“Rising executive compensation is contributing to the affordability crisis in American healthcare and should remain in the forefront of the minds of policy makers,” concluded a study published last month in the PLOS One journal.
According to a report this week from NPR, these salaries are growing as Americans become less healthy than people from other developed nations. Other recent reports about a for-profit hospital CEO who made millions while medical centers went without necessary supplies like blood show that the issue isn’t limited to non-profits.
As of last August, nearly half of the 4,644 Medicare-enrolled hospitals were non-profit, 36.1% were for-profit and 14.7% were government-owned, per an analysis provided by the U.S. Department of Health and Human Services. Overall hospital CEO salaries have grown “quickly” over the past two decades, said the PLOS One study.
“Almost half of the measured increase in CEO compensation (44.5%) accrued to a ‘base case’ CEO, who was leading a non-teaching hospital system or independent hospital with fewer than 100 beds that earned [zero] profits and provided no charity care,” it explained.
That’s where the real problem is, according to Vivian Ho, a health economist at Rice University cited by NPR. She said high pay for health CEOs for providing patients with quality, affordable healthcare. Ho was one of the authors of a study published last year that found estimated substantial growth in non-profit hospital operating profits and cash reserves did not correspond with an increase in charity care.
“Recently, there have been news articles highlighting state and local efforts to either cap CEO compensation or remove tax exempt status for hospitals,” said the PLOS One study. “In Pennsylvania, public school districts pushed back against the non-profit health system in the area ‘Tower Health,’ and four hospitals had their tax-exempt status revoked. The executive salaries at these four locations were deemed to be excessively large, and none of these four hospitals were spending even one percent of their expenses on charity care.”
As it stands, some prestigious non-profit hospitals even garnish patient wages if they can’t pay or refuse to provide emergency care, said NPR.
“In an analysis of 1,113 non-profit health systems and independent hospitals in 2012 and 868 in 2019, we found that mean CEO compensation rose 30% between 2012 and 2019, but mean salary for CEOs in the top decile grew even more, by 42%,” said the PLOS One study.
Results of the study found that non-profit hospital CEOs did not need to improve their performance in order to get significant boosts in pay. This aligns with other reports of a widening pay gap between executives and nurses.
“Ho theorizes that part of the reason that ballooning CEO pay doesn’t translate to more affordable health care is because executive compensation is decided by the hospital’s board members,” said NPR.
A 2023 study found that more than half of the board members of 15 top-ranked hospitals worked in finance or business. While Ho said these board members aren’t “evil,” she did also said they might not be in a place to think about patient affordability.
Rick Pollack, president of the American Hospital Association, said in an email statement cited by NPR that some of the research and criticism of hospital executive pay doesn’t provide context on “the salaries of CEOs at comparably sized organizations in other fields who are the talent that hospitals are competing for.”
Indeed, Lisa Bielamowicz, a co-founder of the consulting firm Gist Healthcare, said that non-profits are pressured to offer competitive salaries as executive compensation increases across all sectors in order to attract talent. She also noted that even non-profits need to turn a profit in order to keep operating.
Ge Bai a professor of health policy and management at Johns Hopkins Bloomberg School of Public Health also cited by NPR, said the line between non-profit and for-profit hospital is becoming blurry in the U.S. This is exacerbated as more hospitals become part of larger health systems, which reduce competition and leave patients with few choices.
This month, The Boston Globe, The American Prospect and The Wall Street Journal all reported on the case of for-profit Steward Health Care CEO Ralph de la Torre, who made a “fortune” of hundreds of millions of dollars while failing to pay doctors and keep hospitals stocked. He was recently spotted viewing equestrian events at the Olympics in France.
“Affordable healthcare continues to be a problem for many Americans,” said the PLOS One study. “As many as 41% of adults currently have debt caused by medical or dental bills. Misaligned incentives for executives at non-profit hospitals contributes to the rising burden of healthcare costs to American families and suggests their financial priorities are not aligned with the obligations to the communities they serve. If there is little distinction between non-profit and for-profit hospital behavior additional policies to ensure non-profit hospitals deliver community benefits should be considered, such as reporting of performance criteria that determine CEO bonuses and required reporting of hospital CEO to employee pay ratios.”