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HFMA'S 2009 Compensation Survey

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Compensation Trends in Turbulent Times It's often said that financial careers in health The survey, which is available in its entirety to care are recession-proof. But is this truly the HFMA members online at www.hma.org/ case? HFMA recently provided some insight compensation2009, examines compensation to this issue with its detailed examination of trends for financial executives in such areas as: compensation trends for CFOs, PFS managers, Job title and other healthcare finance professionals Education attainment over the past two years. Years in position

HFMA's goo9 Compensation Survey reveals some Years in health care

pretty eye-catching findings: Real compensa- Gender

tion increases for CFOs hit their lowest mark in Geographic area S.- . .C. ertificatinn attn

L e near ao-year history ot the survey. Bonus payouts today are lower than two years ago, and CFO tenure has decreased by 25 percent. And the news doesn't appear much more positive for middle managers, who saw compensation

grow slower than in past.

Organization type, size, and net patient revenue

* Standalone versus system location

Although the survey examines trends for many healthcare positions, what follows is a peek at just a few findings pertaining to CFOs.

CFO Compensation Increases Slowing By Half Whether it's due to economic concerns or When adjusted for inflation, the CFO num- tightening budgets, the slowing economy has bers hit new lows. The real, or inflation- hit healthcare CFOs. Although compensation is adjusted, rate of increase from 2007 to 2009 up, it is increasing at a much slower rate than in was 0.3 percent-down from the 3.7 percent the past. As a group, CFOs took two years to rate CFOs saw from 2oo5 to 2oo7 and the achieve the single-year percentage increases in lowest rate of increase since HFMA began compensation they enjoyed earlier this decade.* tracking such data in i98o. Median compen-

An average (mean) cash compensation of sation (the mid-point of the distribution) $209,800 in 2oo9 reflects a 6.9 percent rose from $W67,3oo to $176,ooo, representing increase from 2007 and an annual increase an annual increase of 5.4 percent, which of 3.4 percent. (See exhibit on na e ) Bth ,- slightly outpaced inflation.

those numbers are down by about half from the 14.1 percent compensation gains from 2oo5 to 2007 and the annual 6.7 percent increase CFOs experienced during that same two-year period. For comparison's sake, inflation as measured by the consumer price index (CPI) increased only 2.1 percent annually.

And while the lowest reported salary rose (from $36,ooo in 2007 to $52,000 in 2oo9), the top salary in HFMA's sample dropped (from $1.2 million in 2007 to $87o,ooo in 2oo9, compared with 2oo5's high salary of $793,ooo).

* For a description of the survey sample, seepage 8 of this section.

4)'t HFMKS 2090OPESAIN URE

Hospital ~~ ~ VV an elhaeSse F opnain 03truhZV I/

Average Total Compensation

Average Gross Annual Salary

Percentage Eligible for Bonus/Profit Sharing

Average Annual Bonus/Profit Sharing

Low

Median

High

$151,000 $134,600

64% $25,500

$35,000 $120,000 $685,000

$172,000 $152,900

65% $29,600

$35,000 $146,300 $793,000

$196,200 $171,100

69%

$34,400

$36,000 $167,300

$1,200,000

$209,800 $188,500

68% $31,200

$52,000 $176,000

$870,000

Salaries increased an average of $17,400,

or lo.2 percent, but variable compensation,

adjusted for availability, decreased by $z,500,

or 7.3 percent. Bonus payouts were down from

?oo7, but the 14 percent of bonus-eligible

CFOs who did not receive a payout remained

consistent with 0oo7 and 2oo5 percentages,

and up only slightly from 12 percent in 2oo3.

When viewed overtime, however, compensa-

tion trends appear brighter: From 198o to 2oo9,

compensation averaged a 6 percent annual

increase (3.5 percent adjusted for inflation),

and CFOs realized inflation- adjusted bonuses

of 2.4 percent annually.

Tenure Decreasing

CFOs in today's survey are, on average, one

year older and possess one more year of

healthcare experience than they did in 2oo7.

But CFO survey participants are newer in

their jobs than their counterparts from two

years ago-average tenure in their current

position dropped from lo years in 2oo7 to

7.5 years, possibly signaling increasing turn-

over among CFOs.

Compesatin byYear in urret eoitio

Range

2 Years or Less

From 2.5 to 4.5 Years

From 5 to 9 Years

10 Years and Greater

Count 80

62 84 78

SAverage; (Mean)

Compensation $211,600 $195,400 $235,900 $193,000

Median Compensation

$170,000 $169,100

$188,000 $179,000

[CF Copnato ine18

1980 1984 1986 1989 1991 1995 1999 2001 2003 2005 2007 2009

$38,300$54,700 $56,600 $62,600 $82,100 $99,900

$110,000 $127,000 $151,000 $172,000 $196,200 $209,800

CFO Experienc

Job Tenure Years in HFMA

Years Experience in Health Care

Age Number of Reporting Employees

: AverageMedian (Mean) 5 7.5

19 18

24 24

51 50

75 126

Ifs also unclear how much CFOs are rewarded

for experience in their positions. CFOs who

have held that job for lo or more years earn,

on average, less than those who have been in

their jobs from two-and-a-half to nine years.

Compensation also drops for CFOs who have

been in the healthcare field longer than three

decades, peaking for those who have been in

health care from 25 to 31 years before declining

for those with 32 or more years of experience.

