Hospital and health system executives’ compensation continues to soar and will likely maintain that pace as organizations search for a narrowing set of qualified executives to lead more complex operations across a consolidating health care landscape.
The most significant annual pay hikes are being doled out to executives who are believed to be best qualified to navigate the path to a system that increasingly favors value over volume. Incentive packages tend to focus on systemwide metrics, including reducing variation in care and unnecessary procedures, patient satisfaction and other measures that follow new reimbursement models.
Median total cash compensation across 36 health system executive positions rose 6 percent from 2016 to 2017, compared with a 3.1 percent annual increase for 11 hospital executive positions analyzed, according to Modern Healthcare‘s 37th annual Executive Compensation Survey. The survey reviewed nearly 1,200 health care organizations, including 831 hospitals and 360 health systems. It was the third consecutive year that health system administrators took home raises that mirrored prerecession rates of about 6 percent to 8 percent, up from around 2 percent in 2014.
The biggest compensation bumps were being given to those who are leading changes in strategy, clinical transformation, operational integration and patient experience to comply with reimbursement models that favor a value-based system.
“There is increasing demand for physician leaders to take on quality, clinical informatics, integration, network development and other activities to redefine clinical care,” said Bruce Greenblatt, managing principal at Sullivan, Cotter and Associates, the compensation consulting firm that has supplied data for Modern Healthcare‘s annual surveys since 2003. “That’s where there is a limited number of physicians who have the management skills to lead these missions and where we’re seeing upward pay pressure.”
Overall, presidents and CEOs at health systems received a 7.6 percent year-over-year increase in median total cash compensation, from $1.04 million in 2016 to $1.12 million this year. Systems’ chief operating officers drew the biggest annual increase in total cash compensation among top-tier executives, rising 10 percent to $843,400 for systems with more than $1 billion in net revenue and 7.5 percent to $506,000 at systems with less than $1 billion.
The biggest pay raises among all health systems went to the chief strategy officer, rising 13.9 percent to $548,900 a year; the top clinical research executive, up 11 percent to $455,300; top facilities executive, which increased 10 percent to $285,000; top compliance executive, climbing 9.2 percent to $291,000, and the chief operating officer, 8.7 percent higher at $701,000. Several new positions were added to the survey in 2017, including chief nursing officer/top patient care executive, chief technology officer, top public affairs executive, top community health executive, top clinical information/transformation executive and top quality executive.
The pay increases and expanded roles represent the most sought-after expertise in an evolving health care landscape. Three years ago, IT leaders received some of the largest raises as organizations focused on integrating electronic health records, said Tom Pavlik, a managing principal at Sullivan Cotter.
Of the 47 executive positions surveyed for both hospitals and health systems, only CEOs of independent hospitals and chief technology officers at systems (both down 1.4 percent) and top medical informatics executives at systems (down 1 percent) had lower median total compensation year over year. Presidents and CEOs of standalone hospitals saw their median total compensation drop to $648,700 this year while chief executives of hospitals owned by a parent organization rose by 4.8 percent to $468,800.
Skills dealing in operational synergies are highly valued in today’s rapidly consolidating industry, particularly as more care is delivered outside of hospitals. In just the second quarter of 2017, the number of hospital transactions rose by 15 percent compared with the same period last year, and the deals are getting bigger, a recent analysis from PricewaterhouseCoopers found. As systems buy up more hospitals and physician practices and grow their market share, they need to align operations and engage physicians across the care continuum to generate the best outcomes and return on investment, Pavlik said.
“Systems are getting larger and more complex, which makes the job more difficult,” he said. “More competitive compensation packages are being offered to find the best-qualified executive to lead these organizations.”