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.
The healthcare industry is one of the largest and fastest growing industries in today’s
economy, making the need for an effective and efficient leadership team essential. As with other
industries, each individual within the healthcare professional brings a unique skill set to the
company and plays a vital role within the organization. The role of chief executive officer
(CEOs) is one that carries a great deal of responsibilities, and is a key player in assisting to
ensure that their hospital or group of facilities run as smoothly and efficiently as possible.
Research from one journal article can be quoted as saying “the CEO must lead by example and
action to create a learning organization that is prepared to meet imminent and latent challenges
[man10]. Using this as a base, the role of the CEO is one where they are responsible for making
the most informed decisions to guide their hospital in the direction that meets the goals and
objectives of the facility. Daily challenges and difficulties arise, which require the CEO to
consistently work to ensure to that each department within the hospital has the staff and supplies
required to run smoothly. When one looks at the overall responsibilities of the CEO, the
compensation level given to those individuals should be one that takes those duties into
consideration.
Additional determinants for a board member to consider, in addition to the salary levels
of other chief executives with similar duties, would include the individual’s education level,
amount of experience from prior positions, the amount of responsibility held in prior positions,
as well as knowledge on any job hazards they may have experienced[Pyn11]. These factors are
important in determining the capabilities of the individual in question. The level of education
achieved is a primary factor to be taken into account when determining an executive position’s
salary. Studies of different CEO’s were done where a comparison was made on the different
characteristics of each, which include their level of education (Walston, et al., 2010). From this
sample study, research states that “19 percent of our sample hold a bachelor’s degree in
healthcare administration, 62 percent have earned a master’s degree in healthcare administration,
and 2 percent hold a doctorate degree” (Walston, et al., 2010). The level of education that each
CEO has achieved provides information related to their base knowledge and what has been
acquired just through education. ACEO who has achieved a doctorate provides proof that they
have spent many years advancing their education, working to gain a greater amount of
knowledge than one who has earned a bachelor’s degree. This level of education provides insight
into the individual, showing their willingness to improve and increase their knowledge to be a
better employee. The level of compensation received in terms of salary for a position should take
this effort into account.
One other factor that is as important as education in determining salary compensation is
job experience. Job experience provides data on an individual’s previous positions, the type and
amount of responsibilities held, and the length of time these responsibilities were performed.
This information provides data on how well an individual has used their education, applying it to
their past positions. An individual who has performed similar job duties in the past will have
gained “hands-on” knowledge that would be beneficial in knowing how to approach decisions
and situations. The final factor to be taken into account when determining if salary compensation
is appropriate relates to how executives are financially performing within their organization.
Studies have shown that different factors can play a role in determining the compensation rate for
executives [Rei09]. The measurement of the level of financial performance by executives is
easily obtained and has become an acceptable basis when determining salary levels in nonprofit
hospitals, as the use of this information is vital to the long-term survival of the organization
(Reiter, et al., 2009). When an executive assists in providing a profit to the organization, then
their compensation should be made in accordance, but if the organization is losing money, then
the executive shouldn’t receive the same level of compensation, mainly based on their lack of
success in helping the hospital grow financially.
Each healthcare professional in every position has their own separate set of
responsibilities and challenges that they may face. However, it is important that CEO’s “expand
their horizons by discarding obsolete mental models that do not solve today’s challenges and
must advance learning to be more effective” (Walston, et al., 2010, p. 414). Furthermore, chief
executives should always be ready to tackle and solve any problem or challenge that may come
their way. These individuals need to be strong leaders, being “the key decision maker who has
the vision of the organization, the trust of the community, and the growth of the healthcare
enterprise as his or her functional character” [Pyn11]. Therefore, given the numerous amount of
responsibilities that a chief executive has, a substantially higher salary is well earned.
The Bible shares with us the importance of responsibilities. “Do everything without
grumbling or arguing, so that you may become blameless and pure, ‘children of God without
fault in a warped and crooked generation’. Then you will shine among them like stars in the sky
as you hold firmly to the word of life. And then I will be able to boast on the day of Christ that I
did not run or labor in vain” (Philippians 2:14-16, NIV). Take on your responsibilities without
discord; be they as a doctor, support staff, or a CEO of a hospital, knowing that we do His work
as Christians accepting all that is set before us.
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
Walston, S. L., Chou, A. F., & Khaliq, A. A. (2010). Factors affecting the continuing education of
hospital CEOs and their senior managers. Journal of Healthcare Management / American
College of Healthcare Executives, 55(6), 413-428. doi:10.1097/00115514-201011000-
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