Healthcare CEO Turnover Nears Record High—Performance-Based Compensation May Give Competitive Advantage, Report Reveals

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HealthLeaders Media, together with B. E. Smith, conducted an independent survey of healthcare executives to determine how the reform-driven shift in the delivery model to performance-based care is impacting executive compensation and incentives. The responses were analyzed in a comprehensive report “Restructuring Executive Compensation for the Shift From Volume to Value,” available for complimentary download at healthleadersmedia.com/intelligence.

Healthcare leads all sectors for CEO turnover at 17%, a near record high,” says Doug Smith, President and CEO at B. E. Smith

HealthLeaders Media, together with B. E. Smith, conducted an independent survey of healthcare executives to determine how the reform-driven shift in the delivery model to performance-based care is impacting executive compensation and incentives. The responses were analyzed in a comprehensive report “Restructuring Executive Compensation for the Shift From Volume to Value,” available for complimentary download at healthleadersmedia.com/intelligence.

Healthcare reform has introduced new performance initiatives that have transformed the way providers do business; previously operating under a fee-for-service structure, the industry is shifting to a model that emphasizes value. Compensation plans have largely followed suit. Respondents indicated that patient satisfaction (64%) and clinical performance (63%) are now driving incentives nearly as much as volume metrics like operating margin, which 67% of respondents mentioned as a basis for payment.

“Incentives are slowly moving to the value world,” says Joseph Pepe, MD, president and CEO of CMC Healthcare System in Manchester, N.H., which includes Catholic Medical Center, a 330-licensed-bed not-for-profit hospital. “I think over the years to come that gap will close, and you’ll see the value metrics surpassing volume metrics.”

In an environment of increasing accountability, declining reimbursement, and significant leadership turnover, healthcare organizations still struggle to define a strategy that will incentivize their executives to meet new operational and clinical standards. The report reveals a startling observation about the stability of leadership retention.

“Healthcare leads all sectors for CEO turnover at 17%, a near record high,” says Doug Smith, President and CEO at B. E. Smith, a top ranked executive search firm. “Unfortunately this year’s survey shows that trend is likely to continue, as 45% of executives said they would have to leave their current organization to advance their career, with 19% currently conducting a job search.”

Optimized compensation programs will play a critical role in bucking these trends and ensuring executives continue in the strategic direction of their organization. Pepe says the focus of the compensation incentives should be less about the bottom line and more about growing the continuum of care, increasing primary care lives, and maintaining a low 30-day readmission rate.

Leadership skills are also critical. According to the survey results, physician alignment continues to be the skill mentioned most frequently as being important in ensuring CEO success, listed by 61% of respondents. Rounding out the top three most important skills are cost containment (58%) and the ability to optimize results along the continuum of care (49%).

“Our board spends a lot of time talking about the behavioral competencies that will lead to success. And when I say behavioral competencies, I’m talking about things like the ability to successfully forge new kinds of business models, or to demonstrate bold and innovative thinking,” says Bonnie Bell, executive vice president of people and culture for Texas Health Resources, a Texas-based health system with 25 hospitals and 3,800 licensed beds systemwide.

Other key findings of the report include:
1.    Nearly half (49%) of respondents say "optimizing results along the continuum of care" is essential to CEO success, yet nearly one-third (30%) say their CEOs lack that very skill.
2.    While more than half (51%) of healthcare leaders expect total compensation to increase next year, nearly two-thirds of those (60%) anticipate an increase of 3% or less.
3.    Three key skills for CEO success have seen considerable increase in demand since 2012: cost containment (+23 points), optimizing results along the continuum of care (+10 points), and mergers, acquisitions, and partnerships (+17 points).

In addition to the complimentary report, two extended versions are available for purchase, containing in-depth analysis and additional features: the Premium version, which may be purchased at http://www.hcmarketplace.com/prod-11922/Restructuring-Executive-Compensation-for-the-Shift-From-Volume-to-Value.html, includes case studies from CMC Healthcare System/Catholic Medical Center, The MetroHealth System, and Texas Health Resources lets readers segment data according to their needs, and provides recommendations and discussion questions for healthcare leadership teams; and the Buying Power version, which is available for purchase at http://www.hcmarketplace.com/prod-11924/Restructuring-Executive-Compensation-for-the-Shift-From-Volume-to-Value.html, is designed for healthcare industry suppliers and includes detailed drill-down data on purchasing trends and projections to aid sales strategies.

HealthLeaders Media
HealthLeaders Media is a leading multi-platform media company dedicated to meeting the business information needs of healthcare executives and professionals. As an integrated media company, HealthLeaders Media includes HealthLeaders magazine, HealthLeadersMedia.com, the HealthLeaders Media Intelligence Unit, HealthLeaders Media Rounds events, HealthLeaders Media Breakthroughs reports, and California HealthFax. All these platforms may be found online at http://www.healthleadersmedia.com.

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Amy Wieman
HealthLeaders Media
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