Healthcare employers planning on 3 percent salary increases

Employees at healthcare facilities are getting higher pay increases this year than what was predicted last year, says a healthcare compensation study by management consulting firm, the Hay Group.

The study shows that integrated health systems plan a median base salary increase of 3 percent. Last year, integrated health system providers estimated salary increases for 2011 would be 2.4 percent. Independent hospitals report a median base salary increase of 2.3 percent this year.

“There’s an acknowledgement of the labor market for talent,” said Ron Seifert, vice president and executive compensation practice leader for Hay Group’s healthcare sector. “They’re looking out into 2011 and ’12 and saying ‘We need to start doing things for our employees.’ Whether it’s for executives or staff, they’re now planning 3 percent increases. Certainly there’s some risk that it couldn’t happen if the bottom falls out again (but) they’re trying to budget for these increases for staff.”

[See also: Healthcare salaries on the rise.]

The study, with 1,188 participating hospitals, found a marked difference in compensation for chief executive officers at not-for-profit integrated health systems and independent hospitals. Independent hospital CEOs saw a median 5 percent base salary increase for 2011 while CEOs at not-for-profit integrated health systems saw a median 4 percent base salary increase. When total cash compensation – base salary plus annual incentives – is calculated, CEOs at integrated health systems saw an increase of 3.1 percent while their counterparts at independent hospitals saw an increase of 6 percent.

The higher compensation package given by independents isn’t an indication that independents are in a better financial position than systems, said Seifert, rather, it is a reflection on the need to retain their executives in a competitive labor market.

“What’s happening is their boards really need these executives to stick around through a very, very challenging healthcare environment,” Seifert said. “This is a transition period for most hospitals. Whether they’re contemplating system affiliation or going it alone, they sure as heck don’t want to be losing leaders at this time.”

The compensation study also found:

• Patient satisfaction is the most prevalent performance measure for annual incentives.
• The use of one-year incentive plans is decreasing and the use of long-term incentive plans is increasing.
• 28 percent of health systems have reviewed their annual incentive plans in the last two years; 37 percent in the last five.
• Nurses at independent hospitals received the highest average salary structure change last year, at 2.8 percent.