Yves here. Health care CEOs can’t even come up with adequate justifications for their sky-high pay. They apparently deserve big bucks just because they have a big title.
By Roy Poses, MD, Clinical Associate Professor of Medicine at Brown University, and the President of FIRM – the Foundation for Integrity and Responsibility in Medicine. Originally published at Health Care Renewal
On Health Care Renewal, we have been decrying American health care dysfunction since 2004 (look here). For years, the US consistently has had the most expensive health care system of any developed country. For that exhorbitant price, it provides at best medicocre access to and quality of care.
We have long contended that a major reason for health care dysfunction is perverse incentives, including those that allow top health care leaders to become rich by putting money ahead of patient care. We have presented case after case supporting this point. So what do health care CEOs have to do to make so much money?
The Hardest Part of CEOs’ Days
A recent post in Beckers Hospital Review discussing what “the brightest executives in the healthcare industry” think are the hardest parts of their days. Here is the summary, edited for brevity:
1. Andrew Agwunobi, MD, CEO UConn Health (Farmington, Conn.): ‘when we lose, or are facing the possible loss of good talent.’
2. Wael Barsoum, MD, CEO of Cleveland Clinic Florida (Weston): ‘if I hear about an issue that came up with a patient where they felt like we could’ve done better. It is hard to read letters that said we didn’t do something up to their expectations…. these reports and issues are very rare’
3. David Dill, CEO of LifePoint Health (Brentwood, Tenn.): ‘shaking the nagging feeling that I didn’t get everything done that I need to, mainly because I didn’t mark 10 things off a list like I used to’
4. Suresh Gunasekaran, CEO of University of Iowa Hospitals & Clinics (Iowa City): ‘We hold ourselves to a very high standard … sometimes, very rarely, we don’t hit that standard…. I take a lot of personal responsibility for those failures
5. Tom Jackiewicz, CEO of Keck Medicine (Los Angeles): ‘Since it takes awhile to get on my calendar, I need to ensure I am managing my own emotions to maintain my focus so everyone gets the attention they deserve‘
6. Dr. Divya Joshi, CEO of OSF HealthCare’s Children’s Service Line (Peoria, Ill.): ‘when an initiative gets stuck and is unable to move forward because there are so many people involved or options to pursue…. Beyond that, I would say when I don’t have the answer to something.’
7. Ketul Patel, CEO of CHI Franciscan (Tacoma, Wash.): ‘days full of meetings that are back-to-back‘
8. Chris Van Gorder, CEO of Scripps Health (San Diego): ‘there are bad things that happen occasionally. That burden falls on me…. when something happens to a patient that shouldn’t have happened or if one of my employees is attacked by a patient, those days are difficult’
9. Prathibha Varkey, CEO of Yale New Haven (Conn.): Health’s Northeast Medical Group. ‘driving between the different practices,… driving can be physically exhausting’
10. Kevin Vermeer, CEO of UnityPoint Health (West Des Moines, Iowa) ‘when I must make tough decisions that impact people’s lives‘
11.Andrea Walsh, CEO of HealthP artners (Bloomington, Minn.). ‘juggling priorities on my calendar‘
12. Jeff Welch, CEO of Florida Medical Center and Tenet’s Miami-Dade Group (Fort Lauderdale, Fla.): ‘making sure that everything our organization does is for the betterment of the patient and the community‘
13. Albert Wright, PharmD, CEO of WVU Hospitals and WVU Health System (Morgantown, W.Va.): ‘it’s just keeping everybody rowing in the same direction. The other challenge is that we’ve been on this huge growth boom … .Trying to keep up with the growth has been a challenge because you want to help others and save some of these challenged hospitals, but you have to grow at a pace that is safe and people can keep up with’
Things are tough all over. As a physician, I am unimpressed. I do realize that some of the lists above included vague references to “bad things that happen,” “issues that come up,” not hitting a “standard,” making “tough decisions,” etc. However, without further detail, I wonder if these refer to anything comparable to the urgent issues and decisions that doctors and nurses can face on any given day?
Many of the issues cited with more specificity seem trivial, to be charitable. So the hardest part of being a CEO could be not completing your daily to-do list; attending back-to-back meetings; trying to focus on people with whom you meet; driving around a lot; or juggling calendar priorities?
