Former Aurora executive paid $8.2 million severance package
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MILWAUKEE -- (MCT) Donald Nestor, considered a key architect in Aurora Health Care's aggressive expansion over more than two decades, was paid $8.2 million in salary, bonus and other compensation after his retirement as chief operating officer in January 2009, according to the nonprofit health care system's newly filed tax return.
The timing of the filing is certain to be awkward for Aurora: It comes a few weeks after the health care system announced that it planned to eliminate 175 jobs by the end of this year to control costs.
The health care company operates Auroral Lakeland Medical Center in Elkhorn, as wells as several clinics in Walworth County.
It also comes at a time when nonprofit health care systems are facing more scrutiny on executive compensation from the Internal Revenue Service and Congress.
Nestor announced in October 2008 that he would retire at the end of that year. He was paid $2.2 million in 2008. He continued to work for Aurora last year as a consultant on the construction of its hospitals in Summit and Grafton, which both opened this year, and other projects.
Nestor said the $8.2 million package included deferred and other compensation that accumulated over a 20-year career with Aurora.
"I feel very proud of what we built at Aurora," he said Wednesday. "I feel we did a very good job, and I've been rewarded for that.
"I'm not embarrassed by it. I'd rather not be reading about it," he added. "But I feel I earned it. I believe I had a large part in making Aurora what it is today."
Nestor joined Aurora in 1989 and was chief financial officer from 2000 to 2006 before being promoted to chief operating officer when Ed Howe, Aurora's former chief executive, retired and Nick Turkal was promoted to chief executive.
Nestor was instrumental in the creation and growth of Aurora Medical Group -- which employs doctors throughout eastern Wisconsin -- as well as the health care system's expansion into Kenosha, Green Bay, Oshkosh, Summit, Grafton and other markets and its acquisition of Advanced Healthcare.
Turkal disclosed the $8.2 million pay package in a message to employees after Aurora filed its 2009 tax return this week. The tax return, which includes information on executive compensation, is available to the public.
"I signed the agreement which ended Don's employment with Aurora, as it was time to move forward with a new culture and new type of leadership," Turkal said in the message. "I believed then, and I know now, that it was the right thing to do for Aurora Health Care."
Michael Brophy, an Aurora spokesman, said he could not comment beyond Turkal's message because of a confidentiality agreement.
What nonprofit health care systems pay their executives often draws attention, said George Quinn, senior vice president of the Wisconsin Hospital Association. But he points out that they must compete with for-profit corporations for executives.
"That's what gets lost," Quinn said.
Aurora, with $4 billion in annual revenue and about 30,000 employees, is a huge organization by any measure. And Nell Minow, editor of The Corporate Library, which does independent research on the governance of for-profit corporations, said Nestor's package would not be shocking at a public company.
"In the nonprofit world, we find it disturbing when people are paid as if they are in the for-profit world," she said.
Nestor's severance package would be considered large in manufacturing, Minow said, but not in the financial services industry.
The size of the total package, though, is almost certain to surprise some people.
"I've never heard of anything like this before," said John Toussaint, the president of ThedaCare Center for Healthcare Value in Appleton and former chief executive of ThedaCare. "That's pretty remarkable."
The severance package was more than three times Turkal's total compensation of $2.4 million last year.
Aurora has said that Turkal's compensation is in line with that paid to top executives of other health care systems of similar size. It also is about the same as Howe's compensation in 2001.
Turkal's message to employees suggests that Aurora knows the package -- even though it includes compensation accumulated over many years -- is likely to generate controversy. He noted in the message that employees may get questions about the pay package.
"This decision was made years ago," he wrote. "It is part of Aurora's past."