Inflation-adjusted CEO pay in nonprofit hospitals increased from roughly $1 million to $1.3 million between 2012 and 2019, and the greatest pay increases went to CEOs who grew the profits and size of their health care organizations the most, according to new research from Rice University’s Baker Institute for Public Policy.
In the new study, researchers analyzed compensation trends for CEO leadership across more than 1,800 health systems and independent hospitals from 2012 to 2019. Nonprofit CEO compensation was obtained from IRS 990 and Schedule H tax filings. While CEO pay increased 34%, the average salary for registered nurses grew by just 2.3%.
“Our results raise concerns that nonprofit hospital CEOs are incentivized more to grow their organizations and profits than to improve patient care quality,” said lead author Derek Jenkins, a postdoctoral scholar in health economics at the Baker Institute. “This compensation structure may contribute to ongoing health system consolidation and rising health care costs while doing little to recognize quality improvements or community benefit efforts.”
CEOs received significantly higher pay for heading hospital systems with more beds and greater profits. For example, leading organizations with 500 or more beds resulted in a 157% higher CEO salary relative to organizations with fewer than 100 beds in 2019. While lower mortality and readmission rates were modestly associated with higher CEO pay, these links weakened over time. By 2019, the rewards for being above average on these quality metrics had declined relative to 2012.
“Hospital boards need to reevaluate how they structure CEO pay to better reflect quality care and community impact rather than merely rewarding size and financial performance,” said co-author Marah Short, a scholar in health economics at the Baker Institute.
The study titled Nonprofit Hospital CEO Compensation: Does Quality Matter? was published in the peer-reviewed journal Medical Care. Joining Jenkins and Short as co-authors of the study is Vivian Ho, who holds the James A. Baker III Institute Chair in Health Economics at Rice.
Written by Avery Ruxer Franklin for Rice News.
