Friday, January 24, 2014

Connecting CEO Compensation to Hospital Quality Measures

Heavy media coverage about the size of the compensation packages of some major health system CEOs has led to calls for “pay for performance” and greater transparency. Behind much of this uproar are two key drivers.   The first is the growing interest of legislators like Senator Charles Grassley, Chair of the  Senate Finance Committee and Governor Cuomo of New York state to convert hospitals from not-for-profit 501©(3) status to taxable entities. The second is the national demand for higher value in healthcare. Media focus on byzantine hospitals billing practices has led to spotlights on multi-million dollar pay packages for CEOs of not-for-profit hospitals, and the general public has responded with concerns

In a recent article in ACO News, "Hospital pay now at risk for CEOs," Jean Chenoweth, noted the relatively new trend of hospital boards using performance metrics to determine CEO compensation. If this becomes a standard practice, this will align the performance metrics required of physicians with those of executive leadership. Through the 100 Top Hospitals® program, Truven Health is developing performance benchmarks that will be one of the tools available to hospital boards for determining CEO compensation packages. The Balanced Scorecard consists of 10 measures across four domains: quality, efficiency, finance and consumer assessment of care identifies top performing hospitals. The benchmarks include diverse quality and financial matrices to help manage complex health systems and hospitals.

For more information about the 100 Top Hospitals program, please visit

Jean Chenoweth
Senior Vice President, Performance Improvement and 100 Top Hospitals


  1. This can be a very difficult topic to weigh in on because of all the complexities that go into defining productivity measures. Take for instance an article published in Health Informatics - An International Journal (HIIJ) titled "Medicare Healthcare Charge Disparity Analysis" in which the authors use data from the Center for Medicare & Medicaid to examine charges by more than 3,000 U.S. hospitals. Using cluster analysis the authors were able to show the top 5 hospitals that overcharged the most. Ironically, one of them was the Robert Wood Johnson University Hospital.

    To corroborate this finding I went to the Medicare Hospital Compare website and looked at all three of the Robert Wood Johnson Hospitals in New Jersey and it does appear that these hospitals charge more than the national average. Take for instance the hospital located in Rahway, New Jersey. This hospital has a spending per patient ratio of 1.15; the national average for the nation is .98. To compare this to a local hospital here in Ann Arbor, the University of Michigan Health System has a spending ratio of 1 meaning that is spends slightly more than the national average.

    Ok, so what is Mr. Stephen Jones the CEO of the RWJ Health System supposed to do with the hospital in Rahway? Does he tell the people in finance that they are charging too much for the care that they give and face the possibility of “DRACONIAN” cuts to their budget? And why would he do that if he is rewarded financially based on revenue growth? If there are budget cuts it appears that there will be serious problems in the care that patients are receiving because only 58% of them say that they “always” get help when they need it. The national average for this number is that 67% say that they “always” get help when they need it and at the U of M Hospital that number is 64%. These numbers are again taken from the Hospital Compare website listed above.

    As for finding Mr. Jones salary online, I gave up after five minutes. I wasn’t about to go sifting through the financial statements in the hope that I would find this information. I do agree that we need more transparency in this area, especially at not-for- profit institutions.

    As a nurse that takes care of patients and a student in the Psychiatric Nurse Practitioner program at Wayne State University I find this whole area fascinating. Last semester I was able to take an elective data mining class and I look forward to learning more about how analytics can help answer some of these very difficult questions.

    Thanks for reading this!

    Brian Bigelow

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