These are not exactly the sort of hardship postings that seem to demand lavish compensation.
The Money They Make
Yet we have noted that CEOs do get lavish compensation. The CEOs above who complained of the most trivial hardships, who have to wrestle with busy schedules, multiple meetings, and heavy traffic etc are often paid … millions. Consider the following examples, which are based on the most recent compensation data I could find:
David Dill, whose worst day would be one in which he did not check off his to-do list, is in line for a $25 million dollar plus golden parachute (look here). According to Salary.com, his total compensation in 2017 was $5,372,271. It may be higher now.
Tom Jackiewicz, whose worst day would be one in which he had to manage his emotions to focus on people with whom he was meeting, had a total compensation of $2,322,895 reported on the USC 2019 form 990.
Prathibha Varkey, whose worst day involved a lot of driving, made $187,024 reportable compensation from Yale New Haven Health Services Corporation, $748,096 reportable compensation from related organizations, and $226,128 other compensation, totaling $1,161,248 according to the Yale Health Service Corporation form 990 from 2019 via ProPublica.
Andrea Walsh, whose worst day was one in which she had to juggle priorities on her calendar, made $1,085,956 as Executive Vice President for Marketing in 2017, the last year for which full 990 data is available from HealthPartners via ProPublica. Her current compensation is likely more.
The things you have to do to bring in those big bucks.
For Comparison, The Hardest Parts of Physicians’ Days
So let’s see… in my clinical career as an academic general internist, I faced 100 hour work weeks as an intern. From internship through my career as a hospital-based educator, I had to cope with numerous life-threatening medical emergencies, numerous acute situations in which bad decisions could lead to patients unnecessarily dying or ending up disabled or chronically ill. I had to tell patients they had incurable illnesses, and console the family those who were dying. Furthermore, many other doctors have had more difficult lives. Think about what trauma surgeons do every day, just for one example.
I am sure my colleagues in nursing could come up with their own harrowing lists.
On a personal level, there were many times I would have given anything for a day when the worst problem I had to encounter was a full schedule, boring meetings, or being stuck in traffic.
So tell me again why hospital CEOs make the big bucks, often much bigger than those made by health care professionals in the same institution?
Summary
Inflated executive compensation in health care is rarely challenged, but when it is, the responses are formulaic. Justifications are usually made by public relations flacks who are accountable to these executives, or the executives’ cronies on their boards of trustees. As I wrote in 2015, and in May, 2016, It seems nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same arguments, thus suggesting they were authored as public relations talking points. Additional examples appear here, here here, here, here, and here, here and here.
The talking points are:
– We have to pay competitive rates
– We have to pay enough to retain at least competent executives, given how hard it is to be an executive
– Our executives are not merely competitive, but brilliant (and have to be to do such a difficult job).
Yet the examples above suggest that the work of a top health care manager hardly is as difficult as that of a health care professional. And as we have discussed, these talking points are otherwise easily debunked. But that certainly has not stopped executive compensation from rising year after year.
The plutocratic compensation given leaders of non-profit hospitals is usually justified by the need to competitively pay exceptionally brilliant leaders who must do extremely difficult jobs. Yet even leaders whose records seem to be the opposite of brilliance, or whose work does not seem very hard, often end up handsomely rewarded.
Other aspects of top health care managers’ pay provide perverse incentives. While ostensibly tied to hospitals’ economic performance, their compensation is rarely tied to clinical performance, health care outcomes, health care quality, or patients’ safety. Furthermore, how managers are paid seems wildly out of step with how other organizational employees, especially health care professionals, are paid.
Exalted pay of hospital managers occurred after managers largely supplanted health care professionals as leaders of health care organizations. This is part of a societal wave of “managerialism.” Most organizations are now run by generic managers, rather than people familiar with the particulars of the organizations’ work.
That CEOs would view the minor travails of bureaucratic life as so significant suggests how deep they are within their managerialist bubbles, and how little they understand and relate to what their organizations actually are supposed to do, provide health care on the ground to real patients.
Rather than putting patient care first, paying generic managers enough to make them rich now seems to be the leading goal of hospitals. I postulate that managerialism is a major reason the US health care system costs much more than that of any other developed country, while providing mediocre access and health care quality.
