Should Hospital CEO Salaries Be Cut If Care Quality Fails?

Janice Simmons, May 6, 2010

Pay for performance—finding ways to reward healthcare providers for achieving high-quality care for their patients—has become a popular topic across the country. But can this idea apply across-the-board to hospital CEOs as well?

In legislative action north of the border this week, this question is close to becoming a reality in which compensation for top executives at Ontario's 154 hospitals could see their compensation go up or down depending on their organizations' performances.

On Monday, Ontario Premier Dalton McGuinty proposed legislation to assist the province in getting a better return on investment in areas such as healthcare and postsecondary education. One of the first targets, he said, would be compensation for hospital CEOs—14 of whom made more than $500,000 last year.

While the "Excellent Care for All Bill" is not expressly designed to lower salaries and bonuses for top executives-compensation still could fluctuate depending on how those CEOs perform, according to Health Minister Deb Matthews, in comments that appeared in Toronto's The Globe and Mail.

But, she said that the new rules would now make executives accountable not just for the financial health of their hospitals—but for how effectively they put patients' needs first. This would mean looking at how the hospitals were reducing rates of infection among their patients or how many patients were being readmitted shortly after being discharged from the hospital.

And under the new legislation, medical errors would be reported directly to patients and hospital executives—a practice that is already in taking place in large teaching hospitals, according to Matthews. Every hospital also would be required to measure quality using different metrics, such as standardized patient surveys, and would be required to post annual quality improvement plans on their Web site.

According to reports, the hospitals do not appear concerned that the Ontario government will try to further assume a greater hands-on role in the process. Instead, the task of overseeing the development of a quality improvement plan would remain with each hospital's board of directors. In the long run, an unspecified portion of a CEO's compensation would be tied to achieving the hospital's objectives, Matthews said.

"This is a vote of confidence in the local governance of hospitals," Matthews was quoted at a news conference at Toronto General Hospital, where she was surrounded by clapping and smiling hospital CEOs.

So if the legislation is approved, will it work in Ontario—without a great deal of panic among hospital executives? Well, maybe. Take the Niagara Health System, for instance. When asked about the legislation, Niagara's board chairman told The Welland Tribune that the system had put "building blocks in place" that link quality measures to the health system CEO's pay.

"It's always been included. This is nothing new to us. It's just formalizing the process—across the province," she said in reference to the legislation.

So is this a bellwether of what could occur in the U.S.? While no state or federal law like the Ontario measure is likely to be passed, the pressure is rising on CEOs to make sure quality issues—everything from stopping hospital acquired infections to improving disposal of medical waste—-are responded to promptly. Many boards—like the one in Niagara—do hold their CEOs accountable to addressing quality goals.

But should CEO compensation specifically be tied to the progress—or lack thereof—of making hospitals safer or more efficient? And who should decide what standards best determine improved quality?

These are questions that are likely to ignite heated debate. But as quality becomes a louder battle cry on the healthcare landscape, it's hard to think why those in charge should not be held to the same standards as the "troops"—the frontline providers delivering care to patients.

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Janice Simmons Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at
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