*Orginal Question
Hospital executives often come under scrutiny for the salaries and benefits they receive. According to a recent IRS survey related to chief executive officer salaries, of more than 500 hospitals, the national average income was $490,000. In addition, the salaries of hospital and other health industry executives have come under scrutiny in Congress. For-profit hospitals, which make up about 30% of hospitals, do not have to publicly disclose how much the executives at each facility earn, but nonprofit hospitals must provide that information on the IRS form 990, which are public documents. By law, hospitals are required to show that such compensation is “reasonable” when compared to pay at other similar institutions. If you were a board member of a healthcare organization, what other determinants besides the salary of other chief executives would you want information on before you determined the compensation of the chief executive of the health care organization whose board you are on? In addition, how do the responsibilities of chief executives compare to the responsibilities of other healthcare employees? Do these responsibilities warrant a substantially higher salary? Defend your answer
1(Rebecca)
Du et al. (2018) discussed the wage gap between physicians and other clinical staff compared to the wages of hospital management and executives. Du et al. (2018) mentioned that from the years 2005 to 2015 compensation for major nonprofit medical centers CEOs increased by 93%. Also from the years 2005 to 2015 healthcare workers pay increased by 8%, managers increased by 14%, non clinical worker wages increased by 7%, and physician salaries increased by 1%. During those years there was an increase of about 30% in healthcare wages growth. About 27% of this growth comes from nonclinical workers. Du et al. (2018) mentioned that the increase in nonclinical jobs is not proportionate to the healthcare utilization of these jobs. There is attention drawn to CEO salaries as they typically make more than most physicians. Justification for executives and management in healthcare is typically related to how they improve the efficiency of the hospital and the quality of care given to the patients. Du et al. (2018) stated that While our study cannot comment on the value of nonclinical workers, the growth in costs appears to outpace plausible growth in value, given the relative stagnation of healthcare utilization during the 10-year period of our study. It appears unlikely to us that the near-doubling of mean compensation to hospital executives is justified by the value added by their work (p. 1915).
As the Bible says, But let each one test his own work, and then his reason to boast will be in himself alone and not in his neighbor. For each will have to bear his own load (Galatians 6:4-5, ESV). To justify how much CEOs make they will need to prove what they can and will do for the organization as well as what they have done in the past. Talented CEOs will have obvious successes compared to others.
Mulligan et al. (2020) mentioned that in 2009 the mean compensation for a CEO at nonprofit hospitals was $600,000. CEOs working in larger organizations with increased revenues typically make 3% more than those working in smaller healthcare organizations. Data collected from 2015 showed that CEOs who worked at hospitals affiliated with a university typically earned less than CEOs who worked at organizations not associated with a university. Hospital CEO compensation increased by 7.8% from 2010 to 2015. Mulligan et al. (2020) mentioned that CEOs that worked at institutions with higher revenues always got an increase in pay. With high healthcare costs and policy changes, there is scrutiny over the high pay of CEOs. Over 50% of CEOs come from outside organizations rather than from their own organization with trends showing that CEOs perform better within their first two years when they come from outside organizations. It had been suggested by policy makers that CEO pay be capped. Mulligan et al. (2020) mentioned that capping CEO pay may make it challenging to find the talent needed for these positions and make competition more difficult in relation to non-profit hospitals.
Till and Mcgivern (2020) stated that Clinically-trained chief executives were driven to expand their careers by a desire to make a difference, sense of obligation, or in response to a fortuitous opportunity (p. 2). As the Bible says, Do not withhold good from those to whom it is due, when it is in your power to do it. Do not say to your neighbor, Go, and come again, tomorrow I will give itwhen you have it with you (Proverbs 3:27-28, ESV). While the pay for CEOs may be high and some may not agree with it, when the right CEO is put in position, with the right background and desires, then lots of good can come to the organization. When this happens, the CEOs should be compensated accordingly and not be capped financially.
As the Bible says, The soul of the sluggard craves and gets nothing, while the soul of the diligent is richly supplied (Proverbs 13:4, ESV). Also as the Bible says, Whoever works his land will have plenty of bread, but he who follows worthless pursuits lacks sense (Proverbs 12:11, ESV). My reflection of this Bible verse is that CEOs who work harder to bring in higher revenues, increase efficiency, and improve quality of patient care in larger organizations will make more money than those who do not put in as much work.
References
Du, J. Y., Rascoe, A. S., & Marcus, R. E. (2018). The growing executive-physician wage gap in major US nonprofit hospitals and burden of nonclinical workers on the US healthcare system. Clinical Orthopaedics and Related Research, 476(10), 1910-1919. https://doi.org/10.1097/CORR.0000000000000394
MacConnell, C. R. (2021). Human Resource Management in health care principles and practice (3rd ed.). Jones & Bartlett Learning.
Mulligan, K., Choksy, S., Ishitani, C., & Romley, J. A. (2020). New evidence on the compensation of chief executive officers at nonprofit U.S. hospitals. Medical Care Research and Review, 77(5), 498-506. https://doi.org/10.1177/1077558719849356
Prybil, L. D., Popa, G. J., Warshawsky, N. E., & Sundean, L. J. (2019). Building the case for including nurse leaders on healthcare organization boards. Nursing Economic, 37(4), 169-197.
Till, A., & McGivern, G. (2020). Routes to the top: The developmental journeys of medical, clinical and managerial NHS chief executives. BMJ Leader, 4(2), 64-68. https://doi.org/10.1136/leader-2019-000171
2) (Rachel)
DQ 2 is attached as a file.