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DALLAS, Texas (March 11, 2009) — I have ignored several of the stories concerning hospital CEO compensation. Then I ran across the following:

Compensation for hospital executives stirs debate, scrutiny
CHIME’s Healthcare CIO SmartBrief | 03/10/2009

“An Internal Revenue Service poll that involved 485 hospitals found that hospital presidents on average received almost $500,000 a year in compensation, while some CEOs earned salaries worth $1.4 million. Such benefits have spurred debate from different sectors and scrutiny from Sen. Chuck Grassley, R-Iowa, who said he hopes to push legislation aimed at keeping executive salaries in line. Surveys on staff satisfaction could include questions on what CEOs make, and this data could help leaders of health care organizations determine the state of management-employee ties and other factors.” HealthLeaders Media (03/06)

This is a combination of old fashioned political populism and a failure by many large not-for-profit health systems to tell their charity care/community benefit story effectively. Some CEOs refuse to talk about it, thinking that it will open the flood gates of uncompensated care. But others see this as a high-ground issue, a strong story that connects their hospital to the community.

With respect to compensation, a health system or hospital CEO who runs a system with revenues in excess of $1 billion and is paid $1.4 million is NOT overpaid. There are many successful CEOs who earn much less to guide their community hospitals in an environment where the medical staff can be your customer and your competitor, many times within the same day, and reimbursement trails the costs of providing the service. Peter Drucker once said hospitals are among the most challenging of businesses to run. As a general rule Main Street in America receives more community benefit from the hospital CEO than many of the Wall Street bankers that the taxpayers are bailing out.

Personally, I think Sen Grassley should take a breath — a deep breath — and focus on the economy.

What are your thoughts?

John G. Self, Chairman and Founder of JohnMarch Partners, is the Firm’s senior client advisor. A 32-year veteran of the healthcare industry, he is a former investigative reporter and crime writer for a major daily newspaper. Candidates and clients say he is one of the most thorough executive recruiters working in the healthcare industry.

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