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Payers & Providers NEWS Page 2
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Payers & Providers OPINION Page 3
How much is too much?! This question arises outside independent compensation and prudently it uses resources and
when the topic turns to executive experts and impartial members of the whether the hospital is improving
compensation.! Salaries must be considered hospital governing board.! The governing access, quality and patient safety.
in the context of responsibility, importance board is typically comprised of local or Hospital CEOs earn far less than
and value to society.! ! regional leaders.! They are required by law professional athletes – but who is more
Hospitals are on the front lines of to ensure that the hospital meets its valuable to society?! !
healthcare.! They are open 24 hours a day, mission and remains nancially healthy.! Hospital CEO salaries are not a
seven days a week, providing access to high- Recruiting, retaining and rewarding the signicant factor in the cost of
quality health care services to all patients, most able executive leader is part of the healthcare.! The average annual total
regardless of their ability to pay.! Hospitals hospital board’s obligation.! Often, compensation for a hospital CEO is less
are where life’s greatest joys and deepest executive compensation is linked to than one-tenth of one percent of a
sorrows play out every hour of every day. ! specic measures including patient safety, hospital’s budget.! !
The late Peter Drucker, one of the most quality, efciency, patient satisfaction, Not-for-prot hospitals have few
renowned management consultants of the employee morale and nancial options to adequately compensate
second half of the 20th Century, stated that, CEOs.! All money paid to these CEOs is
“hospitals are the most complex form of transparent and must be reported
human organizations we have ever annually in compliance with federal
attempted to manage.”! Today, the regulations.! Retirement programs for
complexities and challenges facing hospital CEOs take two forms:! basic pension
CEOs are far greater than in the 1990’s plans and supplemental pension
when Peter Drucker made that comment.! ! programs.! Many supplemental pension
Being a hospital CEO doesn’t mean the plans must be paid, or reported as
individual is simply managing a facility and compensation, at the time such
employees.! A hospital CEO is responsible pension amount is vested.! Thus, in a
for overseeing the work of a vast array of given year, a retirement payment may
clinical and administrative professionals – be reported as a lump sum amount.!
doctors, nurses, pharmacists, laboratory This number may, on the surface,
scientists, radiology technicians, health appear high, but when taken in the
information technology experts and food context of decades of successful
service and housekeeping personnel, to executive leadership by a CEO, the
name just a few.! Hospital CEOs also bear one-time retirement payment is
the responsibility of managing a nancial negligible and reasonable.! Usually, the
structure in which the actual cost of pension payment is accrued over many
providing care is often underpaid – years.!
especially from Medicare and Medi-Cal, How much is too much?! It’s easy to
the two largest payers for many hospitals. ask the question, but when the
And, hospital CEOs must navigate a discussion involves leaders in charge of
plethora of complex and, sometimes organizations where life and death
contradictory, state and federal regulations By C. Duane Dauner decisions are made every day, we need
that make the timely delivery of high-quality, the best talent available to manage
affordable care nearly impossible.! performance.! hospitals.! We and our loved ones
Hospitals are often among the largest Hospital CEO searches are conducted depend on them. !
employers in their communities, supporting nationally, even for smaller hospitals.! The In the nal analysis, the lifetime
hundreds or thousands of employees.! marketplace for executive talent has compensation of a hospital CEO must
However, a hospital CEO’s job typically does evolved into a national arena.! Today, most reect his or her contribution to society.!
not end when he or she walks out the door hospital organizations consider candidates
of the hospital.! CEOs often are involved in from across the country when seeking a
community efforts to address the health and CEO.! The results are better-qualied C. Duane Dauner is the president
well-being of all residents.! Hospital CEOs candidates and more competitive of the California Hospital
are key leaders who are directly responsible compensation than in the past.! An Association, which represents
for their community’s most precious resource effective CEO saves his or her organization most of the state’s not-for-profit
– acute care – when people are in greatest far more than he/she earns.! A CEO’s talent and investor-owned hospitals and
need for life-saving health care services.! and abilities determine how well the hospital systems.
The process of establishing a CEO’s hospital is managed, how productively
compensation is rigorous, and involves
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Payers & Providers OPINION Page 4
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Payers & Providers MARKETPLACE/EMPLOYMENT Page 5
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Payers & Providers MARKETPLACE/EMPLOYMENT Page 6
Or visit: www.payersandproviders.com
*New England Journal of Medicine, 2004.
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