Only one of 99 top Alberta health executive abides by minister’s request to refuse bonus

Word that only one of 99 senior Alberta Health Services (AHS) executives refused to accept performance-linked pay as requested by the government reminds me of that now-famous quote: "I am entitled to my entitlements."

The phrase was uttered almost a decade ago to a parliamentary committee by former Liberal cabinet minister David Dingwall, who grabbed a hefty severance package after quitting as president of the Royal Canadian Mint. He'd resigned voluntarily under a cloud over allegations of excessive expense claims.

Dingwall was subsequently cleared of wrongdoing related to his expenses but his comment to the committee has come to symbolize the culture of perks some politicians and senior public servants feel is their due.

Which brings us to the flap over the willingness of almost every senior administrator employed by AHS to ignore Health Minister Fred Horne's demand they turn down the so-called "pay-at-risk" portion of their salaries.

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What's pay-at-risk? Well, you're not supposed to call it a bonus. With the at-risk model, a percentage of an executive's overall compensation package is not paid out unless the organization meets certain goals. These could be improvements in service quality, reductions in spending or some other yardstick. It's not money handed out over and above the salary.

At-risk pay is widely used in private business and began showing up in the U.S. health care sector in the 1990s. The approach has been embraced in Canada, specifically in Alberta and Ontario, where it's part of legislation enshrining performance-based compensation.

In Alberta, the at-risk portion of executives' salaries added up to $3.2 million for the 2012-13 fiscal year, the Edmonton Journal reported.

Horne, struggling with ballooning health-care costs, wanted to withhold the money that was supposed to be paid out last June. He argued it wasn't fair for executives to take their at-risk money when the government was freezing pay for doctors, teachers and other public servants, the Journal said.

The AHS board refused the minister's request, saying it was contractually obligated to distribute the withheld money. In response, Horne fired the board and installed a single administrator, who confirmed the at-risk component had to be paid out.

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Horne contended the old board had prevented some executives from refusing the money.

“My reaction to it is that OK, there is a legal obligation to pay out that pay-at-risk, but people also have the legal right not to take it," told the Journal in June. "They were denied that option and I’m going to make sure they have that option.”

Well, it turns out there wasn't a huge groundswell of altruism in health-care system's executive suites after all.

The Journal noted that Dr. Chris Eagle, who resigned as AHS president in October, was among those who took the at-risk money. The Calgary Sun reported at the time of Eagle's departure that he did not receive a severance package but would receive his usual $580,000 salary for a year.

The dispute over handing out the at-risk money raised doubts about the whole concept's value in Canadian health care.

Andrea Laupacis, a former member of the AHS board from 2008 to 2010, called the dismissals unfair.

"Perhaps more importantly, this episode reinforced my growing belief that pay-at-risk in Canadian health care is almost impossible to do well, and to wonder whether we should abandon it all together," she wrote on the web site Healthy Debate, which she edits.

Laupacis said there's little evidence that withholding a fifth of executives' salaries is enough to change their behaviour, compared with the same approach for workers with "mechanical skills."

It's also hard to establish valid "metrics" as the base for at-risk pay for executives running health facilities when some involve system-wide issues.

"Executives can rightly argue that it isn’t fair to make their pay-at-risk dependent upon parts of the health care system beyond their control," she wrote. "However, focusing pay-at-risk only on the things executives can directly control encourages the kind of siloed approach to health care we’d like to get away from."

And in the absence of hard metrics, health-authority boards tend to be quite generous with the amount of pay-at-risk they approve for distribution, she argued.

he public also misunderstands the whole concept, regarding pay-at-risk percentages as bonuses.

A later Healthy Debate article that Laupacis co-authored amplified those reservations but suggested greater transparency and independent auditing of the attainment of performance goals might help.