Improving the situation might first require changing regulation of executive compensation practices in hospitals, improving its oversight, and making hospital boards of trustees more accountable. But that would be just a few small steps in the right direction
True health care reform might require something more revolutionary, the reversal of the managers’ coup d’etat, returning leadership of health care to health care professionals who actually care about patients and put their and the public’s health first, ahead of their personal gain. Of course, that might not be possible without a societal revolution to separate managers from the levers of power in government, industry, and non-profit organizations. Remember the most salient example of managerialism now for most people in the US is a an executive with a Wharton business degree as the President of the United States.
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The word competitive has opposite meanings when applied to top managers or workers. Workers must bear low wages to be competitive but managers salaries must be as high as possible to be competitive.
Can someone explain this in a straight way?
Yes, this bizarre inversion of principles at opposite ends of the pay scale makes no sense.
Pay is about power, full stop.
The list about is missing a few examples:
Get out of bed 5 days a week
Put on Trousers, both legs (Or female business attire, including makeup)
Possibly make their own breakfast.
Drive to work in traffic
Stop at red lights – Hostile work environment.
The poor delicate executive flowers must be crushed by the time they arrive at their grueling job (at their time of choosing).
and so on….
I hate to think what public transit would do to them.
On a related note, Yves mentioned that –
My pet theory is similar – these types of people think their pay should be correlated to the magnitude of the revenue stream they oversee. But as an accountant myself, a transaction is a transaction despite the amount. I get paid the same for doing a journal entry deferring $1 million in revenue as I do for one for $10. If I said I needed to be paid more for the high dollar transactions I’d be laughed out of the building. Too bad the same doesn’t happen with the c-suite types.
You suggest CEOs should be paid less than insanely high amounts of money for … uh…( nobody is sure what value they add)… ? Without them the enterprise would falter! Think of the CEOs!! Think of their families!!!
Oh, the humanity!
i believe the term for it is “doublespeak,” as coined by a name named George Orwell.
Thanks Yves for posting this to lighten the impending sense of doom of having to spend time with the family over Christmas.
While I may have it bad, actually, there’s no “may” about it, I do have it bad, consider, dear reader, that I’ve been allocated the task over the festive period of swapping out my mother-in-law’s cat’s scratching post (which to the innocents among you doesn’t possibly sound too bad, but involves not only disassembling the old scratching post and finding some way to dispose of it, but also assembling the new one and, no doubt, being held personally responsible if the aforementioned cat doesn’t “take” to the new one), I now, despite my many trials and tribulations, have got a new appreciation for the burdens of others.
(for a while, there, I wondered if I might ever be able to escape the above sentence; readers may also now be experiencing a similar sensation)
For whomests amongstests us can fail to thank our lucky stars that, though we may have long, dreary commutes, tedious and illogical job demands, crappy pay and ever-declining conditions in our workplaces we are, nevertheless, spared the borderline-cruelty of having to cope with:
I simply don’t know how they do it.
+100
Absolutely Onion-level hilarious, this is. Same in every industry. Making “tough decisions,” says literally every boss ever.
A few years ago, my boss was having a hallway conversation with the CFO of our academic medical center. This guy, who at the time, was making 800K per year, was complaining because they keep losing service and maintenance staff to our employer, a “small liberal arts college” in the granite state. The CFO said “the problem is, you guys have a union and all of our people go work for you as soon as we get them trained.”
Now, if a cardio-thoracic surgeon were leaving because they were getting a better deal somewhere else, this same CFO would go on about the need to maintain competitive wages, and the fact that the struggle to retain staff in low level position suggests that this group of employees might have more leverage than they realize.
Lately I’ve heard a rumor that the medical center, which posted a tidy positive operating margin (not profit, mind you, being a 501c3), is now thinking of outsourcing their house keeping operation. And when I was out there the other day, the little cafe area off the main corridor had signs on the tables saying “please use the sanitary wipes provides to clean your table for the next customer.” One of the house keeping staff used to be assigned to that area. Didn’t look like many people were taking the place up on the offer of doing the work once assigned to paid staff.
this is similar to companies that complain that they can’t keep good people, then pay poorly and treat their employees poorly.
anyone with sense and ability will abandon ship. but they still follow the “treat ’em mean to keep ’em keen” philosophy.
you end up getting what you are willing to pay for.
aye. I’ve fired every boss I’ve ever had, but one.(“quit”)
I worked in kitchens for my working life…mostly mom and pops, because i was allergic to corporate kitchens.
eventually, they’d start talking about the Reserve Army of the Unemployed, or something, and i’d hang around a while, then fire them and go somewhere else and start all over.
