Oddly, the exact opposite trend is developing this year for senior leadership compensation. CEOs at not-for-profit integrated systems received a median 4% hike in base salary for 2010, while independent hospital CEOs saw an increase of 5%. The variation in total cash compensation (base salary plus annual incentives) is even wider in 2011: CEOs at integrated systems saw an increase of 3.1%, while independent hospital CEOs saw an increase of 6% in total cash.
“I would read that as a very quirky statistic. I would interpret that as an exaggeration of that pent up demand,” said Seifert, adding that hospital boards understand that the skills required to lead complex organizations like hospitals or health systems come at a premium.
Community hospitals in particular are loosening the purse strings. “They paid less than their counterparts in the integrated systems in prior years and in light of the current environment they really can’t afford executive turnover. We saw them making bolder adjustments, generally speaking.”
Boards and trustees are also warming to the idea of long-term incentive pay for senior executives. The Hay Group 2011 survey found that 79% of not-for-profit integrated health systems still offer annual incentive plans, but that number has fallen from 89% in 2007. Meanwhile, the use of long-term incentive plans among integrated systems has increased from 14% in 2006, to 25% in 2011.
“This is not an executive-driven change. It is a strategic shift in the thinking of boards and trustees,” Seifert says.