Healthcare Issues & Trends

Advice & Insights for Healthcare's Leaders & HR Professionals

EXECUTIVE PAY FOR PERFORMANCE: THE FUNDAMENTALS The How, Why, When, Where, and What of Executive Pay

Posted on November 11, 2013 by Administrator

While the idea is simple—paying more to get more—the realities of healthcare executive pay are much more complex. From the compensation issues arising from healthcare reform to those that have existed for decades, understanding the linkage between executive pay and organizational performance is as important as ever. So INTEGRATED Healthcare Strategies offers this exploration of The Fundamentals; a literal How, Why, When, Where, and What of executive pay for performance in a free E-book.

Here you will find five summaries of articles authored by INTEGRATED thought-leaders, that provide five different perspectives to help you better understand how pay impacts performance so you can better manage your organization's success. The full articles can be accessed by downloading INTEGRATED’s free E-book!

HOW can pay impact care?

Article: “Improving Quality of Care Through Executive Incentive Plans”, Eric Reehl, senior consultant

Between healthcare reform and accountable care organizations, the industry continues to emphasize quality to determine executive incentive plans. In a recent survey by INTEGRATED Healthcare Strategies on quality measures used at hospitals and healthcare systems, we found that the CMS Hospital Quality Initiative (HQI) measures were the most common. When this survey was conducted, more than half of the respondents used the CMS measures to assess quality. Learn more in INTEGRATED’s free E-book.

WHY do execs get pay increases?

Article: “Why is Executive Pay Still Rising?”, David A Bjork, senior vice president & senior advisor of executive compensation

With nearly 6,000 hospitals and hundreds of health systems competing for executive talent, there are plenty of open positions and a lot of recruiting activity. However, executive pay continues to rise. Find out why in INTEGRATED’s free E-book.

WHEN will new approaches arrive?

Article: "Hospital and Healthcare System Executive Compensation: The Future of Performance and Pay", Kevin Talbot, senior vice president & practice leader of total compensation and rewards

According to INTEGRATED Healthcare Strategies’ 2013 National Healthcare Leadership Compensation Survey, more than 80 percent of all hospitals and healthcare systems have annual incentive plans for their executives. Most of these plans are relatively similar in design, employing a combination of financial and non-financial performance metrics and targeting incentives at around 20 percent to 30 percent of base salary depending on the position. What does this mean for the future of executive compensation? Download INTEGRATED’s free E-book for the answers.

WHERE is non-profit CEO pay headed?

Article: "CEO Compensation Practices in Nonprofit Hospitals: A Matter for Public Concern and Action?”, Ken Ackerman, chairman, and David Bjork, senior vice president & senior advisor of executive compensation

Virtually all non-profit hospitals and health systems are facing major challenges such as labor shortages, intense competition, and increasing financial risk for various dimensions of performance—quality, patient safety, patient satisfaction and efficiency. Find out how this impacts where non-profit CEO pay is headed in INTEGRATED’s free E-book.

WHAT incentives drive value-based care?

Article: “Using Executive Pay to Bridge the Gap to Value-Based Care”, Becker’s Hospital Reviewinterview with Kevin Talbot, senior vice president & practice leader of total compensation and rewards

Typically, for an annual incentive plan, CEOs receive an incentive that is 30 percent of their base salary. To achieve that fully, they need to meet certain criteria. In terms of how much of that 30 percent is based on financial versus clinical, 40 percent or less should be based on financial. A majority should be based on clinical quality, patient safety and patient satisfaction. Are you curious how this is happening? Answers can be found in INTEGRATED’s free E-book.

These five articles authored by INTEGRATED thought-leaders will be offered as a free downloadable E-book October 1 — December 31, 2013. Don’t forget to visit our website and download your copy!



Connections Between CEO Pay and the Size and Complexity of the Organization

Posted on October 21, 2013 by INTEGRATED

Last week Modern Healthcare published, “Hospitals with Expensive Tech, High Patient Satisfaction Have Highest-Paid CEOs.” In this article, Ashok Selvam, writes that pay for non-profit CEOs has little to do with their quality scores or performance. Selvam also writes, “high-level executives generally make more at hospitals with expensive technology and high marks in patient satisfaction, according to a new study published in JAMA Internal Medicine.”

INTEGRATED Healthcare Strategies conducted research earlier this year and came to a similar conclusion as the JAMA study, finding no significant connection between CEO pay and a hospital's financial performance or its performance on process quality, mortality or readmission rates. However, we found that there is a significant connection between CEO pay and the size and complexity of the organization. Larger and more complex organizations like academic health centers and integrated health systems pay more than smaller, less complex organizations. As a result, net total operating revenue is a reliable predictor of pay for executives.

