100 statistics for CEOs and CFOs

Amidst the changing landscape of today's healthcare industry, more important than ever are the roles of the CEO and CFO. From navigating healthcare reform to a constantly changing economy, empirical data never fails to be useful when making sense of the nuanced trends of the industry. To assist with the dynamic responsibilities of effectively leading a hospital or health system, we have provided below 100 statistics regarding healthcare finance, executive compensation, CEO succession and more.

Key finance statistics
Source: Moody's Investors Service, "Preliminary U.S. Not-for-Profit and Public Hospital 2014 Medians: Growth in Hospital Revenue Edges Ahead of Expenses in 2014," May 2015.

Note: The preliminary medians are based on fiscal year 2014 audited financial statements representing 48 percent of Moody's rated portfolio. These medians primarily reflect audit year ends of Sept. 30, 2014 and prior.

1. Annual median revenue growth rose to 4.7 percent (up from the all-time low of 3.9 percent in FY 2013), with total operating revenue at $679,912,000, based on the preliminary fiscal year 2014 U.S. nonprofit and public hospital medians.

"Revenue growth was supported by continued consolidation in the nonprofit hospital sector and the initial influence of the Affordable Care Act as benefits of the exchanges and Medicaid expansion were realized," said Beth Wexler, Moody's vice president and senior credit officer.

2. The annual expense growth ratedeclined to 4.6 in FY 2014 from 5 percent in FY 2013 and 5.5 percent in FY 2012. The slowdown in the expense growth rate is attributable to the ongoing shift of patient care to lower-cost and more efficient settings, such as outpatient and ambulatory surgery centers, in addition to operating efficiencies gained from increasing size and scale.

3. The median cash on hand rose to 212 days in FY 2014. That's up from 207 days in 2013 and up 197 days in 2012.

4. Unrestricted cash and investments were $377 million in FY 2014, up $20 million from FY 2013, mostly due to solid equity gains and restrained capital spending.

5. Profitability margins stabilized in 2014, though the 2.2 percent operating margin and 9.2 percent operating cash flow margins are down from higher levels in 2012.

6. Median net patient revenues were $588,190,000.

Average cost per inpatient day
Source: 2015 data is from 2013 by Kaiser State Health Facts

7. State/local government hospitals: $1,878

8. Nonprofit hospitals: $2,289

9. For-profit hospitals: $1,791

Key ratios: Preliminary medians in 2014
Source: Moody's Investors Service, "Preliminary U.S. Not-for-Profit and Public Hospital 2014 Medians: Growth in Hospital Revenue Edges Ahead of Expenses in 2014," May 2015

Note: The preliminary medians are based on FY 2014 audited financial statements representing 48 percent of Moody's rated portfolio. These medians primarily reflect audit year ends of Sept. 30, 2014 and prior.

10. Excess margin: 5.3 percent

11. Return on assets: 4.3 percent

12. Cash-to-direct debt ratio: 157.2 percent

13. Cash-to-comprehensive debt ratio: 111 percent

14. Debt-to-capitalization ratio: 32.4 percent

15. Debt-to-total operating revenue: 35.2 percent

16. Annual operating revenue growth rate: 4.7 percent

17. Annual debt service coverage: 4.9x

18. Maximum annual debt service coverage: 4.5x

19. Debt-to-cash flow: 3.1x

20. Capital spending ratio: 1.1x

21. Accounts receivable: 51.1 days

22. Average payment period: 63.7 days

Medicare and Medicaid payments

Source: American Hospital Association Underpayment by Medicare and Medicaid Fact Sheet 2015
23. Combined underpayments were $51 billion in 2013, the latest year for which data is available. This includes a shortfall of $37.9 billion for Medicare and $13.2 billion for Medicaid.

24. Hospitals received payment of only 88 cents for every dollar spent by hospitals caring for Medicare patients in 2013. For Medicaid, hospitals received payment of only 90 cents for every dollar spent by hospitals caring for Medicaid patients.

25. In 2013, 65 percent of hospitals received Medicare payments less than cost, while 62 percent of hospitals received Medicaid payments less than cost.

M&A activity
26. Moody's Investors Service predicts merger and acquisition activity will grow
and remain elevated for at least two years as financially distressed nonprofit hospitals seek solace in consolidation to avoid payment default.