But in food service, you also have all those Other Bosses that you can’t fire(“customers”).
when i get together with my dad, it always amazes me that he doesn’t tip(i’m sorry, 25 cents don’t count.) and sends everything back with a snarl.
I know full well that i’ve consumed orders of magnitude less bodily fluid in my lifetime than he has, because i tip more than fairly, and won’t eat out if i can’t, and treat the serving humans like humans.
a quiet revolution has been ongoing in this manner for decades, btw.
Don’t know about the US, I can’t imagine they could get away with it there, but here in the UK the coffee shop chains have a policy of placing their “please give to our. Foundation” at the register in lieu of any possibility of having a tip jar (and corporate policy usually prevents staff from having one).
In this situation I *always* buy whatever naff and completely unnecessary upsell they force the poor baristas or waitresses to foist on customers lest they get marked down in performance reviews for “failing to meet customer needs” or whatever horror-inducing language they give it.
The staff, if you end up being a regular, seem to think this makes you one step down from Mother Theresa or something (especially as so many other customers seem to insist, again, here in the UK, perhaps folks in the US are a little more understanding of the fact that it is not the staff’s choice, they are being forced to go through these motions, on venting their displeasure at having to say a simple “no, thanks” on the staff themselves).
Yes, buying-in and feeding the corporate machine through succumbing to these upsell cons is just perpetuating it. But the revolution will have to be fought on different ground if, in my view, the staff of these places gets put in the front line.
i won’t generally darken a door if i know about such anti-tipping policies beforehand….or i’ll blatantly tip anyway, in person, and dare the damned boss to do anything(I’m quite terrifying to look at most days,lol…at least for the city, or starbucks or whatever.)
Luby’s is like that…but i go there often anyway, because it’s like Proust’s madelines dipped in tea, for me….square fish= mamaw and papaw and stories about the Depression.
and! when with my dad, i make sure he knows that i come tipping well behind him,lol.
Oh boy, the working class (supposedly ignorant and at “their betters” beck and call, with no recourse, the so called ‘betters’ think) leave for better pay and benefits. Who could’a’node?
As for outsourcing housekeeping: I’ve seen how that works in practice at my uni. People are now expected to empty their own trash cans, dust bins, and sort the recycles from not, at centralized collection points. The new “cheaper” housekeeping has simply shifted work to the non-housekeeping employees. The stairwells are “swept”, in the sense that the swept dust is pushed into a corner on stairwell landings and not dealt with, creating larger dust piles on every landing. Basically, foisting housekeeping work on to faculty and staff while claiming cost savings in housekeeping. Nevermind the lost productivity (I hate that word) onto faculty and staff. Shifting work from on book to off book doesn’t change anything except accounting fictions – and the PC gloss favoring neoliberal ideology.
adding: Now, in summer, many academic offices once free of fruit fly swarms and the smell of decomposing food, are infested with fruit fly swarms. This is blamed on faculty failingto perform their new housekeeping duties on a regular daily basis. ( Which was once performed by, you know, the HOUSEKEEPING staff.)
Academia admin has deeply drunk the neoliberal (free lunch for govts) kool-aid. imo.
shorter: I don’t want universal basic income or even a universal jobs guarantee. I want an economic policy (a fiscal instead of a monitary policy) that works for full employment at decent wages.
Keynesianism, not Friedmanism.
I don’t think UBI conflicts with that at all. The greater demand from the money people get will drive up wages and create jobs, and the fact that people aren’t so desperate will give them more leverage to drive up wages. All that is inflationary, so counter the inflation with carbon taxes or progressive taxes and there you go. Throw in health care reform and we would be in a lot better shape IMO.
Years ago I was reading a wide swath of books on corp think and picked up one on HR strategies. Baldly stated that it’s understood in HR higher ups that compensation packages for executives revolves around status…as defined by the executive themselves.
May explain why those compensation packages are statospheric and ceaselessly rise.
Same for doctors until the influx of managerialism whereby they saw their own status and power sink below the managers.
