Executives recruited into the C-suites of for-profit healthcare companies can expect their bonuses and at-risk compensation to be increasingly pegged to performance on patient quality, safety and satisfaction, experts say.
RegionalCare Hospital Partners, an eight-hospital for-profit system based in Brentwood, Tenn., that is merging with Capella Healthcare, put patient performance metrics into its executive bonus formula three years ago, said Chairman and CEO Marty Rash.
Patients are going to seek care where quality and satisfaction are highest, Rash said. So, it was natural for the RegionalCare board of directors and the board's compensation committee to tie a double-digit portion of executive bonuses to attaining those targets, he said. “If we say that our purpose and responsibility is to deliver high-quality care that is safe and compassionate, then it is imperative that we align the way we evaluate our leaders with our purpose,” Rash said.
The widespread adoption of detailed patient quality and service measures in annual healthcare executive bonus and at-risk compensation plans is a fairly new phenomenon, said David Yang, principal at national executive compensation consultant Frederic W. Cook & Co., which has published a survey of compensation trends for decades.
Before 2010, Yang estimates that no more than one-quarter of the 20-plus largest publicly traded hospital and healthcare companies told shareholders in proxies or other financial filings exactly how much the attainment of patient quality and satisfaction goals would affect executive bonuses. Today, the number is above 50%, Yang said.
Proxies recently filed for upcoming annual shareholder meetings show such giants as HCA, HealthSouth Corp., Kindred Healthcare and others using patient quality and service metrics to determine from 15% to 30% of annual performance bonuses for senior executives.
These large investor-owned hospital companies are trailing behind their colleagues in the not-for-profit sector, who have had about a five-year head start, said Jose Pagoaga, managing principal at Sullivan, Cotter and Associates, an executive compensation consultancy specializing in healthcare.