Hospital executives often come under scrutiny for the salaries and benefits they receive. According to a
recent IRS survey related to chief executive officer salaries, of more than 500 hospitals, the national
average income was $490,000. In addition, the salaries of hospital and other health industry executives
have come under scrutiny in Congress. For-profit hospitals, which make up about 30% of hospitals, do
not have to publicly disclose how much the executives at each facility earn, but nonprofit hospitals must
provide that information on the IRS form 990, which are public documents. By law, hospitals are required
to show that such compensation is "reasonable" when compared to pay at other similar institutions. If
you were a board member of a healthcare organization, what other determinants besides the salary of
other chief executives would you want information on before you determined the compensation of the
chief executive of the health care organization whose board you are on? In addition, how do the
responsibilities of chief executives compare to the responsibilities of other healthcare employees? Do
these responsibilities warrant a substantially higher salary? Defend your answer.
Christine,
Excellent post this week, it was very informative and easy to follow. I agree fully that the
executives within any healthcare organization are important to the governing and success of the
organization. In addition to their duties as administrators these individuals are also the “face” of
the organization, often times in the public view. Mayo Clinic CEO’s are a prime example of this.
The current CEO Dr. John Noseworthy is retiring at the end of 2018, and the newly board
appointed CEO, Dr. Gianrico Farrugia has already been noted in multiple newspaper articles,
sharing his background, family, and beliefs on the changes coming to the industry[Sno18]. When
looking at the debates in healthcare over the compensation of their top executives one must look
at not only the qualifications and business side but also what these individuals represent and how
well they perform that act.
Many top executives within the healthcare industry have been shown to earn a six-figure
salary, while also receiving the benefits and perks associated with their role at their organization.
When one looks at historical salary ranges for these individuals there is interesting information
that makes taking a second look a good idea for any board member. One of these facts pertains to
the 2009 Internal Revenue Service (IRS) released report. Findings within this report identified
tax-exempt hospitals throughout the United States eliminating staff positions and also putting
greater limits on budgeted expenditures, while not touching the pay received by executive
leadership, continuing to pay them six-figure salaries[Sha14]. In this industry, especially since
the health of patients seeking care at these facilities could be affected, it is important for
healthcare organizations to provide information to validate that the salary being paid to the
executive is reasonable for the position, while also not depleting needed resources with the
allocation of funds being focused more toward meeting that individual’s salary.
A board member of a healthcare organization should analyze the organization’s budget, as
well as the compensable factors, and benchmark positions in order to aid in making the proper
decision on the salary level of their chief executives. Compensable factors to be identified and
reviewed include experience, education, the complexity of duties performed previously and in
the current position, supervision received, supervision exercised, mental demands, physical
demands and working conditions[Pyn11]. The main factors that I feel should be reviewed would
be the individual’s level of experience, the complexity of duties performed previously and in the
current position, and how much supervisory experience they have shown.
Experience provides a backing on the individual’s ability in handling and their exposure
to situations or work-related issues. The complexity of duties past and present shows the
individual’s skill level and their judgement abilities. The final key factor, the amount of
supervisory experience, is essential in determining salary levels. The executives of any
healthcare organization are responsible for overseeing and managing the entire organization,
when looking at the salary compensation to be provided to these individuals, it is important for
the board of directors to look at how well these individuals have accomplished this main
responsibility. Healthcare is a complex industry which is constantly changing, needing talented
individuals with the skill level to manage this increasingly complex arena[Rei09].
“The one who plants and the one who waters have one purpose, and they will
each be rewarded according to their own labor” (1 Corinthians 3:8, NIV). We each have
roles to play in this world, roles at work, at home, and with each other. How well we perform
those roles will determine the reward received. Executive officers have a very large role to play
in the healthcare industry, making decisions that could be life changing for patients and for
employees. An officer who is meeting this role, fulfilling their duties and caring for those under
him or her, they should be compensated appropriately for that work.
References
Pynes, J. E., & Lombardi, D. N. (2011). Human resources management for health care
organizations: A strategic approach. San Francisco, CA: Jossey-Bass.
Reiter, K. L., Sandoval, G. A., Brown, A. D., & Pink, G. H. (2009). CEO Compensation and
hospital financial performance. Medical Care Research and Review, 66(6), 725-738.
doi:10.1177/1077558709338479
Shay, P. D., & White, K. R. (2014). Executive compensation in health care: A systematic review.
Health Care Management Review, 39(3), 255-267. doi:10.1097/HMR.0b013e3182915e44
Snowbeck, C. (2018). New Mayo Clinic CEO most recently led its Florida operation. Star
Tribune. Retrieved November 25, 2018, from http://www.startribune.com/mayo-clinic-
names-its-next-ceo/490568251/
