understand the market data, particularly whether the health systems used in the comparator groups were sufficiently similar to El Camino Hospital and whether the 20% geographic differential was appropriate. Peer Group Approach SullivanCotter s 2012 analysis included market data compiled primarily from three industry-leading surveys which were published in Our experience is that most health care consulting firms use the same survey sources. Both tabular and regression data were used; this is a common technique in the market: Tabular data reflect actual pay levels from a range of health systems. SullivanCotter s 2011 survey used a group of 89 health systems with revenue ranging from $400M to $900M. The median revenue was almost exactly the same as El Camino Hospital s net revenue of $635M. Page 33/127

32 Dr. Nandini Tandon July 9, 2013 Page 2 Regression data reflect a statistical approximation of the market data using actual revenue levels. The statistical model is also based on actual market data. SullivanCotter has reviewed the impact of constraining the peer group to a single set of health systems within a smaller revenue range, with the aim of including only those health systems that are most similar to El Camino Hospital in terms of size. This analysis used updated 2013 market data, including 47 health systems with a net revenue range of $500M to $750M (median revenue of $640M is similar to El Camino Hospital s net revenue). The results were similar to the market data already collected (i.e., generally within 5%). As such, the Committee should feel comfortable that the current market data are appropriate to use when determining FY2014 salaries. The use of multiple survey sources and a slightly wider revenue range leads to a more robust data set, which is particularly important for those Vice President positions that are not found in all organizations, and more stability in the market data from year to year. We note that the Committee used a different consultant prior to We understand that they also used multiple survey sources, including a specific peer group of national health systems from their database, but with a significantly wider revenue range: from half to twice El Camino Hospital s net revenue (i.e., $315M to $1.5B). Geographic Differential El Camino Hospital has historically used national market data and applied a geographic differential to reflect the higher cost of living and cost of labor in Silicon Valley. National market data are significantly more robust than regional data (i.e., more data points), resulting in more stable compensation information from year to year. Further, even if there were sufficient data points, regional data (e.g., Northern California) may not be suitable given the differences in cost of living and cost of labor across the region. In 2012, we determined the 20% differential based on two approaches: Cost of labor data, as measured by the Economic Research Institute (ERI): Cost of labor data reflects the relative pay levels for similar jobs in different locations, and is generally consistent within a small geographic area (e.g., cost of labor data around Silicon Valley are similar to that for Mountain View). We also collected cost of living data, but this is impacted by the cost of real estate which can vary significantly within a small geographic area. As such, it is not appropriate to use cost of living data to adjust compensation levels. The difference between national and regional compensation data (using common positions with adequate data). Our updated analysis, using 2013 data, indicated that the median cost of labor index for 91 organizations in the regular survey cut applicable to El Camino Hospital (i.e., $400M to $900M) was 103.6% and the average was 102.5%, relative to 125.3% for El Camino Hospital (Mountain View, CA). 64 of these organizations were in areas between 95% and 105% of the national average, and only eight organizations were more than 10% higher than the national average. These percentages reflect the cost of labor relative to national averages. Detailed information is provided in the Appendix. The difference between the index for El Camino Hospital and the organizations in the survey is approximately 20%, supporting the 20% geographic adjustment factor. We note that ERI data are representative of the location, but are not an exact measure of wage differences for health systems specifically. As such, there is no right answer and it is appropriate to round the adjustment (e.g., Page 34/127

