Categories

Tag: Flower’s Law of Behavioral Economics

So That’s What You Get The Big Bucks For?

flying cadeuciiWhat motivates a healthcare executive?

Remember Flower’s Laws of Behavioral Economics? The first two are:

  1. People do what you pay them to do.
  2. People do exactly what you pay them to do.

That is, it’s not general. It’s not “be a good doctor.” It’s more like, “Do lots of complex back fusion surgeries.” What’s more profitable gets done more.

I know that some people say that money has nothing to do with people’s motivation in healthcare, and that’s fine, I totally respect that opinion. You’re just in the wrong section. You want Aisle C, between Dr. Seuss and the Disney fairy tales.

But what about healthcare executives? What gets them more money? What constitutes hitting it into the cheap seats for them?

There are of course lots of compensation surveys. There’s a whole industry of people who do that. But they don’t tie compensation to anything specific. So when someone does a study that does look at correlations, that’s interesting information. One came out a few months ago in JAMA’s Internal Medicine .

Karen Joynt, MD, and her colleagues used 2009 data, so things might be beginning to change now. And they only looked at CEOs, so we will have to speculate whether the same things apply to other C-suite suits.

What did they find? They found great variation in the salaries, with a mean (average) salary of $595,781, a median (half are above and half below) of $404,938). The nearly $200,000 difference tells us that the sample is skewed by a smaller number of really large salaries at the top.

There is nothing surprising in the size of the salaries or their variation. That’s normal for any industry. No matter how much you might think that healthcare is special and different and sacred, it is nonetheless a very big business. In many or most towns, the hospitals and health systems are the biggest businesses in town. A typical suburban three-hospital system might have an annual budget in the $5 billion range.

What correlates with a higher salary? Size.

More beds means a higher salary ($550 for each extra bed, to be exact). Teaching status means $425,078 more — in other words, doubling the median. And most teaching hospitals are much bigger than average. Urban location gets you more, but this is likely also a marker for size, or the cliché phrase “big city hospital” wouldn’t roll off the tongue so easily. High tech gets you more, too. Hospitals with high technologic capabilities paid their CEOs $135,862 more than hospitals with low levels of technology — but this again is likely a marker (a co-variate) for size and teaching status.

Continue reading…

Registration

Forgotten Password?