COMMUNITY HEALTH SYSTEMS, INC. (NYSE:CYH) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Item5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On February22, 2017, the Board of Directors of Community Health
Systems, Inc. (the Company), upon recommendation of the
Compensation Committee of the Board of Directors (the
Compensation Committee), met and approved certain compensation
arrangements for the Companys Named Executive Officers, as
reflected in the Companys definitive proxy statement for its
annual meeting of stockholders for 2016. The Companys Named
Executive Officers (other than David L. Miller who retired at the
end of 2016) are each employees of the Companys wholly-owned
subsidiary, CHSPSC, LLC, and receive no compensation for their
services as an officer of the Company. The following arrangements
were approved:
Cash Incentive Compensation Payments for 2016 under the 2004
Employee Performance Incentive Plan
The following payments in respect of fiscal year 2016 incentive
compensation targets, under the Companys 2004 Employee
Performance Incentive Plan (the Cash Incentive Plan) were
approved, the Named Executive Officers having been found to have
met the levels of their performance goals indicated below:
|
Name and Position |
PercentageofTotalTarget Incentive Compensation Opportunity Attained |
2016 Incentive CompensationPayment | ||||
| Wayne T. Smith, Chairman and Chief Executive Officer |
13% of target
(40%ofbasesalaryoutof maximum 300%) |
$ | 640,000 | |||
|
W. Larry Cash, Director, President of Financial Services and Chief Financial Officer |
15% of target
(30% of base salary out of maximum 200%) |
$ | 255,000 | |||
|
Tim L. Hingtgen |
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|
President and Chief Operating Officer, effective September1, 2016 |
For the period from September 1 through December 31, 2016:
53% of target
(105%ofbasesalarypaidfor the period from September 1 |
$ | 253,750 | |||
|
Division President (January 1 through April30, 2016) and Executive Vice President of Operations (May 1 through August31, 2016) |
For the period from January 1 through August 31, 2016:
69% of target
(104% of base salary paid for the period from January 1 |
$ | 429,874 |
|
David L. Miller, Former Executive Vice President and Special Advisor to the Chief Executive Officer (September 1 through December31, 2016) and Former President and Chief Operating Officer (January 1throughAugust31, 2016) |
15% of target
(30%ofbasesalaryoutof maximum 200%) |
$225,000 | ||||
| Michael T. Portacci, Division President, Division Operations |
31% of target
(47% of base salary out of maximum 150%) |
$311,770 |
The variation in the percentage of targets attained for the
Companys CEO, CFO, COO and Former Executive Vice President and
Special Advisor to the Chief Executive Officer (Former EVP) as
compared to the attainment levels for the Division Presidents, is
explained by the difference in the respective elements of their
Cash Incentive Plan compensation. Such elements for the CEO, CFO,
COO and Former EVP include only Company level goals, while the
Division Presidents elements also include margin improvement and
other goals related to the performance of the hospitals, as well
as the employed clinical providers, within their respective
markets.
From January1, 2016 through August31, 2016, Mr.Hingtgen served
first as a Division President and then as Executive Vice
President Operations of the Company. The incentive compensation
plan for Mr.Hingtgen approved by the Board of Directors on the
recommendation of the Compensation Committee on February25, 2016
and reported in the Companys Current Report on Form 8-K filed
with the SEC on February26, 2016, was applied to Mr.Hingtgens
base salary compensation paid for the period from January1, 2016
through August31, 2016. Effective September1, 2016, Mr.Hingtgen
was promoted to President and COO of the Company. The
Compensation Committee established performance goals for
Mr.Hingtgen in the position of President and COO for the period
from September1, 2016 through December31, 2016. This incentive
compensation plan was approved by the Board of Directors on
September14, 2016 and reported in the Companys Current Report on
Form 8-K filed with the SEC on September15, 2016, and was applied
to Mr.Hingtgens base salary compensation paid for the period from
September1, 2016 through December31, 2016.
2017 Cash Incentive Compensation Targets
The Compensation Committee has also established performance goals
for each of the Named Executive Officers (other than Mr.Miller
who retired at the end of 2016) for fiscal year 2017 under the
Cash Incentive Plan. For fiscal year 2017, the incentive
compensation plans established by the Compensation Committee
include the following components:
|
Overall, the 2017 incentive compensation plans continue to be weighted towards the attainment of key financial objectives as follows (expressed as a percentage of base salary; opportunity), subject to the ability to receive an additional percentage for overachievement of Company-level goals as noted below: |
|
Executive |
Performance Goal |
Opportunity | ||||
|
CEO |
Company EBITDA | % | ||||
| Continuing Operations EPS | % | |||||
| Net Revenues | % | |||||
| Total Shareholder Return | % | |||||
| Performance Improvements | % | |||||
| Total CEO | % | |||||
|
CFO |
Company EBITDA | % | ||||
| Continuing Operations EPS | % | |||||
| Net Revenues | % |
| Total Shareholder Return | % | |||||
| Performance Improvements | % | |||||
| Total CFO | % | |||||
|
COO |
Company EBITDA | % | ||||
| Continuing Operations EPS | % | |||||
| Net Revenues | % | |||||
| Division Hospital EBITDA | % | |||||
| Performance Improvements | % | |||||
| Total COO | % | |||||
| Division Presidents | Division Hospital EBITDA | % | ||||
| Company EBITDA | % | |||||
| Continuing Operations EPS | % | |||||
| Division Hospital EBITDA Margin Improvement | % | |||||
| Division Hospital Net Revenues | % | |||||
| Division Hospital Non-Self-Pay Admissions Growth | % | |||||
| Division Hospital Non-Self-Pay Adjusted Admissions Growth | % | |||||
| Division Clinic Performance | % | |||||
| Performance Improvements | % | |||||
| Total Division Presidents (each) | % |
|
The incentive compensation targets for the CEO and the CFO include a component for relative Total Shareholder Return (1 year) relative to a peer group consisting of selected companies in the Healthcare Facilities Group. For the CEO and CFO, up to 20% and 15%, of their respective base salaries can be earned if the maximum target of above the 65th percentile of this peer group is attained. |
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For each of the executive officers noted above, an incentive opportunity is included for the attainment of specific non-financial performance improvements. The incentive compensation to be awarded for the attainment of non-financial performance improvements has been set at 30% for the CEO and CFO, at 25% for the COO and at 10% for each Division President; these amounts will be reduced if the performance improvements are not attained. Any such reduction will be determined in the discretion of the Compensation Committee. The 2017 non-financial performance criteria include such items as: successful physician and mid-level practitioner recruitment efforts; maintaining expenditures within the established capital budget; maintaining/improving the prior years overall clinical compliance (including Joint Commission scores); volume, revenue, and earnings growth and total shareholder return, relative to industry peers; and substantial progress toward the Companys portfolio rationalization and deleveraging plan. |
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Each Named Executive Officer will have the opportunity to achieve an additional percentage of their base salary for overachievement of Company-level goals up to a maximum of an additional 35% for the CEO, CFO and COO, and 25% for each Division President. |
2017 Base Salaries
The following base salary amounts for the Companys Named
Executive Officers (other than Mr.Miller who retired at the end
of 2016) were approved on February22, 2017. The salary levels for
our CEO and CFO for 2017 are unchanged from 2016. None of our
executive officers has a written employment agreement.
