With the turbulence of healthcare reform has come an increase in the prevalence of severance agreements in contracts between healthcare organizations and CEOs found the 2013 Health Care CEO Severance Survey.
The survey, conducted by global benefits consulting firm Mercer, executive search firm Witt/Kieffer, and legal services provider Hunton & Williams LLP, assessed severance practices across 196 healthcare providers and managed care organizations across the country to find out what organizations are offering CEOs in compensation contracts beyond cash compensation and benefits.
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“We’ve gotten a lot of questions around severance agreements likely because of the many transformations in healthcare going on right now,” said Pat Kopacz, a principal at Mercer who oversaw the survey. “There are also a lot of new affiliations in the industry, so it’s not surprising that this is a hot topic.”
The survey found that 83 percent of healthcare organizations have a written severance agreement with their CEO, that 5 percent of organizations provide service-based severance benefits and that the majority of organizations continue benefits for a fixed period, generally 24 months. Kopacz added that most organizations also continue benefits such dental and vision, during the severance period.
Other survey findings show that slightly more than one-third of organizations provide for mitigation (reduced or terminated benefits if the CEO is employed during the severance period), said Kopacz. And two-thirds of organizations indicated severance benefits were subject to a non-compete or non-solicitation agreement.
The information revealed by the survey is helpful to organizations, their boards and CEOs, said Kopacz.
“It’s important for there to be an understanding of what standard practices are and what data is available for hospitals to benchmark against each other,” she said. “It’s the kind of thing that’s informative to the board as well as the executive who may entertaining an offer with a new healthcare organization.”
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