U.S. Nonprofit Hospital CEO Annual Pay Averages $600,000

Heads of U.S. nonprofit hospitals earn an average of almost $600,000 a year, compensation that isn’t tied to quality measures such as mortality rates, a Harvard University study found.

The chief executive officers paid the most oversee larger, urban hospitals that are usually teaching institutions and have a median salary of more than $1.66 million, according to research published today in JAMA Internal Medicine. The top executives paid the least –- a median of $117,933 –- are most often at small, non-teaching facilities in rural areas.

The findings are among the first to detail how much nonprofit hospital CEOs are paid and the variations in salaries, said Ashish Jha, the study’s senior author. As insurers and government programs such as Medicare link compensation to the quality of care, hospital CEO pay appears out-of-step with the trend in the health industry, he said.

“I was surprised that quality, things like hospital death rates, seemed to have little influence on CEO compensation,” Jha, a professor of health policy at Harvard School of Public Health in Boston, said in an e-mail. “These findings suggest that while doctors are increasingly paid based on their quality scores, the same may not be happening for senior hospital leaders like CEOs.” Hospital boards can decide that quality measures, especially ones that track patient outcomes, are critical to CEO pay, Jha said.

‘Profound Impact’

“I was hoping that there would be at least some signal that boards are paying attention to these patient outcomes and rewarding their CEOs, at least to some degree, based on patient outcomes,” he said. “When they do, they can have a profound impact on the priorities and effectiveness of U.S. hospitals.”

Still, nonprofit hospitals are competing with other industries to hire the best chief executives they can, so they can’t always pay less without sacrificing capability, Jha said.

Researchers in the study examined seven data sources, including tax forms for nonprofit hospitals in 2009, to determine the salaries of 1,877 chief executive officers of 2,681 hospitals. Their average compensation was $595,781 in 2009.

Top executives were paid more for each additional hospital bed; for higher levels of advanced technologies; and if the hospitals were highly rated on patient satisfaction surveys, the study found.

Teaching Hospitals

Chief executive officers at teaching hospitals received $425,078 more than those at non-teaching hospitals, while those who worked in institutions with high levels of advanced technologies were paid $135,862 more than those whose hospitals had low levels of technology.

“Hospitals and health-care systems are among the most complex organizations to manage and CEO compensation reflects the complexity of the job,” Elizabeth Lietz, a spokeswoman for the American Hospital Association, said in an e-mail. “It appears that the study fails to fully capture the full range of responsibilities of today’s health-care leaders.”

The researchers found no association between CEO pay and hospital margins, liquidity, occupancy rates, mortality rates, readmission rates or charity care and other community benefits including community health services, subsidized health services, research and contributions to charitable organizations.

To contact the reporter on this story: Nicole Ostrow in New York at nostrow1@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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