Michael Tarwater, the
CEO of one of the nation’s largest hospital chains, enjoys a rarely
discussed perk: The freedom to fly planes owned by the nonprofit system
for business and pleasure.
Flight logs provided by Carolinas
HealthCare System show Tarwater took at least 29 personal flights on the
system’s planes from 2008 through 2012. During that time, he has also
been on board 101 flights that the system said were for business.
Tarwater’s
personal flights are counted as part of his compensation, which totaled
$4.8 million in 2012, according to the hospital system.
Widely
recognized for guiding Mecklenburg County’s largest employer through a
period of remarkable growth, Tarwater has also honed another skill: He’s
an accomplished pilot.
Tarwater served as co-pilot on more than
half of the Carolinas HealthCare flights he was aboard during the five
years ending in 2012, system records show. He holds an Airline Transport
Pilot certificate, the highest license issued by the Federal Aviation
Administration.
The hospital system owns five planes and three helicopters, which are used mainly for transporting patients and organs.
Tarwater
declined to be interviewed, but he told the Observer that since 2008 he
has reported an average of $2,475 per year as income attributable to
his personal flights. The personal travel was reported in accordance
with IRS guidelines, officials said.
But IRS rules allow Tarwater
to value those flights at amounts far lower than the cost of operating
the planes. Had he chartered the flights from a private company, he
likely would have paid roughly $20,000 a year, on average, the Observer
found.
A number of Tarwater’s personal trips were to Dothan,
Ala., where his daughter and grandchildren live. Others were to Gulf
Shores, Ala., near Pensacola, Fla., where his father lives.
In
one typical case, Tarwater flew from Charlotte to Dothan on Sept. 28,
2012, and returned two days later. SkySouth, a charter company based in
Burlington, N.C., would have charged about $4,900 for the trip, the
company’s general manager said.
Calls to five other systems
suggest the practice of using hospital planes for personal travel isn’t
common. A number of systems – including Novant Health, Duke University
Hospitals, UNC Hospitals and the Mayo Clinic – say they do not allow
executives to use their aircraft for personal flights.
Some experts believe the practice is rare – and questionable.
“It
seems inappropriate for them to use (planes) for personal purposes,
given that they are being supported via tax exemption,” said Gerard
Anderson, director of the Johns Hopkins Center for Hospital Finance and
Management. “So we are all paying for the vacation the CEO is taking.”
As
nonprofits, Carolinas HealthCare hospitals in Mecklenburg, Cabarrus and
Lincoln counties get tax exemptions worth more than $100 million a
year, the Observer estimated. CHS, the state’s largest hospital system,
owns more than $1 billion in tax-exempt property and pays no corporate
income taxes or sales taxes.
The system, which brings in about $7
billion in annual revenue, says it earns its tax exemptions by
providing extensive benefits to the community, including more than $280
million last year in free and discounted care for uninsured patients who
can’t afford to pay their bills.
Tarwater’s personal trips accounted for fewer than 1 percent of the flights taken by CHS planes, the system said.
All
personal use of the system’s airplanes “follows IRS guidelines and
Carolinas HealthCare System policies,” the system said in a written
statement.
With CEO approval, other senior CHS executives are
also allowed to use the planes for personal travel, the system said. CHS
did not identify other executives who have done that. Such flights are
“very rare,” and are reported as income in keeping with IRS guidelines,
said system spokeswoman Amy Murphy.
The vast majority of
Carolinas HealthCare’s business travel is booked on commercial airlines,
the system said. But from 2008 to 2012, executives boarded about 9
percent of CHS flights.
The system said it considers many factors
when deciding whether to use its planes for business trips: “short time
frames to coordinate and book travel, inadequate commercial service at
destinations, long drive times, time that would be spent waiting for
departures and connections of commercial aircraft, and an ability to
work more efficiently.”
Frequent flier
Tarwater has
frequently co-piloted several Carolinas HealthCare planes, including a
twin-engine business jet called a Cessna Citation. According to the FAA,
he has a “type rating” that authorizes him to serve as the
pilot-in-command in a Citation.
But he has done much of his
recent flying on the system’s six-seat Beechcraft Baron, a twin-engine
piston plane that Carolinas HealthCare acquired in 2011 for $700,000.
Typically,
the plane is used about six days each month, data obtained by the
Observer shows. The other planes in the CHS fleet are used far more
frequently. Unlike the other CHS aircraft, the Baron generates no
revenue because it’s not chartered and not used to transport patients.
Of
the 93 trips that CHS reported for the Baron through the end of 2012,
Tarwater served as a co-pilot on 29 of them – or about 31 percent.
