“Organizations have lower budgets, and I just don't see anyone trying to catch up on an overall basis,” Pavlik says. “I think there is still a strong demand for highly skilled executives. Especially when you start looking at the strong challenges we have with ACOs, pay-for-performance. There is still strong demand.”
One factor that experts say continues to exert negative pressure on executive wages is widespread public disclosure.
In recent years, much of the attention on compensation transparency has focused on employer-provided country club memberships, generous transportation benefits and other perks that had to be specifically outlined in Internal Revenue Service Form 990 tax disclosure starting in tax year 2008.
But in the context of a long-lasting economic downturn, the CEO's publicly reported salary and especially raises or bonuses can become a public-relations liability for a hospital board of directors, not only in relation to lawmakers and the public, but also in hospitals' relations with their own workers.
“Executive compensation is kind of a political football,” says Lindalee Lawrence, president of Wellesley, Mass.-based compensation consulting firm Lawrence Associates. “We see this in other not-for-profit organizations, not just healthcare, but the unions are not hesitant to look at the (IRS Form) 990 and bring that to the fore as part of their negotiation strategy.”
Although the increases in compensation may look modest, the total take-home pay figures for healthcare CEOs can still seem large on the whole—especially to community members serving on the hospital compensation committee who find they are voting to approve salaries larger than their own.
Healthcare system CEOs in 2011 remained the only group of executives in the survey to average more than $1 million a year in total cash compensation, with cash compensation pay climbing 4.3% to $1.05 million in 2011, the survey data show.
(Similar to other executive compensation surveys, one year's compensation is defined in the Sullivan, Cotter data as the current year's base salary plus all incentive payments in the most recent prior year.)
A closer examination of system CEO figures shows that the recipients of the biggest compensation gains were top executives of smaller health systems, whose 14.4% median total compensation growth rate was the highest of any job category.
CEOs of smaller systems, defined in the survey as those that recorded less than $1 billion in revenue, earned median total compensation of $631,300 in 2011—but all of that increase came from incentive pay and other kinds of cash contributions. Smaller-system CEO base pay did not change from the $600,000 median between 2010 and 2011.
Meanwhile, CEOs at larger systems—those with more than $1 billion in annual revenue—saw more balance in their pay packages. Large-system CEOs took home median total compensation of $1.2 million in 2011, which was a 3.2% increase. That percentage growth nearly matched those CEOs' 3.9% growth in base pay, to $924,700 from $890,000.
Turning to free-standing hospitals, median total compensation for CEOs grew by 8.5% to $571,000 in 2011 from $526,500 last year, even though their base compensation rose 3%, the survey data show.
“Hospitals were quick to respond (to the recession) and make cutbacks in executive wages, and are now finding more need to have stability in executive leadership and are responding more quickly,” says Ron Seifert, a vice president and the healthcare executive compensation practice leader for Philadelphia-based consulting firm Hay Group.
However, similar to the CEOs of healthcare systems, dividing the CEOs of hospitals into categories of larger and smaller revenue shows that all of the compensation gains for the top executives are at smaller hospitals, which were classified as having net revenue of less than $250 million.
CEOs at smaller-revenue hospitals saw 7.4% growth in median total compensation, to $445,000 in 2011, including a 7.7% rise in their $433,100 median base compensation.
But at hospitals with more than $250 million in revenue, CEOs actually lost ground in total compensation and base pay. Median total compensation fell 1.5% to $665,000, while base pay dropped 0.8% to $605,000.
Large-hospital CEOs, including those at many urban academic medical centers, were the only job category in the survey that saw declines in base and total pay in 2011.
Looking at differences in pay between various types of C-suite executives at free-standing hospitals versus hospitals within systems revealed that top executives at stand-alones had larger total paychecks and more substantial increases.
CEOs at free-standing hospitals saw a median 8.5% increase in total compensation, to $571,000, while chief operating officers in the survey received 4.5% increases and $337,000 in total cash compensation. The same pattern was seen for chief medical officers and chief financial officers, whose median total compensation packages grew faster at stand-alone hospitals.
Examining differences between the various C-suite positions at hospitals versus health systems, the survey found that CMOs earned more than COOs at hospitals, but not in systems, in their respective categories.
At systems, CMOs earned median total compensation of $472,100 in 2011, compared with the $535,800 earned by system COOs. But at hospitals, CMOs earned $343,200 at stand-alones and $329,300 at system-based hospitals—both of which were higher than their COO colleagues, who earned $337,000 at stand-alones and $274,400 at system-based hospitals.
“It's not uncommon for a CMO, particularly at smaller organizations, to make more than the COO,” says Kevin Talbot, executive vice president and practice leader for executive compensation and governance at Minneapolis-based human resources consulting firm Integrated Healthcare Strategies. “Physician executives in general are in high demand. Whether it's in the CMO world or the leadership of a medical group that is owned by a hospital, those jobs are important now.”
Talbot says the physician leader is frequently at the center of a hospital or health system's planning process for longer-term strategies such as achieving physician-alignment goals.
“The question is, will we see an increase in long-term incentive plans to bring about these longer-term strategies?” Talbot asks.