27. Small hospitals with revenues of $500 million or less are most likely to be affected, according to Moody's. These providers are facing increasing regulatory and financial changes, leading to increased consolidation with larger, often for-profit hospital operators, which have been buffered from change by economies of scale. Nonprofit hospitals have declined from 80 percent market penetration in 1999 to 73 percent penetration in 2003, and, M&A volume in the first quarter of 2015 and fourth quarter of 2014 show the first significant transaction growth since 2012.

Compensation figures
28. The average base salary for an independent health system CEO
in 2014 was $752,800, according to Integrated Healthcare Strategies' "2014 National Healthcare Leadership Compensation Survey" report.

29. The average base salary for an independent hospital CEO was $425,200, according to the Integrated Healthcare Strategies report.

30. The average base salary for an independent health system CFO in 2014 was $416,200, according to Integrated Healthcare Strategies report.

31. The average base salary of an independent hospital CFO was $247,900, according to the report.

32. Healthcare executive compensation is adapting to new leadership competencies. According to a B.E. Smith whitepaper, as hospitals and health systems attempt to adapt to the new leadership realities — such as increased CEO turnover and merger and acquisition activity — executive compensation in the healthcare industry rose 2 percent to 3 percent over the past year, with slightly higher pay raises for CEOs.

33. Total cash compensation levels for hospital executivesdecreased an average of 0.4 percent in 2014, according to Sullivan, Cotter and Associates' "2014 Manager and Executive Compensation in Hospitals and Health Systems Survey."

34. Compensation levels for health system executives increased by 0.9 percent in 2014 due to lower average payouts under annual incentive plans.

35. The average base salary increases between 2013 and 2014 for executives of health systems are as follows:

CEO — 2.6 percent

COO — 2.9 percent

CFO — 3.5 percent

CMO — 2.5 percent

36. The average base salary increases between 2013 and 2014 for executives of independent hospitals are as follows:

CEO — 6.4 percent

COO — 4.5 percent

CFO — 2.1 percent

CMO — 4.9 percent

37. The average base salary increases between 2013 and 2014 for executives of system-owned hospitals are as follows:

CEO — 1.7 percent

COO — 1.7 percent

CFO — 2.5 percent

CMO — 1.7 percent

38. Roughly 70 percent of CFOs received salary increases in the past two years, according to a Compensation Advisory Partners report studying compensation in all industries.

39. The median salary increase for CFOs was 3 percent in 2014.

40. About half of CEOs received salary increases in the past two years, according to the Compensation Advisory Partners report.

41. The median salary increase for CEOs was just 0.3 percent in 2014.

42. Total CFO compensation continues to be approximately one-third of total CEO compensation across all industries.

43. Health systems offered the following median target award opportunities to their executives in 2014, according to the 2014 Manager and Executive Compensation in Hospitals and Health Systems Survey by Sullivan, Cotter and Associates:

CEO — 35 percent (up from 31 percent in 2004)

COO — 30 percent (up from 25 percent)

CFO — 28 percent (up from 24 percent)

SVP — 25 percent (up from 23 percent)

VP — 20 percent (up from 19 percent)

44. Hospitals offered their executives the following median target award opportunities in 2014:

CEO — 30 percent (up from 28 percent in 2004)

COO — 25 percent (up from 22 percent)

CFO — 25 percent (up from 22 percent)

SVP — 20 percent (down from 24 percent)

VP — 17 percent (down from 19 percent)

Compensation strategies
Source: HealthLeaders Media Intelligence, "Reforming Executive Compensation to Accelerate Change," November 2014

The 2014 Executive Compensation Survey, conducted in August 2014 is based on the survey results from 454 respondents.

45. Thirty-three percent of respondents said their executive compensation structure needs major enhancement. Forty-nine percent believe minor enhancements are needed and eighteen percent do not think any enhancements are necessary.

46. Only seven percent of respondents think their organization's executive compensation packages are aligned with their organization's strategies. Fifty-three percent believe their executive compensation packages are pretty well aligned with their organization's strategies, and forty percent believe they are either slightly or seriously misaligned.

47. Thirty-five percent of respondents said change is needed to their organization's executive compensation strategy to meet the financial needs of healthcare today, but there is no plan yet. Twenty percent said no changes have been made and none are needed and fifteen percent reported change is needed and a plan is pending.

