How healthcare CEO salaries hurt consumers

Healthcare industry CEOs racked in highest average pay in 2014
Tools

The healthcare industry had the highest level of median pay for CEOs last year--$13.6 million--beating industries such as energy, technology and finance, according to recent data calculated by the Associated Press.

It's possible these hefty paychecks hurt consumers. Typically, high CEO salaries lead to more efficient management and better outcomes--but for insurance companies, this doesn't appear to be the case, reported the International Business Times. Analysts have blamed high CEO paychecks--as well as those for other managerial positions throughout the industry--for soaring healthcare costs, noted the IBT.

The healthcare industry has taken many recent steps to make healthcare more affordable, including the introduction of value-based care and the ongoing effort to reduce hospital readmissions. But CEO pay packages may affect inflated costs of healthcare.

"If executives are loaded up with stock options and other types of equity-based pay, they have a personal incentive to boost share prices by whatever means necessary," Sarah Anderson, global economy project director at the Institute for Policy Studies, told the IBT.

For the most part, an insurer CEO's earned salary is a small portion of his or her actual take home pay. Last year, Aetna's Mark Bertolini's base salary was $996,169, but he ended up receiving more than $36 million in total compensation, primarily from stocks and options. UnitedHealth Group's Stephen Hemsley took home more than $66 million in salary, stock options and other forms of compensation last year. That number was down from his total pay five years ago of $102 million, noted the IBT.

When it comes to the industry as a whole, payer CEOs bring home the most bacon, averaging $584,000 a year, IBT said. Hospital CEOs are next on the list, earning an average of $386,000, while hospital administrators earn $267,000. Hospital physicians earn an average of $306,000 despite being the most highly trained professionals in the healthcare industry, FierceHealthcare previously reported. As with insurer CEOs, top hospital executives earn most of their income from non-salary compensation

High CEO salaries are often a subject of debate. Many large insurers benchmark against other insurers to determine appropriate compensation levels, but this is problematic if a CEO's pay increases without taking overall company performance into account. It has been suggested that a CEO's pay should depend upon how well he or she does the job, not how well a CEO at another company is compensated, FierceHealthPayer previously reported.  

For more:
- here's the AP data
- check out the International Business Times piece

Related Articles:
Top health insurance CEO pay exceeds $10 million in 2014
It may be time to revamp how insurers pay their CEOs
Average pay for insurer CEOs jumped to $14M
Hospital CEOs--not doctors--among medicine's top earners