Nonprofit hospitals are in the news recently, with ongoing conversations about whether nonprofit hospitals provide adequate care to the poor and needy given their tax-exempt status, among other issues. At the top of these hospitals are the chief executive officers. The nonprofit hospital CEO is responsible for the overall management of their hospital. They set the strategy and vision for the hospital (such as transitioning to value-based payments), manage the financial resources, oversee operations and personnel, develop partnerships, ensure compliance with regulations, and steer their hospital through pandemics.
The CEOs that run these tax-exempt hospitals are among the highest paid nonprofit executives in the United States. The average nonprofit hospital CEO makes $660,000 in total compensation (base salary, bonus, and benefits) per year. Most of these CEOs make between $214,429 and $834,631 per year, with top five percent of nonprofit hospital CEOs making more than $2,000,482 per year.
There are over 4,500 nonprofit hospitals in the United States. Not all hospitals are the same, so it makes sense the hospital CEO pay varies hospital-to-hospital. But what differences in hospitals drive the different pay? Commonly-cited factors are hospital size, hospital financial performance, the CEO's experience and qualifications, and the region and market where the hospital is located. Do these match the Cause IQ data? Yes. Below we compare hospital size, as measured by the number of facilities within the hospital entity (according to Form 990, Schedule H, Part V, Section A) to the average CEO compensation of those hospitals. The results show that the larger the hospital, the more the CEO earns.
Number of facilities in hospital | Average CEO compensation | |
---|---|---|
One facility |
$551K
| |
2 to 3 facilities |
$888K
| |
4 to 6 facilities |
$1.1M
| |
7 to 10 facilities |
$1.6M
| |
> 11 facilities |
$1.9M
|
Percent hospital spent on public assistance | Average CEO compensation | |
---|---|---|
< 1% public benefit spend |
$346K
| |
1% to 2.5% public benefit spend |
$554K
| |
2.5% to 5% public benefit spend |
$708K
| |
5% to 10% public benefit spend |
$804K
| |
> 10% public benefit spend |
$621K
|
We also wanted to compare nonprofit hospital CEO pay to how much a hospital contributes to its community. Are hospitals that pay their CEOs the most also the greediest, contributing the least to their local communities? Fortunately not. We test this by looking at how much money the hospital spent on public benefit — Medicaid, financial assistance, and means-tested programs — to how much the hospital paid its CEO. We found that the greater percent the hospital spent on public benefit (up to a point), the more the hospital paid its CEO. This warrants further investigation, but a potential explanation could be that larger and more profitable hospitals have the financial health to both pay their CEOs more and provide greater support to their community. This trend does break down for hospitals that spend more than 10% of their budget on public benefit, but these hospitals could have a different mission than other hospitals.
Cause IQ digitizes and cleans electronic and paper / scanned Form 990s for over 1.8 million IRS-registered tax-exempt organizations. In this article, we looked at 501(c)(3) organizations that filled out Schedule H of the Form 990, indicating they were a hospital, and operated at least one hospital facility according to Schedule H, Part V, Section A. We then looked at personnel who were the CEO, Executive Director, or equivalent person-in-charge of their hospital, eliminating people who no longer work at the hospitals, only worked a partial year at the hospital in the most recent Form 990, or worked less than 30 hours a week at the hospital (which does happen for among related hospital entities). This resulted in a list of 1,593 nonprofit hospital CEOs. The compensation figures, unless otherwise noted, are for total compensation, which we calculate by adding Form 990, Part VII, Columns D, E, and F.
Article originally published on January 10, 2023.