Despite increased scrutiny of executive compensation, hospital chief executive officers again topped the list of highest paid not-for-profit executives and many in the industry expect their pay to continue rising, according to an analysis of two surveys.
Last week, the American College of Healthcare Executives released a survey to Modern Healthcare of hospital CEOs that said 60% expected their salaries to continue to rise at the same rate and another 7% said they expect them to rise at a faster rate. The survey was faxed in January to 932 randomly selected hospital CEOs who are ACHE members, and 444 responded.
The ACHE said it conducted the survey-which isn't done regularly-to gain a better understanding of trends in compensation in light of emerging Internal Revenue Service standards. Also, Congress' interest and lawsuits over healthcare organizations billing of the uninsured have placed increased scrutiny on executive compensation.
Not-for-profits' tax-exempt status has drawn a lot of scrutiny from Congress and the IRS (Sept. 19, p. 6), and healthcare executives and physicians appeared prominently on a recent list of the highest paid executives of philanthropic organizations.
Hospital executives again could be found near the top of the annual list by the Chronicle of Philanthropy, and were ranked as the five highest-paid C-suite officers. Herbert Pardes, president and CEO of New York-Presbyterian Hospital, led the way among executives and ranked fourth on the overall list. All the not-for-profits included in the analysis were among those the Chronicle identified as raising the most money in 2004 from private sources.
It's not surprising that healthcare executives top the list of highest paid not-for-profit executives, said Kathryn Hastings, who specializes in healthcare human resources consulting as a managing principal for the consultancy Sullivan, Cotter and Associates. She said healthcare organizations are complex multibillion-dollar operations, but executives should be compensated handsomely only if they and their organizations are successful.
In the ACHE poll, 62% of respondents said their organizations have a formal short-term incentive compensation plan. Michael Peregrine, a partner at law firm McDermott Will & Emery in Chicago, said if those plans were just, it would be in an organization's best interest to draw attention to them by posting the plan on its Web site.
Pardes earned $2.5 million in 2003, the most recent year available, and a hospital spokeswoman released a statement that said the organization's compensation committee is made up of outside directors.
Seven-figure salaries aren't the norm among hospital and health system CEOs, said Tom Dolan, president and CEO of the ACHE. Dolan cited a Sullivan Cotter survey (Aug. 1, p. 26) that put the average hospital CEO compensation between $345,400 and $402,500 and average health system CEO compensation around $784,000.
-with Melanie Evans