Why CEO pay is on the rise: Lown Institute

Vikas Saini, MD, president of the Lown Institute, is speaking out on high hospital CEO pay.

Dr. Saini recently discussed rising compensation with the Fresno Bee. His thoughts were also published to the Lown Institute's website April 10. 

Valley Children's Hospital in Madera, Calif., has recently come under such heavy criticism for its executive compensation that it opted to provide 24-hour security at President and CEO Todd Suntrapak's home. Mr. Suntrapak was paid $5.1 million in the fiscal year ending 2022 and $5.5 million in 2021, with the majority of his pay coming from bonuses.  

According to the Bee, Mr. Suntrapak made more than double the next-highest compensated nonprofit executive in the San Joaquin Valley region of California. He also made significantly more than other children's hospital executives in California, including the 413-bed Children's Hospital of Los Angeles and the 511-bed Rady Children's Hospital in San Diego. Both paid their CEOs $1.7 million in 2022. 

For comparison, Valley Children's is a 358-bed hospital.

"[That's] pretty hefty for a hospital of that size," Dr. Saini said. "We don't pretend to know the 'right pay' for a hospital CEO, but we do think it's reasonable to ask, what's it for?"

Valley Children's has defended its CEO pay. Board members say that executive compensation "is determined on a thorough review and recommendations from multiple, independent executive compensation consultants."

More hospitals have been adding board members from the private sector "over the past several decades," according to the Lown Institute. One study found that 44% of board members at hospitals ranked highly by U.S. News hail from the financial sector — private equity and wealth management firms, banks, and insurance companies. 

Dr. Saini says these board members "are oriented to the bottom line" and "think about [hospitals] like a regular business." Thus, they can influence CEO pay to remain competitive.

"When [hospitals] hire a new CEO, they're not going to pay below the median; they're not even going to pay at the median," Dr. Saini said. "They're saying, 'We've got to go higher.' And if everybody does that, it creates an upward spiral, and that's what we've seen for 30 years."

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Featured Whitepapers

Featured Webinars