Study sheds light on executive pay in healthcare industry

Compensation for hospital CEOs in 2018 ranged from $274,300 to $1,409,500, depending on the size of the hospital, according to a new 2019 Hospital Executive Compensation Report by Total Compensation Solutions, a compensation consulting firm specializing in the not-for-profit healthcare and long-term care sectors.

Compensation includes base salary plus bonus. The largest portion of  remuneration is base salary, ranging from about 68 to 76% of the total.

The report looked at median total cash compensation by hospital revenue, for six key executive positions: CEO, COO, CFO, the top legal officer, chief medical officer and chief nursing officer.

It found CEO compensation of $274,300 for hospital with revenue up to $49.9 million. On the higher end, the report said CEO compensation was $1.4 million for hospitals with over $1 billion in revenue.

In between the low and high revenue hospitals, at hospitals with revenue between $50 and $99.9 million, CEOs made $350,600; for hospitals with revenue between $100 million to $249.9 million, CEOs made $528,200; at hospitals with revenue between $250 and $499.9 million, CEOs made $701,200; and at hospitals with revenue between $500 million to $1 billion, CEOs made $959,700.

Chief operating officers had compensation of $192,900 working at hospitals  with revenue up to $49.9 million; and compensation of $815,800 for hospitals with revenue over $1 billion.

For CFOs, the compensation is $189,200 for the low end and $739.1 on the high end; for the top legal officer, there was no compensation listed on the low end and $606,700 on the high end; for CMOs, it was $332,700 and $632,800, respectively; and for chief nursing officers, $161,800 to $421,700.

Base salary as a percentage of remuneration went down as hospital revenue climbed. While base salary represented 80.3% of remuneration for hospitals with revenue up to $50 million, it was 61.3% of remuneration for hospitals with revenue over $1 billion.

Those at hospitals in the $100 million to $249.9 million range, which was most common according to TCS, saw their bonus make up 9.2% of their earnings, their base salary making up 72.5%.

Most hospitals, or 27.8% of those covered in the study, bring in between $100 million and $249.9 million a year in revenue, according to the report, while 22% bring in between $250 million to $499.9 million and 11.7% bring in $500 million to $1 billion.

About 19.3% bring in $50 million to $99.9 million a year in revenue, while 11.9% bring in $49.9 million. The smallest percentage of hospitals, 7.3%, earn over a $1 billion annually.

WHY THIS MATTERS

Earnings for executives in healthcare have been under scrutiny for being significantly higher than similar positions in other industries.

A report published in 2018 by Clinical Orthopaedics and Related Research showed healthcare executives such as CEOs and CFOs saw pay increases of more than 90% over 10 years, while other health professionals generally saw increases of 10 to 20%.

TCS said the report was meant to help hospitals explain and justify their compensation policies and practices.

The company has been publishing a not-for-profit compensation survey for the last 16 years when it observed hospital executive compensation was "not typical of what we saw in the general not-for-profit sector."

THE LARGER TREND

The report looked at job data on 25 executive and director-level positions found in 1,345 hospitals across the country. It looked at various compensation elements reported in the Internal Revenue Service's Form 990, such as base salary, bonus, other income, retirement and non-taxable benefits.

TCS also took into consideration geography and revenue size. Economic and governmental factors, like the stock market dipping significantly at the end of 2018, as well as that a government shutdown that lasted over a month, can affect the work of the C-Suite.

The current legal challenge to the Affordable Care Act could deem the law  unconstitutional, with the effect of 20 million people losing their healthcare coverage, impacting hospitals and especially at emergency rooms. This would put a greater stress the executives who run these institutions, TCS said.

ON THE RECORD

"It is vital that organizations have an awareness of the competitive external market to help retain high performing executives and attract qualified candidates for executive level positions," the report said.

Max Sullivan is a freelance writer and reporter who, in addition to writing about healthcare, has covered business stories, municipal government, education and crime. Twitter: @maxsullivanlive maxesullivan@gmail.com