Healthcare executive compensation is on the upswing in 2022, new report finds

Both base compensation and incentive payouts have improved this year as organizations recover from the depths of the pandemic.

Healthcare labor trends are boosting compensation for hospital and health system executives, according to a new report.

Produced by SullivanCotter, the report (available via purchase) finds that median base salaries for executives have risen by 4.5% this year, while incentive payouts reflect a measure of recovery from the worst of the COVID-19 pandemic.

Salary increases for 2022 rebounded “due to successful business recovery efforts and high demand for talent that is outpacing supply due to burnout, retirements accelerated by the pandemic and the need for highly qualified leaders to lead organizations through increasingly complex times,” according to the report, which drew its findings from a survey of more than 3,000 organizations.

The report notes that the percentage increase for executives is less than that seen for many clinical roles, including registered nurses, for whom the median salary increased by more than 8% this year.

“This reflects organizations’ strategy to reward staff for the day-to-day work that has put extra demand and stress on teams, as well as supporting recruitment and retention efforts,” the report states.

Meanwhile, incentive payouts based on 2021 performance “returned to levels consistent with historical practices as financial and operating performance within the industry improved,” with median total cash compensation for executives increasing by 9.7%.

Considerations for uncertain times

The report includes recommended compensation strategies for organizations to use to meet ongoing challenges. Amid inflation and a labor crunch, organizations should plan on budgeting executive salary increases that exceed 3% to “retain key talent, mitigate inflation effects and address issues of pay equity.”

Establishing incentive-plan goals and performance levels is tricky in the current environment. Organizations should strive to recognize “the current challenges (engagement, patient satisfaction, financial and growth) with goal setting while also ensuring that these measures align with future priorities,” including operational sustainability; diversity, equity and inclusion; and environmental, social and governance factors.

“Understand the need for experienced leaders to address response/recovery efforts as well as access, affordability and community wellness needs,” the report states. “Differentiate rewards so limited dollars are directed to address retention/recruitment and reward high performers critical to the organization’s success; segment total-rewards approaches as needed to meet specific business unit needs — thus moving away from a ‘one size fits all’ approach.”