Executive compensation for healthcare CEOs rose only 1.5 percent last year and communicators aren't faring much better, according to initial findings of an annual salary survey released exclusively to Healthcare PR & Marketing News.
CEO annual compensation came in at an average of $395,900 in 1998, up from $390,000 average in 1997, according to William M. Mercer's annual Integrated Health Networks Salary (IHN) survey, which will be released later this year. But experts say that the industry is looking to more attractive incentive packages to retain top healthcare talent.
Top communications executives at large hospital health systems are seeing the biggest salary increases, earning an average salary of $104,800, a modest 1 percent increase from last year. And salaries for communications directors-who typically report to top PR executives-inched up even less in 1998 to an average of $78,000 from $77,900 in 1997. The IHN report is based on 88 large healthcare systems with 1,400 employees. (For more information on 1997 compensation, refer to HPRMN's 1997 Salary Survey and Exclusive Guide to Executive Recruiters included in the Dec. 11, 1997 issue.)
Although communicators are enjoying a higher perceived value within the executive ranks - with increased access to CEOs - expect your compensation growth to be contingent on incentive-based pay as you move up the executive ladder.
In 1998, 40 percent of executive-level pay was based on an incentive (bonus) structure, according to Thomas Dolan, president of the American College of Healthcare Executives (ACHE). And this trend is spreading to mid-level management, primarily because of pressure from mergers to increase profit margins, and because healthcare organizations must be conservative with base salaries.
"[Healthcare organizations] are negotiating with retention bonuses and sweetened severance packages to retain and recruit top healthcare talent with the ultimate goal of linking people's [compensation] to the performance of the healthcare system," says Jose Pagoaga, a William M. Mercer principal and the survey's author.
This trend is most prevalent in the for-profit sector, followed by not-for-profit organizations. It is least common among government-run hospitals and independent "stand-alone" providers, adds Dolan.
For PR executive directors who were eligible for incentives, they accounted for 17.8 percent of the total cash compensation - an average of $116,700, Mercer found. And for incentive-eligible communications directors, incentives comprised 17 percent of the total cash compensation, hiking the annual pay up to $84,300.
As healthcare continues to be shaped by aggressive consolidation and incentive-based compensation models, communicators must become savvy in all facets of the healthcare delivery business-from financial matters to managed care issues, says Smooch Reynolds, president of The Repovich-Reynolds Group, a PR executive search firm in Pasadena, Calif.
"Making intuitive judgment calls is critical for today's [healthcare] PR professional and requires telling CEOs what they need to hear instead of what they want to hear."
Look forward to more executive compensation coverage in upcoming issues, culminating with HPRMN's 1998 Salary Survey and Exclusive Guide to Executive Recruiters, this fall. (Mercer, Joze Pagoaga, 404/614-2992; The Repovich-Reynolds Group, Smooch Reynolds, 626/585-9455, x233; ACHE, Thomas Dolan, 312/424-2800)
| CEO Turnover On Decline | ||
| In 1997, hospital CEO turnover dipped to its lowest level in 17 years, according to the American College of Healthcare Executives (ACHE) in Chicago. Turnover among the industry's top brass peaked at 18.4 percent in 1988 and has fluctuated since then. Here's an overview of the trend in the last 10 years: | ||
| Year | Turnover Rate | |
| 1987 | 17.5% | |
| 1988 | 18.4% | |
| 1989 | 16.2% | |
| 1990 | 12.8% | |
| 1991 | 16.7% | |
| 1992 | 14.5% | |
| 1993 | 13.9% | |
| 1994 | 14.3% | |
| 1995 | 15.4% | |
| 1996 | 16% | |
| 1997 | 12.1% | |
| Source: ACHE | ||
| 1998 PR Compensation | ||
| Compensation | PR Director | Comm. Dir. |
| Average Salary | $104,800 | $78,000 |
| Total Cash Compensation | $116,700 | $84,300 |
| Incentive Represents: | 17.8% | 17% |
| Hospital Revenues: < $500M | $82,000 | $66,600 |
| - $500M < $1 billion | $104,500 | $68,300 |
| - $1 billion or more | $129,900 | $87,200 |
| Source: William M. Mercer | ||