33 Dr. Nandini Tandon July 9, 2013 Page 3 to the nearest 5%). We note that the Committee s prior consultant also used a 20% geographic adjustment, with validation each year based on ERI cost of labor data. The comparison between national and regional data also supported the 20% adjustment factor, although the small sample size for regional data meant that results were not uniform among all positions. In this analysis, SullivanCotter relied on data that we had compiled for a third-party organization and, since we do not own the rights to the data, we cannot provide the detailed results of this analysis. Conclusion SullivanCotter recommends that the Committee continue to use the market data presented in May 2013 for purposes of setting and approving compensation for FY2014. The above analysis supports the use of these market data. Since a full review is anticipated to be conducted in 2014, we recommend reviewing and, if needed, adjusting the methodology at that time. We hope this letter meets the needs of El Camino Hospital s Executive Compensation Committee in reviewing the market data. Sincerely, Michael J. Stewart Managing Director Stuart E. Harvey, FSA, EA, MAAA Principal and Actuary Attachment Page 35/127

34 Cost of Labor and Cost of Living Data from the Economic Research Institute (Health Systems with Net Revenue of $400M to $900M) Appendix System Location Differential as a Percentage of National 1 Org City State Cost of Labor 2 Cost of Living Providence Health & Services AK Region Anchorage AK 105.5% 114.2% Infirmary Health System Mobile AL 100.6% 100.9% John C. Lincoln Health Network Phoenix AZ 100.9% 102.2% Maricopa Integrated Health System Phoenix AZ 100.9% 102.2% Scottsdale Healthcare Scottsdale AZ 101.0% 102.5% Carondelet Health Network Tucson AZ 98.1% 100.9% TMC HealthCare Tucson AZ 98.1% 100.9% El Camino Hospital Mountain View CA 125.3% 117.5% UCSD Medical Center San Diego CA 109.4% 118.4% Poudre Valley Health System Fort Collins CO 103.8% 99.6% Morton Plant Mease Health Care Clearwater FL 104.3% 96.4% Nemours Foundation Jacksonville FL 104.3% 100.1% Saint Vincent's HealthCare Jacksonville FL 104.3% 100.1% Lakeland Regional Health System Lakeland FL 104.0% 95.9% Saint Joseph's Baptist Health Care Tampa FL 103.8% 99.2% Shriners International Headquarters Tampa FL 103.8% 99.2% Phoebe Putney Health System Albany GA 98.8% 100.8% Grady Health System Atlanta GA 104.4% 105.8% Georgia Health Sciences Health System Augusta GA 100.4% 98.1% Northeast Georgia Health System Gainesville GA 97.5% 98.6% Gwinnett Hospital System Lawrenceville GA 102.9% 99.3% Memorial Health Savannah GA 99.1% 100.7% Hawaii Health Systems Corporation Honolulu HI 101.8% 130.7% The Queen's Health System Honolulu HI 101.8% 130.7% Genesis Health System Davenport IA 99.4% 102.4% Northwest Community Healthcare Arlington Heights IL 104.4% 106.8% Sinai Health System Chicago IL 106.4% 115.9% Covenant Ministries of Benevolence Chicago IL 106.4% 115.9% Alexian Brothers Health System Elk Grove Village IL 104.6% 103.2% Rockford Health System Rockford IL 102.0% 98.0% SwedishAmerican Health System Rockford IL 102.0% 98.0% Memorial Health System Springfield IL 97.3% 98.5% Cadence Health Winfield IL 104.2% 105.6% Parkview Health Fort Wayne IN 96.7% 96.2% Memorial Hospital & Health System South Bend IN 99.7% 97.3% Louisiana Children's Medical Center New Orleans LA 103.4% 103.8% CHRISTUS Health Louisiana Shreveport LA 95.7% 101.0% Willis-Knighton Health System Shreveport LA 95.7% 101.0% Northeast Health System Beverly MA 107.7% 109.8% Southcoast Health System New Bedford MA 104.4% 107.6% Allegiance Health Jackson MI 100.9% 95.3% Bronson Healthcare Group Kalamazoo MI 99.2% 99.1% MidMichigan Health Midland MI 99.4% 102.5% Lakeland HealthCare St. Joseph MI 104.8% 99.1% CentraCare