31st an­nual Ex­ec­u­tive Com­pen­sa­tion Sur­vey show salary hikes come down to earth

Modern Healthcare - - Front Page -

Health­care ex­ecs see smaller raises over­all, but some still net strong in­creases while oth­ers lose ground

Five years ago, if you had told a hos­pi­tal CEO that he should feel thank­ful to re­ceive a 3% pay raise, the ex­ec­u­tive might have called you crazy.

Wel­come to 2011. To­day’s health­care ex­ec­u­tives are op­er­at­ing in a world where a long re­ces­sion has been dis­placed by a long-sput­ter­ing re­cov­ery, and C-suite of­fi­cials’ pay­checks have been cut in the same spirit of aus­ter­ity as ev­ery­one else’s for four years run­ning.

But in that time, the top ex­ec­u­tive jobs have only got­ten tougher, ex­perts say. Gov­ern­ment bu­reau­crats have piled on new reg­u­la­tory schemes that re­quire mul­ti­year projects and vex­ing 21st cen­tury ques­tions, such as how should providers tran­si­tion into a pay-for-per­for­mance world or will they ever cre­ate their own med­i­cal home or ac­count­able care de­liv­ery model.

So the 3% av­er­age in­creases in base com­pen­sa­tion that hos­pi­tal and health sys­tem ex­ec­u­tives in more than a dozen cat­e­gories re­ceived in 2011 were the re­sult of con­flict­ing forces—con­tin­ued shared-sac­ri­fice bal­anced against a de­sire to keep ex­pe­ri­enced ex­ec­u­tives on board in the post-re­form age.

Mod­ern Health­care’s an­nual Ex­ec­u­tive Com­pen­sa­tion Sur­vey found that ex­ec­u­tives in the 24 cat­e­gories tracked at hos­pi­tals posted av­er­age salary growth of 3.1% in 2011,

Pav­lik says the 2011 salary fig­ures, which were drawn from re­sponses from about 1,200 health­care providers across the coun­try, ful­filled his salary pre­dic­tions head­ing into the year, even though the raises in the range of 3% were lower than his­tor­i­cal trends.

“That’s cer­tainly more con­ser­va­tive than the last 10 years, prior to the down­turn,” he says. “Pay in­creases were bet­ter than 4% for the rest of the decade.” In­deed, past sur­veys showed much larger an­nual in­creases that some­times stretched into dou­ble-digit ter­ri­tory dur­ing more pros­per­ous years.

Gov­ern­ing boards’ most re­cent de­ci­sions on ex­ec­u­tive pay seemed to an­swer one ques­tion that had lin­gered from pre­vi­ous sur­veys: whether CEOs would even­tu­ally make up the “lost” com­pen­sa­tion when they took pay cuts and freezes along with the rest of their staffs. “Or­ga­ni­za­tions have lower bud­gets, and I just don’t see any­one try­ing to catch up on an over­all ba­sis,” Pav­lik says. “I think there is still a strong de­mand for highly skilled ex­ec­u­tives. Es­pe­cially when you start look­ing at the strong chal­lenges we have with ACOs, pay-for-per­for­mance. There is still strong de­mand.”

One fac­tor that ex­perts say con­tin­ues to ex­ert neg­a­tive pres­sure on ex­ec­u­tive wages is wide­spread pub­lic dis­clo­sure.

In re­cent years, much of the at­ten­tion on com­pen­sa­tion trans­parency has fo­cused on em­ployer-pro­vided coun­try club mem­ber­ships, gen­er­ous trans­porta­tion ben­e­fits and other perks that had to be specif­i­cally out­lined in In­ter­nal Rev­enue Ser­vice Form 990 tax dis­clo­sure start­ing in tax year 2008.

But in the con­text of a long-last­ing eco­nomic down­turn, the CEO’s pub­licly re­ported salary and es­pe­cially raises or bonuses can be­come a pub­lic-re­la­tions li­a­bil­ity for a hos­pi­tal board of direc­tors, not only in re­la­tion to lawmakers and the pub­lic, but also in hos­pi­tals’ re­la­tions with their own work­ers.

“Ex­ec­u­tive com­pen­sa­tion is kind of a po­lit­i­cal foot­ball,” says Lin­dalee Lawrence, pres­i­dent of Welles­ley, Mass.based com­pen­sa­tion con­sult­ing firm Lawrence As­so­ciates. “We see this in other not-for-profit or­ga­ni­za­tions, not just health­care, but the unions are not hes­i­tant to look at the (IRS Form) 990 and bring that to the fore as part of their ne­go­ti­a­tion strat­egy.”

Al­though the in­creases in com­pen­sa­tion may look mod­est, the to­tal take-home pay fig­ures for health­care CEOs can still seem large

“I think there is still a strong de­mand for highly skilled ex­ec­u­tives. Es­pe­cially when you start look­ing at the strong chal­lenges we have with ACOs, pay-for-per­for­mance.” — Tom Pav­lik, man­ag­ing prin­ci­pal,

Sullivan, Cot­ter and As­so­ciates

while their col­leagues in 44 job cat­e­gories tracked at health sys­tems re­ceived 3.3% in­creases, ac­cord­ing to cal­cu­la­tions from the data done by Tom Pav­lik, man­ag­ing prin­ci­pal for Chicago-based Sullivan, Cot­ter and As­so­ciates, the con­sult­ing firm that pro­vides the an­nual sur­vey data to the mag­a­zine.

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