Healthcare Executive Pay Boom


An article in Modern Healthcare has a great title that you will love.  It’s called Healthcare Executive Pay Boom Driven By Performance Bonuses. Remember, this is a business magazine made for the people who run the healthcare industry.  That’s not you, if you are a doctor, because we idiotically gave that away years ago.  Anyway, there is excitement in the air for the hospital administrators as they start raking in the cash.  Here are some highlights from the piece:

  • Executives in many of the top-paying positions saw large pay bumps in 2015, driven in part by bonus packages triggered by improved quality and financial performance. The average compensation for CEOs at the 270 systems that participated in Modern Healthcare’s latest survey of executive compensation surged to $1.2 million in 2015, an 8.2% increase over the previous year.
  • According to Modern Healthcare’s 35th annual Executive Compensation Survey, total cash compensation for all titles increased 6.3% in 2015
  • An increase in complexity of the challenges facing top leaders at the system level has led to increased compensation.
  • With hospitals consolidating and under intense pressure to improve quality amid declining reimbursement, more systems are embracing performance-based pay for top executives. Pay is now even being linked to successful population health management, Hastings said.

Let’s stop right there. Increase complexity of challenges?  Which ones?  Oh, that’s right, new colors for the hospital like cobalt blue.  How has your pay been over the past year? Are you making a 6% to 8% increase? Probably not.  By the way, when they say performance-for-pay for top executives, they really mean how well their doctors are making their numbers look good.  So the metaphor that comes to mind is the slaves rowing the Roman galley boat here.  The faster they go, the more money they make the hospital administrators.  Now you know why your boss at the hospital is so enthralled with quality metrics.

Now some more treats from the article:

  • Belt-tightening and cost control at the nation’s hospitals hasn’t extended to the executive ranks, where pay increases for most titles posted healthy gains in 2015, driven largely by hefty pay-for-performance increases.
  • The quickly evolving pay-for-performance strategy used by many boards is driving pay packages higher. Board consultants usually recommend a similar peer group for comparison purposes, pick a set of financial and quality indicators for making non-base compensation awards, and then determine whether they want their organization to be in the middle, top or back of the pack. To compete, many consultants recommend boards err toward higher incentives.
  • The incentive packages developed for top officials often filter down through the entire organization. “We have a long history of linking executive and physician leadership rewards to our organization’s performance based on multiple indicators,” said Kathy Oswald, senior vice president and chief human resources officer at the Henry Ford Health System, Detroit. “These include measures related to quality, safety, patient satisfaction and employee and physician engagement, as well as the financial performance of the organization.”

To sum this section up, the belt-tightening and cost control doesn’t effect hospital administrators. But you knew that.  And I love that many consultants recommend boards err toward higher incentives.  When is the last time your hospital employer erred on your side?  Lastly, the third bullet point again proves my slave rowing the boat theory.

Remember folks, these are unproven quality metrics imposed on you by your hospital administrators so that they can make more money!  It’s time for a revolution!  Do not play this game anymore.  If you do then you are part of the problem.  The least you can do is spread this blog entry via Twitter, Facebook, LinkedIN or even email.  Knowledge is power.  Action, however, gets shit done.


Douglas Farrago MD

Douglas Farrago MD is a full-time practicing family doc in Forest, Va. He started Forest Direct Primary Care where he takes no insurance and bills patients a monthly fee. He is board certified in the specialty of Family Practice. He is the inventor of a product called the Knee Saver which is currently in the Baseball Hall of Fame. The Knee Saver and its knock-offs are worn by many major league baseball catchers. He is also the inventor of the CryoHelmet used by athletes for head injuries as well as migraine sufferers. Dr. Farrago is the author of four books, two of which are the top two most popular DPC books. From 2001 – 2011, Dr. Farrago was the editor and creator of the Placebo Journal which ran for 10 full years. Described as the Mad Magazine for doctors, he and the Placebo Journal were featured in the Washington Post, US News and World Report, the AP, and the NY Times. Dr. Farrago is also the editor of the blog Authentic Medicine which was born out of concern about where the direction of healthcare is heading and the belief that the wrong people are in charge. This blog has been going daily for more than 15 years Article about Dr. Farrago in Doximity Email Dr. Farrago – [email protected] 

  3 comments for “Healthcare Executive Pay Boom

  1. David Grant
    September 2, 2015 at 10:22 pm

    Anyone who purports to measure quality of medical care is a charlatan until proven otherwise. Anyone who purports to measure quality and give a result as one number is a charlatan, period.

  2. Steve O'
    August 30, 2015 at 7:24 pm

    OK, let me get this straight. The actual people who do the job can’t get bonuses, because it looks like a kickback. It’s only legal when the people who don’t do nuthin’ get bonuses.
    Those people measure the people who do the work, and since they know nothing about actually doing the job, they use nonsense Wonderland statistics to make the people who do the work think they’re not doing the work very well, and lower their pay to give bonuses to the people who DON’T do the work.
    How’m I doin’ on the quiz?

    • drhockey
      August 31, 2015 at 8:51 am


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