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Another story on hospital executive compensation emerged this week.  This time the story concerns Boston healthcare leaders, the who’s who of that distinguished medical community. 

The story, which appeared in the Boston Herald, is similar to so many others. CEOs, whose compensation cross the seven-figure hurdle, find themselves in the bright lights of public policy scrutiny.  The Boston Herald story focused on increases in executive compensation in the context of rising costs and the mounting number of uninsured or underinsured patients. 

The Predictable Political Response:  Then came the expected political solution: State Sen. Mark Montigny (D-New Bedford) proposed a bill to limit hospital CEO salaries. Said Mr. Montigny:  You can’t do God’s work on a banker’s salary. It just shouldn’t work that way.

“Until we demand that these salaries be limited, we will not get continued support from the public for universal health care,” Sen. Montigny claimed in the Herald story.

Then came the nurses’ union response: “The pay is exceeding what the general public would view as appropriate,” said Julie Pinkham of the Massachusetts Nurses Association.

When applied to other industries of similar size and complexity, the reported salaries are NOT out of line, union and lawmaker protestations to the contrary.  After all, that is what unions and legislators do when addressing executive compensation.

Perhaps a little perspective is in order:   Did not Peter Drucker once comment that hospitals are among THE most complex of businesses to run?  However, in the glare of public scrutiny and debate over the cost of healthcare, CEOs with seven-figure salaries are vulnerable to political indignation.  It is important to note, that seven-figure CEO salaries cannot be justified solely on competition for the top talent.  Executives who consistently lose money from operations – and there are certainly those in this industry – should face tough scrutiny from their Boards.  Blaming government cuts in hospital reimbursement is not a reasonable excuse.  Top hospital CEOs, from New York to California, are producing positive margins.   

Perhaps what is lacking is more emphasis on pay-for-performance with respect to patient safety and quality.  Patient and physician satisfaction are important, but there is no consistent connection between those two measures and patient safety. 

Perhaps improvements in a hospital’s so-called "excess of revenue over expenses" category – profit, to you normal business types — should be linked in Board performance reviews to patient safety and quality.  After all, THERE IS a connection between improvements in quality and patient safety and the bottom line:  Quality care is cheaper care. JGS

Boston Herald link:Article URL: http://www.bostonherald.com/news/regional/politics/view.bg?articleid=1085950