A Team 10 investigation found profits at Rady Children's Hospital approached $1 billion over five years and CEO Patrick Frias was rewarded with a 20 percent pay raise after net income skyrocketed after COVID.
Team 10's findings come as nurses on Tuesday ended a two-day strike over wages and benefits.
The nurses are seeking a 30 percent boost in pay over three years, while the hospital has offered a 25 percent increase over that time. Nurses also want better health care and improvements in retirement benefits.
Hundreds of nurses were on the picket line Tuesday under warm, sunny skies, and they told Team 10 they were shocked with the station's findings.
"I know we are a great hospital, and we make money, but the fact that they have this much and we are out here having to do this over health benefits and competitive wages is a little surprising," said Katie Langenstrass, who leads the 1,600-plus member nurses union.
Team 10 found the largest annual profit came in fiscal year 2022, when the hospital made nearly $313 million. That was about double the profit made from the prior year.
Rady Children's, as a not-for-profit company, must make their annual tax returns available to the public.
Team 10 compiled records from fiscal year 2018 to 2022, the most recent records available.
In fiscal 2020, during the start of COVID, the hospital reported a $116 million profit.
That was the low point for profits during the five-year span, with the hospital making $206 million in 2019, and $142 million in 2018, records show.
Those records also show that the compensation for Frias increased more than 20 percent from 2020 to 2022, lifting his total compensation to around $1.7 million.
Team 10 also found that overall executive compensation increased 27 percent from 2021 to 2022, according to hospital financial records. However, overall executive compensation dropped about 20 percent from 2020 to 2021 before the upswing.
Frias, a doctor, other executives at Rady's declined to be interviewed for this story.
The company sent a series of statements on Tuesday afternoon, saying the hospital was making $1.6 billion in investments in new facilities and that salaries are reviewed annually and compared against similar children's hospitals.
"Our 1,600 nurses are not the only employees at Rady Children’s that deserve fair and equitable compensation," the statement said. "We have 4,000 other employees who are not nurses that also provide vital services for patients that we need to ensure receive fair and competitive ompensation."
Frias previously told ABC 10 NEWS that the hospital used competitive market data and surveys conducted by the California Hospital Association to develop its offer for the nurses.
"We knew there was going to be a little bit of catch-up coming into the contract," Frias previously said. "That's why the first year was front-loaded with a higher increase, and we also know that with the first-year adjustments alone, that puts our nurses among the higher-paid nurses in the San Diego region."
Langenstrass, after viewing the compensation given to Frias, jokingly said it "looks like he has a little to share."
"These are such large numbers," she said. "It's astonishing to see how much the hospital is bringing in and how much executives are getting paid, and they are forcing us to do this to get our fair share."
Langenstrass wasn't alone in being surprised in the hospital's bottom line, but was still unhappy with contract negotiations.
"That's a lot of profit for a non-profit organization," said Marie Wahl, a nurse of 16 years at Rady Children's. "And we are the lowest paid, some of the lowest paid nurses in the county. That's a big number to not give that money back to the people who are the heart of your hospital. It's kind of disappointing to be honest."
Rady Children's sent Team 10 a series of statements on Tuesday afternoon that covered their financial success and compensation. Here are the statements:
*In FY22, Rady Children’s net Income was positive $312M due to two primary factors: 1) Federal approval of the California provider fee and 2) unrealized gains on investments in our endowment. Many California hospitals that serve a high number of Medi-Cal patients experience similar large fluctuations in income due to administrative delays in provider fee program approvals. This is not unique to Rady Children’s. Additionally, most Children’s hospitals (and many adult health systems) rely on endowments and the investment returns they provide to support new investments (such as buildings, equipment, patient programs/services and information systems). Rady Children’s operating and net income margins are consistent with national averages for similar size organizations. Rady Children’s will rely on its endowment investment returns and net income to help fund it’s $1.6B investment in new facilities that will bring our hospital to compliance with seismic mandates. Additionally, comparing 2022 to 2020 and 21 is difficult due to the impacts of the pandemic on those years.
*It’s important to understand that our margin (the endowment or investment portfolio) fluctuates up and down (positive and negative) with the markets continuously. So, at one moment in time it can appear that net income is very high due to the financial markets, while another moment in time it appears that our net income is very negative. For the current fiscal year (2024), for example, both operating revenue and operating income have declined from the prior fiscal year with operating income at roughly half of the prior year.
*Rady Children’s compensation approach applies to everyone who is employed by the health system, and that includes executives and the CEO. Salaries are reviewed annually and are benchmarked against similar pediatric not-for-profit hospitals. A compensation review is conducted annually by an external third-party to ensure salaries are appropriate and reasonable and is reviewed and approved by the Rady Children’s Board.
*The Hospital must consider its investments carefully in order to ensure the future financial health of the health system so we can continue to take care of the kids in San Diego for years to come.
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