Health System St. Cloud MN 98.4% 102.5% HealthEast Care System St. Paul MN 107.8% 105.8% Truman Medical Centers Kansas City MO 101.2% 102.9% North Mississippi Health Services Tupelo MS 93.3% 98.0% Cape Fear Valley Health System Fayetteville NC 98.1% 103.6% CaroMont Health Gastonia NC 106.6% 98.8% Cone Health Greensboro NC 102.2% 101.9% WakeMed Health & Hospitals Raleigh NC 105.5% 102.7% New Hanover Health Network Wilmington NC 100.9% 103.8% Alegent Health Omaha NE 99.5% 101.8% Methodist Health System Omaha NE 99.5% 101.8% Kennedy Health System Cherry Hill NJ 107.8% 112.2% JFK Health System Edison NJ 115.5% 109.9% Saint Peter's Healthcare System New Brunswick NJ 118.3% 113.5% Saint Joseph's Healthcare System Paterson NJ 118.3% 105.3% Capital Health Trenton NJ 112.8% 110.8% Albany Medical Center Albany NY 103.6% 106.6% CenterLight Health System Bronx NY 118.3% 113.1% Metropolitan Jewish Health System Brooklyn NY 118.3% 138.2% HealthQuest LaGrangeville NY 108.2% 108.8% Hospital for Special Surgery New York NY 121.8% 153.4% Rochester General Health System Rochester NY 106.8% 104.8% Page 36/127

35 Cost of Labor and Cost of Living Data from the Economic Research Institute (Health Systems with Net Revenue of $400M to $900M) Appendix System Location Differential as a Percentage of National 1 Org City State Cost of Labor 2 Cost of Living Akron General Health System Akron OH 102.5% 103.0% The Christ Hospital Cincinnati OH 102.3% 103.9% The MetroHealth System Cleveland OH 102.4% 104.3% Mercy Toledo OH 99.8% 102.3% Samaritan Health Services Corvallis OR 101.6% 104.4% Pinnacle Health System Harrisburg PA 97.4% 100.2% Einstein Healthcare Network Philadelphia PA 105.8% 113.3% Guthrie Health Sayre PA 100.2% 97.7% Susquehanna Health Williamsport PA 96.2% 99.4% Care New England Providence RI 104.4% 109.0% McLeod Health Florence SC 98.4% 99.4% West Tennessee Healthcare Jackson TN 96.6% 92.4% CHRISTUS Spohn Health System Corpus Christi TX 101.3% 93.3% CHRISTUS Health Gulf Coast & Southeast Texas Houston TX 109.2% 97.0% UT Health Science Center at Houston Houston TX 109.2% 97.0% Community Hospital Corporation Plano TX 108.8% 99.9% CHRISTUS Santa Rosa Health System San Antonio TX 101.2% 93.9% ETMC Regional Healthcare System Tyler TX 102.7% 96.9% Trinity Mother Frances Hospitals and Clinics Tyler TX 102.7% 96.9% Valley Health Winchester VA 101.7% 99.2% Gundersen Lutheran La Crosse WI 97.7% 101.4% Children's Hospital and Health System Milwaukee WI 105.3% 104.5% ProHealth Care Waukesha WI 105.7% 98.2% Aspirus Wausau WI 99.9% 99.5% Average 3 : 103.6% 104.2% 1 For each location, a benchmark salary of $300,000 was used for the analysis. 2 Indicates +/- 5% salary differential. 2 Indicates +/- 10% salary differential. 3 Summary statistics include one organization that wishes to remain anonymous. Median 3 : 102.5% 101.9% Count 3 : 91 Page 37/127

36 Separator Page Attachment 12c Form 990s California CEO Data 8_28_2013.pdf Page 38/127

37 El Camino Hospital IRS Form 990 Analysis (Unaged Data; Compensation Data Reported in $000) Chief Executive Officer-California IRS Form 990 Data - Unaged Compensation Data in Thousands Form 990 Line 12 Revenue (in Millions) Bed size* Name Position Organization City State FY Year Ending W-2 Year Ending Base Compensation Other Compensation Total Cash Compensation Non-taxable Benefits Total Taxable Compensation Compensation Information for FY2012 (from SullivanCotter s May 2013 report) El Camino Hospital Mountain View CA $ Tomi Ryba President & Chief Executive Officer $714.5 $137.8 $852.3 $50.0 $902.3 $158.7 $28.1 $1, California Peer Organizations Sutter Health Sacramento CA 12/31/ /31/2011 $ ,184 Patrick Fry President/CEO $1,556.0 $1,472.3 $3,028.3 $16.9 $3,045.2 $2,163.9 $32.2 $5,241.3 $1,637.7 Catholic Healthcare West/Dignity Health San Francisco CA 6/30/ /31/2010 $9, ,980 Lloyd H. Dean President/CEO (1) $1,322.0 $2,050.3 $3,372.4 $535.0 $3,907.3 $1,154.4 $75.2 $5,136.9 $509.9 Sutter Health Sacramento CA 12/31/ /31/2011 $ ,184 Ed Berdick Regional President, East Bay $842.7 $549.1 $1,391.8 $17.3 $1,409.1 $828.6 $19.7 $2,257.4 $549.1 Sutter Health Sacramento CA 12/31/ /31/2011 $ ,184 Sarah