Survey: Salary growth for C-suite health execs slows, but retention is up

Salary increases for healthcare employees continue to slow, but turnover has been reduced dramatically as well, according to the 2010 Hay Group Healthcare Compensation Study, sponsored by TIAA-CREF.

"In my conversations within the C-suite, healthcare leaders are committed to ensuring better patient experiences and operational improvements no matter what the outside influences are. They're remaining at the helm to see it through," said Ron Seifert, the executive compensation practice leader for Hay Group's healthcare practice.

Compensation based on same hospital comparisons indicated that pay increases (the rate of change for organizations who participated in the survey in both 2009 and 2010) is 1.5 percent for base salary and 1.7 percent for total cash compensation (base pay plus bonus) for all jobs, the survey found.

On a same incumbent comparison (actual person in the position, not just the position itself), base salary increased by a rate of 2.5 percent; this is a decrease from the 4 percent figure in 2009, the Hay Group reported. Total cash compensation increased by a rate of three percent in 2010, slower than the 4.5 percent increase in 2009.

Over the past decade, actual healthcare salary increases have exceeded salary budget expectations, with the exception of 2001, 2008 and 2009.

The study also showed that all executive groups experienced a decrease in both the most recent and next planned salary structure increases from the 2009 report. For instance, in 2010, the number of CEOs receiving at least a 6 percent increase in base salary has dropped to its lowest level in ten years (22 percent). Just two years ago, 89 percent of healthcare CEOs were granted base salary increases of at least 6 percent.

"There's tremendous change and risk in the healthcare industry now, and some view this as a real opportunity to innovate on how they deliver care while other organizations feel hamstrung by new regulations and lower reimbursements,” said Seifert. “Regardless, all healthcare organizations are striving to find ways to become more efficient, both financially and operationally, which is resulting in a slowing of salary increases among other belt-tightening measures."

The study also reflected the sector's ongoing evolution, with continuing merger, acquisition, and consolidation activity as well as executives and managers assuming more dynamic roles as the healthcare environment calls for more integration across the continuum of care. For the first time in a significant period, the turnover rates have decreased for the CEO (5.2 percent in 2009-2010 from 14 percent in 2008-2009), the chief operating officer (4.1 percent from 11.6 percent), and the chief financial officer (5 percent from 12.2 percent). However, the chief human resources officer experienced the only increase in turnover rates among all top executive positions: 12.5 percent for 2010, an increase from the previous year's rate of 7 percent.

Other major findings from this year's report include:

• In the healthcare nonprofit sector, same incumbent base salary increases were significantly less in 2010; CEOs received an increase of 2.5 percent compared to 4.6 percent in 2009.
• Patient satisfaction remains the most prevalent performance measure for annual incentives across all employee groups of the organization.
• Twenty-four percent of survey participants have a long-term incentive (LTI) plan in place in 2010, up from 19 percent in 2009. Of the organizations with LTI plans, performance units are the most commonly used vehicle, with 95 percent offering such a plan.
• The overall prevalence of annual incentive plans in hospitals was 82 percent again in 2010, representing no change from 2009. Incentive plans are the most prevalent within for-profit hospitals (95 percent), followed by government hospitals at 89 percent.
• The most recent average salary structure change was highest for nursing (2.9 percent). All employee groups had an average structure change of less than three percent for 2010.
• The average merit increase in 2010 was less than two percent for all employee groups, with nursing receiving the highest increase (1.9 percent).
• Executives received larger average total salary increases (2.5 percent), followed by nurses (2.4 percent) and other non-executive employees (2.3 percent).

The survey, sponsored by TIAA-CREF, is taken from a database for the 27 years Hay Group has been conducting the study. It now includes data from 120 integrated healthcare systems and an additional 30 integrated healthcare subsystems, plus data from 1,268 hospitals covering more than 600,000 incumbents; of these 1,268 hospitals and 1,038 participants are acute-care facilities.