I coined the term "seven-figure club" some time back for hospital executives paid more than $1 million a year. It was intended to describe a relatively small group.
It's actually not so small. According to a well-written but very much under-the-radar series by the investigative website 100Reporters, at least 100 non-profit hospital executives in California alone are in the seven-figure club. Extrapolate that out based on population data, and that means there are at least 1,000 members nationwide (100Reporters notes that at least 12 work for Intermountain Health Care in Utah).
That doesn't even account for the salaries at for-profit hospitals, which are mostly kept under wraps and recruitment executives have told me over the years are more competitive than in the not-for-profit sector. Or the trade groups--there were three members at the American Hospital Association in 2011, averaging almost $1.9 million in total compensation apiece. It requires about 8 percent of the AHA's total member dues to pay for just those three executives.
Then there's the new club, those with the eight-figure pay packages, which Crain's New York Business reported may become part of the "new normal" of hospital compensation. Barnabas Health CEO Ronald Del Mauro was paid a staggering $22 million in 2012, while Atlantic Health CEO Joseph Trunfio was paid $10 million.
The rationale is all the same: Pay needs to go up in order to recruit the best and brightest executives; running a hospital system is becoming more and more complex, etc.
If that's the case, it's only a matter of time before the nine-figure club starts accepting members.
I generally like hospital executives. Most tend to be low-key and genial, although a handful of those on the for-profit side tend to break that mold. But few are dynamic visionaries--that part of healthcare is owned by the biotech and software sectors, along with a few economists and research-oriented physicians.
While the days of seven-figure club members are long, they are also predictable--check the census and cash flow reports, confer with the medical staff, get updates on supplies, negotiate with payers, have some meetings on long-term planning. If it is a large hospital in a large market, those meetings are likely focused on site expansion and acquisition. If it is a medium-sized facility, tI expect they spend their time focused on finding a larger partner. Breakfast and dinner meetings and events switch focus to development and fundraising.
There may also be some meetings on quality initiatives, but they are of nominal consequence. Members of the seven-figure club enjoy little to no accountability from their customers. Clinical personnel at hospitals make ludicrous errors all the time--if I can track my cellphone from my computer when it disappears, is there really any excuse when a medical instrument is left in someone's body? And does anybody ever get fired for that? That seems particularly pertinent since General Motors Chief Executive Officer Mary Barra is getting raked over the coals because 13 people died in crashes of GM cars with faulty ignition switches. At least 10 times as many people will suffer preventable deaths in hospitals--today.
Given those realities, the fact that there are so many hospital executives who are paid so well is less a reflection of their skillset and more the fact the U.S. healthcare system is woefully bloated, spending more than double on care than any other developed country in the world, while obtaining just middling results. In any system awash in too much money and not enough accountability, those near the top of the food chain always wind up paying themselves more and more money.
Hospitals are now using Watson--the IBM supercomputer that made a splash three years ago when it dominated human contestants on the game show "Jeopardy!"-- to figure out treatment options for more patients with brain cancer. It pores over all the available medical literature, research and generally accepted treatment protocols and algorithms to arrive at specific recommendations.
Couldn't Watson be programmed to pore over business cases, news clippings, accounting algorithms and spreadsheets to make the same recommendations the seven-figure club members make to their boards of directors?
I doubt very much the advice it would dispense would differ radically from its human counterparts, and given it would be operating with far more data and far less political intrigue, it may actually provide sounder advice. And unlike its human counterparts, I'm pretty certain someone can figure out how to program it to not ask for more money while finding ways to rationalize such rapacity.-Ron (@FierceHealthcare)