One commenter in the article takes issue with the suggested lack of connection between pay and quality, explaining that the study uses only a limited set of metrics and that perhaps hospitals measure and reward different metrics. While there are certainly many variables that can influence pay, our research shows that the majority of CEOs do have incentives tied to the very metrics the JAMA study cites. In fact, 80% of CEOs have annual incentives. The most common metrics used in those incentive plans are financial performance (usually operating margin or income), process quality (typically the process metrics in the CMS Value-Based Purchasing program), and patient experience (typically HCAHPs scores), followed closely in prevalence by readmissions and mortality.

So if the majority of CEOs have performance-based incentives, and most of the incentive plans measure performance in the aforementioned areas, why is there little connection between CEO pay and performance in those areas? There are two key considerations. The first is that while most CEOs have annual incentives, those incentives make up only a small portion of total compensation. According to INTEGRATED’s 2013 National Healthcare Leadership Compensation Survey, the average annual incentive award for CEOs was about 35% of base salary. When you factor in benefits, incentive pay makes up, on average, less than a quarter of the total compensation typically provided to a CEO of a not-for-profit hospital or health system. So while pay for CEOs is variable, it is still largely driven by base salary.

The other consideration is that the level of performance required to earn an incentive varies greatly among organizations. Pay—including incentive pay—for CEOs at non-profit hospitals is typically set by the compensation committee of the board. When measuring and awarding performance, many of these committees look only at how performance compared to the prior year; few look at how performance compared to other hospitals like them. In other words, CEO pay is typically linked to financial performance, process quality, readmissions, etc., but it’s linked to progress compared to prior results, not relative performance compared to the industry. A CEO at a lower performance hospital who makes incremental gains in performance may receive the same award as a CEO at a high performing organization who maintains that high level of performance.

While there is no simple, one-size-fits-all solution for designing incentives for CEOs that strengthen the connection between pay and performance, it has to start with the boards and compensation committees that oversee executive pay, including incentives. Getting good information about the organization’s performance in comparison to peer organizations is a good first step.

The most engaged employees leave first?

Posted on June 21, 2013 by INTEGRATED

Employee engagement in healthcare organizationsHow can it be that your healthcare organization's most engaged employees would also be the ones at the highest risk of leaving? That doesn't make sense, right?  Well, it does if you look beyond the overall engagement score.

If you've read any of our previous posts on employee engagement, you'll recall that INTEGRATED Healthcare Strategies uses multiple metrics to calculate engagement that include categories like: exerting extra effort; willingness to promote the organization as a workplace; being an overall satisfied employee; and really feeling a sense of belonging to the organization.

INTEGRATED thinks about engagement at a much deeper level. Our employee engagement expert, David Rowlee, PhD, likes to understand how that engagement score actually came about. For example, there is an engagement group called 'Seekers' that exert an extremely high level of effort, takes a great deal of pride in the organization, promotes the organization as a great place to work, is highly satisfied and feels strongly connected...but wants to leave the organization at the next possible opportunity. That's a problem.

Visit or to watch our latest video and others in the series that tell you everything you don't know, and need to know, about understanding employee engagement in your organization.


Leading Successful Health System Integration

Posted on June 4, 2013 by INTEGRATED

Authored by Debbie Weber, as appeared in the Summer 2013 issue of HR Pulse, a publication of ASHHRA

We’ve all recently read a lot about hospital mergers and acquisitions, and the integration of medical group practices into health systems. Much of that has focused on physician engagement, economies and efficiencies of operational centralization, and creating the new enterprise-wide culture.

But few resources are available to health care human resource (HR) leaders regarding the unique business and cultural differences between the HR needs of an acute care hospital and those of a medical group practice. HR leaders who are keenly aware of these differences are heavily involved in the redesign and restructuring of their HR departments to create an infrastructure that supports their organization’s new and rapidly expanding business model.

While medical group practices certainly share a similar genetic makeup with other health care business lines, there are subtle and not so subtle differences HR leaders need to clearly understand.  View full article

The 5 Types of Workforce Employee Engagement Profiles

Posted on May 21, 2013 by INTEGRATED

To truly understand employee engagement survey scores, healthcare organizations must look beyond the "face value."  This is an area where many surveys fall short--only providing an overall score and not analyzing deeper--a dangerous mistake if seemingly high engagement scores mask underlying problems.

Most healthcare organizations are surprised to discover there are five types of engagement groups that typically exhist in their organization:  Engaged, Seekers, Campers, Detaching and Separated.  How are they different from one another, and how do they each impact an organization?   

These are complex concepts, but the meanings are clear.  That's why INTEGRATED, along with Dr. David Rowlee, developed a video series to make employee engagement, "Clearly Understandable." 

In the fourth video in the series, Dr. Rowlee profiles each of the five engagement groups and explains why Seekers are the most dangerous.  

If you have less than five minutes to see intel critical to your organization's success, check out the video on YouTube.  Or, visit our website to see all the videos in the series.

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