Healthcare systems, affected by a challenging economic environment, lifted executive pay to a slightly lesser extent this year than last, a recent survey shows.
Median base salaries for all healthcare leaders, including salary, merit, across-the-board and market adjustments, rose 4.1% year-on-year and slightly trailed the 4.3% increase seen in 2022.
The lackluster trend is likely a function of hospital balance sheets, which ended in the red in about half of cases last year.
Indeed, the healthcare industry – not unlike the biopharma sector – is facing a difficult mix of conditions, from workforce shortages to increased labor, supply and borrowing costs, explained Bruce Greenblatt, executive workforce practice lead for SullivanCotter.
The workforce consultancy conducts its HealthCare Management and Executive Compensation Survey annually to track changes in salaries and incentives. Findings encompass more than 3,000 organizations representing roughly 42,160 individuals.
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Ongoing revenue shortfalls due to service mix changes, access limitations and low volumes also meant execs had trouble “making their numbers.” As such, incentive-plan payouts for meeting 2022 goals in areas like quality or patient experience fell versus 2021.
To put that in perspective, base salary alone rose by 4.8%, while base salary plus incentive – a variable known as total cash compensation (TCC) – lagged at just 3.5% growth.
Underlying the moderation in TCC was the dip in incentive-plan payouts, reflecting “more pressures and variability in performance,” noted Tom Pavlik, managing principal at SullivanCotter. Incentive plans, Pavlik added, are working as designed, given the “challenges in meeting performance goals.”
Raises also hit differently, depending on the role. Salaries for health system executives grew by 4.8% at median, outpacing those of leaders at the subsidiary hospital level, which expanded by 3.9%.
Median base salary increases of 5% or higher tended to go to those focusing on strategy/planning, technology, financial sustainability and risk, integration and workforce strategy, according to the findings.
Upper management, rather than rank-and-file healthcare leaders, tended to see the higher end of the pay boost. Think operations and finance chiefs, along with heads of technology and IT, HR and DEI.
Business and operating execs, like top planning and risk management execs, were also found to be among those scoring higher earnings adjustments.
Salaries are likely to continue their upward trend, as health systems need to attract, retain and motivate the right leaders in a competitive market, SullivanCotter predicts. Healthcare organizations should prepare for a 2024 base salary budget increase that includes core merit increases of 3% at median, says the consultancy.
Based on the 2023 survey findings, its recommendations for compensation committees also include an openness to making the needed adjustments to retain key contributors and address pay equity issues. Additionally, there are recommendations to conduct a risk assessment to determine any potential retention concerns for critical roles; and use tactics like compensation and professional development to mitigate those risks.
Health systems should also differentiate among rewards, directing limited dollars to patching up the retention/recruitment needs and rewarding high performers critical to the organization’s short- and long-term leadership plans, SullivanCotter suggests.
