The 2010 Healthcare Compensation Study reveals a continued slowing of salary increases for healthcare employees, but shows that turnover has been reduced dramatically.
The Hay Group, a Philadelphia-based consulting firm, has conducted the compensation study for 27 years. The current iteration includes data from 120 integrated healthcare systems, an additional 30 integrated healthcare subsystems and 1,268 hospitals, approximately half of which are acute care facilities.
Compensation based on same-hospital comparisons indicate the pay increase (the rate of change for organizations who participated in the survey in both 2009 and 2010) is 1.5 percent for base salary and 1.7 percent for total cash compensation (base pay plus bonus) for all jobs.
On a same-incumbent-comparison (actual person in the position, not just the position itself), base salary increased by 2.5 percent, a decrease from the 4 percent figure in 2009. Total cash compensation increased by a rate of 3 percent in 2010, slower than the 4.5 percent increase in 2009.
Over the past decade, actual healthcare salary increases have exceeded salary budget expectations, with the exception of 2001, 2008 and 2009.
The 2010 study showed all healthcare executive groups experienced a decrease in both the most recent and next planned salary structure increases from the 2009 report. For instance, in 2010, the number of CEOs receiving at least a 6 percent increase in base salary dropped to its lowest level in 10 years (22 percent). Just two years ago, 89 percent of healthcare CEOs were granted base salary increases of at least 6 percent.
“All healthcare organizations are striving to find ways to become more efficient, both financially and operationally, which is resulting in a slowing of salary increases among other belt-tightening measures,” said Ron Seifert, the executive compensation practice leader for the Hay Group’s healthcare practice.
Seifert said the study reflects continuing merger, acquisition and consolidation activity in the healthcare sector and indicates executives and managers are assuming more dynamic roles as the healthcare environment calls for more integration across the continuum of care.
For the first time in a significant period, the turnover rates have decreased for the Chief Executive Officer (5.2 percent in 2009-2010 from 14 percent in 2008-2009), the Chief Operating Officer (4.1 percent from 11.6 percent), and the Chief Financial Officer (5 percent from 12.2 percent).
The Chief Human Resources Officer experienced the only increase in turnover rates among all top executive positions, with a turnover rate of 12.5 percent for 2010, an increase from the previous year’s rate of 7 percent.
“Taking into account the slowing of salary increases, it’s encouraging to see improved retention rates for almost all senior leadership positions,” said Seifert.
Other major findings from the survey:
- In the healthcare not-for-profit sector, same incumbent base salary increases were significantly less in 2010; CEOs received an increase of 2.5 percent compared to 4.6 percent in 2009.
- Patient satisfaction remains the most prevalent performance measure for annual incentives across all employee groups of the organization.
- Twenty-four percent of survey participants have a long-term incentive (LTI) plan in place in 2010, up from 19 percent in 2009. Of the organizations with LTI plans, performance units are the most commonly used vehicle, with 95 percent offering such a plan.
- The overall prevalence of annual incentive plans in hospitals was 82 percent in 2010, representing no change from 2009. Incentive plans are the most prevalent within for profit hospitals (95 percent), followed by government hospitals at 89 percent.
- The most recent average salary structure change was highest for nursing (2.9 percent). All employee groups had an average structure change of less than 3 percent for 2010.
- The average merit increase in 2010 was less than 2 percent for all employee groups, with nursing receiving the highest increase (1.9 percent).
- Executives received larger average total salary increases (2.5 percent), followed by nurses (2.4 percent), and other non-executive employees (2.3 percent).