Nineteen of those flights were personal trips, according to Carolinas
HealthCare data.
One former airplane mechanic said he saw golf
clubs being loaded on the plane about a half-dozen times. Pilots, he
recalled, sometimes said, “I’m ferrying the golfers today.”
Murphy,
the CHS spokeswoman, noted that the Baron is smaller than the system’s
other four planes, and less expensive to operate. She said the system
bought the plane as an economical way to take executives on shorter
business trips – and to areas served by small airports that aren’t
designed for larger planes.
When the system bought the Baron, it did not have to add hangar space or hire more pilots or mechanics, Murphy said.
Fueling and insuring it costs more than $50,000 a year, the system said.
‘All taxpayers are paying’
To be sure, personal trips on company planes are much more common in parts of the for-profit world.
Bank
of America CEO Brian Moynihan received $477,000 worth of personal use
of corporate aircraft in 2012, for example. Coca-Cola Bottling Co. chief
executive Frank Harrison III received more than $133,000 of personal
aircraft use last year.
But nonprofit experts say it’s extremely
rare for nonprofit leaders to take personal flights on planes owned by
their organizations. Taxpayers are essentially subsidizing such flights,
experts say, because they must pay higher taxes to make up for what
nonprofits don’t pay.
“I think it’s a travesty and it’s a waste
of their tax-exempt status,” said Ken Berger, CEO of Charity Navigator, a
watchdog group that studies nonprofits. “All taxpayers are paying for
this.”
Pablo Eisenberg, another nonprofit expert, called it an “outrage.”
“That is not a common practice (in the nonprofit world), and it shouldn’t be allowed. Period,” he said.
Novant
Health, which runs the three Presbyterian hospitals in Mecklenburg
County, owns a twin-engine turboprop that senior leaders use for
business trips around the system’s four-state coverage area. But
“personal use for recreational or entertainment purposes is not allowed”
on the plane, Novant said in a written response to questions.
One
exception, the system said, was a 2012 case in which a senior leader
used the plane to attend a family funeral while also meeting a work
obligation. The system didn’t disclose the executive’s identity or the
flight’s destination.
UNC Hospitals leases two helicopters for
patient transports, and also buys access to planes owned by another
organization. But the system does not allow its officials to use the
aircraft for personal flights, spokesperson Karen McCall said.
Duke
Medicine owns two helicopters, but no planes. That system uses the
helicopters for medical purposes, but prohibits personal flights.
An ethical question
Tarwater
obtained his Airline Transport Pilot certificate in 2005, according to
the FAA. By then, he had already logged nearly 1,600 hours of flight
time. Among his accomplishments: piloting a transatlantic crossing from
Nottingham, England to North Carolina.
Piloting the system’s
planes helps Tarwater fulfill requirements aimed at keeping flight
skills sharp. Pilots who want to carry passengers or navigate using
electronic instruments, for instance, have to show recent flight
experience.
Tarwater does not schedule any of his flights on
Carolinas HealthCare planes for the purposes of meeting such
requirements, the system said. But Murphy noted that “any flight during
which a licensed pilot functions as a pilot is counted for purposes of
maintaining currency requirements.”
Some charity experts question
whether nonprofit leaders should be allowed to use planes owned by
their organizations to pursue their love of flying. Said Eisenberg: “I
think it’s ethically to be criticized.”
Carolinas HealthCare System responds:
CEO
Michael Tarwater declined to be interviewed for this story. But the
system provided written answers, along with this statement:
As
the only hospital-based, accredited fixed-wing air ambulance service
based in the Carolinas, MedCenter Air’s elite team serves a vital role
in transporting critically ill and injured patients and operates 24
hours per day, 7 days per week and 365 days per year. Not only do
patients of Carolinas HealthCare System benefit from this service, but
so do the patients of more than 50 other organizations who contract with
MedCenter Air for air ambulance charter services.
All personal
use of MedCenter Air fixed-wing aircraft follows IRS guidelines and
Carolinas HealthCare System policies. Of the 4,064 flights by MedCenter
Air’s fixed-wing aircraft between 2008 and 2012, the vast majority
involved the transport of critically injured or sick patients. Only 29
of these flights, or less than one percent, involved personal travel by
Carolinas HealthCare System’s CEO.
Furthermore, Carolinas
HealthCare System does not respond to the hearsay comments provided to
us by the Observer from certain unnamed sources. We question the
Observer’s use of any sources without fully investigating possible
motives behind their participation in a story.
Read more here: http://www.charlotteobserver.com