Compensation and Benefits: Employee Costs Bear Scrutiny, Deliver Results

As pay for healthcare executives and physicians undergoes significant change, driven by market upheaval and regulation, the move from fee-for-service payment to value-based compensation is not without challenge.

Determining fair market value for compensation models is also proving difficult as industry experts note that many salary surveys don’t reflect the break-out for quality or shared savings-based pay. This is typically the case for both physicians and healthcare executive teams.

Given that those leading healthcare systems and hospitals are facing huge challenges outlined by the “triple-aim” of clinical quality, patient service and financial and operational efficiency, compensation for top healthcare executives is expected to remain high.

“Balancing those priorities requires executive expertise and acumen that is rare, which is why executive compensation in health care continues to increase,” said Steve Sullivan, managing director with Pearl Meyer’s Houston office.

Sullivan notes the increasing reliance on a mix of short- and long-term variable pay that helps calibrate pay and performance.

“Healthcare has been marching to a new drum beat for several years, and that is a much more leveraged approach to executive pay, meaning greater exposure of their executives’ to pay at risk,” he notes. “Going forward, there will certainly be a greater prevalence in the use of long-term plans.”

He adds that there is big upside to the alignment of variable compensation plans and the organizations future goals and metrics. “Then, when hospital leaders earn those incentives, it’s a win-win.”

Finally, it’s critical to think about compensation structure for the entire organization’s employee base, not just at the top. “They’re the ones who are going to make or break the change mandates that you put in place,” advises Sullivan.