Hospital boards and compensation committees that have a written total compensation philosophy explaining the rationale for executive pay could help hospitals make better decisions and improve transparency, according to "Governance for Health Care Providers: The Call to Leadership," a healthcare book written by Integrated Healthcare Strategies Chairman Kenneth Ackerman.
A total compensation philosophy statement contains the following three elements.
1. Definition of the peer group. Community hospital CEO pay is usually compared with other community hospital CEO's pay, and academic medical center CEO salaries are usually compared with those of other academic medical center CEOs. Defining these peer groups for comparability studies gives a foundation for setting executive pay at certain levels.
2. Mix of compensation components. Will the CEO and other executives only receive salary and standard benefits? Or are there more factors at play, such as annual incentives, long-term incentives, perquisites, severance and supplemental/retirement benefits? The philosophy statement should outline this mix.
3. Target competitive positioning. Hospitals boards must define where their executive pay will stand among their peers. For example, compensation could be set at median levels, or around the 50th percentile. However, some hospitals may set the bar higher or lower depending on ability to attract high-performing executives.
A total compensation philosophy statement contains the following three elements.
1. Definition of the peer group. Community hospital CEO pay is usually compared with other community hospital CEO's pay, and academic medical center CEO salaries are usually compared with those of other academic medical center CEOs. Defining these peer groups for comparability studies gives a foundation for setting executive pay at certain levels.
2. Mix of compensation components. Will the CEO and other executives only receive salary and standard benefits? Or are there more factors at play, such as annual incentives, long-term incentives, perquisites, severance and supplemental/retirement benefits? The philosophy statement should outline this mix.
3. Target competitive positioning. Hospitals boards must define where their executive pay will stand among their peers. For example, compensation could be set at median levels, or around the 50th percentile. However, some hospitals may set the bar higher or lower depending on ability to attract high-performing executives.
More Articles on Hospital Executive Compensation:
3 Types of Excess Benefit Compensation at Non-Profit Hospitals
5 Basic Features of Today's Hospital Executive Contracts
8 Benchmarks on Hospital Executive Annual Incentives