Quality metrics may not factor into hospital CEOs' $596K salary

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 - Fistful of Money / Finance

The compensation of CEOs at nonprofit U.S. hospitals may not be based on patient outcomes, the provision of care or benefit to the community. Instead, a JAMA Internal Medicine study published online Oct. 14 found that compensation may be more closely linked to technology and patient satisfaction.

Using salary data made publicly available for the first time in 2012, researchers looked at information on at 1,877 CEOs at 2,681 private, nonfederal, not-for-profit hospitals in the U.S. They also used data from other sources providing information on Medicare costs and other measures.

“We hypothesized that CEOs who oversaw more complex organizations (measured by number of beds, number of hospitals overseen, membership in a system, or being a major teaching hospital) would be compensated more highly than others,” wrote the authors, led by Karen E. Joynt, MD, MPH, of the Harvard School of Public Health in Boston.

They analyzed hospital structure and organization, financial performance, technology, care quality and benefit to the community. As their primary outcome, they determined the total compensation of CEOs.

The average CEO compensation was $595,781, and pay was associated with the number of hospital beds, hospital teaching status and an urban location. CEOs earned $550 for each additional bed and $425,079 more at teaching hospitals that at non-teaching hospitals. Technologically advanced hospitals offered CEOs $135,862 more than less advanced hospitals. CEOs of hospitals with high levels of patient satisfaction earned $51,706 more than their counterparts at lower-performing hospitals.

“We found no association between CEO pay and hospitals’ margins, liquidity, capitalization, occupancy rates, process quality performance, mortality rates, readmission rates, or measures of community benefit,” the authors explained.

But Warren S. Browner, MD, MPH, CEO of California Pacific Medical Center in San Francisco, argued in an editorial that Joynt and her colleagues looked at only a few of the many possible quality metrics. It is difficult, he explained, for hospitals to measure them all. The measures important to one hospital may not be important to others.

“A more likely explanation for the absence of a correlation between CEO pay and quality is that hospitals are concerned about, measure, and reward different quality metrics,” he wrote.