Compensation figures for top executives have been receiving heightened attention due to high unemployment figures and spreading protests across the country, and hospital executives are not immune to the attention. Base salary increases for not-for-profit hospital executives have been hovering around 3 to 4 percent on average, but the same cannot be said for the prevalence of perquisites for hospital executives, says Steven Slutsky, JD, director and executive compensation consultant in PricewaterhouseCoopers' Philadelphia office.
He says two of the main reasons for the decline in perquisites involve the uncertainty around the healthcare industry and the changing attitudes regarding enhanced disclosures around executive pay and the associated perquisites. (Not-for-profit hospitals must submit their Form 990 disclosure, while for-profit hospitals submit proxy disclosures to the Securities and Exchange Commission to give shareholders a better idea of how compensation is paid to top executives.)
From his experience, Mr. Slutsky says he has seen trends in eight perquisites for executives as of late, and most are on the decline.
1. Cars and/or car allowances. Cars and car allowances are one of the most common perquisites associated with executive compensation, and while they are still prevalent, Mr. Slutsky says healthcare organizations are phasing those perks out to limit associated travel costs. "The exception is for healthcare systems with multiple facilities where the executives are expected to spend substantial time visiting the other facilities," Mr. Slutsky says.
2. Country club dues. Country club memberships have an upper-class stigma attached to them. However, Mr. Slutsky says many hospital CEOs will use them to bring in physician groups or host other private meetings.
Country club memberships are generally not provided to new healthcare executives, as eliminating this type of perquisite has been driven by the concerns of other stakeholders, but Mr. Slutsky says incumbent executives who traditionally were receiving that perquisite before are still receiving it.
3. Supplemental retirement/deferral programs. Most not-for-profits traditionally offered defined benefit pension plans for employees, although those plans are starting to disappear. For executives, supplemental retirement and deferral programs are the most common retirement perquisites, and several hospital executives who have retired over the past several years have received deferred and/or supplemental compensation upon retiring.
This type of compensation is usually a lump sum of an executive's accrued annual benefits. For example, Larry Sanders, former CEO of Columbus (Ga.) Regional Healthcare System, received $2.2 million in the 2010 fiscal year, and $1 million of that total compensation was a payout of a supplemental retirement benefit.
Mr. Slutsky says these types of programs are still available for many executives. "The restoration and additional [deferral] benefit plans are a culmination of many years of buildup," he adds.
4. Enhanced life, health and disability insurance. A recent Gallup poll showed that 44.5 percent of American adults receive health insurance from their employer, down from nearly 50 percent in 2008. However, enhanced health insurance, as well as life and disability insurance, are still generally provided for hospital executives.
Mr. Slutsky says these "enhanced" insurance programs are additional protections and increased benefits for executive teams. For example, a life insurance plan might cover 1.5 times the salary of the broad employee population, but for executives, it might cover two to four times their salary.
5. Home office equipment. Having the ability to access work from home is a mainstay for any executive, but the years of desktop computers and tower CPUs are dwindling. "The advent of laptops has reduced the number of organizations which provide home computers, but printers are still being provided," Mr. Slutsky says.
6. Financial planning. Mr. Slutsky says financial planning services, such as those that handle investment and retirement finances, are still fairly common, but estate planning, legal planning and other similar services are not as widely available for executives.
7. Spousal travel. Hospital executives that need to go on specific business trips, such as location meetings or hospital-related conferences, may choose to take along his or her spouse, and some hospitals will cover the added expenses. Typically, spousal travel encompasses airfare, lodging, meals and other travel-related expenses. "Organization-paid spousal travel tends to continue to be provided to incumbent executives who were receiving it, but it's not as prevalent for new executives," Mr. Slutsky says.
8. Executive physicals. Mr. Slutsky says executive physicals, which are not usually thought of as an executive perquisite, have actually been increasing in prevalence as many healthcare organizations consider it important to ensure the health of top administrators.
He says two of the main reasons for the decline in perquisites involve the uncertainty around the healthcare industry and the changing attitudes regarding enhanced disclosures around executive pay and the associated perquisites. (Not-for-profit hospitals must submit their Form 990 disclosure, while for-profit hospitals submit proxy disclosures to the Securities and Exchange Commission to give shareholders a better idea of how compensation is paid to top executives.)
From his experience, Mr. Slutsky says he has seen trends in eight perquisites for executives as of late, and most are on the decline.
1. Cars and/or car allowances. Cars and car allowances are one of the most common perquisites associated with executive compensation, and while they are still prevalent, Mr. Slutsky says healthcare organizations are phasing those perks out to limit associated travel costs. "The exception is for healthcare systems with multiple facilities where the executives are expected to spend substantial time visiting the other facilities," Mr. Slutsky says.
2. Country club dues. Country club memberships have an upper-class stigma attached to them. However, Mr. Slutsky says many hospital CEOs will use them to bring in physician groups or host other private meetings.
Country club memberships are generally not provided to new healthcare executives, as eliminating this type of perquisite has been driven by the concerns of other stakeholders, but Mr. Slutsky says incumbent executives who traditionally were receiving that perquisite before are still receiving it.
3. Supplemental retirement/deferral programs. Most not-for-profits traditionally offered defined benefit pension plans for employees, although those plans are starting to disappear. For executives, supplemental retirement and deferral programs are the most common retirement perquisites, and several hospital executives who have retired over the past several years have received deferred and/or supplemental compensation upon retiring.
This type of compensation is usually a lump sum of an executive's accrued annual benefits. For example, Larry Sanders, former CEO of Columbus (Ga.) Regional Healthcare System, received $2.2 million in the 2010 fiscal year, and $1 million of that total compensation was a payout of a supplemental retirement benefit.
Mr. Slutsky says these types of programs are still available for many executives. "The restoration and additional [deferral] benefit plans are a culmination of many years of buildup," he adds.
4. Enhanced life, health and disability insurance. A recent Gallup poll showed that 44.5 percent of American adults receive health insurance from their employer, down from nearly 50 percent in 2008. However, enhanced health insurance, as well as life and disability insurance, are still generally provided for hospital executives.
Mr. Slutsky says these "enhanced" insurance programs are additional protections and increased benefits for executive teams. For example, a life insurance plan might cover 1.5 times the salary of the broad employee population, but for executives, it might cover two to four times their salary.
5. Home office equipment. Having the ability to access work from home is a mainstay for any executive, but the years of desktop computers and tower CPUs are dwindling. "The advent of laptops has reduced the number of organizations which provide home computers, but printers are still being provided," Mr. Slutsky says.
6. Financial planning. Mr. Slutsky says financial planning services, such as those that handle investment and retirement finances, are still fairly common, but estate planning, legal planning and other similar services are not as widely available for executives.
7. Spousal travel. Hospital executives that need to go on specific business trips, such as location meetings or hospital-related conferences, may choose to take along his or her spouse, and some hospitals will cover the added expenses. Typically, spousal travel encompasses airfare, lodging, meals and other travel-related expenses. "Organization-paid spousal travel tends to continue to be provided to incumbent executives who were receiving it, but it's not as prevalent for new executives," Mr. Slutsky says.
8. Executive physicals. Mr. Slutsky says executive physicals, which are not usually thought of as an executive perquisite, have actually been increasing in prevalence as many healthcare organizations consider it important to ensure the health of top administrators.
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