Bonuses driving the upward trend in C-suite compensation

The 2017 executive compensation survey released by the American Medical Group Association more of C-suite leaders’ pay has become driven by performance incentives while physician CEOs continued to take home the most money.

AMGA collected responses from 55 organizations representing “1,323 unique data points” with data on total cash compensation, base salary, earned bonuses and benefits. Physician CEOs beat their non-physician counterparts on median base compensation ($540,000 versus $416,593) and bonus compensation ($155,822 versus $91,859), though non-physician CEOs say a greater year-over-year increase in pay (11.1 percent versus 7.5 percent).

Chief medical officers saw the greatest percentage increase in median total compensation, which rose by 25.7 percent between 2016 and 2017, but larger jumps may have been driven by differences in what executives’ pay is included in each year’s survey.

Across the board, however, incentives appeared to play “an ever-more-important role” for healthcare leaders as the transition to value-based care continued. Median earned base-to-bonus ratio—measuring what proportion of compensation comes from incentives beyond base salary—rose for several job titles in 2017. That ratio jumped for non-physician CEOs (20 percent in 2016 to 24.9 percent in 2017), physician CEOs (18.7 percent versus 22.7 percent), chief financial officers (15.7 percent vs. 19.6 percent) and chief operating officers (15 percent versus 21.9 percent).

“As we work in the field with medical group executives, we commonly hear that there is a renewed focus on operations,” AMGA Consulting COO Wayne Hartley, MHA, said in a press release. “Many resources have gone into payer strategy and care model design in recent years and now organizations are focused on orchestrating those investments to achieve the desired outcomes.”

The increased focus on what will drive value-based care was reflected in some of the raises for certain roles. Directors of care coordination, for example, saw a 14 percent increase in total compensation in 2017 to a median of $132,600.

Of the groups which responded to questions on short-term incentives, most CEOs could earn bonuses as high as 41 percent of their base salary. The average max bonus was higher in certain physician and clinical quality leadership positions such as medical director for primary care (average max bonus of 44 percent of base salary) and specialty directors (50 percent).

For long-term incentives and benefits, most C-suite leaders were being offered supplemental plans for life insurance and long-term disability as well as having professional member dues to healthcare associations covered by their companies. Responses were more mixed on benefits like having the company provide a cell phone or financial counsel, while relatively few medical groups reported covering an executive’s country club or health club fees.

The report did find a sizeable increase in executives being offered supplemental executive retirement plans, or SERPs. 62 percent of physician CEOs had that benefit in 2017, up from 41 percent the year before, while prevalence in the benefits package for non-physician CEOs jumped from 31 percent to 50 percent.

“With the effort required to align resources for success under value-based care, it may be that more organizations are deciding that incentives to promote consistency in the leadership team are key to success,” said AMGA Consulting president Fred Horton, MHA. “Alternatively, as SERPs tend to be more common in larger organizations, it may be that continued consolidation into larger systems is driving this benefit. Either way, there is high demand for talented executives, and vacancies in senior positions can impact organizational momentum during a challenging time for the industry.”

Executive compensation appeared to be growing at faster rate than pay for the physicians in many of those same medical groups. In a separate AMGA compensation survey released in July 2017, physicians reported an average raise of 2.9 percent from the year before—below the 7.5 percent to 11.1 percent pay hikes for CEOs.