Healthcare Executives Need Big Compensation, And Big Results

“It’s stressful, dirty, hard work, and the burnout rate is high,” said Tom McNulty, a 19-year-old college student who volunteers for an ambulance corps outside Rochester. He told the New York Times that he finds it fulfilling, but that he would not make it a career: “Financially, it’s not feasible.”

Turns out the healthcare industry is staffed by some of the lowest as well as highest paid professionals in any business. The average staff nurse is paid about $61,000 a year, and an emergency medical technician earns just about minimum wage, for a yearly income of $27,000, according to the Compdata analysis.

Did you know that many medics work two or three jobs just to get by?

However, the recent release of Medicare’s physician payments cast a spotlight on the millions of dollars paid to some specialists, and there is a startling secret behind America’s healthcare hierarchy:

Physicians, the most highly trained members in the industry’s work force, are on average right in the middle of the compensation pack.

That is because the biggest bucks are currently earned not through the delivery of care, but from overseeing the business of medicine.

So what are they overseeing?

A lot actually. Healthcare is one of the single largest portions of our nations’ GDP. A healthcare CEO has to understand a phenomenon of staggering proportion.

However, with all that governance, it’s easy to lose sight of the forest for the trees.

The fact remains — physician burnout is happening. There’s a widening primary care doctor shortage. Students aren’t motivated to practice family care.

However, the base pay of insurance executives, hospital executives and even hospital administrators often far outstrips doctors’ salaries, according to an analysis performed for The New York Times by Compdata Surveys:

  • $584,000 on average for an insurance chief executive officer
  • $386,000 for a hospital C.E.O.
  • $237,000 for a hospital administrator

Compare that to:

  • $306,000 for a surgeon
  • $185,000 for a general doctor

And those numbers almost certainly understate the payment gap, since top executives frequently earn the bulk of their income in non-salary compensation.

In a deal that is not unusual in the industry, Mark T. Bertolini, the chief executive of Aetna, earned a salary of about $977,000 in 2012 but a total compensation package of over $36 million, the bulk of it from stocks vested and options he exercised that year.

Likewise, Ronald J. Del Mauro, a former president of Barnabas Health, a midsize health system in New Jersey, earned a salary of just $28,000 in 2012, the year he retired, but total compensation of $21.7 million.

The proliferation of high earners in the medical business and administration ranks adds to the United States’ $2.7 trillion healthcare bill and stands in stark contrast with other developed countries, where top-ranked hospitals have only skeleton administrative staffs and where health care workers are generally paid less.

“At large hospitals there are senior V.P.s, V.P.s of this, that and the other,” said Cathy Schoen, senior vice president for policy, research and evaluation at the Commonwealth Fund, a New York-based foundation that focuses on healthcare. “Each one of them is paid more than before, and more than in any other country.”

She added, “The pay for the top five or 10 executives at insurers is pretty astounding — way more than a highly trained surgeon.”

She said that executive salaries in health care “increased hugely in the ‘90s” and that the trend has continued.

For example, in addition to Mr. Del Mauro’s $21.7 million package, Barnabas Health listed more than 20 vice presidents who earned over $350,000 on its latest available tax return; the new chief executive earned about $3 million. Data released by Medicare show that Barnabas Health’s hospitals bill more than twice the national average for many procedures. (In 2006, the hospital paid one of the largest Medicare fines ever to settle fraud charges brought by federal prosecutors.)

Hospitals and insurers maintain that large pay packages are necessary to attract top executives who have the expertise needed to cope with the complex structure of American health care, where hospitals and insurers undertake hundreds of negotiations to set prices.

In many areas, the healthcare industry is home to the top earning executives in the nonprofit sector.

And studies suggest that administrative costs make up 20 to 30 percent of the United States health care bill, far higher than in any other country. American insurers, meanwhile, spent $606 per person on administrative costs, more than twice as much as in any other developed country and more than three times as much as many, according to a study by the Commonwealth Fund.

As a result of the system’s complexity, there are many jobs descriptions for positions that often don’t exist elsewhere: medical coders, claims adjusters, medical device brokers, drug purchasers — not to mention the “navigators” created by the Affordable Care Act.

Yes, we’re frustrated. There’s an army of businesspeople and mountains of administrative costs, and they’re reflected in our inflated charges for medical services.

It’s money floating up into the executive bonuses and their substantial salaries.

Meanwhile, fee-for-service docs are drowning which would indicate that the structure itself is flawed.

And, people in our nation are deprived effective healthcare due to inflated costs, and rushed visits…

Yes, these visionaries deserve substantial compensation. But we need to ask ourselves, is it proportional to their results?

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