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CEO Incentive Pay Gets a Makeover

Philip Betbeze, for HealthLeaders Media, September 20, 2013

As he and I spoke, Chastain reviewed actual executive compensation plans from a variety of his clients. Many of them are determining executive bonus compensation based on Surgical Care Improvement Project (SCIP) measures, whether the organization exceeded norms on evidence-based medicine follow-through, and other complex measures of quality.

"Right now, I'm looking at two or three pages of really complicated stuff about quality," he says. "It's the right stuff, the quality committees of these boards are getting with the compensation committees on a systematic approach to what they're going after on the quality side. This is much more granular than before. It's not just core measures and patient satisfaction."

Chastain says that around 40% of a health system CEO's, overall compensation can now be tied to these measures, which should be quite enough to align incentives and force executives to do some of the most difficult work in their health systems—improving quality, removing waste, and improving integration.

Breaking down that potential bonus, executives who achieve goals in areas such as their net operating income, patient satisfaction score, a strategic component or two, and safety and quality can receive the full bonus.

Chastain says the most difficult to measure historically, quality and safety, when they were part of the bonus structure in the past at all, were often difficult to measure, and depended on fairly simple metrics. Not anymore.

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3 comments on "CEO Incentive Pay Gets a Makeover"


Edward Reed (9/20/2013 at 2:13 PM)
The idea of an BONUS is appalling in this health care atmosphere. Everyone is expected to sacrifice (patients and staff) except the ones who can do with less and not sacrifice anything. A simple definition of Bonus is>something in addtion to what is expected. Why should a CEO/CFO expect something is addition to what is expected. They are being payed like everyone else. They simply are doing what they are hired for. Like the RN, LPN, CNA and other health care workers. I know>>they think they deserve it!!!

bettynoyes (9/20/2013 at 1:46 PM)
I see tremendous ramification of this with the managers ability to lead each department. That skill set is often lacking

bob sigmond (9/20/2013 at 1:25 PM)
How about providing other incentives, instead of or beyond financial incentives? Like more time off for further study, support for greater impact and involvement in local, state and national health policy, etc. Some of the financial incentives are becoming embarrassing