Long-term incentive plans, CEO compensation on the rise

Most large hospital systems are compensating their executives based on long-term incentive (LTI) plans, according to a new healthcare compensation study.

Use of LTI plans among integrated health systems are at its highest since the Hay Group began tracking such data in 2006, according to the consulting firm's study results. And as previous salary reports released this year suggest, the survey shows CEO pay continues to rise.

The findings indicate that 39 percent of facilities within integrated health systems had an LTI plan this year compared to 17 percent in 2012. Only 14 percent had a plan in 2006.

Industry experts attribute the uptick to the changing nature of the healthcare sector. "To survive in this new environment, many health systems are making big investments in the acquisition of physician practices and technologies to support their long-term strategy," Ron Seifert, vice president and executive compensation leader for Hay Group's Healthcare Practice said in a statement.

Larger systems were more likely to use LTI plans, the study found. Sixty-three percent of systems with revenues of more than $5 billion offered plans in 2013. However, 38 percent of systems with revenues of $3 billion and $5 billion offered LTI plans to their executives. And only seven percent of independent hospitals had an LTI plan in 2013.

The study also revealed that CEOs and other senior executives experienced the largest base salary increases in 2013 of all employee groups studied. Specifically, median base salaries increased:

  • 4 percent for CEOs at non-profit integrated health systems;
  • 3 percent for senior executives at non-profit integrated health systems;
  • 3 percent for CEOs and senior executives at non-system hospitals.

Hospital nurses saw the smallest pay increase: 1.8 percent for base salary and 2.0 percent in total cash, compared with 2.5 percent increases in both base salary and total cash in 2012, according to the study.

A recent study found that hospital CEO compensation is tied more to patient satisfaction and technology than tangible outcomes, FierceHealthcare previously reported.

To learn more:
- here's the study (registration required)
- here's the statement