Bigger Organization, Bigger Paycheck It's not surprising to note that CFOs in larger organizations earn substantially more than System CFO Hospital CFO those in smaller hospitals and health systems, Average Compensation $314,300 $188,700 although the difference isn't as drastic as seen Median Compensation $280,000 $163,400

Eligible for Variable Compensation 87% 65%in patient revenues. For instance, CFOs in Count of Respondents 53 250 system headquarters earn more than two- Female 25% 29% thirds more than the average hospital CFO, Graduate Degree 53% 50% but their organizations take in more than nine CPA 55% 47%HFMA Certification 15% 26%times more revenue than the average hospital. Median Employees under direction 195 70

Despite similar experience levels, system CFOs Average Years in HFMA 19 18 Average Years in Healthcare 25 24direct more than twice as many employees and Average Age 51 50

are more likely to be CPAs than hospital peers. Average Years in Current Job 5 8

Bed Count 25 and Below From 32 to 120 From 112 to 270 275 and Above Hospital Total* System Headquarters

count of Respondents

61 62 61

250 53

Location, Location, Location Nationally, compensation trends are continu- ing as they have since 2ool, with the highest paid CFOs in the Northeastern states, where

high-cost states such as New York and Pennsylvania pull the average up. But not

only does the Midwest - home to many small, rural hospitals - register the lowest regional compensation levels, it's the one region where average compensation dropped, from $i78,ooo in 200 7 to $172,1oo this year.

Amore accurate measure of compensation may be the Medicare Wage Index, which takes regional labor costs into account. Using the index, an area with exactly average healthcare wages costs would have a wage index of 1.oooo. For example, an area with wage costs 2 percent above the national average would have a wage index of i.o2oo. More

Average Net Patient Revenue

$23 million $63 million

$140 million $409 million $160 million

$1,459 million

Average CFO Compensation

$106,000 $144,500 $216,900 $287,900 $188,700 $314,300

CFOs in our survey are from areas with below-

average wage indexes, which maybe due to the fact that many hospitals are in rural areas and small cities with lower wage indexes.

The index has consistently shown over the years that CFOs in high-wage parts of the

country earn more than their counterparts in low-wage regions. But what may be particu-

larly noteworthy is the $123,ooo swing from the bottom quartile to the top quartile.

Range Less than or equal to 0.8492

From 0.8493 to 0.9122 From 0.9138 to 0.9971 More than or equal to 0.9982

*Using the adjusted wage index released in 2008.

Average (Mean) Count Compensation

75 $151,700 75 $165,200 77 $246,300 76 $275,500

CFOCopenato n by•'. Orgniztio Type. and Size•

6 HMAS 009COPESATONSUVE

Gender Gap Shrinking After increasing in 2oo7 and holding

steady in 2oo3 and 2oo5, the differenc

compensation between male and fema

CFOs closed to its narrowest gap since

And in terms of percentage of average

pensation, it's the lowest recorded on t

survey. Part of the reason for the rever

may be that the percentage of female s

Men

Compensation

Average Compensation

Median Compensation

Eligible for Bonus/Profit Share

Count of Respondents

Median Medicare Wage Index*

Qualifications

Graduate Degree

CPA

HFMA certification

Responsibility Median Employees under direction

Median Net Patient Revenue of Organization

Median Bed Count (Hospital Only)

Percent in System Headquarters

Experience

Average Years in Current Job

Average Years in HFMA

Average Years in Healthcare

Average Age

$ $

$222,400 $180,000

71% 218

0.9501

54% 46% 28%

75 $98 million

132 18%

7 19 25 51

iearly

:e in

CFOs (a smaller and well-paid subgroup of

healthcare CFOs) increased from io percent

in 2007 to 25 percent in 20o9.

2001. A closer look at the data reveals contributing com- factors to the pay gap between genders. Some his of the higher-paying- and likely higher

sal responsibility- positions at the largest insti-

ystem tutions are more likely to be filled by men

(data show that the size of an organization,

omen including revenue and employees, is the big-

179,500 gest factor in CFO compensation). Among

146,800 respondents, men on average run organiza-

63% tions with larger revenues and have more

86 employees reporting to them. Plus, they have

0.9266 about five more years of healthcare experience

41% and are more likely to have a graduate degree

52% than women (though a larger percentage of

15% women are CPAs).

57 Female CFOs are more likely to be found at

$79 million smaller hospitals - 38 percent of CFOs at the

87 smallest hospitals are women, compared with

15% 25 percent at the largest organizations. And while a gender gap still exists when grouping

8 CFOs by their organization's size, compensa-

14 tion differences drop by about half- from

20 $42,9oo overall to $2o,ooo to $25,o0o.

. . .Copnainb e .ain eeu

Range

Less or equal to $33.9 million

From $34 million to $90 million

From $94 million to $265 million

Greater than or equal to $275 million

Count 71 74 72 73

S::Average(Mean) Compensation

$104,000 $158,600 $237,300 $343,600

Female 38% 22% 26% 25%

S mean Compensation

Men $111,800

$162,800 $243,900 $349,100

S::mean Compensation

Women $91,400

$143,200 $218,800 $326,700

Gender Gap

$20,300 $19,700

$25,200 $22,400

About 2009's Compensation Survey Respondents were contacted in January and

February of !oo9, with questions pertaining

to earnings as of Jan. 1, 2oo9. Respondents

were drawn randomly from among HFMA

members with like titles. CFOs made up the

largest group of respondents: 305 CFOs

responded to the survey, out of a sample of 581.

All respondents with a title including the

words chief financial officer or CFO are

recorded as CFOs, including such joint titles

as CFO/VP and CFO Controller. Responses

numbers by other title are listed as well.

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305

270 269 256 239 234

232

231

213 198 167

139 126

Number of Responses

TITLE: Compensation Trends in Turbulent Times SOURCE: Healthcare Financ Manage 63 no8 Ag 2009

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