Exec pay not linked to quality, report finds

Even though healthcare CEOs saw the biggest pay bumps out of all sectors last year, their executive compensation levels are not linked to hospital performance, according to a report by the New Hampshire Center for Public Policy released Monday.

The report examined CEO pay at nonprofit hospitals in New Hampshire and found a strong correlation between a hospital's size and how much it pays its chief exec. However, quality, cost of care and provision of charity care had no definite link to compensation levels.

The report also found that although CEO pay at the state's 23 not-for-profit hospitals is rising faster than average wages for private sector workers, most nonprofit facilities still are meeting the Internal Revenue Service standards for determining compensation.

In New Hampshire, nonprofit hospital CEO compensation increased on average 18 percent between 2006 and 2009 when wages were stagnant for many other workers during a severe recession, FierceHealthFinance previously reported.

Despite finding no link between executive pay and performance, hospitals and health systems have been defending their rising compensation as an investment in leadership and staff, noting that the ability to attract and retain the most talented leaders comes with a hefty price tag.

Meanwhile, New Hampshire Attorney General Michael Delaney attributed the rising executive compensation to a "log-rolling" effect, in which hospitals move the log forward by setting similar pay levels.

"In actual practice, hospitals tend to target the 75 percentile, and often higher, in setting their CEO's compensation," Delaney said in a statement. "This creates an upward spiral and executive compensation can grow at a rate disproportionate to relevant measures of achievement, or to increases experienced by other sectors of the population," he said.

For more:
- read the report (.pdf) and summary
- here's the NH AG statement

Suggested Articles

The profit margins and management of Community Health Group raise questions about oversight of managed care insurers.

Financial experts are warning practices about the pitfalls of promoting medical credit cards to their patients.

A proposed rule issued by HHS on Tuesday would expand short-term coverage, a move Seema Verma said will have "virtually no impact" on ACA premiums.