Most healthcare CEOs get very generous severance

The vast majority of healthcare organizations have severance agreements in place with their chief executive officers, with many of those top-ranking executives continuing to receive a payout and their regular benefits as long as two years after they have left, according to a new survey by Mercer and Witt Kiefer.

The study of 196 different healthcare organizations--about a third of which were hospitals or hospital systems--concluded that 83 percent had a severance package in place with their CEOs. Overall, severance agreements are outlined in 75 percent of the CEOs' employment contracts.

The leading cause of activating a severance package is involuntary termination without cause, which has occurred within 90 percent of the organizations surveyed. The second leading reason for triggering a severance package is change in management control, followed by non-renewal of contracts. Terminations for good cause occurred in only 19 percent of the organizations surveyed.

Severance packages were quite generous: 49 percent included two years of pay, and 88 percent included at least one year of pay. Six percent of organizations kept their CEO on the payroll for three years after their severance. Nearly three-quarters received base compensation during that time, but 18 percent received their base salary plus incentive payments. No data on the value of such packages was available, but many CEOs earn well over $1 million in base compensation.

Virtually every CEO received continuing healthcare benefits at the same level as when they were employed, and 84 percent received the same benefit packages as they had when they were still on the job.

To learn more:
- read the Mercer press release
- read the survey (.pdf)

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