1. Leadership Compensation Alignment
Chad Aduddell and Aaron Austin
December 7, 2016

2. As we continue our Living Our Mission journey, we have talked about the need to transition our organization from lots of activity, to results. This is consistent with the shift we have seen in the Health care industry over the past 7 years, especially in the reimbursement environment with government and commercial payors – the move from volume to value.
For the past year and a half, at CHI St. Vincent we have been measuring our Living Our Mission metrics. This year, we are implementing a systematic approach with the LEM to ensure that every leader has the right goals and the right prioritization (weighting) of goals to hold us all accountable and ensure that everyone is focused and contributing to us delivering on our commitment to be a great place to work, practice medicine, and deliver excellent and compassionate care.
Similar to the changes in the healthcare industry, we have to ensure that incentives are aligned so that we reward and reinforce high performance vs rewarding activity.

3. Incentive Compensation Tools to impact Merit Increase
Components
Base Salary
Incentive Compensation
Tools to impact
Merit Increase
Market Adjustments
Equity Adjustments
Last month, Aaron and I had our annual meeting with the Compensation Committee of our Board and we discussed compensation philosophy.
There are multiple components of overall compensation – for leaders, managers and above, the two biggest components are:
base salary and incentive compensation.
Aaron is going to talk about Incentive Compensation in a few minutes, but I note that Incentive Compensation is a team sport rather than individual, meaning that the incentive is based on System Light Switches and System results rather than individual results, which does not allow us to incentivize or reward an individual
So that leaves us with Base salary as an area that we can impact for individuals. For Base salary - our Executive team and our Board really have two tools (two levers that we can pull) to reward our leaders and to keep our salaries competitive.
Merit Increases and Market Adjustments
The Board approved the FY17 2% across the board increase for leaders. Even thought this was called a Merit Based increase, it really was an across the board increase, as all leaders were treated the same in terms of the increase, regardless of performance.
The Board has mandated that we move from across the board salary increases to Merit Based Increases. So, I am going to outline how that is intended to work.
Keep in mind, the Board and HR will still review Market Compensation Data and make Market Adjustments where we need to in order to remain competitive.

4. LEM Performance 70% + Leadership Competencies 30%
Merit Increase
LEM Performance 70% + Leadership Competencies 30% 5
Significantly Exceeds Expectations
Challenge ?? 4
Exceeds Expectations
Exceeds Target
2%+ 3
Meets Expectations
Target
1-2% 2
Does Not Meet Expectations
Minimum 1% 1
Significantly Below Expectations
No Increase 0%
Our philosophy is shifting for FY17 to move to results based Merit increases versus across the board increases or subjective increases
So, next October when the Compensation Committee of the board meets, if the board approves an increase in salary based on our financial performance– Merit increases will be performance based.
Performance will be based on 2 things – LEM performance will be 70% and Leadership Competencies will be 30%
LEM is the objective, the results; the WHAT
Leadership Competencies are Who you are -your leadership style – HOW you get results - are you exhibiting our core values and consistent with achieving results
Amount of the increase will depend on financial situation of CHI St. Vincent.

5. Example LEM Performance 70% 30% People 2 0.6 20% Quality 0.4 10%
Safety 5
0.5
Patient Experience 1
0.3
Financial
0.2
100%
LEM Score is
2.0

6. Example Leadership Competencies 30% 12.5% Integrity and Spirituality 4
0.5
Inspirational Leadership 5
0.625
Innovation
Change Leadership
Accountability 3
0.375
Coaching and Development
Collaboration and Teamwork
Managing Performance Outcomes
100%
Leadership Competency Score
3.88

7. LEM + Leadership Competencies
Example
LEM + Leadership Competencies
LEM Performance
70%
2.0
1.4
Leadership Competencies
30%
3.88
1.16
Total Performance
100%
2.56
Does Not Meet Expectations
Minimum 1%

8. Incentive Compensation Plan for FY17

9. FY17 Light Switches Light Switch #1: Mission Metric:
80% of the budgeted payer mix of charity care, uninsured, and Medicaid as a % of gross revenue.
Light Switch #2: Operating EBIDA
50% of budget turns the plan ‘on’, but payout will be pro-rated based on results
80% of budget is required for a full payout of opportunity based on goal performance.
Decision by PC on

10. Incentive Goal Performance Areas
FY17 Potential Payouts
Incentive Goal Performance Areas
Threshold
Target
Maximum
Local/Mkt Manager
2.5% 5%
7.5%
Local/Mkt Director
10%
15%
**Must be in eligible position at time payment is made (Typically Nov/Dec) and in good standing
**Must be employed in eligible position prior to Jan 2017 to be eligible for FY17
Decision by PC on

11. Example – Manager Scorecard
Divisional Results
Goal Measurement and Opportunity Percent 
Goal Category
Goal
Weighting
Threshold
Target
Maximum
Measurement
Result
Level Achieved
Percentage Achieved
STEWARDSHIP
Operating EBIDA
67 M
20%
0.50%
1.00%
1.50%
QUALITY Index
(Quality, Pt Experience, and Safety)
61st%
25%
0.625%
1.25%
1.875%
PEOPLE
Physician Satisfaction
TBD
15%
0.375%
0.75%
1.125%
Organizational Engagement
GROWTH
Primary Care
 Total
 100%
 2.5% 5%
7.5% 
Divisional Total Earned
Divisional Financial Light Switch Adjustment (if applicable)
Total Percentage Earned

12. Questions