Do bigger executive paychecks help hospitals stay competitive?

Amid falling profits, Massachusetts hospitals are investing in executives to withstand the the changing healthcare landscape, according to an in-depth report on nonprofit compensation by the Lowell Sun.

As physicians flock to Boston's academic medical centers for higher reimbursement rates, patients follow, leaving other hospitals throughout the state to struggle with low patient volumes. It seems many of these hospitals — including Lawrence (Mass.) General Hospital, Emerson Hospital in Concord, Mass., Lowell (Mass.) General Hospital and those in the Burlington, Mass.-based Lahey Health System — have chosen to keep executive compensation competitive, despite falling profits, according to the report.

The report notes that compensation for top non-physician executives, which includes salary, benefits and bonuses, has increased from 2012 to 2014 by 41 percent at Lawrence General, 36 percent at Lahey Health and 18 percent at Lowell General. Compensation has also increased at Emerson Hospital, though the newspaper was unable to give an exact percent change due to a lack of information from the hospital, according to the report.

The comparison isn't perfect, but it shows there is a trend in making sure executives are well-compensated. Lahey Health's executive compensation increase is due largely to the promotion of Howard Grant, MD, who was named president and CEO of the entire system and received $1.7 million in 2014, according to the report. Emerson Hospital also paid a once-every-five-years retirement plan payout to executives in 2014, skewing payment increase rates. And Lowell General, despite reporting the lowest rate of compensation growth, actually paid its CEO more than any other in the region in 2014 — a total of $1.9 million — in addition to paying for taxes on retirement benefits, according to the report.

Some don't see this as a winning strategy. Alan Sager, PhD, a professor at Boston University, is one of the critics. "[Being a hospital executive is] a very hard job," he told the Lowell Sun, but "the deck for 55 years has been stacked against community hospitals. Do you think if we had paid our CEOs more in the '60s, '70s, '80s and '90s we'd have more [hospitals that survived]? I don't think so."

Well-paid executives may not be able to save the hospitals. As the Lowell Sun notes, Burlington-based Lahey Hospital and Medical Center performed best financially of the hospitals the newspaper compared, bringing in a profit of $67 million in 2014 and recording an 8.1 percent operating margin. It also paid the least in bonuses and incentives to nonphysician executives compared to its regional competitors, totaling $713,250 from 2012 to 2014, including the bonus for Dr. Grant of $360,750, according to the report. However, Lahey Hospital and Medical Center has something many of the others don't —it's a teaching hospital and part of a larger health system.

See the full report and a listing of the 20 highest paid hospital and health system executives in the region here.


More articles on compensation:

Calif. legislation would increase hospital reporting on executive compensation
8 lowest-paying medical specialties
Northwell Health CEO's compensation climbed to $9.6M in 2015

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