Hospital executives are seeing their compensation increase at even faster rates than previously calculated, according to new research out of North Carolina, even as many of them continue to fall short in providing charity care to their most marginalized patients.
The pay disparity between hospitals’ administrative staff and clinical staff is exploding: Some of the individual hospital CEOs covered in the study saw their salaries increase by more than 700 percent in just a few years, while doctors and nurses got a fraction of that salary increase, 15 to 20 percent, across an entire decade.
Compensation for health system CEOs and other executives has been the subject of much press scrutiny. Activists and lawmakers have called for hospitals to take the money they are paying their leadership and spend it on patient care. Nurses unions in labor standoffs used it to justify their decision to strike (or threaten to strike) unless their hospitals acted to increase compensation for clinical staff and otherwise improve their working conditions.
There isn’t enough money to be gained from cutting executive pay to ameliorate all American health care problems. But the disconnect between the soaring pay of hospital leaders and the plight of nurses and patients is a symptom of a dysfunctional health system that too often prioritizes moneymaking — even for systems technically classified as nonprofits — over patient care. That’s especially true since many hospitals use aggressive tactics to extract payments from low-income patients and fail to deliver the community benefit that justifies their nonprofit status.
“Existing evidence suggests that hospital CEO pay is not meaningfully tied to quality of care or patient safety,” the authors of this new study, commissioned by North Carolina State Treasurer Dale Folwell and peer-reviewed by academics at Rice University and Johns Hopkins, wrote. “Instead, experts have warned that too many hospital CEOs and top tier executives are financially incentivized to cut costs and boost revenue in ways that threaten patient safety and hurt affordability.”
The researchers reviewed executive compensation from nine of the state’s largest hospital systems from 2010 to 2021, using tax filings and other public data to paint a broad if still incomplete picture. Two publicly owned hospitals were not required to fully disclose what they pay their leadership, which left researchers to rely on press reports and other data sources. But if anything, they point out, that means they are only underestimating the executives’ pay.
The study’s most notable finding was that previous attempts to assess the growth of hospital leaders’ pay appear to actually underestimate how quickly compensation for these executives is increasing. One prior study, which measured CEO pay from 2005 to 2015, found CEO salaries rose nationally by 93 percent over that period — meaning they almost doubled over a decade.
The North Carolina researchers used a smaller but more detailed data set that let them track personnel turnover at those positions, a “missing link” in previous research “that inadvertently concealed an explosion in hospital CEO pay,” as they put it. As it turns out, most individual hospital CEOs in North Carolina actually doubled their salary within just five years, half the time previously indicated.
Here’s how to understand the unique methodological trick the researchers applied to uncover this trend. Previous studies would generally look at the salary of a CEO at a given hospital one year, then look at the CEO salary at the same hospital a little later — say, 10 years later — and compare the two, even if a different person who started at a different salary became CEO during that time.
Say the prior CEO had made $2 million in 2010 and then left and a new CEO was hired. By 2021, the new CEO was also making $2 million. It would appear, at first glance, as if executive pay had been essentially unchanged over that period. But that method of evaluating the data could in theory mask an enormous increase in compensation for the new CEO. Let’s say, hypothetically, that the new CEO was hired in 2015, making $1 million, By 2019, they were making $2 million, doubling their salary in five years, a trend you can only detect when tracking the compensation for individual hospital leaders, as the North Carolina researchers did.
The researchers discovered this kind of scenario playing out in the real world. At Duke Health, for example, CEO Eugene Washington was making $1.2 million less in 2021 than his predecessor had been in 2010. But what those topline numbers do not reveal is Washington had doubled his compensation from his initial starting salary within four years. Some of the other examples were even more egregious: Atrium Health CEO Gene Woods more than quadrupled his salary in six years, and Mission Health CEO Ronald Paulus saw his paycheck grow by more than 700 percent in less than a decade.
Those pay increases for hospital leadership dwarfed the average growth nationwide in compensation for clinical staff like doctors and nurses. Family physician wages increased by 23 percent from 2010 to 2019; registered nurses saw their pay rise by just 15 percent over the same period.
According to the North Carolina researchers, the state’s nine largest nonprofit hospital systems paid 11 current or former CEOs a total of $38.7 million in 2019. That is equivalent to the salaries of 572 registered nurses, who were making about $68,000 on average in North Carolina that same year.
At the same time that hospital executives saw their salaries skyrocket, many of their facilities failed to provide the “community benefit” that is supposed to justify their nonprofit status. Patients who should have received charity care at North Carolina hospitals have instead been billed at least $150 million for medical services in recent years. In 2020, the state’s nonprofit health systems enjoyed $1.8 billion in tax breaks — but only one of them provided enough charity care to offset that tax exemption.
Taken together, the study paints a picture of hospital executives enriching themselves at the expense of vulnerable patients and overworked staff. The authors urged lawmakers to require transparency from all hospitals on executive compensation and stricter enforcement of the community benefit requirements that nonprofit facilities are supposed to abide by.
Those would be steps toward a more equitable health system, they wrote, than the one described in their report.