Healthcare Reform Revs Compensation in the C-Suite

Factors to manage in short- and long-term

Overall, 89% or respondents agree completely or agree somewhat that annual incentive milestones may be too short, and that time periods longer than a year may provide a better match with performance in light of the industry's shift in emphasis to overall population health.

Especially considering the nation's long-term financial slump and what can be at times a highly charged political discourse, healthcare executive compensation earns a degree of public attention. More than one-third (39%) agree completely or agree somewhat that the public's desire for transparency hinders their ability to offer competitive compensation packages. And more than half (53%) agree completely or agree somewhat that their need to focus on cost containment hinders their ability to offer competitive compensation packages.

"There will be pressures from outside organizations and the community," says Kenneth S. Lewis, MD, JD, CEO of Union Hospital of Cecil County, a 122-bed not-for-profit acute care hospital in Elkton, Md. "It will continue to be an area that is closely watched in all industries, and even more so in healthcare, as there are increasing pressures to ratchet down costs."

Also, more than half (53%) say the stalled housing market presents executive recruiting problems.

A fundamental change in compensation

Lewis sums up how the shift to value-based purchasing is driving a fundamental change in the basis for executive compensation: "Revenue always was a surrogate for growth and productivity. Now, what we are really looking for are measures of efficiency, good patient outcomes, cost management, and operating margin."

Boards are modifying executive compensation programs accordingly, linking broad strategic directions to specific objectives. Although there is general acceptance of the concept of value-based purchasing, many organizations will be challenged by various organizational and operational tactics, executive compensation included.

This article appears in the November 2012 issue of HealthLeaders magazine.

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