Healthcare executive pay is growing amid financial challenges, high turnover and increased scrutiny on executive compensation packages, according to a survey from SullivanCotter.
The firm gathered data from around 3,300 healthcare organizations and found year over year increases in average base salaries, incentive pay and total compensation. The pay increases come at a time when great leadership is essential. Executives are responsible for overcoming huge challenges in labor shortages, inflation, cybersecurity and stagnant margins.
The growing complexity of operations and consolidation are leading to executive turnover and organizational restructuring.
"The industry is experiencing a critical gap in expertise as operations grow more complex and leaders retire or continue to step away," said Bruce Greenblatt, executive workforce practice leader at SullivanCotter. "The pool of qualified executive talent is increasingly limited and this is placing upward pressure on total compensation – particularly via higher base salaries."
Five things to know:
1. Median executive base salaries are up 4.6% this year, compared to 4.4% growth last year.
2. System-level executive base salaries jumped 5.3% while executives at subsidiary hospitals reported an average 3.5% base salary boost.
3. Incentive awards increased in 2023 compared to 2022 as operations and financial situations improved. There weren't significant changes in annual incentive plan awards or prevalence, according to the report. About half of the organizations surveyed changed annual incentive plans for this year amid increased regulatory action and scrutiny around executive compensation.
"This included a refined approach to goal calibration and increased weighting of financial and systemwide performance metrics – highlighting the need to focus on financial sustainability, integration and refined care delivery models to move forward in a post-COVID environment," said Tom Pavlik, managing principal at SullivanCotter.
4. Total cash compensation for system-level executives jumped 8.3% on average. Subsidiary hospital executives also reported a 7.4% increase in total cash compensation as they hit their incentive targets.
5. Most – 93% of respondents – used financial metrics for system-level executive incentive pay. Eighty-five percent reported using quality metrics, 75% consider patient experience and access, and 73% consider people categories for executive incentive pay