Healthcare leaders are seeing smaller raises, but retention is up, according to the Hay Group's 2010 Healthcare Compensation Study. The share of healthcare CEOs receiving at least a 6 percent increase in base salary dropped to its lowest level in 10 years (22 percent). Just two years ago, nine in 10 healthcare CEOs were given raises of at least 6 percent.
Ron Seifert, executive compensation practice leader for Hay Group's Healthcare Practice, told FierceHealthcare that poor performance in the financial markets and lower-than-anticipated volumes in many healthcare systems were a "double whammy." Boards looked at what was going on in the state and federal legislatures and organizational performance and decided: "Now is not the time to be giving out increases."
To be sure, the market is stratified. Some healthcare organizations, such as big academic and high-acuity hospitals, are doing well, and their executives will expect to be rewarded, Seifert noted. While he has sensed an air of conservativism in board rooms and executive suites, he believes organizations need to retain leaders during difficult times. The sustained challenges posed by a healthcare reform environment, he says, mean there is a need to have capable leaders executing strategies and business plans. "Organizations really have to look in the mirror," Seifert said. "We've got really capable leaders, even if we feel the need to be conservative, what's the answer now?"
Despite less impressive salary increases, senior leaders have not headed for the exit; in fact, turnover has become less common at the executive level. For the first time in a while, the turnover rates have slowed for CEOs down to 5 percent, from 14 percent between 2008-09 and 2009-10. Turnover rates also fell for COOs (4 percent from 12 percent), and CFOs (5 percent from 12 percent) over that time span. Among all top executive slots, chief HR officer saw the only increase in turnover rates--up to 13 percent for 2010 from last year's rate of 7 percent.
The good news is that Seifert doesn't think the flood gates area opening. Don't view the downward trend in raises and the uptick in retention as part of a permanent shift in the paradigm, he said.
In other findings:
- In the healthcare not-for-profit sector, base salary increases dropped to 3 percent from 5 percent between 2009 and 2010.
- Patient satisfaction remains the most common performance measure for annual incentives across all employee groups in an organization
- One in four survey participants had a multiyear incentive plan in place in 2010, up from one in five in 2009.
To learn more:
- read the Hay Group press release
- read the FierceHealthFinance special report on top healthcare system CEO payouts
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