Healthcare's Senior Leadership Pay Continues to Rise

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

Across the C-suite, salaries and total cash compensation continue to rise, though changes to incentive structures may be influencing the size of the increase.

INTEGRATED Healthcare Strategies' 2012 National Healthcare Leadership Compensation Survey reports that though the use of annual incentives for executives remains very common, with approximately 80% of all hospitals and systems providing this type of plan for executives, the use of long-term incentives is slowly increasing, explains Kevin Talbot, executive vice president and practice leader at Integrated Healthcare Strategies.

He notes that an IHS study indicates from 2001 to 2011 hospitals and health systems began slowly adding more long-term incentives into the executive compensation model. IHS' data also indicates the most common performance category for annual incentives remains financial (generally, operating margin) though clinical quality and patient satisfaction are also in the incentive mix.

For not-for-profit CEOs nationwide the median total cash compensation (base plus incentives) increased 3% to 6.7% over last year, and these organizations' senior leadership teams gained similar pay increases, according to IHS' survey and the Sullivan, Cotter and Associates, Inc.  report, 2012 Survey of Manager and Executive Compensation in Hospitals and Health Systems.

Health system CEOs' median base salaries increased to $717,500 (2012) from $650,000 (2011), while independent hospital CEOs' median base salaries rose to $506,100 from $472,000 during that period, according to IHS. Comparatively, Sullivan, Cotter and Associates shows the base pay for system CEOs nationwide increased while the TCC declined slightly—base pay increased to $334,700 from $325,000, while TCC decreased to $411,100 from $412,100 from 2012 to 2011, respectively. Unlike their health system counterparts, independent hospital CEOs' base pay and TCC climbed between 2011 and 2012—base pay went up to $530,000 from $504,000 (a 4.9% gain) and TCC jumped 4.3% to $600,000 from $574,000.

Nationally, CEO compensation has risen year over year, though there are variations in pay for CEOs at health systems versus independent facilities. CEOs at not-for-profit integrated health systems received a median 4% increase in base salary from 2010 to 2011, while independent hospital CEOs saw a salary improvement of 5%, according to the 2011 Hay Group Compensation Survey.

Other members of the C-suite, too, are seeing increases, but the percentages vary by position. COOs at systems saw a modest 1.6% increase in base pay in 2012, but actually had a TCC decrease of -1.7%, cutting their overall salary and incentive pay to $249,100 (2012) from $253,300 (2011), the Sullivan, Cotter and Associates survey notes. However, the same survey notes that COOs at independent facilities got a 9.2% TCC boost to $375,900 (2012) from $341,200 (2011). Nationally, system CIOs received one of the largest TCC increases year over year, according to Sullivan, Cotter and Associates (5.8%). IHS reported a median base salary increase of (3.5%). In 2012, independent hospital CIOs' median base pay hit $217,100 (previously $205,000) while systems CIOs reached a base pay of $291,700 ($273,500 in 2011), according to IHS; Sullivan, Cotter and Associates tracked a 7.9% increase in TCC for all CIOs nationally reaching $254,300 (2012), up from $234,300 (2011).

Sullivan, Cotter and Associates reports healthcare system CFOs earned a median base pay of $205,000 (2012), up from $200,000 (2011). Their TCC increased 2.1% to $238,300 from $233,300 in that same period. Freestanding hospital CFOs had a 6% uptick in TCC reaching $340,000 (2012), up from $319,700 (2011).

Though nationally hospitals are focusing more on quality initiatives that require even greater clinician attention, CMOs received average salary increases in both surveys. IHS reports CMOs at systems had a base pay increase of just 2% while CMOs at freestanding hospitals had a slightly higher increase of 2.4%. Sullivan, Cotter and Associates' data shows a TCC increase of just 0.3% for CMOs at systems, while independent hospitals gave CMOs a 3% boost.

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