Dive Brief:
- Healthcare CEO salaries reached their highest median level in 2014 at $13.6 million—more than energy, finance or technology markets, according to a recent analysis by The Associated Press.
- Although the actual salary may be a small percentage of the pay, many CEOs are compensated with stocks and options. Aetna's CEO Mark Bertolini's base salary last year was $996,169, but he received more than $36 million in total compensation.
- Some analysts point to high salaries as a contributing factor to spiking healthcare costs. Sarah Anderson, global economy project director at the Institute for Policy Studies said in a recent IBT article: "If executives are loaded up with stock options and other types of equity-based pay, they have a personal incentive to boost share prices by whatever means necessary."
Dive Insight:
Despite attempts to reduce healthcare costs, CEO compensation continues to rise—up 4% from 2013, the sixth time pay has risen in the past seven years, according to The AP.
"There's no doubt that one of the reasons why Americans pay more for health insurance and for healthcare than people in any other country in the world is because of this high executive compensation," Wendell Potter, a former public relations executive for Cigna, told IBT in a recent article.
The ACA is trying to do something about this. The law caps how much companies can seek in tax deductions for out-sized salaries, in 2013 returning $72 million to taxpayers. According to the Institute for Policy Studies, the regulation hasn't had much of an impact on actual salaries, however—companies are just paying more taxes in order to maintain them.
Healthcare firms point to a competitive hiring market as the impetus behind the high salaries. Nonprofit hospitals in particular have come under fire for this—think UPMC's CEO Jeffrey Romoff—but as Tom Flannery, a partner with the consulting firm Mercer, told Modern Healthcare, "Not everyone can step up and step into running a healthcare system with 25 to 50 hospitals. It's a heck of a complex job."