Healthcare Issues & Trends

Advice & Insights for healthcare's Leaders & HR Professionals

Integrated Healthcare Strategies Survey Results Show Latest Trends in Healthcare Salary Increases

Posted on March 30, 2012 by Gallagher Integrated

Integrated Healthcare Strategies, a national consulting firm dedicated exclusively to healthcare and focused on improving the operations of healthcare organizations, today announced key findings from its Spring 2012 Salary Increase, Incentive, and Benefit Updates Survey.  The firm, with offices in Kansas City, Minneapolis, and Dallas, conducts the survey as a series and has published five previous surveys on this topic.  “At the start of the unstable conditions inflicted on the US economy, Integrated Healthcare Strategies began monitoring trends in healthcare salary increases, incentive practices, and benefit changes,” said Kevin Talbot, Executive Vice President and leader of the Executive Compensation and Governance service line of Integrated Healthcare Strategies.  “This sixth survey in the series examines the last quarter of 2011 and into the first quarter of 2012.”   The results of the survey indicate that nearly 90% of hospitals and health systems are either leaving 2012 salary increase budgets unchanged from 2011 or increasing budgets from 2011.  Although salary increases for executives, middle management, and staff-level employees continue to be at levels below historical trends, the survey found that budgeted salary increases are slightly higher than the levels reported in earlier surveys conducted by the firm.  The median budgeted salary increases for 2012 is 2.5% for executives, 2.8% for middle management, and 2.6% for staff.  Organizations reported that they were able to follow through and provide the increases they had budgeted in 2011.  This survey showed that actual increases were on par with budgeted increases in 2011.  “We expect these numbers to continue to increase at a conservative pace through 2012,” said Talbot.  In the area of executive incentive plans, results showed that, of the nearly three quarters that had incentive plans for their executives, approximately one quarter said they would be making changes to their plans in the coming year.  Of that same group, 90% will pay awards based on performance in 2011.  The largest group, almost 40%, will pay incentive awards at or near target.  Responsive to market popularity to enhance physician alignment, the firm expanded the Spring 2012 survey to measure the prevalence of physician alignment goals in executive incentive plans.  Data revealed 37.8% of the respondents are using some kind of physician alignment criteria in their incentive plans.  The most popular of these goals is “Meeting CMS Quality Standards.”  The next two most common criteria are “Physician use of electronic patient records” and “Readmission Rates.”  A second topic added to the survey, gainsharing, told that market use prevalence was only 15%; data on this topic from the firm’s National Staff Compensation Survey found that national prevalence of the practice was only 20%.  Of those in the Spring 2012 survey that reported having a gainsharing plan in place, over half responded that they pay a flat dollar amount to eligible employees with an average payout of less than $450 annually, another 36% pay a percentage of annual salary with an average payout of 2%, and the remaining 9% pay the gainsharing bonus using another method of calculation.   The survey explored Float Pool RNs and analysis found that 38.5% of the organizations are paying these providers the same as their typical staff RN – providing little financial incentive to work on a different unit each day.  Another 27.5% are paying a flat dollar differential for those in the float pool; 17% are paying RNs in a higher pay grade (or paying a higher pay rate) than the staff RN, and 14.7% are paying Float Pool RNs a separate differential for being in the float pool.  If they are being paid a different rate, it’s on average 15% higher.  The percent differential average is 20% and the flat dollar median differential is $3.25/hour.  Last year’s Salary Increase, Incentive, and Benefit Updates Survey revealed a pay rate compression issue brought on by pay grades not moving and employees not receiving much, if any, merit increases, and new employees being hired in at the same or close to the same rates as three to four year employees.  Over one quarter of organizations reported that they are leaving the employee pay rates compressed.   The Spring 2012 survey began to research the topic of the new coding scheme, ICD-10, and it’s affect on staff changes.   Nearly 60% of respondents reported that they anticipate some type of staffing change.  Of those, 53.6% are expecting to hire more coders, another 23.2% are anticipating more coder turnover, and another 23.2% are anticipating other changes such as implementing more training programs.  Integrated Healthcare Strategies conducts surveys on all the ‘People of Healthcare’ – executives, employees, physicians, advanced practice clinicians, medical directors and nurses.

Compensation Manifesto: 11 Steps for Hospital CEOs and Compensation Committees to "Get it Right"

Posted on March 20, 2012 by Gallagher Integrated

The ACHE 2012 Congress on Healthcare Leadership is underway in Chicago.  The Congress began yesterday and runs until March 22, stacking the agenda full of opportunities to explore leadership development, review the major challenges facing healthcare organizations today and tomorrow, and learn how to enhance leadership effectiveness through educational sessions.  Our firm had the honor of presenting one such session on the first dy of the Congress.  Below is an excerpt from a review posted by Becker's Hospital Review on the session:

Compensation of hospital CEOs and other top hospital executives, especially at non-profit organizations, is undergoing mass amounts of scrutiny, thanks in part to the new federal standards that require transparency of all tax-exempt organizations. 

