The latest HealthLeaders Media research report looks at structures and strategies for executive compensation as the industry shifts from volume- to value-based models.
This article first appeared in the November 2014 issue of HealthLeaders magazine.
Because the healthcare industry is embarking on reform-prompted structural and financial overhauls, classic and comfortable production-based executive incentives are under scrutiny. Modifying executive compensation parameters is not easy, partly because moving in new strategic directions implies adopting new performance metrics. Compensation committees with a strong desire for stability may find that if they resist change, their strategic direction and their compensation packages will become misaligned at the top levels of the organization.
Joseph Pepe, MD, president and CEO of CMC Healthcare System in Manchester, New Hampshire—which includes the 330-licensed-bed Catholic Medical Center, the New England Heart Institute, as well as a number of subsidiaries—is helping the CMC board take a new direction when updating executive compensation. "The compensation committee is looking at this now, trying to find out what's fair," he says. "They are used to focusing on what like institutions are doing. I'm trying to get them a little bit out of their comfort zones, suggesting that we look beyond overall revenue, although I think that is a consideration.
"Instead," Pepe says, "we should look at what we want to achieve for the future. For example, if the future depends on the capabilities of improved operational efficiency, clinical integration, quality outcomes, and care management, then why not develop metrics around these so that there's incentive pay based on where we need to go in the future?"
Michael Zeis is a research analyst for HealthLeaders Media.