48. Thirty-one percent of respondents said change is needed, but there is no plan yet regarding their organizations' executive compensation strategy to address the patient care objectives of healthcare. Twenty-seven percent said change was made in the right direction, while two percent said change was made in the wrong direction. Seventeen percent believe no change is needed and none have been made.

49. Forty-three percent of respondents said their organization has not modified its group or team incentives for executive compensation packages or don't expect to do so in consideration of the shift from fee-for-service to value-based purchasing. Thirty-three percent reported their organization has either already modified its team incentives or plans to do so.

50. More health systems (41 percent) than hospitals (31 percent) or physician organizations (24 percent) have made or intend to modify group or team incentives for executive compensation packages.

51. Survey respondents indicated that incentives are weighted slightly toward team goals (55 percent) over individual goals (45 percent).

52. Sixty-four percent and sixty percent of executives at organizations with medium and high levels of net patient revenue, respectively, receive a greater portion of team-based incentives than executives at low-revenue organizations (46 percent).

53. Forty-eight percent of respondents said operating margin targets serve as a basis for their current individual incentive payments, followed by staff engagement or satisfaction targets (47 percent), clinical performance targets (43 percent) and cost containment targets (42 percent).

54. Operating margins serve as a basis for sixty percent of respondents' current team incentive payments, followed by clinical performance targets (59 percent) and staff engagement or satisfaction targets (51 percent).

55. Forty-three percent of executives surveyed said their organization hasn't taken steps to match incentives to values such as cost containment and clinical outcomes, although the industry is moving to align executive compensation with performance-based models.

56. Forty percent of survey respondents said their executive compensation packages are either slightly or seriously misaligned with their organization's strategies. As for incentive payments, operating margins serve as a basis for 60 percent of respondents' current team incentive payments, followed by clinical performance targets (59 percent) and staff engagement or satisfaction targets (51 percent).

Turnover
57. Hospital CEO turnover in 2014 decreased to 18 percent
, according to a report in March by the American College of Healthcare Executives. This marks a slight decrease from the record high rate of 20 percent in 2013, though it is still one of the highest reported rates in the past 15 years.

58. The healthcare and life sciences industry accounted for approximately 25 percent of the year's 138 CFO appointments, making it the overall leader in CFO turnover, according to the Wall Street Journal. This rate is the highest for any sector in the last five years and marks a steep increase from 2013.

59. Approximately 15 percent of healthcare and life sciences companies included in the Wall Street Journal database hired new CFOs in 2014.

60. Healthcare companies hired significantly more outsiders as their CFOs (57 percent of CFOs) compared with companies across all other industries (49 percent of CFOs).

61. The average hospital CEO tenure is under 3.5 years, according to a 2013 Black Book Rankings poll.

62. Fifty-six percent of CEO turnovers are involuntary.

63. Almost half of CFOs, COOs, and CIOs are fired within nine months of a new CEO being hired.

64. Eighty-seven percent of CMOs are replaced within two months of a new CEO appointment.

65. Ninety-four percent of new CEOs without healthcare sector experience believe extensive healthcare knowledge is not necessary to replace senior management positions.

66. Eighty-nine percent of people involved in the hiring process believe a broad area of business expertise is beneficial in a hospital CEO position.

67. The most common business backgrounds for new hospital CEO candidates are as follows: venture capital/private equity industry (42 percent), followed by finance and accounting (40 percent), banking (32 percent), and marketing and sales (19 percent).

68. Only 3.4 percent of hospital CEOs have a continuous tenure of 20 years or more, according to an American College of Health Executives report.

69. Fifty-one percent of CEOs have previously served as CEO of another hospital.

70. Sixty-seven percent of CEOs voluntary departed their previous hospital.

71. First-time CEOs lead smaller hospitals (ones with fewer than 200 beds) seventy-five percent of the time.

72. Forty-two percent of facilities developed new services as a result of CEO turnover. Forty percent initiated strategic planning, 37 percent cut costs, and 30 percent made efforts to improve quality.

73. Seventy-five percent of CEO positions are filled within six months of the previous CEO's departure.

74. Seventy-three percent of current CEOs report improved hospital culture as a result of turnover. Seventy-one percent reported improved employee morale and medical staff relations while 60 percent reported improved financial performance.

