Time to rethink how we compensate nonprofit hospital CEOs, think tank says
The average nonprofit hospital executive earns eight times more than their average hourly employee, pushing some health policy experts to call for a change in how these leaders are compensated.
That’s according to a new perspective—published Feb. 10 in Health Affairs—from leaders with the Lown Institute, a nonpartisian think tank focused on retooling the American healthcare system.
When the pandemic hit, it exposed stark disparities in care and also hospital employee pay. Some execs forfeited money to make up for steep financial losses but more than 80% of hospitals continued to hand out CEO bonuses while workers took pay cuts or were furloughed.
“Our collective experience with the COVID-19 pandemic has provided an opportunity for the public, hospital boards, policymakers, and regulators to reflect on recent trends in hospital compensation and to rethink how we should pay nonprofit hospital CEOs,” Vikas Saini, MD, president of the Brookline, Massachusetts-based think tank, and co-authors argued.
The compensation chasm has been growing steadily well before the pandemic, however. From 2005-2015, the average compensation of major nonprofit hospital CEOs ballooned by 93%, from $1.6 million to $3.1 million, while hospital workers’ pay grew by 8% over that same timespan.
And in 2018, for example, the highest-paid exec of the American Red Cross, a nonprofit with $3.6 billion in revenue, took home nearly $800,000 in total compensation. That same year, the president and CEO of New Orleans-based Ochsner Clinic Foundation, an academic health system with $3.4 billion in revenue, earned $5 million.
It’s no secret that executives are paid primarily based on patient volume, the authors noted, with other factors such as geographic location and teaching status also contributing factors. But health system CEOs must be incentivized to bolster clinical outcomes, patient safety and cost efficiency as well, the authors explained.
Execs could also be rewarded based on their stewardship of the community’s health, the experts added. A hospital’s patient mix should be factored in, too, as institutions caring for more publicly insured or uninsured individuals often operate on thin margins and require more finesse to manage.
“It’s time for a public discussion of these issues,” the authors added. “We hope it is the start of a longer process that will engage all stakeholders in discussing the importance of aligning incentives to create real value in U.S. healthcare.”
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Matt joined Chicago’s TriMed team in 2018 covering all areas of health imaging after two years reporting on the hospital field. He holds a bachelor’s in English from UIC, and enjoys a good cup of coffee and an interesting documentary.