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Analysis

Nonprofit Exec Pay Growth Outpaces Doctor, Nurse Raises

By John Commins  
   August 15, 2018

In 2005, CEOs at major nonprofit health systems made three times as much as orthopedic surgeons. In 2015, they made five times as much. The disparity grew even wider for pediatricians and registered nurses.

The wage gap between senior executives and the physicians and nurses they employ at 22 major nonprofit health systems across the nation widened considerably over a decade, with clinicians on the lagging end.

The inflation-adjusted average compensation for CEOs at these medical centers increased from $1.6 million in 2005 to $3.1 million in 2015, a 93% increase, according to a new study in Clinical Orthopaedics and Related Research.

Over the same decade, compensation rose by 26% for orthopedic surgeons, 15% for pediatricians, and 3% for registered nurses, the study showed.

"There is a fast-rising wage gap between the top executives of major nonprofit centers and physicians that reflects the substantial, and growing, cost-burden of management and nonclinical worker wages on the U.S. healthcare system," lead author Randall E. Marcus, MD, of University Hospitals Cleveland Medical Center/Case Western Reserve University, said in remarks accompanying the study.

In 2005, hospital CEOs made three times as much as orthopedic surgeons. In 2015, they made five times as much. There were larger increases in the wage gap between CEOs and pediatricians, from 7:1 to 12:1; and CEOs and registered nurses, from 23:1 to 44:1, the study found.

The researchers also looked at the rising numbers and costs of managers and other nonclinical workers. In 2015, there were 10 nonclinical workers for every one physician.

Related: Tax Reform Redefines 'Reasonable' Compensation For Nonprofit Execs

Related: About 16% of Nonprofit Hospital Orgs Face New Excise Tax on Exec Pay

Related: Differences Between NFPs and For-Profits are Marginal

Nationwide, healthcare wages grew from $663 billion in 2005 to $865 billion in 2015. Nonclinicans accounted for 27% of this growth, managers for 7%, and physicians for 18%, the study said.

National healthcare expenditures increased from $2.5 trillion in 2005 to $3.2 trillion in 2015, with wages accounting for more than one-fourth of the growth that took place despite relatively stable use of healthcare services over the decade, the study said.  

The study suggested the growing numbers of nonclinicians and their compensation increases "appear to outpace plausible growth in value."

"It appears unlikely to us that the near-doubling of mean compensation to hospital executives is justified by the value added by their work," the study said.

"The value of each nonclinical healthcare worker, including executives, should be of concern to all of us and scrutinized closely by the boards of directors of these nonprofit medical centers."

John Commins is a senior editor at HealthLeaders.


KEY TAKEAWAYS

Healthcare wages grew from $663 billion in 2005 to $865 billion in 2015. Nonclinicans accounted for 27% of this growth, managers for 7%.

CEO compensation nearly doubled over the same period.

Study asks whether the growing numbers of nonclinicians and their increased compensation is commensurate with their value.


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