Becker's Hospital Review

Special Compensation Section 4. Compensation for critical C-suite positions will climb, too. While presidents and CEOs take home the biggest paydays at hospitals and health systems, other executive positions are holding steady with six-figure payouts. CFOs, CIOs and CNOs at high-grossing hospitals and systems normally make between $340,000 and $650,000. Mercer's analysis examined compensation data for 2012 for three nonCEO hospital executive positions: CFO, CIO and CNO. CFOs at hospitals and health systems with more than $1 billion in total revenue earned anywhere from $310,800 to $649,300 — the highest of the three non-CEO positions studied at the largest of health systems. Even across all organizations, CFOs can expect to record total cash compensation between $171,800 and $335,000. However, CIOs actually made more than CFOs, on average, across allsized organizations. Total cash compensation for CIOs ranged from $250,700 in the 25th percentile to $415,400 in the 75th percentile. Base salaries reached as high as $362,400 for CIOs across various-sized hospitals and health systems. For chief nursing executives, salaries and total cash compensation are among the lowest of non-CEO executive positions. However, depending on the size of the hospital or health system, CNOs could earn up to $340,300. Middle-of-the-road salaries for CNOs hover between $171,700 and $236,600, while total cash compensation for CNOs in the 50th percentile could hit anywhere between $187,500 and $282,800, according to Mercer's survey. 5. Retaining key talent will be an element of many compensation programs. In order to keep highly qualified executives and prevent turnover during a hectic period of reform, many systems are installing retention devices in their compensation plans. For example, Dr. Flannery says hospitals may award a CEO a bonus of 30 percent of base pay, if all performance criteria are met. However, half of the bonus may be paid immediately, while the other half may be deferred over five years. That could scatter tens of thousands, or hundreds of thousands, of dollars over several years, and if the CEO left during the deferment period, the bonus may be forfeited. This may make someone reconsider before leaving, Dr. Flannery says. Michael Dunford, executive vice president and managing principal at Cejka Executive Search, agrees. He says some of the most forward-thinking and innovative compensation contracts he has seen involve "attractive, performance-based, deferred packages that are meaningful and tie in retention" in order to receive full value. 6. Perks are becoming a thing of the past. Steven Slutsky, JD, director and executive compensation consultant in PwC's Philadelphia office, says many popular perquisites of the past are quickly on the decline now, even more so than last year. Cars, country club dues, home office equipment, spousal travel and others are fading away due to their negative perception. Instead, hospitals and health systems are rolling perquisites into total cash compensation, which hospitals can more easily defend. "[Giving out perquisites] can look horrible: You're giving the CEO an automobile, but not employees? Don't executives make enough to pay for their own car?" Dr. Flannery says. "Organizations do not want the distraction of those arguments. Have compensation that is appropriate, competitive and reflects the performance of the individual executive as well as the collective performance of the executive team." 7. Executives behind CEOs will be in high demand — and compensation will follow. Dr. Flannery explains that as healthcare reform continues to chug along, there are still only a select group of hospital and health system CEOs that have helped initiate major projects, like accountable care organizations. "If you think about the organizations that 25 have already done that, the CEO is probably not going to leave in the middle of the project," he says. However, executives who are second- or third-in-command, such as the COO or CFO, who have successfully helped with ACOs and other healthcare reform efforts have created a new market for themselves. "Those people now become in high demand because they have demonstrated the skills to do all the complex work that is necessary, and they have the hands-on experience," Dr. Flannery says. "There's likely to be a bump in their compensation, particularly for those who have demonstrated success." 8. Physician executives will continue to attract unique compensation packages. Because hospital executives will increasingly be paid on value and performance rather than market rates and profitability alone, there is one subset of executives that may have an advantage in terms of experience: physician executives. Physicians who have turned to the C-suite may already be very familiar with value-based purchasing, as well as inner workings of an organization's clinical setting, and this places a premium dollar on their availability. "Physician executives with experience and working knowledge of various payor contracting systems have been in high demand and are well-positioned for senior leadership roles," says Paul Esselman, executive vice president and managing principal at Cejka Executive Search. "In this environment, those physician executives with the 'triple-threat' skills and experience in clinical practice, system engagement and managed care administration are in a unique position to tie the clinical outcomes to reimbursement, thereby maximizing their value and compensation opportunity." n

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