Hospital CEO pay not tied to quality of care, study shows

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Hospital CEOs' pay isn't linked to their hospital's benefit to the community. Nor is it linked to the quality of care the hospital provides, a new study found.

Instead, the chief executive officers, or CEOs, tended to earn more at hospitals with high patient satisfaction ratings and advanced technology.

"I was hoping I'd see even some modest relationship with quality performance," said Dr. Ashish Jha. "I think we were a little disappointed."

Jha worked on the study at the Harvard School of Public Health in Boston. He and his colleagues combined data from tax returns, hospital surveys and performance and cost reports.

They looked at CEO paychecks in 2009 alongside hospital size, quality and other data from 2008, figuring salaries and bonuses might be tied to the prior year's figures.

The study included 1,877 CEOs from 2,681 private, non-profit hospitals across the country. The average executive earned about $596,000. (In comparison, according to the Economic Policy Institute, CEOs at the top 350 U.S. companies made an average of $14.1 million each in 2012.)

Executive paychecks at hospitals varied widely. The CEOs with salaries and bonuses in the lowest 10 percent earned $118,000 a year, on average. They mostly worked at small, non-teaching hospitals in rural areas.

On the other end of the spectrum, executives in the highest 10 percent earned almost $1.7 million. They tended to head up large teaching hospitals in cities.

CEOs at hospitals that had more beds and more advanced medical technology made more money than those at other hospitals, the researchers found.

And executives tended to earn more when more of their hospitals' patients reported being very satisfied with their care.

However, the hospital's own bottom line, including how often its beds were occupied, was not linked to a CEO's pay, the researchers reported in JAMA Internal Medicine.

Neither were commonly used measures of a hospital's quality, such as how many patients die in the hospital, and how many come back to the hospital soon after they were released.

Rexford Santerre, a healthcare management researcher at the University of Connecticut in Storrs, said the study just shows associations. It's not clear that any of the measures directly influence pay, or vice versa.

"For example, more highly motivated CEOs may choose to work in hospitals with high patient satisfaction rates and high pay," Santerre, who wasn't involved in the study, told Reuters Health in an email.

"As a result, those two variables, patient satisfaction rates and CEO pay will be correlated but one does not cause the other."

Jha agreed that in some cases, it's not clear how hospital stats are linked to salaries. As another example, hospitals may reward CEOs that care about technology - or wealthy hospitals can afford to be technologically advanced and pay their executives well.

But Jha said the lack of a link between compensation and hospital quality was still disconcerting. He pointed to how much emphasis has been placed on improving quality measures in recent years.

"If you're going to ask doctors and nurses to be accountable, if you're going to ask patients to be accountable … then I think we should make sure that everybody's in, and that senior managers of hospitals also have a stake in insuring high-quality care," he said.

Dr. Warren Browner said it's possible non-profit hospitals do base CEO bonuses on quality measures - just not the ones the researchers looked at here.

Browner, from the California Pacific Medical Center in San Francisco, wrote a commentary published with the study.

Some CEOs are likely rewarded based on the quality of care their hospitals provide, Jha said. But that seems to be the exception rather than the rule, he added.