Kenneth Ackerman, chairman of Integrated Healthcare Strategies and former president of Geisinger Medical Center in Danville, Pa., spoke at the American College of Healthcare Executives 2012 Congress on Healthcare Leadership in Chicago on March 19. He said that hospital executives and the compensation committee within the board of directors must be on the same page if community members, media and all other interested parties are to understand the methodology behind the salary figures. He explained 11 checklist points for hospital executives and hospital compensation committees to follow in order to reach that level of understanding.

Read full article

Key Differences in Executive and Physician Benefits

Posted on March 15, 2012 by Gallagher Integrated

This information originally appeared in an article written by Amber May, Consultant with Integrated Healthcare Strategies.In an era of payment reform, effective integration between hospitals and physicians may be critical to the future success of both.  As more health care organizations look to align with physicians and more physicians seek employment, it is important to understand how employed physicians are typically compensated.  This article will focus on one element of physician compensation, benefits, and four key differences in them as compared to health care executive benefits.   

  • Benefit expenditures.  Executive and physician benefits are both compared to market standards by looking at the cash equivalent value of benefits provided to other executives and physicians at not-for-profit health care organizations.  All significant benefits that can be quantified are valued and expressed as a percentage of salary (for executives) or total cash compensation (for physicians).  Physicians typically receive fewer supplemental benefits, resulting in lower overall benefit expenditures.   For example, market median for benefits for a hospital chief executive officer is equal to 28% of salary while a physician earning $500,000 has median benefit expenditures equal to 11.2% of compensation.  The market median decreases as physician compensation increases because fixed benefit costs (e.g., medical and dental coverage) represent a smaller percentage of compensation as compensation increases.      
  • Retirement benefits.  There is less focus on supplemental retirement benefits for physicians than for executives.  Approximately two-thirds of health care executives receive supplemental retirement plans, about half of which are structured to provide a defined benefit and half of which provide a defined contribution.  Supplemental benefits are less common for physicians, and where they are provided, tend to be structured as defined contribution plans.     
  • Long-term disability benefits.  Supplemental long-term disability benefits enhancing group disability coverage are provided to approximately half of health care executives.  While only 25% of organizations provide supplemental disability coverage to physicians, physicians tend to value the coverage, particularly if it provides specialty-specific disability coverage.   
  • Business expenses.  Different from perquisites, business expenses are typically defined as ordinary and necessary expenses.  This commonly includes cell phones, laptops, professional memberships, and subscriptions for executives.  For physicians, it typically includes an allowance for continuing medical education (CME), additional time off for CME, malpractice insurance and malpractice “tail” coverage, professional dues, and licensure fees. 

Note that these differences reflect the status quo.  As organizations try to align the efforts of physicians and administrators to meet the demands of health care reform, the differences in executive and physician benefits may diminish over time.

Salinas Valley Memorial Healthcare System Audit

Posted on March 9, 2012 by Eric Reehl

We have been following recent developments in the investigation of the compensation and governance of Salinas Valley Memorial Healthcare System.  (This post gives an overview of the situation at SVMHS.)   The California State Auditor has released its report on SVMHS.  You can read a pdf of the full report here.  Highlights of the Auditor’s report include: 

  • The Health Care System does not have a formal policy for compensating its chief executive officer (CEO) and other executives.
  • The board of directors (board) has made decisions regarding executive compensation in violation of the Ralph M. Brown Act, which requires conducting meetings in an open manner to keep the public informed of its actions.
  • The Health Care System's executives were granted compensation at the upper level of industry practices.
    • The former CEO, who retired in April 2011, received $4.9 million in retirement and severance benefits over four years.
    • The salaries of the vice presidents employed as of August 2011 ranged from $272,000 to $341,000, and the former CEO's salary was $668,000 in 2011.
  • We identified two instances in which conflict-of-interest laws may have been violated.
  • About 25 percent of the Health Care System's employees and consultants that it identified as needing to file statements of economic interests for 2010 had not filed them as of September 2011—more than five months after the filing deadline.
  • The Health Care System did not consistently document how it selected contractors in cases for which it was not required by law to use a competitive process.
  • The Health Care System reported operating losses during fiscal years 2009-10 and 2010-11, sustaining an operating loss of $7.4 million in the latter fiscal year alone.
  • By offering incentives to resign and imposing involuntary separations, the Health Care System reported reducing staffing by 341 positions from July 2010 through October 2011.

Patient Safety — Does Your Community Believe You?

Posted on March 9, 2012 by Gallagher Integrated

One of our firm's most experienced labor relations expert, Kevin Haeberle, has been in the trenches with hospitals and health systems battling labor union activities.  From his extensive experiences, and committment to stay up-to-date on labor news, comes this update on the latest tactics employed by Nurses Unions.   In an article published today by Becker's Hospital Review, Kevin talks about the hot-button issue of patient safety in hospitals, and how some unions are skewing community perceptions for the good of their own purposes. Read the full article on the Becker's Hospital Review website.

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