Ways Affecting Healthcare Executive Compensation

The shift of healthcare services to a value-based model has put pressure on hospital managers to do more than they previously would. Therefore, finding and training executives that can meet the demands hasn’t been an easy job. That has seen the scrapping off of old compensation models that didn’t value healthcare management. Consequently, now they are given better payments. Payment for the most senior executives in healthcare systems such as CFOs, CEOs, and COOs usually ranges between $274,300 and $1,409,500. The gross income includes both yearly bonuses and salaries. This piece looks into the factors that have led to such high figures for hospital managers.

Why does this matter?

Revenues for healthcare systems executives have been under the watch for a long time because they seem to be significantly higher than for their counterparts in other industries. They seem to have had over ninety percent increments over ten years, while other health professionals had between ten and twenty percent boosts. It is among the several trends in healthcare, including that of adult day care software. As more baby boomers leave the workforce, they require being taken care of in fantastic facilities. That is why there has been an upsurge in need of adult daycare facilities.

1. Medical background

A closer look into the executive’s education background reveals that those with medical degrees earn more than those without. Leading healthcare organizations offer physicians more opportunities to gain experience in several areas, such as clinical integration, financial management, service line growth, and technology advancement. Getting an MBA puts a medical doctor in a better position of learning business-relevant matters. That way, they can work comfortably along with their non-physician workmates. Therefore, there has been an increase in the number of physicians that enroll for MBA degrees, especially those they are considering an executive position.

2. Hospital revenue

As it’s expected, hospital revenue plays an essential role in determining how much the executives will take home. Besides, there is no way a healthcare institution can afford to pay more than its worth. If the organization doesn’t make much revenue in a year, the CEO ought to sacrifice end-year bonuses that are now a trend in many corporations. There is an emerging trend that seems to incline executives’ salaries on the hospital’s profit.

3. Community type

According to the IRS’s exception act, top management personnel in non-profit hospitals are to be compensated based on the surroundings of the hospital. That saw the management officials earning average salaries based on the nature of their communities. Those in high population areas earned an average of $650,200. Executives in critical access hospitals made $152,699, while those in rural and non-critical access hospitals made $289,500.

4. Attainment of predetermined goals

Many hospitals from around the globe have incentive plans. A few decades ago, this was a strange term in the healthcare industry. So, they have come a long way. On the brighter side, well-performing individuals are assured of a good income at the end of the month once they meet the required figures. Most of the incentive plans are based on a percentage of the base income. For instance, a CEO earning $100,000 per year has the chance of taking home $130,000 if they meet the annual goals.

Take-Home

As top executives in health systems are expected to deal with increasingly complex operational and financial challenges, their earning structures have been continuously evolving. The above four factors are only a sneak peek into the factors that determine how much a hospital CEO, CFO, or COO will earn. The elements are complicated, but generally, these are the four primary reasons.