These tables offer top management and the Board an effective tool that establishes the range of compensation opportunity for C-Suite executive positions. As a total cash compensation amount, this includes any rewards granted in short-term bonus or incentive plans.
To be certain, short-term bonus/incentive plans encourage the achievement of tactical goals of the hospital or healthcare system. Over the past 10 years, these plans have increased in prevalence in the healthcare industry. The award opportunity as a % of base salary has increased from 15% of base salary to 35% of base salary for the CEO; and from 10% of base salary to 25% for VPs. Setting the exact amount of these awards falls under the performance evaluation process.
When evaluating performance, the Board and management must establish which factors are important to the hospital: revenue growth, operational efficiency, patient safety, or other factors. Research suggests that a combination of these factors, among others, typically leads to a better understanding of the link between pay and performance and how that link is established.
Performance metrics reflect the ownership structure of the healthcare institution. Publicly traded healthcare companies tend to utilize income and revenue as the primary measure while not-for-profits often use clinical measures and patient surveys such as the following:
- Clinical Quality Metrics
- Patient Satisfaction
- Operating Margin/Operating Income
- Patient Safety
- Mission Accomplishment
- Employee Satisfaction/Engagement
- Community Benefit and/or
- Employee Retention/Turnover.
With this linkage and with this higher level of understanding, a fair and equitable level of pay can be established for executives in a healthcare environment. As a result, pay satisfaction is increased immeasurably.