The survey results suggest hospital system CEOs received increases in their base compensation that was about four times greater than average workers, who have gotten annual pay hikes of less than 2% in recent years. Of the 143 analyzed, 37, or 25.9%, received raises in their base compensation that were 10% or higher; another 69, or 48.3%, had raises between 2% and 9.9%; and just 23 of the group, or 16.1%, saw a decline in their base compensation, according to Form 990s.
As the pay gap between hospital CEOs and average workers widens, the maxim about the need to hold on to top talent remains the same. “Dignity Health's executive compensation philosophy is designed to attract and retain the caliber of executives required to fulfill its mission of care,” according to a written statement. It is particularly important, they say, because of the breadth, complexity and scope of the system and its services.
And the way hospitals and health systems and their boards are attracting the right people to fill those top jobs seems to be increasingly through top dollars. It's necessary, they say, to be competitive.
“We want to make sure we can recruit and retain the highest quality of staff, while balancing benefits and the salaries that are reasonable as compared to other organizations,” Mayo's Ragsdale said.
Dignity Health and Mayo Clinic both do that with the help of their boards, an independent committee and legal counsel, while using third-party compensation consultants to perform market assessments.
“It's a balance of making sure we're in a position to recruit and retain but also to be good stewards with our fiduciary responsibility,” Ragsdale said.
Compared to comparably sized organizations in the for-profit arena, CEO compensation at not-for-profit health systems lags considerably, other experts argue. “The compensation ratio of a CEO in major corporations is 250 to 300 times the average worker's compensation in that company,” said Ken Ackerman, chairman of Integrated Healthcare Strategies.
But when you compare even large not-for-profit enterprises, you don't see those kinds of multiples, he said.
“Peter Drucker, recognized as the No. 1 management consultant in the world, always referred to healthcare as being as complicated as any business he's ever worked with. He even made the point that a small hospital is very complicated,” Ackerman said.
“I don't have any trouble with my colleagues that are handsomely paid. They're earning every penny of what they're making,” he said.
Correction: The chart "Biggest Core Salary Winners - 2012" indicates that Orlando Health CEO Sherrie Sitarik received a 40% increase in base compensation between 2011 and 2012. Sitarik was executive VP/chief strategy officer for the first three months of the fiscal year before assuming the role of CEO on Jan. 1, 2012. Her 2012 base salary reflected a full 12 months as CEO.
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