The other day I was asked about healthcare compensation -- CEOs, physicians and insurance company executives -- and how we could address the seeming imbalance.
Physicians, who understandably are frustrated with the constant pressure of cuts in their payments, have become angry because they realize the deal is stacked against them. Most of their glaring and finger pointing is in the direction of hospital system CEOs, and, no surprise here, insurance company executives, some of whom earn remarkably large salaries. Senior executives in the health insurance industry where generous base salaries, bonuses, delayed compensation and stock options can drive up annual compensation in excess of $10 million fairly quickly, have become a lightning rod for physician frustration and anger. The pay for health system and hospital CEOs also has risen but not as much, and besides, hospitals do not deny physician payments.
The imbalance in executive and professional compensation is not an issue that will go away in the estimable future, especially in the healthcare sector. As lawmakers wrestle with issues, and one another, over how to cut the deficit and the long-term debt, healthcare executives, physicians and other healthcare professionals will find themselves at the nexus of tough debates and policy decisions regarding funding, compensation, quality and increased accountability.
Although the cost of healthcare -- specifically Medicare -- is one of the biggest problems in the deficit crisis and any solution to reducing the debt, healthcare providers do not live in a compensation vacuum. Hospital CEOs who see leaders in other industries making far more for managing less complexity in operations, want their fair share. Indeed, over the past 20 years, executive compensation for health system and hospital senior executives has gradually improved. Physicians, citing their years of education, sacrifice, the demands of a busy practice and the ever -present pressures of accountability, oppose any cuts. In fact, they want more. For a professional group that was once at the top of the healthcare compensation food chain, they are frustrated with the fact that they are being left behind. This is only natural.
Here are three thoughts that hopefully will help us begin the long, and perhaps impossible, journey to regaining balance in executive and professional compensation.
1. Executive, professional and sports figure compensation is hopelessly screwed up. They are so far out of whack that we may never recover. The phrases common sense and executive compensation should not be used in the same sentence. Common sense is such a misnomer. It is pretty uncommon when it comes to comp issues in all of these fields. I point the finger at professional sports as one of the most visible and biggest contributors to what has become a ridiculous imbalance between pay, performance and any hope of reasonable balance. Those of us who follow baseball need to remind ourselves that there are very few jobs in life where one can fail 7 times out of 10 and still be a star and make a huge salary. In a society that frequently relies on lawsuits to adjudicate a clinical outcome that did not meet a patient's expectation, however silly or unreasonable, the skyrocketing pay for many professional athletes must drive physicians nuts.
2. While I am sympathetic to the complaints of physicians regarding compensation, I know this will not be an issue that is never successfully resolved. As we amble through healthcare reform, whether it is with PPACA or the result of the debt reduction crisis, everyone in the healthcare industry will end up with less, unless they can demonstrate exceptional, measurable, verifiable value, and even then, they will probably still get less, just more than those who fail to meet tougher standards. Accountability, performance and results will be key for physicians and professionals who want to hold the line on what they charge or will accept. Our deficit/debt issues are so big, so potentially cataclysmic, that anyone in healthcare who does not believe that we will take a hit is just not in touch with the math. I wish there was way to avoid compensation pain, but I doubt there will be. Part of the problem is that hospitals, doctors and other healthcare professionals sit on the sidelines waiting for the change. We NEVER lead change. That is why we can be compared to the country dog that came to town: “if you run you get screwed, if you stand still you get screwed. “ We have become adept adapters, not leaders of structural change.
3. Mohamed A. El-Erian and his colleagues at PIMCO refer to our current economic mess as the "New Normal." PIMCO is the largest bond fund in the world and they just announced they are not buying any US Treasuries for a while. The rating agency, Standard and Poors, has now fired another shot across the bow of our government hoping to generate action on deficit and debt reduction. As I survey this economic jumble, our "New Normal," I am reminded of Winston Churchill's great line about the US: that we will do the right thing AFTER we have tried everything else. He may have been referring to our involvement in World War II, but his statement was prescient of the path to resolving problems that America tends to follow. Well, we have just about tried everything else and the options for cleaning the nation's financial disarray will be painful. Unfortunately, the coming economic reset for physicians and other healthcare professionals will be frustrating and unfair.
I thought about incorporating the theme of shared sacrifice as one of my three points, but that would only have earned me the tag of "insufferable idealist."
© 2011 John Gregory Self