What is a Healthcare Leader Worth? Determining Hospital Executive Compensation

At the Becker's Hospital Review Annual Meeting in Chicago on May 18, Paul Esselman, executive vice president and managing principal, and Rebecca Kapphahn, engagement manager at Cejka Executive Search, discussed hospital executive compensation.

To determine compensation, hospitals should start with compensation surveys as a baseline and then assess the leader's worth to the organization, according to Mr. Esselman and Ms. Kapphahn. When deciding whether to up a leader's compensation to retain him or her or to look for a new leader, a hospital has to consider the possible financial consequences of an incumbent leader leaving the organization and the costs of recruiting a new leader. For example, hospitals should consider if the incumbent is performing to expectations, if he or she fits well with the organization's culture, if he or she is respected by fellow leaders and staff and if the hospital's executive team is stable enough to continue operations without the leader for several months.

"Soft skills" are becoming increasingly important for healthcare leaders. Leaders who are collaborative, have good communication skills, are politically savvy and engage in the organization are highly valuable to hospitals, Ms. Kapphahn said. Candidates with these qualities will thus demand higher compensation.

Other factors that impact compensation include the organization's size, which affects the leader's scope of responsibility; market competition; the organization's location; the track record of the position; the stability of the current leadership team; and the reputation of the organization. For example, if the hospital is recruiting its third CEO in the last five years or the hospital's reputation from the candidate's perspective is not good, compensation will be driven up, according to Mr. Esselman.

More Articles on Hospital Executive Compensation:

11 Hospital, Health System Executive Compensation Trends
4 Unique Compensation Issues at Critical Access Hospitals

48 Statistics on For-Profit Hospital Operator Executive Compensation

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