|
Name and Position |
2017BaseSalary | |||
|
Wayne T. Smith, Chairman and Chief Executive Officer |
$ | 1,600,000 | ||
|
W. Larry Cash, Director, President of Financial Services |
$ | 850,000 | ||
|
Tim L. Hingtgen, President and Chief Operating Officer |
$ | 800,000 | ||
|
Michael T. Portacci, Division President, Division |
$ | 685,000 |
Long-Term Incentive Compensation Equity Awards
On February22, 2017, to the Companys Amended and Restated 2009
Stock Option and Award Plan (the Stock Plan), the Compensation
Committee approved the following equity grants to its Named
Executive Officers (other than Mr.Miller who retired at the end
of 2016). All such equity grants will be effective on March1,
2017 (the grant date) and may be amended, modified or terminated
by the Board of Directors or the Compensation Committee at any
time prior to March1, 2017.
|
Name and Position |
Non-Qualified StockOptions | Performance- BasedRestricted Shares | Time-Vesting RestrictedStock | |||||||||
|
Wayne T. Smith, Chairman and Chief Executive Officer |
75,000 | 75,000 | ||||||||||
|
W. Larry Cash, Director, President of Financial Services |
16,000 | 16,000 | ||||||||||
|
Tim L. Hingtgen, President and Chief Operating Officer |
37,500 | 37,500 | ||||||||||
|
Michael T. Portacci, Division President, Division |
20,000 | 20,000 | ||||||||||
|
All other executive officers as a group (112,500 of the |
112,500 | 112,500 |
Eighty percent (80%)of the target number of shares of
performance-based restricted shares granted to each Named
Executive Officer is subject to the attainment of a
pre-determined level of Cumulative Same-Store Adjusted EBITDA
Growth during the three-year period beginning January1, 2017 and
ending December31, 2019 (the Performance Period). The remaining
twenty percent (20%)of the target number of shares of
performance-based restricted shares granted to each Named
Executive Officer is subject to the attainment of a
pre-determined level of Cumulative Adjusted EPS during the
Performance Period. Each portion of the performance-based awards
(Cumulative Same-Store Adjusted EBITDA Growth and Cumulative
Adjusted EPS, as applicable) will have the potential for
overachievement and for underachievement with respect to the
portion of the award achievable for such target as follows:
|
Achievement % |
Percentage of Granted SharesEarnedForApplicable Portion of the Award |
|||
|
120% |
% | |||
|
50% |
% | |||
|
80% |
% | |||
|
Below 80% |
% |
Vesting related to performance between the percentiles listed
above will be determined by straight line interpolation. In
addition, for purposes of determining the level of achievement
for each portion of the performance-based awards, the
determination of the level of achievement for Cumulative
Same-Store Adjusted EBITDA Growth and Cumulative Adjusted EPS, as
applicable, will be determined independently from each other and
will not impact the determination of the level of achievement for
the other portion of the award.
To the extent that the performance objective has been attained
(in the case of the performance-based restricted stock awards),
the restrictions will lapse on the portion of the award subject
to that performance objective on the third anniversary of the
grant date, provided that the grantee continues to be employed on
such date, subject to certain exceptions, including those noted
below. To the extent that the minimum performance objective is
not attained, the portion of the award subject to that
performance objective will be forfeited in its entirety.
Notwithstanding the performance objectives and the vesting
requirements described above, the restrictions will lapse earlier
in the event of the death or disability of the grantee, or in the
event of a change in control of the Company (as defined in the
Stock Plan) if and to the extent that the outstanding awards are
not assumed, continued or replaced by the acquirer on terms that
are equal to or more favorable than the terms of the original
grant. In the event of a grantees termination of employment
without cause by his employer, the award will not be terminated;
rather, to the extent that it is determined that the performance
objective has been met (or if it has already been met), the award
will accelerate in its entirety on such date.
The time-vesting restricted stock vests ratably over three years,
beginning on the first anniversary of the grant date.
COMMUNITY HEALTH SYSTEMS, INC. (NYSE:CYH) Recent Trading Information
COMMUNITY HEALTH SYSTEMS, INC. (NYSE:CYH) closed its last trading session at with 8,340,802 shares trading hands.
