Healthcare CEO pay climbs steadily since ACA passage
- Earnings of healthcare CEOs have continued to grow under the Affordable Care Act (ACA) and the pay packages give them little incentive to rein in spending, a new Axios analysis concludes.
- Since the ACA was passed in 2010, CEOs of the 70 largest healthcare companies have cumulatively earned a whopping $9.8 billion — or almost 11% more money on average each year. However, because most of the pay is in vested stock, CEOs often base decisionmaking on what boosts stock prices (e.g., bigger sales, more tests and procedures) and not the ACA goals of patient-centered, value-based care.
- The analysis was based on financial reports from 70 publicly traded U.S. healthcare companies comprising more than $2 trillion in annual revenues. Not-for-profit hospital CEOs were not included.
The biggest payout — $863 million — went to John Martin, CEO of biotechnology company Gilead Sciences, according to the analysis. Other takeaways include:
- Just four of the 113 healthcare CEOs in the analysis were women
- 11 of the top 20 top earners were CEOs of pharma and drug-related companies;
- CEOs earned a little less as a whole last year versus 2015 due to market uncertainty over the presidential election.
Rising salaries are drawing increased scrutiny and some pushback. In April, North Carolina lawmakers approved a bill that would bar compensation for CEOs of behavioral health managed care organizations from exceeding by more than 30% the average salary of other behavioral health managed care businesses in the state. The bill seemed targeted at Cardinal Healthcare Innovations CEO Richard Topping, whose salary was $435,000 more than the average salary for a managed care organization in the state.
Salaries of executives at nonprofit organizations have also been growing. According to a Wall Street Journal report in March, many nonprofits are embracing salary strategies used in the for-profit world and offering packages totaling more than $1 million, with possibility of bonuses and deferred payments. In 2014, about 75% of nonprofit pay packages totaling $1 million or more went to healthcare executives.
In Massachusetts, in fact, pay for hospital CEOs outpaced state health spending. The largest compensation package went to Elizabeth Nabel, president of Brigham and Women’s Hospital, who received $5.4 million in 2014, up 119% from the previous year. By contrast, overall healthcare spending in Massachusetts rose 4.8% that year.
In an analysis earlier this year, Axios found that Sutter Health CEO Patrick Fry gets paid the most per patient stay ($6.88 a day) among the 20 largest hospital systems. Greenwich Hospital CEO Norman Roth earned the most ($56.40 a day) among other studied hospitals.