Becker's Hospital Review

11 2013 Health System Total Compensation Data $873,800 Independent health system CEO $645,700 Subsidiary health system CEO $459,700 Independent health system CFO $378,200 Subsidiary health system CFO $484,200 Independent health system COO $414,500 Subsidiary health system COO 2013 Hospital Total Compensation Data $402,500 Independent hospital CEO $368,700 Subsidiary hospital CEO $235,500 Independent hospital CFO $225,200 Subsidiary hospital CFO $280,900 Independent hospital COO $296,800 Subsidiary hospital COO Source: Integrated Healthcare Strategies Note: All data are medians. 3. physician engagement and value-based outcomes are the ris- ing gold standards for compensation plans. The JAMA study focused on CEO pay from 2009, and indeed, more hospitals have started including value-based metrics in the five years since, Mr. Esselman of Cejka says. Quality metrics are not the only emerging compensation factor. Physician align- ment is viewed as one of the most important facets of hospital strategic planning today, and building a positive rapport with the physician community — as well as successfully recruiting physicians — are now affecting an executive's pay. "As hospitals and health systems look to affiliate and incorporate physicians within their marketplace and align them to their hospital, we are seeing a portion [of executive compensation] tied to how well they integrate and col- laborate with medical staff," Mr. Esselman says. 4. groups will ensure compensation more closely falls in line with goals. Last year, many patient advocacy groups and unions pushed hospitals to improve their executive pay practices. For example, the Massachusetts Nurses Association called for a new state law that would cap hospital CEO salaries at 100 times the lowest-paid hospi- tal employees. The SEIU-United Healthcare Workers West also filed a ballot initiative that would prevent nonprofit hospitals from receiving more than $450,000 in annual compensation, which is approximately the same amount paid to the president of the United States. However, hospitals have argued high compensation is needed to attract qualified candidates and compete with the more lucrative private sector jobs. These types of measures are not likely to subside. Policy experts say it would behoove hospital executives, board members and compensation committee members to adjust compensation contracts to the times and ensure transpar- ency exists in the process. "There is a major shift in the role of the hospital executive," says Tom Flan- nery, PhD, partner at consulting firm Mercer. "Their role is evolving to focus less on brick-and-mortar issues and more on building services and partner- ing with physicians and caregivers to create a patient-centric culture that ad- dresses both patient-focused care and high-value outcomes." 5. physician executives are the hot commodity. While most top hos- pital executives are receiving annual pay increases of 2 to 4 percent, physician executives are experiencing higher rates. Mr. Esselman says last year, physi- cian executives received an average pay increase of 7 percent. Gallup polls have consistently shown that physicians, along with nurses, are among the most trusted professionals. As health systems move toward ac- countable care structures, they too are trusting — and justly compensating — physicians willing to lead the systems to success. "We're certainly seeing physician leaders vie for the top leadership positions within hospital and health systems, more so than we have seen in the past 10 years," Mr. Esselman says. n Even without the price transparency issue, it's dif- ficult to be an acute-care provider navigating the changing landscape of healthcare. Steven Brill's TIME exposé, "Bitter Pill: Why Medical Bills Are Killing Us," published March 2013, brought the topic to widespread public attention and effec- tively forced hospitals' hand to do something — anything — to assuage concerns over a rare, yet alarming reality of hospital charges. The fallout The next nine months were somewhat of a whirl- wind for the issue. CMS published chargemaster pricing data in May 2013 for the 100 most common inpatient and 30 most common outpatient treat- ments. The New York Times began a six-month, six- installment series in June 2013 on the cost of various procedures. Several organizations published state- by-state price transparency report cards, and North Carolina passed a law to increase price transparency. In the furor, hospitals have attempted to accommo- date public demands for price transparency to vary- ing degrees of success. Miami Children's Hospital was the latest, in mid-January, to take action, reduc- ing its chargemaster prices by 30 percent. "It's such a big buzz because it's a new concept for hospitals. At first blush, it's like playing poker with your cards face up — exposed and vulnerable — unless you have a firm grasp on what price means, what it includes and the risk that comes with it," says Joe Kuehn, a senior partner with KPMG's healthcare consulting practice. The entire point of the price transparency push is to commoditize healthcare like other goods so consumers have the ability to price discriminate. As a result, hospitals are becoming increasingly responsible for comprehensive price inventories. They must take stock of what their services are worth and make a plan for communicating value. No easy choices The trouble with this for most institutions, ac- cording to Mr. Kuehn, is they may not have deci- sion support systems with the data and analytics capabilities necessary to appropriately evaluate the cost of care delivery for bundles of services in conjunction with related quality measures. This is where competitive pricing becomes complex and strategic; overpricing can price institutions out of the market, while underpricing causes losses. The consumer half of the equation makes pric- ing even more convoluted. "A consumer with no other information will decide higher facility pric- es — the Porsche or Audi — are better. Hospitals do not have a particularly good mechanism for educating the public about how good they are and that there is potentially no correlation between cost and quality," says Wendy Lynch, director of the Altarum Institute's Center for Consumer Choice in Healthcare. Jim Lee, Altarum Institute's vice president, agrees. "Consumers do not trust insurers when they send them to low-cost, high-quality services," he says, noting the concern is one Altarum Institute sees a lot in its work: Hospitals struggling to effectively communicate value in price transparent scenarios. The Cost of Price Transparency (continued from cover)

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