The widening gap in pay among CEOs and direct patient care workers between 2015 and 2022 was focused among the biggest hospitals and health systems, according to a recent study from Rice University’s Baker Institute for Public Policy in Houston.
Here are five things to know:
1. The growing divide between nonprofit hospital CEO pay and direct patient care worker pay was concentrated almost entirely in the largest 10% of hospitals by bed size, according to the July 16 research brief.
The analysis used CEO compensation data from IRS Form 990 filings compiled by Candid, and labor cost data from the National Academy for State Health Policy’s Hospital Cost Tool. It compared CEO-to-DPC wage ratios by hospital bed-size decile from 2015 to 2022, tracked changes in labor cost composition, and used linear regression models to test the relationship between wage ratios and hospital size, quality, charity care spending, teaching status and operating profit, run separately for multi-hospital systems and independent hospitals.
2. At the largest hospitals, the CEO-to-DPC wage ratio climbed from about 36 to 1 in 2015 to more than 51 to 1 in 2022. CEO pay at those systems rose 62% over that span, to $6.31 million from $3.9 million, while DPC worker pay grew 11%, to $121,000 from $108,000.
3. Mid-size and small hospitals saw a much narrower gap. Among hospitals in the second through ninth deciles, CEO pay grew about 22% compared with 12% for DPC staff. At the smallest 10% of hospitals, CEO pay rose 13% to $625,000, even as DPC pay slipped in real terms, from $92,200 to $90,600.
4. The overall shape of hospital labor spending barely changed, despite a wave of consolidation reshaping hospital ownership over this period. The share of labor spending going to direct patient care rose slightly, to 64.9% from 63.8%, while administrative and overhead shares dipped only slightly. That means the growing pay disparity was concentrated at the executive level rather than reflecting a broader shift of resources away from frontline staffing. The most notable compositional shift was a tripling in reliance on contracted DPC staff, to 8.7% of labor costs from 2.5%.
5. Bigger, more profitable hospitals tended to have wider pay gaps, but generosity toward charity care did not drive the disparity. The study’s regression models linked hospital profit and bed size to higher CEO-to-DPC ratios. Among multi-hospital systems, though, hospitals that spent more on charity care actually had smaller gaps, not larger ones.
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