The virtue of ‘at-risk’ in hospital executive pay

Posted on January 12, 2012 in Health Delivery System

Source: — Authors: – news/commentary/editorials
Published Tuesday, Jan. 10, 2012.    Editorial

There’s nothing like the salaries of hospital presidents to get the public riled, especially when there are perks such as cosmetic surgery, golf-club memberships, weight-loss programs and car allowances – and when medicare resources are perennially stretched. Hospital CEO salaries should not be capped, but they should be set according to a sensible framework.

Recently, Ontario hospitals became subject to Freedom of Information laws. Most of them pre-emptively posted details on their websites. Though total compensation has been known for some time through a so-called sunshine list – with one CEO’s package coming in at just over $750,000 – all sorts of new nuggets were revealed, including an annual $100,000 pension top-up.

In the spring, the provincial government moved to ban some of these privileges, such as season’s tickets to cultural and sporting events, access to private health clinics and tax planning.

During this critical time when hospitals are being merged and exceptional change agents are needed to take them to the next level, salary caps would be a mistake. But Ontario is wrong-headed in letting each hospital’s board determine compensation guidelines and standards for executives.

By contrast, CEO pay in British Columbia, for example, is determined through a compensation plan administered by the Health Employers’ Association of B.C. The government must approve any adjustments to the plan. The CEO of Fraser Health Authority is the highest paid, with total compensation of about $461,000.

Ontario ought to develop a compensation framework, as an independent expert panel has recommended; the Ontario Hospital Association is moving toward such a system, expected in early March.

A good framework would provide some consistency to compensation. It would require that a more significant portion of executive pay be dependent on attaining performance indicators – what is often called “at-risk pay.”

“I think getting up to 30 per cent [of at-risk pay] is where you ultimately need to get,” says Tom Closson, the president of the Ontario Hospital Association. At some smaller hospitals, however, the amounts are as little as 3 per cent.

Hospitals should move to tie a significant amount of CEO pay to performance. After all, patients and taxpayers deserve to know where their money is going.

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