The Massachusetts Attorney General’s office has announced a very significant increase in its oversight of the compensation of executives and directors of healthcare organizations. Read the press release here and the full memo here. Among the important points are:

* The AG will move from annual “after the fact” data collection to “broader, more timely and proactive examination of executive compensation on an organization and industry-wide basis.”

* Echoing concerns recently expressed by certain officials of the IRS (see our earlier posts on this subject), the AG suggests that the focus of the IRS Intermediate Sanctions rules on using “comparables” for setting executive compensation may lead to boards regularly setting their own organization’s executives pay to be above average – i.e. what is “comparable” may not be “reasonable.”

* The AG intends to institute new reporting requirements to create standardization in format, methodology and timing, to facilitate comparison among organizations and between hospitals and health insurance companies, with the goal of being able to analyze the healthcare industry in Massachusetts as a whole.

* The AG noted that 2 major organizations compensate their directors; and referring to Principles for Good Governance of charities issued by the Panel on the Nonprofit Sector, indicated that the AG would be looking into the rationale for this compensation.

The AG is starting its review with Blue Cross, Harvard Pilgrim, Fallon and Tufts, but clearly intends to expand its scope, and the new reporting requirements will apply accross the board. We’ll keep you posted as the AG’s office releases new information.