Dr. Ana Pujols-McKee, executive vice president and chief medical officer of the Joint Commission, said hospital systems with incentive payouts absolutely need to include quality-of-care performance in executive pay. “In an environment where there will be a bonus or an incentive for performance, I don't think it's reasonable to have it based purely on financial performance,” she said. “Quality is the product we're paying for as the consumers. That's what we expect.”
Dallas-based Tenet, which operates 77 hospitals, awards 25% of top executives' yearly cash incentives based on quality, the company's Securities and Exchange Commission filings show. To measure performance, the system's directors track the same measures used by Medicare to penalize or reward hospitals under the CMS' value-based purchasing initiative, such as rates of potentially avoidable infections. Trevor Fetter, Tenet's president and CEO, also earns incentive cash if hospital readmission rates drop and patient and physician satisfaction improve. Fetter earned $1.3 million in incentive pay in 2013. Tenet's chief financial officer, hospital president and general counsel have the same incentives.
While HCA does not place as much weight as Tenet does on quality incentives, its measures include rates of central line-associated blood stream and catheter-associated urinary tract infections. Incentives also are tied to performance on the CMS' core measures for heart attack, heart failure, pneumonia, surgery and immunization as well as patient-satisfaction scores, SEC filings show.
Last month, HCA, which operates 165 hospitals, added patient satisfaction and quality measures to its executives' incentive criteria. Quality will account for 15% of the Nashville-based system's 2014 annual cash incentive award for R. Milton Johnson, who was promoted to president and CEO from CFO after Richard Bracken, chairman, retired as chief executive last year.
Previously, HCA paid out bonuses based exclusively on earnings before interest, taxes, depreciation and amortization but allowed the board to use discretion to dock up to 20% based on quality performance. In 2013, the board did not dock any executive incentive awards based on quality, according to SEC filings. Bracken received $3.3 million as his incentive award last year and a salary of $1.4 million. Johnson last year received $1.4 million in cash incentives with salary of $899,983.
“We were among the first healthcare providers to tie our senior officers' performance bonuses to clinical quality,” HCA spokesman Ed Fishbough said.
William Carpenter III, CEO of LifePoint Hospitals, which operates 61 hospitals, sees one-quarter of his annual cash incentive awarded on quality measures that include patient-satisfaction scores and completion of patient-safety planning and a questionnaire on patient-safety attitudes, SEC filings show. Carpenter received an incentive payout of $1.5 million for fiscal 2012 and a salary of $978,192.