Krevans Regional President, SAC Sierra Region $865.5 $633.4 $1,498.9 $11.3 $1,510.2 $716.2 $22.5 $2,248.9 $706.2 Sutter Health Sacramento CA 12/31/ /31/2011 $ ,184 Martin Brotman Regional President, West Bay $956.1 $407.0 $1,363.1 $11.7 $1,374.9 $694.4 $19.0 $2,088.2 $407.0 Adventist Health System-West Roseville CA 12/31/ /31/2011 $ ,152 Robert Carmen President $934.3 $267.2 $1,201.5 $547.7 $1,749.3 $18.2 $21.7 $1,789.1 $424.5 Sutter Health Sacramento CA 12/31/ /31/2011 $ ,184 Jeff Gerard Regional President, Peninsula Costal $658.7 $435.0 $1,093.7 $5.3 $1,099.0 $556.5 $19.6 $1,675.0 $456.1 Santa Barbara Cottage Hospital Santa Barbara CA 12/31/ /31/2011 $ Ronald C. Werft Chief Executive Officer (2) $725.5 $249.3 $974.8 $11.1 $985.9 $604.1 $10.3 $1, Sutter Health Sacramento CA 12/31/ /31/2011 $ ,184 David Benn Regional President, Central Valley $635.9 $323.4 $959.4 $6.2 $965.5 $546.7 $18.7 $1,530.9 $406.2 Mills-Peninsula Health Services Burlingame CA 12/31/ /31/2011 $ Robert Merwin President/CEO $570.8 $271.2 $842.0 $5.6 $847.6 $486.8 $20.5 $1,354.9 $338.1 Hoag Memorial Hospital Presbyterian Newport Beach CA 9/30/ /31/2010 $ Richard F. Afable, MD President/CEO (3) $589.1 $291.4 $880.5 $131.4 $1,011.9 $191.9 $30.3 $1, Lucile Slater Packard Children's Hospital at Stanford Stanford CA 8/31/ /31/2010 $ Christopher G. Dawes President/CEO (4) $691.6 $293.3 $984.9 $171.0 $1,155.9 $27.0 $21.2 $1, Community Hospital of the Monterey Peninsula Monterey CA 12/31/ /31/2011 $ Steven Packer, MD President/CEO $593.5 $197.1 $790.6 $46.9 $837.4 $ $ Rideout Memorial Hospital Marysville CA 6/30/ /31/2010 $ Theresa Hamilton Chief Executive Officer (5) $ $371.6 $358.5 $730.1 $17.5 $16.3 $ Marin General Hospital Greenbrae CA 12/31/ /31/2011 $ Lee Domanico Chief Executive Officer (6) $ $ $743.8 $12.5 $0.8 $ Northbay Healthcare Group Fairfield CA 12/31/ /31/2011 $ Gary Passama Chief Executive Officer (7) $466.5 $191.4 $ $657.9 $25.6 $3.3 $ Santa Rosa Memorial Santa Rosa CA 6/30/ /31/2010 $ Kevin Klockenga Chief Executive Officer (8) $350.9 $137.7 $488.6 $128.4 $617.1 $9.8 $27.3 $ Dominican Health Services Santa Cruz CA 6/30/ /31/2011 $ Nanette Mickiewicz, MD EVP (9) $341.5 $200.9 $542.4 $10.4 $552.8 $31.4 $38.5 $ Seton Medical Center Daly City CA 6/30/ /31/2010 $ Lorraine Auerbach President/CEO (10) $ $426.1 $73.7 $499.8 $17.7 $45.2 $ O'Connor Hospital San Jose CA 6/30/ /31/2010 $ James F. Dover President/CEO (11) $ $424.7 $66.7 $491.4 $21.7 $43.6 $ Enloe Medical Center Chico CA 6/30/ /31/2010 $ Mike Wiltermood Chief Executive Officer (12) $336.2 $59.3 $395.5 $99.5 $495.0 $14.7 $4.2 $ Stanford Hospital and Clinics Stanford CA 8/31/ /31/2010 $2, Amir Dan Rubin Director/CEO (13) Stanford Hospital and Clinics Stanford CA 8/31/ /31/2010 $2, Michael J. Peterson VP Special Projects/Interim CEO (13) Stanford Hospital and Clinics Stanford CA 8/31/ /31/2010 $2, Martha Marsh Former President & CEO (13) John Muir Health Walnut Creek CA 12/31/ /31/2011 $1, Calvin Knight President/CEO (14) John Muir Health Walnut Creek CA 12/31/ /31/2011 $1, J. Kendall Anderson Former President/CEO (14) Saint Agnes Medical Center Fresno CA 6/30/ /31/2010 $ Nancy Hollingsworth Interim President & CEO (15) Saint Agnes Medical Center Fresno CA 6/30/ /31/2010 $ James Leonard Former President & CEO (15) Saint Agnes Medical Center Fresno CA 6/30/ /31/2010 $ Thomas Anderson Former Interim President & CEO (15) Huntington Hospital Pasadena CA (+) Washington Hospital Fremont CA (+) Sequoia Hospital Redwood City CA (+) Good Samaritan (part of HCA [for profit]) San Jose CA (+) California Pacific Medical Center San Francisco CA (+) UCSF Medical Center San Francisco CA (+) Bonus and Incentive Compensation Base Plus Bonus and Incentive Only Retirement and Other Deferred Compensation Compen-sation Reported in Prior Form 990 (+) Form 990s are not required to be completed or filed by certain organizations (El Camino Hospital is not required to complete one), such as tax district hospitals, for-profit hospitals, and hospitals that are part of a larger health system. Additional community-based health districts were researched but Form 990s were not available. Page 39/127