Annual Executive Compensation Survey Is Out

Hospital CEO compensation is moderating, as a result of a tough economy, increased transparency and closer public scrutiny, according to the annual survey published by Modern Healthcare and Sullivan, Cotter and Associates. Median total compensation of CEOs of health systems rose just 2.6% in 2010, and 0.2% last year — way down from 9.7% in 2008.

But that hardly means boards can breath easy thinking regulators will be satiated.

To the contrary, attorneys general in New Hampshire and Massachusetts are looking at CEO pay. The revised IRS Form 990 (see Sullivan Cotter’s summary) will provide new fuel for tax examiners to assess not-for-profit hospitals’ compliance with tax exemption requirements.

Many observers believe that as the health care reform law kicks in and hospitals receive millions of dollars in revenues from previously uninsured patients, regulators will scrutinize and even try to cap hospital CEO pay. Don’t believe it could happen? Think about federal bailouts of financial institutions and subsequent targeting of executive pay.

The lesson for boards: Be sure you’re doing a thorough, objective job overseeing executive compensation and community benefit. Past issues of the Great Boards newsletter include articles on best practices to oversee executive compensation and community benefit, respectively, plus a summary of changes in the IRS Form 990. If your board hasn’t checked its policies and practices in these areas lately, or asked your general counsel or compensation advisor for an independent assessment, now would be a good time.

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