While most hospital and health systems are reworking their executive incentive plans, only 16% eliminated bonus payouts entirely this year as COVID-19 roils the healthcare industry and the broader economy.
Annual and long-term performance-based incentives have driven pay hikes of 4% to 7% each of the last five years, according to Modern Healthcare’s annual Executive Compensation Survey. Prior to the pandemic, weighted average total cash compensation, which encompasses base salaries and bonuses, for executives across 376 health systems surveyed increased 6.5%. Weighted average total cash compensation rose 3.2% for executives across more than 1,000 hospitals.
That trend shifted along with the rest of the industry as COVID-19 slashed revenue for many providers and costs surged, although federal bailout funds and revenue that wasn’t fee-for-service have buffered some hospitals and health systems.
As of the end of June, approximately 38% of organizations had implemented temporary executive salary reductions typically ranging from 10% to 30% and spanning three to six months, according to executive compensation experts at SullivanCotter, the consulting firm that has supplied data for Modern Healthcare’s annual survey since 2003.
As of mid-May, nearly two-thirds of providers were considering revising, replacing or adding new incentives for COVID-19 or moving to a partially or entirely discretionary plan, where the amount, requirements and timing are not disclosed in advance and left to the compensation committee’s discretion. Also as of mid-May, 16% of health systems and hospitals had reported plans to eliminate bonuses, so those results may have changed, SullivanCotter noted.
Around 15% of providers have already rolled back temporary salary reductions, June survey data show.
While COVID-19 has had varied impacts on providers based on their market, eligibility for relief funding and structure, the aggregate toll on the industry is significant, drawing scrutiny on rising base salaries or incentive payouts.