Many of the bonuses given to non-profit hospital CEOs are tied to increasing profit margins, patient revenues and utilization according to an investigative story published by Kaiser Health News (KHN) and ABC News yesterday. Some bonuses are tied to improving quality measures and patient care, but compensation experts interviewed in the article agree that those incentives are secondary to financial measures.
For all the talk about reform, CEO incentives for traditional financial goals of boosting revenue and the bottom line still far outweigh those for rigorous quality and efficiency targets, experts say.
“What you’re seeing is incentive plans that look pretty similar to what they looked like five years ago or ten years ago,” said James Guthrie, a hospital compensation consultant for Integrated Healthcare Strategies. “They’re changing, but they’re changing fairly slowly.”
In the meantime, health care costs continue to rise, and hospitals constant efforts to “one up” each other are helping to drive those costs up for all of us. From buying the newest robotic surgery system, to $8,000 handheld ultrasound machines, hospitals are investing a lot of money in equipment that doesn’t necessarily improve quality.
This is not to say that hospitals shouldn’t innovate, acquire new technology or expand services. They should do those things, but in an effort to improve quality or fill an unmet health care need – not compete with other non-profit health systems.
In Pennsylvania, we used to have a “Certificate of Need” requirement that kept hospitals from duplicating equipment or services to keep costs in check, but the legislature let the law expire in 1996. Senator Jim Ferlo is proposing the legislature bring back the Certificate of Need regulation – an idea that is worth further consideration.
Regardless of the outcome of that debate though, this article from KHN makes it pretty clear that basing million dollar bonuses for hospital CEOs on increasing volume, profits or procedures – instead of higher quality – is a surefire formula for higher health care costs.