Salary Growth for Healthcare Employees Continues to Slow, but Retention is up, According to the 2010 Hay Group Healthcare

PHILADELPHIA--(BUSINESS WIRE)-- The 2010 Healthcare Compensation Study, released today and sponsored by TIAA-CREF, confirms a continued slowing of salary increases for healthcare employees, but shows that turnover has been reduced dramatically as well.

Compensation based on same hospital comparisons indicated that pay increases (the rate of change for organizations who participated in the survey in both 2009 and 2010) is 1.5 percent for base salary and 1.7 percent for total cash compensation (base pay plus bonus) for all jobs. On a same-incumbent-comparison (actual person in the position, not just the position itself), base salary increased by a rate of 2.5 percent; this is a decrease from the four percent figure in 2009. Total cash compensation increased by a rate of three percent in 2010, slower than the 4.5 percent increase in 2009. Over the past decade, actual healthcare salary increases have exceeded salary budget expectations, with the exception of 2001, 2008 and 2009.

“It’s an exciting time in healthcare, and how you react really depends on whether or not you enjoy roller coasters,” remarks Ron Seifert, the executive compensation practice leader for Hay Group’s healthcare practice. “There’s tremendous change and risk in the healthcare industry now, and some view this as a real opportunity to innovate on how they deliver care while other organizations feel hamstrung by new regulations and lower reimbursements. Regardless, all healthcare organizations are striving to find ways to become more efficient, both financially and operationally, which is resulting in a slowing of salary increases among other belt-tightening measures.”

The 2010 study shows all executive groups experienced a decrease in both the most recent and next planned salary structure increases from the 2009 report. For instance, in 2010, the number of CEOs receiving at least a six percent increase in base salary has dropped to its lowest level in ten years (22 percent). Just two years ago, 89 percent of healthcare CEOs were granted base salary increases of at least 6 percent.

The study also reflects the sector’s ongoing evolution, with continuing merger, acquisition, and consolidation activity as well as executives and managers assuming more dynamic roles as the healthcare environment calls for more integration across the continuum of care. For the first time in a significant period, the turnover rates have decreased for the Chief Executive Officer (5.2 percent in 2009-2010 from 14.0 percent in 2008-2009), the Chief Operating Officer (4.1 percent from 11.6 percent), and the Chief Financial Officer (5.0 percent from 12.2 percent). The Chief Human Resources Officer experienced the only increase in turnover rates among all top executive positions with a turnover rate of 12.5 percent for 2010, an increase from the previous year’s rate of 7.0 percent.

“Taking into account the slowing of salary increases, it’s encouraging to see improved retention rates for almost all senior leadership positions,” says Seifert. “In my conversations within the C-suite, healthcare leaders are committed to ensuring better patient experiences and operational improvements no matter what the outside influences are. They’re remaining at the helm to see it through.”

The healthcare industry experienced ten strong years of growth, even adding 20,000 jobs a month during what is now being dubbed ‘The Great Recession.’ However, over the last two months, the Bureau of Labor and Statistics has shown that healthcare is shedding more jobs than they are creating, further pointing to a realignment of the industry. For instance, physician practices are shedding jobs while nursing and ambulatory services are adding jobs, pointing to the fact that more resources and talent are consolidating into systems and subsystems.

Other major findings from this year’s Integrated Healthcare Systems Prevalence and Planning Report include:

  • In the healthcare not-for-profit sector, same incumbent base salary increases were significantly less in 2010; CEOs received an increase of 2.5 percent compared to 4.6 percent in 2009.
  • Patient satisfaction remains the most prevalent performance measure for annual incentives across all employee groups of the organization.
  • Twenty-four percent of survey participants have a long-term incentive (LTI) plan in place in 2010, up from 19 percent in 2009. Of the organizations with LTI plans, performance units are the most commonly used vehicle, with 95 percent offering such a plan.

Other major findings from this year’s Hospital Prevalence and Planning Report include:

  • The overall prevalence of annual incentive plans in hospitals was 82 percent again in 2010, representing no change from 2009. Incentive plans are the most prevalent within for profit hospitals (95 percent), followed by government hospitals at 89 percent.
  • The most recent average salary structure change was highest for nursing (2.9 percent). All employee groups had an average structure change of less than three percent for 2010.
  • The average merit increase in 2010 was less than two percent for all employee groups, with nursing receiving the highest increase (1.9 percent).
  • Executives received larger average total salary increases (2.5 percent), followed by nurses (2.4 percent), and other non-executive employees (2.3 percent).

Study depth and methodology

The 2010 Healthcare Survey sponsored by TIAA-CREF is the largest and most robust database in the 27 years Hay Group has been conducting the study. It now includes data from 120 integrated healthcare systems and an additional 30 integrated healthcare subsystems, plus data from 1,268 hospitals covering over 600,000 incumbents; of these 1,268 hospitals, 1,038 participants are acute care facilities.

In recognition of the difference in scope of responsibilities of similarly titled positions between organizations, jobs matched to the corporate and regional positions by participants are content evaluated using Hay Group’s proprietary job evaluation methodology. Making pay comparisons on the basis of job title alone can produce comparisons that do not reflect job content or complexity. Hay Group’s job evaluation methodology eliminates the potential of an inaccurate outcome by examining compensation relative to job content and complexity rather than merely by job title or company size.

Hay Group will host a complimentary one-hour webinar on August 18, 2010 to discuss the findings from this year’s study. Anyone interested in attending can email [email protected] for more information.

About Hay Group

Hay Group is a global consulting firm that works with leaders to transform strategy into reality. We develop talent, organize people to be more effective, and motivate them to perform at their best. With 86 offices in 48 countries, we work with more than 7,000 clients around the world. Our clients are from private, public, and not-for-profit sectors, across every major industry and represent diverse business challenges. For more than 60 years, we have been renowned for the quality of our research and the intellectual rigor of our work. We transform research into actionable insights. We give our clients breakthrough perspectives on their organization and we do it in the most efficient way to achieve the desired results. Our focus is on making change happen and helping people and organizations realize their potential.

For more information on Hay Group’s healthcare practice, services or this study, please contact Colin Owens at [email protected] or 800-776-0486.

To arrange an interview, please contact Aven James at [email protected] or 212-840-1661.


For Hay Group
Aven James, 212-840-1661
[email protected]

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