75. Thirty-five percent of current CEOs report increased marketing by competitors as a result of turnover. Fourteen percent report worsened employee morale and medical staff relations.

Gender disparity

Source: American College of Healthcare Executives, "A Comparison of the Career Attainments of Men and Women Healthcare Executives," December 2012

76. Women attain CEO positions at about fifty percent the rate at which men do, according to an American College of Healthcare Executives report. This represents an increase over the previous rate of 40 percent when a similar study was conducted in 1990, 1995, and 2000.

77. Women on average earn 20 percent less than men (when comparing workers with roughly equal experience and education) in the healthcare industry. When looking at the general business world, the gap widens to 28 percent.

78. Eighty-seven percent of women and 77 percent of men started their healthcare management career at the departmental level instead of in a senior management position.

79. Thirty-seven percent of women aspired to be a CEO in the next fifteen years, compared to sixty-six percent of men over the same time period.

80. Eighty-eight percent of men believe there is gender equity in their workplace, compared to 69 percent of women who would say the same.

81. Thirty-three percent of women said that they failed to receive fair compensation due to gender between 2007 and 2012. Only one percent of men claimed the same.

Leadership roles

82. Seventy-eight percent of CFOs have influence over which industries their business should enter or exit, according to a Deloitte CFO Signals report. Fifty-seven percent have say regarding where to focus cost-reduction efforts.

83. Only 10 percent of CFOs are involved in decisions regarding innovation efforts. Similarly, a paltry fifteen percent decide what customers and markets to target.

84. Ninety-seven percent of CFOs are welcome to discuss corporate strategy with their CEO. Ninety-four percent report having good access to their CEO.

85. Hospital CEOs cite financial challenges as the greatest issue confronting their organization. Within financial challenges, they see the following as the most pressing:

Medicaid reimbursement (69 percent)

Bad debt (67 percent)

Decreasing inpatient volume (63 percent)

Medicare reimbursement (57 percent)

Competition from other providers (55 percent)

86. Hospital CEOs ranked healthcare reform implementation as the second-greatest challenge to their organization. Within healthcare reform implementation, they ranked the following as the most pressing:

Reduce operating costs (78 percent)

Shift to value-based purchasing (66 percent)

Alignment of provider and payer incentives (65 percent)

Align with physicians more closely (54 percent)

Develop information systems integrated with primary care physicians (48 percent)

87. Hospital CEOs ranked governmental mandates as the third-greatest challenge to their organization. Within governmental mandates, the following were ranked the most pressing:

CMS audits (80 percent)

ICD-10 implementation (68 percent)

CMS regulations (64 percent)

State regulations (34 percent)

Increased government scrutiny (32 percent)

Retirement/Succession
88. The average age of a healthcare CEO is 57
, according to a survey by Yaffe & Company. The average age at which a CEO plans to retire is 65.

89. Only 12 percent of healthcare CEOs were younger than 50 years old in 2014, according to a study by Yaffe & Company. Further, 17 percent of CEOs are at least 65 years old.

90. Sixty-one percent of healthcare CEOs do not plan on working past the age of 65.

91. Fifty percent of healthcare CEOs periodically review their retirement benefits.

92. Seventy-seven percent of healthcare CEOs surveyed indicated that they are satisfied or somewhat satisfied with their retirement benefits.

93. Only 39 percent of healthcare CEOs have a formal succession plan in place.

94. Forty-nine percent of healthcare CEOs with a formal succession plan review it annually. Forty-one percent review it sporadically and seven percent review it every other year.

95. Fifty-two percent of healthcare CEOs have a potential internal successor. When looking only at CEOs that plan to retire in the next five years, that figure rises to 66 percent.

96. COO is the most common position held by internal successors with 43 percent of CEOs with internal successors listing them as their first choice. The next most common positions held by internal successors are CFO (25 percent), CMO (11 percent), and patient care (6 percent).

97. Fifty-three percent of hospital CEOs had a Supplemental Executive Retirement Plan (SERP) in 2012, according to a survey by Yaffe & Company.

98. Thirty-four percent of hospital CFOs had a SERP in 2012.

99. The average SERP for a CEO is 17.1 percent of his or her base salary.

100. The average SERP for a CFO is 10.8 percent of his or her base salary

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