Hospitals and health systems seeking executive-level talent must find leaders with the appropriate skills to oversee increasingly complex organizations, all while navigating a tight labor market and challenging economic environment.
“This industry is just under enormous pressure and stress,” said Michelle Johnson, senior partner at executive search firm WittKieffer. “I think we have to get a little creative, or at least a little more creative, both in terms of how we structure compensation and also in a willingness to broaden our hiring efforts.”
Organizations are drawing up competitive compensation packages with higher base salaries and incentives that better reflect the company’s priorities to attract the best talent to the C-suite and other top positions, according to consulting firm SullivanCotter. The company provides data from more than 2,000 health systems, hospitals, medical groups and health plans for Modern Healthcare’s annual Executive Compensation Survey.
Here are five things to know about trends in executive compensation over the past year.
1. Median salary for executive-level jobs is growing more slowly.
Consultants noted that inflationary pressures drove salary increases, albeit at a slower pace than last year.
Median base salary for healthcare executives at all organization types grew 4.1% year over year, down from the 4.3% reported in 2022, according to SullivanCotter's compensation survey. Data were calculated by comparing salaries as of Jan. 1, 2023, with those as of Jan. 1, 2022.
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“We saw inflation go through the roof, and that put pressure on executive compensation because as prices were going up, it was natural for boards to say, ‘Well, wait a minute. How is this affecting the market, and what do we need to do so that we are remaining relevant?’” said Alexander Yaffe, managing director at consulting firm Pearl Meyer.
At health systems, median base salary for presidents and CEOs grew 6.8%, while chief operating officers saw 3.8% growth. The highest increases in median base salary went to managed care executives (9%), professional services executives (8%), risk management executives (7.6%) and chief physician executives (7.5%), the survey found. Chief strategy officers' median salary had the smallest increase, at 0.6%.
Median base salary for hospital CEOs and presidents increased 2%, and chief operating officers saw 4.4% growth. Professional services executives and operations executives had the highest increases in median base salary, at 8% and 5.4%, respectively. The median salary for foundation or fund development executives remained unchanged from 2022 to 2023.
None of the executive roles saw a year-over-year decrease in median base salary.
2. Salaries for health system executives rose faster than those at subsidiary hospitals.
Health systems have grown more complex as they look to diversify revenue streams, merge with other systems and occupy increased market share. The challenges of overseeing large ambulatory footprints, physician groups, home health services and health plans, in addition to multiple hospitals, often mean boosted pay for leadership, consultants said.
Median base salaries for health system executives grew 4.8%, compared with 3.9% for hospital executives, the survey found.
3. Incentives for health system leaders are changing.
Median total cash compensation, which includes base salary and annual incentives, for health system executives grew 3.5%, according to the survey.
Consultants say the difference between total cash compensation and median base salary signals a downturn in incentive pay, related to the high costs and other financial hardships facing health systems.
Incentive models also continue to shift. Fifty-three percent of health systems changed their incentive plans for executives to include goals that better reflect an organization’s priorities, according to SullivanCotter’s April Pulse Survey, a separate report that draws data from more than 100 nonprofit health systems. New performance measures include efficiency, workforce engagement, quality and patient experience, said Bruce Greenblatt, managing director at SullivanCotter.
Healthcare organizations are showing more interest in long-term incentives, which can have a direct effect on retaining executives, Yaffe said. A popular tool is non-qualified deferred compensation, in which an employer sets aside a pool of money to award later—often five to 10 years in the future—in addition to what the employee is currently earning.
4. Demand for executive talent is higher than the available supply.
Health systems are using recruiting tools such as sign-on bonuses, retention awards, remote working options and professional development opportunities to attract leaders.
More than half of nonprofit health systems reported increased executive recruitment efforts, such as the addition of key roles, in the past year, Greenblatt said, citing the April Pulse Survey.
Churn presents an added challenge. Nearly 90% of health systems that responded to the April Pulse Survey saw steady or heightened turnover over the past year among leadership roles due to burnout, retirements and the availability of other career opportunities.
Consulting firms say they're often asked to step in when it comes to succession planning and strengthening the pipeline.
“We’re being asked increasingly by our clients to provide support and coaching for seasoned leaders and to help develop emerging leaders to try to address the supply side, so that there are more and more effective leaders available for the needs of these healthcare organizations,” Johnson said.
5. Overall, healthcare requires wide-ranging skills.
As healthcare organizations become more complex, leaders need to be able to address extensive operational costs, tackle labor shortages and adapt to an evolving revenue mix, Greenblatt said.
In response, organizations are seeking to broaden the expertise at the top of the payroll: The compensation survey found a larger number in 2023 are hiring leaders for patient access, patient experience, IT security, digital strategy and health equity, compared with the previous year.
Greenblatt said some health systems are looking outside of the industry for leadership talent in areas such as marketing, human resources and technology.
For the complete survey results, click here.
