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Hospital and health system executives' compensation continues to soar and will likely maintain that pace as organizations search for a narrowing set of qualified executives to lead more complex operations across a consolidating healthcare landscape. Incentive packages tend to focus on systemwide metrics, including reducing variation in care and unnecessary procedures, patient satisfaction and other measures that follow new reimbursement models.
As providers slowly wade deeper into risk-based contracting, clinical alignment takes on a bigger role, said Steven Sullivan, a principal at consulting group Pearl Meyer who specializes in executive pay. Employee, patient and physician engagement often serves a more prominent role in incentive plans. If that's not the case, providers are likely already behind, Sullivan said.
"What I see driving executive pay is where they are on risk-based contracting," Sullivan said. "The clinical measures have a renewed importance. Back 10 years ago, systems measured it just because they had to. Now, as more enter partnerships and strategic alliances, you come to the table with high clinical scores and efficiency so you have an advantage in doing a deal."
Financial goals, which are still important metrics, have also evolved. There is more focus on cost per unit of care to measure efficiency, following cash flow and EBITDA to ensure sustainable operations or pursue growth opportunities, experts said.
Many providers are trying to grow volume and increase patient safety, which presents challenges in setting targets for compensation packages due to unanticipated changes in the payer mix, population fluctuations and shifting utilization, said Ed Steinhoff, a managing director at Pearl Meyer who also specializes in executive pay. Metrics aren't all or nothing, they are a moving target, he said.
"Systems are setting targets on a relative basis, which helps balance the uncertainty of today's system and external influences," Steinhoff said.