It’s no secret that executive pay has accelerated into the stratosphere, well beyond that of the average worker in the United States. One study found that in 2016, the average CEO of a larger firm made $15.6 in yearly compensation—about 271 times that of the typical worker. For comparison, that gap was 20-to-1 in 1965, and 59-to-1 in 1989.
You might think that gap is smaller in medicine. After all, surgeons and physicians have a reputation for being well-paid, and many healthcare systems are nonprofits, which would seem to put a damper on excessive executive pay. But a new study shows that, in fact, the wage gap between doctors and hospital executives is widening.
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Researchers at the University Hospitals Cleveland Medical Center/Case Western Reserve University used public data to compare administrator compensation with that of doctors and nurses between 2005 and 2015. They analyzed 22 major nonprofit healthcare systems across the US.
The data showed that, adjusted for inflation, medical-center CEOs made an average of $1.6 million in 2005, which rose to $3.1 million in 2015. That puts them at the lower end of the spectrum for CEOs—as much as making multiple millions a year puts you at the “lower end” of anything. But it’s a 93 percent increase in pay. Over that same period, doctors saw an increase of 15 to 26 percent. (The study uses pay for pediatricians as the lower end of the scale, with orthopedic surgeons on the high end.) Registered nurses saw wages increase by just three percent.
The numbers show an increasing upward trend, with widening gaps between CEOs and the people who work for them. In 2005, hospital CEOs made three times more than orthopedic surgeons, the highest-earning doctors. Ten years later, in 2015, they made five times more. Pediatricians, at the lower end of the scale, saw a widening gap as well: from 7 to 1 in 2005, to 12 to 1 in 2015. For registered nurses, the ratio increased from 23 to 1 to 44 to 1.
Those CEOs would likely argue that they’re worth those expensive salaries: After all, they’re working comparatively cheaply. But the researchers note that national healthcare expenditures increased from $2.5 trillion in 2005 to $3.2 trillion in 2015. Wages accounted for more than a quarter of that growth, with 27 percent of the wage increases coming from nonclinical workers—compared to 18 percent from physicians. In other words, increasing healthcare CEO pay is helping to balloon the amount of spending on healthcare overall.
Is it worth it? That’s the question aimed at every multimillion-dollar CEO. The study sounds a skeptical note, concluding with a bit of an understatement: "It appears unlikely to us that the near-doubling of mean compensation to hospital executives is justified by the value added by their work."
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