Pay Comparison: Physician VS Hospital CEO
Our goal at Reimbursement Rx is to help residents and doctors understand the medical compensation system to make better financial choices.
It is no secret that hospital CEOs and other administrators can earn a very high salary. But how does that compare to the people performing the actual healthcare delivery, the physicians?
While certain small and struggling rural hospitals CEO make $120,000, their counterparts at larger urban institutions can take home up to and above $2 million per year.
This means that the average CEO compensation nationwide is about $600,000 per year.
Meanwhile, although there are certain specialist physicians who earn large yearly salaries (although there are very few physicians making $2 million or more per year), most physicians do not make 7 figure or high 6 figure salaries. The average physician salary nationwide is $200,000 per full time equivalent.
So, the average physician takes home just a THIRD of what the average hospital CEO takes home.
But if it’s true that high-performing hospital CEO’s and administrators make hospitals more efficient and effective places to deliver healthcare, one could argue that they are worth their weight in gold, right?
Well, according to a JAMA study, there is no link between (nonprofit) CEO pay and hospital quality indicators such as re-admission rates, mortality rates, or community outreach programs. In other words, a highly paid CEO will NOT necessarily increase the performance of a hospital.
So if hospital performance can’t be the justification for a high hospital CEO salary, what can be?
While this is a very loaded question, the simple answer is that the huge bureaucracies of any hospital organization make financial decisions that are not based on patient or physician satisfaction due to a complete and a total lack of accountability.
Hospital boards that are very often comprised of people who are not healthcare providers decide who gets paid what and how much hospital rates are. Their goal is to maximize the profits of their medical group, and NOT patient and physician satisfaction.
This means that hospital boards can justify CEO compensation for many other reasons besides helping the hospital do it’s job better, and in the process, creating a market where physicians are not being compensated as they should be.
So while the general population complains about ever rising health care costs, it’s clear that it’s not the physicians that are getting richer due to rising costs.
Of the 2.7 trillion in healthcare expenditures every year in the US, physician compensation is responsible for just 9% of total healthcare expenditure. Meanwhile, administrative costs, those costs associated with all aspects of healthcare administration including those highly paid CEOs and other highly paid administrators, sit at a whooping 25% of all healthcare expenditure in the US!
So 25 cents of every dollar that goes into healthcare is eaten up by administration! Whereas, the average physician would be lucky to even see a few cents for every dollar that is spent on the care they provide.
This situation sounds helpless, but physicians are NOT totally powerless in navigating this disparity.
Check out these videos below to learn more about how physicians can circumnavigate large hospital administrations and take control of their financial futures.
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