Does the salary of a hospital chief executive officer (CEO) have anything to do with the quality of care being provided at the facility—or even the hospital’s bottom line? Unfortunately, and surprisingly, there isn’t a clear answer to that.
Healthcare CEOs can shape the priorities and performance of their organizations, having an impact that can reverberate to the many crevices of healthcare. But the degree to which their compensation is based on their hospitals’ quality of performance has been unknown. A JAMA Internal Medicine study sought to characterize CEO compensation and examine its relationship with quality metrics.
What did they find?
Researchers determined that the average income for a CEO at a nonprofit hospital is almost $600,000, with CEOs at large networks and large teaching hospitals easily clearing $1 million. In addition to base pay, healthcare CEOs can tack on additional bucks with bonuses and stock options (at for-profit institutions). CEOs at the largest hospital systems, especially for-profits, can make up to $12 million.
In the meantime, physicians comparatively only make a tiny fraction of those income levels. Orthopedic surgeons, who are the most highly paid specialists, had a mean income of $413,000 in 2013, according to Medscape’s 2014 Compensation Report.
The JAMA Internal Medicine study found that hospitals with high levels of advanced technologic capabilities and those with high performance on patient satisfaction appeared to compensate their CEOs more than those with low levels of technology and low performance. However, there was no association found between CEO pay and hospital’s margins, liquidity, capitalization, occupancy rates, process quality performance, mortality rates, readmission rates, or measures of community benefit.
What about the rest of the healthcare industry?
At the 11 largest for-profit insurers, CEOs earned on average of $11.3 million in 2013. Executives at leading biotech companies earn the most of any group, averaging $18.3 million a year on Forbes’ 2012 list of the highest-paid CEOs.
There’s no question that running a successful hospital takes talent and competence. But hospital CEO’s salaries don’t appear to always be associated with obvious measures of hospital success.