Meet the New Rent Extractors: Healthcare CEOs

Roy Poses makes a key observation about the recent coverage of healthcare CEO salaries that I haven’t seen elsewhere (boldface mine):

We just saw examples of non-profit hospital CEOs making over $1 million to over $6 million in total compensation. That would imply that non-profit CEOs may make from three times to over thirty times the total compensation of a surgeon, and from over five times to over thirty-five times the compensation of a general internist. (And the ratio for such outliers as Mr Del Mauro above would be even higher.)

So is a hospital CEO thirty times more brilliant than a general internist?

That suggests also that we go back to another version of the brilliance argument found in one article above. In the NJBiz article, the NJ Hospital Association President said, about CEOs, not physicians,

They are literally on call 24/7, 365 days a year and they are running an institution where lives are at stake.

They may be on call in a sense, but they are never on first call. Their decisions may ultimately affect lives, and perhaps put lives at risk. But they never have to make a decision about a patient that could literally cost that patient his or her life. And they almost never have to be accountable for what happens to individual patients.

It is easy to argue that physicians’ responsibilities for life and death decisions are much more direct. Explain, then, those pay ratios again….

So is executive compensation in hospitals, or other parts of the health care system, based on executives’ brilliance. Or is it based on their ability to be rentiers, rent-seekers, who can control the choke points of money flow, and make sure they get more than their share before what is left can go to real health care?

Hmmm, I wonder….

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2 Responses to Meet the New Rent Extractors: Healthcare CEOs

  1. Matt D says:

    It’s naive to pretend that pay has anything to do with brilliance or with saving lives. The average hospital revenue is $150M, and the CEO is ultimately responsible for deciding how that money is spent. If a CEO can save $10M through better decisions, then $3M compensation might be worth it.

    Whether one CEO is that much different than the next CEO candidate is debatable, but it doesn’t take many percentage points to make millions of dollars of difference.

  2. thetinfoilhatsociety says:

    Once upon a time the board members of a hospital were: former/current patients, general staff members, nurses, and physicians. The chief of the hospital was likely to be a doctor. They were, or had, worked “in the trenches” and knew exactly what it was like for those on the floor and often in the beds. Hospitals depended on endowments from wealthy individuals, either former patients or those who believed in the motto to help those less fortunate than oneself. Thus, they weren’t profit generating machines for those on the upper floors (meaning administration). It would be a better world if hospitals went back to that model. Sadly, the cash pay hospitals springing up all over this country, owned and run by doctors who care for the patients of these hospitals, are more in line with the ideals and ethics of those lost institutions of old. Better care, at a more reasonable cost, with much increased staffing, low turnover, and satisfaction by everyone concerned, not the least the patient.

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