Healthcare Executive Pay Growth Rate Top Among Eight Major Industries

By Christopher Orella and Randy Ramirez

CEOs and CFOs of public healthcare organizations experienced the most dramatic increase in pay across eight major industry sectors during 2014, according to the new BDO 600 CEO and CFO Pay Study. The analysis, which examined proxy statements of public healthcare companies with annual revenues between $25 million to $1 billion, found that the average healthcare executive CEO pay jumped 55 percent between 2013 to 2014 to approximately $4 million.

The complexity of a healthcare CEO’s job has increased dramatically in recent years, and it has become exceedingly difficult to find someone with the right skills and experience to lead organizations in such a disruptive environment.

Average CFO compensation also ascended to $1.4 million, a 34 percent year-over-year increase. The disparity between CEO and CFO pay was greatest in healthcare, when compared against seven other industries, with CFOs earning an average of 35 percent of what CEOs made in 2014.

However, that gap is likely to tighten as healthcare CFOs take on a more strategic role and collaborate closely with a growing executive team to address the changing reimbursement environment and the demand for improved metrics.

Boards are also taking on more responsibilities, and seeing pay levels rise, with board compensation in 2014 averaging $176,749 in healthcare, up 8 percent from the prior year.

Scrutiny Intensifies

Where there are increases in executive pay, scrutiny is sure to follow. Soon, publicly traded companies will be required to publish a ratio that compares CEO pay with the median employee, which is certain to add fuel to the fire.

While pay can help draw in the right talent, hospitals in particular must be careful to justify their actions or risk backlash from their communities.

Christopher Orella is an Assurance Managing Partner and Co-Leader of The BDO Center for Healthcare Excellence & Innovation. He can be reached at corella@bdo.com. Randy Ramirez is a Director in BDO’s Compensation and Benefits practice. He can be reached at rramirez@bdo.com.