Should nuns, priests run hospitals to avoid exuberant exec pay?

With healthcare executive pay and national healthcare costs under scrutiny, many wonder what the remedy to exuberant compensation packages could be and if it's needed.

Although the national average for compensation (including bonuses, pensions, and other benefits) is about $632,800 a year for hospital leaders at large institutions, some healthcare executives earn upwards of $1 million in Madison, Wisc., according to the Wisconsin State Journal.

Even more, a report from Columbus Business First revealed that there is a disparity in CEO pay of up to a $1 million in areas surrounding Columbus, Ohio.

Although compensation is typically tied to a base salary and performance-based bonuses, some institutions also compensate for higher volumes of patients or even reduce compensation for providing too much charity care, according to University of Connecticut professors in the Wisconsin State Journal article. In Connecticut, CEOs of nonprofit hospitals who increased bed occupancy rates by 10 percent received raises of 8 percent. Those who increased charity care by 10 percent saw decreases of 1.5 percent, according to the article.

Proponents of the generous compensation package argue that it takes talent and strong leadership to run healthcare institutions.

"Running a hospital is probably the toughest management job that exists," said David Bjork, senior vice president of the Minneapolis-based consulting firm Integrated Healthcare Strategies, in the article.

With the risk of financial incentives over quality care, the public is closely examining the leaders at the top and may wonder if faith-based leadership might be better motivated to improve patients' health over laypersons.

Today's hospital and health system compensation is quite different than the days when Catholic nuns ran hospitals, those who took a vow of poverty, according to the Wisconsin State Journal.

Although Catholic-run organizations come with controversial influence on family planning, the nun- and priest-run hospitals could prove cost-effective. For example, Sister Mary Jean who retired from the chief executive post at SSM Health Care last month worked for free, although SSM paid the Franciscan Sisters of Mary an annual fee of $1.96 million in 2009 to compensate them for their labor, reports the New York Times. During her tenure, operating revenues at SSM quintupled to $3 billion in 2010, and SSM provided $115.4 million in uncompensated care, according to the article.

The trend of nun and priest leadership at hospitals is on the decline to near extinction, notes the NYT. In 1968, nuns or priests held chief executive positions at the 796 Catholic hospitals in the country. Today, they hold 8 of those positions out of 636 hospitals.

For more information:
- read the Wisconsin State Journal article
- read the NYT article

Related Articles
Public decries more exec pay in weak economy
Hospital CEO compensation falls
Hospital CEO gets 6-figure payout amid bankruptcy