It's Good to Be in Healthcare

Despite all the ululating about shrinking reimbursements and the impact of federal healthcare reform, and any of a number of financial icebergs out there, let's acknowledge that it's good to be in healthcare.

Numerous surveys show that physicians, highly skilled clinicians, and healthcare executives in the United States are the most highly compensated class of workers on the planet. Physicians held the top six positions for median pay in Money magazine's Best Jobs in America survey. Nurse anesthetists were ranked No. 7, with a median salary of $156,000.

New survey results from Executive Compensation 2010/2011* show that hospital CEOs earn an average $353,900 per year, (CEOs at not-for-profits average $225,400). CEOs at homecare facilities average $282,300 a year, CEOs at physician clinics average $254,000. CEOs at behavioral health facilities average $241,300, and CEOs at long-term care facilities average $235,700.)

There are regional variations in salary but everybody seems to be doing all right. Hospital administrators in the Northeast average the highest base salary, $247,900 per year, followed by those in the West, $226,100. The Southeast is $213,300, South Central is $192,000 per year, and the Midwest is $152,600.

As a broad and vaguely defined category, "healthcare industry presidents" earn the highest average base salary, $296,400, of any industry in the overall economy, followed by the insurance industry, with an average base salary of $290,700, the Executive Compensation survey finds.

EC's survey found that "while pay increase budgets for the healthcare industry have steadily decreased since the onset of the recession in 2007, salaries for many executive positions have continued to rise."

CIOs, for example, have seen their pay increase by 10.5% over the last three years, an average of $193,000 in the healthcare sector, and $200,100 at hospitals. CEOs, on the other hand, have seen their pay reduced by nearly 20% since 2007, while the average base salary for COOs has dropped 9% to $225,500 in healthcare and $245,100 at hospitals.

These executives, physicians, and skilled clinicians undoubtedly would make a strong argument that they deserve the salaries they're getting. Besides, it's what the market is paying, a lot of them work well beyond a 40-hour week, and it's hard to blame anyone for earning as much money as they can.

However, let's put this in perspective. According to the U.S. Census Bureau, 4.1% of U.S. households had an income between $150,000 and $200,000 in 2009, and 3.9% had an income of $200,000 or higher, while 11% of U.S. households earn between $15,000-$25,0000 annually. The median household income in the U.S. that year was $50,221.

These relatively high salaries in the higher echelons of healthcare probably are not driving up the cost of healthcare, which accounts for about $2.2 trillion annually. It's hard to see that salaries could dramatically affect a number that big.

However, it does raise questions about perspective, because people in positions of relative wealth and influence are setting policies and pricing services for people who aren't. Can that 3.9% of households that make $200,000 understand the financial constraints on that 11% of households earning $15,000-$25,000? For those earning $250,000 a year, $100 for an office visit, or $1,000 or $5,000 for a health insurance deductible may seem reasonable. If you're earning $25,000 a year, however, that can be healthcare denied.

"Cost containment" in healthcare means shifting more costs onto the backs of patients, about 90% of whom who earn considerably less than physicians and hospital executives. Studies consistently show that healthcare inflation is relatively constant, at about 7% or so every year—often double or triple the Consumer Price Index—in boom times and in busts.  

Maureen Maitland, vice president of Standard & Poor's Indices, attributes the rise in healthcare costs to supply and demand; healthcare providers are charging more because they can. "Basically the demand for healthcare is high, and physicians and hospitals are trying to meet their budgets, and are able to put these rate increases through," she said.

This is unsustainable. More and more, middle class Americans are feeling the pinch of rising health insurance premiums in an era of stagnant wages. So far, public scorn and blame has been directed almost entirely at the health insurance industry. That will change, however, as more people look for explanations and scapegoats. The mainstream media will write more stories about compensation for senior executives at hospitals and health systems. Even, doctors—consistently among the most trusted professionals in the United States—may soon find their compensation on the public radar.

Will the criticism be fair? Given the rage out there in the public, it almost doesn't matter. Healthcare is as much an emotional issue as it is an economic issue for many Americans. That was made clear during the healthcare reform debate over the last two years when town hall meetings devolved into screeching matches.

So, as healthcare costs continue to climb, brace yourself for renewed public interest in C-Suite salaries. A lot of people are figuring out what we already know: it's good to be in healthcare.

 
*Compensation Data Healthcare 2010/2011 contains data on over 200 industry-specific job titles and more than 250 benchmark titles ranging from entry-level to top executives. In 2010, Compdata Surveys received data from nearly 1,200 healthcare organizations across the country, reporting on 5,400 locations, effective Jan. 1, 2010.