Healthcare Employees Can Expect Higher Base Salary Increases in 2011, Hay Group Study Finds

Healthcare providers are granting higher pay increases in 2011, but they are also focusing on leadership retention and building for long-term success.

PHILADELPHIA, PA, July 14, 2011 – The 2011 Hay Group Healthcare Compensation Study, released today, shows planned median base salary increases of 3.0 percent in 2011 for employees of large integrated health systems (IHS). This is an increase from 2010 when providers reported a planned 2.4 percent median base salary increase for healthcare employees. Conversely, independent hospitals (those not affiliated with systems) are reporting lower median base salary increases of 2.3 percent in 2011, reflecting the ongoing economic challenges facing those employers.

When looking at actual pay changes between 2010 and 2011, there is a noticeable variation at the Chief Executive Officer level. CEOs at not-for-profit IHS received a median 4.0 percent increase in base salary for 2011, while independent hospital CEOs saw an increase of 5.0 percent. The variation in total cash compensation (base salary plus annual incentives) is even wider between the two: CEOs at IHS saw an increase of 3.1 percent, while independent hospital CEOs saw an increase of 6.0 percent in total cash for 2011.

“Economic uncertainty has forced boards and human resource departments to invest more to attract and retain leaders who can execute in this challenging environment,” says Ron Seifert, vice president and executive compensation practice leader for Hay Group’s healthcare sector. “Leaders who have the fortitude and competencies to lead complex organizations through complex times will be at a premium, and boards have become aware of that.”

According to Hay Group’s study, incentive plans in 2011 reflect the healthcare industry’s increased focus on long-term improvement. For instance, while IHS CEO’s median rate of increase to base salary has grown by 1.5 percentage points in 2011, the rate of change for median total cash has dropped 2.3 percentage points. This appears to be due to a decline in the use of annual incentive plans. In fact, the prevalence of annual incentive plans for not-for-profit IHS has dropped 10 percent since 2007, when a high of 89 percent of systems offered these plans. Today, only 79 percent of not-for-profit IHS offer one-year plans – the lowest in at least six years. At the same time, the popularity of long-term incentive plans (LTIs) has increased dramatically from 2006 when only 14 percent of IHS offered LTIs to senior executives; 25 percent of IHS offered these plans in 2011.

“The growth of long-term incentives is directly related to healthcare’s focus on the future,” remarks Seifert. “Boards are using these plans as a means to ensure senior executives are motivated and focused on achieving long-term goals. With good goal setting, these plans can strengthen and accelerate the achievement of critical multi-year objectives.”

Some additional findings from the 2011 Hay Group Healthcare Compensation Study include:

  • Patient satisfaction remains the most prevalent performance measure for annual incentives, with 79 percent of providers using this as the primary measure across all executive employee groups of the organization
  • Only 28 percent of health systems have reviewed their annual incentive plans in the last two years. For 37 percent of health systems, it has been at least five years since annual incentive plan designs were reviewed
  • At independent hospitals, nurses received the highest average salary structure change in 2010 at 2.8 percent
  • Median increases for integrated healthcare system salary structures (2.0 percent) are equivalent to those in the financial services sector, the health insurance sector and the general marketNinety-three percent (93 percent) of the surveyed organizations with an LTI plan use a single type of award; the remaining 7.0 percent use two or more types of awards

 

Study depth and methodology:

The 2011 Hay Group Healthcare Compensation Study is in its twenty-eighth (28th) year and results in two separate reports: the Integrated Healthcare Systems report and the Hospital report. Originally chartered by eight core companies, the IHS report now provides data from 109 systems as well as an additional 25 subsystems, representing over 6,000 incumbents. One thousand one hundred and eighty-eight (1,188) hospitals participated in the overall database covering more than 580,000 incumbents. Of the hospitals that participated in this report, 997 of them are acute care facilities. The range of jobs covered in this study makes it the only top-to-bottom healthcare compensation database in the market. The data in these reports has an effective date of January 1, 2011.

In recognition of the difference in scope of responsibilities of similarly titled positions between organizations, jobs matched to the corporate and regional positions by participants are content evaluated using Hay Group’s proprietary job evaluation methodology. Making pay comparisons on the basis of job title alone can produce comparisons that do not reflect job content or complexity. Hay Group’s job evaluation methodology eliminates the potential of an inaccurate outcome by examining compensation relative to job content and complexity rather than merely by job title or company size.

For more information on Hay Group’s healthcare practice, services or this study, please contact Colin Owens at Healthcare.US@haygroup.com or 800-776-0486. To arrange an interview, please contact Aven James at Aven@blisspr.com or 212-840-1661.

 

About Hay Group:

Hay Group is a global management consulting firm that works with leaders to transform strategy into reality. We develop talent, organize people to be more effective and motivate them to perform at their best. Our focus is on making change happen and helping people and organizations realize their potential. We have over 2600 employees working in 84 offices in 48 countries. Our insight is supported by robust data from over 125 countries. Our clients are from the private, public and not-for-profit sectors, across every major industry. For more information please contact your local office through www.haygroup.com.