Layers and layers of special people now claim greater and greater percentages of social capital, to sooth self esteem. Phooy!
Other contributing factors in the ongoing CEO pay circus are:
1. The “Lake Wobegon effect” — where every CEO’s pay must be above average (I’ll let those of you more mathematically inclined mine the absurdities here)
2. What I call “the CEO pay circle-jerk” whereby senior executives sit on one another’s pay committees, with predictably “happy endings” for all
For actual serious investigation of this problem, see Steven Clifford’s “The CEO Pay Machine”
https://www.penguinrandomhouse.com/books/549465/the-ceo-pay-machine-by-steven-clifford/
You have to feel sorry for all the work that these executives do for all their pay. They sacrifice so much of their lives. Fortunately some manage to see the light-
https://www.theonion.com/executive-quits-fast-track-to-spend-more-time-with-poss-1819565527
Maybe companies should do to executives what they do for some of their employees. Make them re-apply for their jobs each and every year so that they can justify their jobs. Make them fill out a daily log book listing each and every task or job that they do each day for future examination. Make them wear uniforms and sing company songs. That sort of stuff.
I offer a CEO pay ratchet process that is guaranteed to reduce CEO pay. Whether you are dissatisfied with your CEO or he is clearly going to leave, go to the next in line (Executive VP?) and offer them the job at half the salary. Let’s assume they take the job but then increase their salary demands or threaten to leave: go to the next in line and offer them the job at half the salary.
This somewhat protracted process allows you to evaluate the impacts of the changes on CEO performance. I suspect they will be little to none.
Many next level “leaders” will take the reduced pay position simply to establish that they had the title for future job searches. Of course, if they get poor evaluations, that will be not helpful, so there is still pressure upon them to perform.
Extensive CEO searches are due diligence camouflage and a waste of time and money. Were not the “nest in lines” also vetted?
What is interesting is that the executives don’t seem to have much opportunity to move to different firms for more money and mobility dropped after 2001.
from https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFA2020&paper_id=1511
“We examine the evolution of executive mobility and its implications for corporate decisions from 1920-2011. We find that in the eight decades leading up to 2001 movements of executives to new executive positions became more common; executives moved across an increasingly diverse set of industries; and conditional on moving, executives moved to larger, more profitable, and higher-paying firms, even more so in recent decades. However, many of these trends reversed starting in the early-2000s”
I know of one formerly well-compensated CEO (Carly Fiorina) of a company (HP) that I worked at for 20+ years who was eventually fired in 2005.
As far as I can tell, in her long job search after dismissal from HP, she has tried, unsuccessfully, to find new positions as US Senator and as Presidential candidate Ted Cruz’s VP.
If Fiorina is typical of many CEO’s, they do not have a great ability to find other employment if they lose their current positions.
This indicates that they would, typically, work for less, maybe a lot less, as their ability to find a similarly highly paid position is limited.
We need Professor Michael Jensen to suggest that cutting executive compensation is a corporate imperative to “increase shareholder value” because they won’t abandon ship, due to lack of alternatives.
Monty Python’s “Upper Class Twit of the Year” immediately springs to mind.
https://www.youtube.com/watch?v=zGxSM5y7Pfs
Current executives would be completely overwhelmed at what the average working-class person goes through just to stay alive, IMHO.
The point is not to offer extravagant pay as to attract the most qualified, competitive candidates, but rather use the pay as evidence that the selected candidate is the most qualified and brilliant. If the holy men of the meritocracy and market declare that increased pay must equate to a greater value of service, then clearly their high pay must mean greater value of service. It’s a giant tautology; Why do you pay him so much? Because he is immensely qualified. How do you know that? He must be, look at how much he gets paid.
Perhaps there is this justification for their “sky high pay” – self-directed altruism (AKA selfishness). From the always worth re-reading John Kenneth Galbraith: “The salary of the chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself.”
Look, these guys (and they are mostly guys) are nothing but parasites on the system. Get rid of them. Forget about looking at their compensation. Just get rid of them. If you want a hospital well run ask the nurses to do it. Nurses that spend at least a quarter of their time on the floor, caring for patients, not “administrators”.
Much the same for university “administrators.”
Almost completed a masters program in “Health” Care Administration.
Then recalled: https://m.youtube.com/watch?v=wshyX6Hw52I