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Thursday, July 3, 2014

Hospital CEOs--Not Doctors--among Medicine's top earners

NYT finds healthcare exec pay eclipses salaries of surgeons and general physicians
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Healthcare and insurance executives' base pay outstrips physician salaries, according to an analysis for The New York Times by Compdata Surveys. 
Hospital CEOs on average earn a base pay of $386,000 and hospital administrators make an average of $237,000, the analysis found.  But even though physicians are the most highly trained professionals in the healthcare industry, surgeons earn an average of $306,000 and general doctors make $185,000, according to the Times.

But those salaries don't take into account that top hospital executives earn most of their income from non-salary compensation, according to the article. For example, in 2012, the year he retired, Ronald J. Del Mauro, former president of Barnabas Health in New Jersey, earned a salary of $28,000 but had a total compensation package of $21.7 million.

But the highest earners are top health insurance execs. Aetna CEO  Mark T. Bertolini,  for instance, earned a salary of $977,000 in 2012 but his total compensation package was more than $36 million.




"The pay for the top five or 10 executives at insurers is pretty astounding--way more than a highly trained surgeon," Cathy Schoen, senior vice president for policy, research and evaluation at the Commonwealth Fund, told the Times.

Yet research indicates the more CEOs are paid, the worse their performance. "For the high-pay CEOs, with high overconfidence and high tenure, the effects are just crazy," Michael Cooper of the University of Utah's David Eccles School of Business, one of the study authors, told Forbes, noting they return 22 percent worse in shareholder value over three years as compared to their peers.

It's not just the CEOs who oversee the business of healthcare that are on the receiving end of these generous packages. Senior leaders frequently earn high salaries too.  "At large hospitals there are senior VPs, VPs of this, that and the other," Cathy Schoen, senior vice president for policy, research and evaluation at the Commonwealth Fund, a New York-based foundation that focuses on healthcare, told the Times. "Each one of them is paid more than before, and more than in any other country."

Doctors aren't pleased about the widening gap, especially given that the administrative costs result in inflated charges for medical services, according to the article. "Most doctors want to do well by their patients," said Abeel A. Mangi, M.D., a cardiothoracic surgeon at the Yale School of Medicine, in the article. "Other constituents, such as device manufacturers, pharmaceutical companies and even hospital administrators, may not necessarily have that perspective."
Last month Hans Rechsteiner, M.D., a surgeon in Wisconsin led a backlash against the prices after he discovered a brief outpatient appendectomy he performed for $1,700 generated a $12,000 hospital bill for the patient.



Although the healthcare industry boasts some of the highest paid professionals in any business, it also has staff that earn the lowest salaries, the Times noted. An emergency medical technician typically earns an annual salary of $27,000, the analysis found, while the average staff nurse receives $61,000 a year.

I don't think many will disagree that overseeing a healthcare institution is an extremely challenging job given the current industry climate. But is it worth $22 million year? That is approximately $60,000 a day.

 FierceHealthcare ran a story about CEO compensation trends in 2014, which indicate execs will receive modest pay raises and boards will work to make sure bonuses will be attached to performances measures.

Parkland Health & Hospital System in Dallas announced it will raise the minimum wage from $8.78 to $10.25 an hour next month for approximately 230 lowest-level employees. I suspect those employees are grateful for the extra $1.47 an hour or $58 a week to help pay for a tank of gas, a few groceries or coinsurance for a doctor's visit.
But don't weep for the 60 vice presidents and top executives at Parkland who have $350,000 less for bonuses. The pool of money left in that account is $3 million to $5 million. More than enough to hand out to the C-suite. -

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