SullivanCotter Report Highlights Executive Compensation Impact of Competitive Talent Market and Pandemic Recovery

Median base salaries increased by 4.5%

CHICAGO, Aug. 11, 2022 /PRNewswire/ -- SullivanCotter, the nation's leading independent consulting firm in the assessment and development of total rewards programs, workforce solutions, and data products for health care and not-for-profits, has released the findings of its 2022 Health Care Management and Executive Compensation Survey.

This year, the median base salaries for health care executives increased by 4.5%, reflecting an increasingly competitive marketplace for talent at hospitals and health systems nationwide. In addition, incentive award payouts reflect a recovery year from the onset of the pandemic. By maintaining competitive compensation for executives, organizations are able to effectively build back and restore performance and talent to pre-pandemic levels.

Incentive Awards

In 2021, incentive payouts for 2020 performance were below historical levels due to the unprecedented impact of the pandemic onset on both financial and operating performance. The 2022 survey, however, indicated that incentive payouts for 2021 performance returned to levels consistent with historical practices as financial and operating performance within the industry improved, increasing median total cash compensation (equal to base salary plus annual incentives) by 9.7%.

"Although total cash compensation for executives grew year over year, it is important to note that there were no shifts in annual incentive plan prevalence or award opportunity levels. The growth in reported total cash compensation is being driven by higher incentive awards that reflect improved organizational performance after a particularly challenging year. Thus, it shows that the performance-based incentive programs are operating as designed by tempering awards in challenging years and increasing them when performance improves," said Bruce Greenblatt, Managing Director, SullivanCotter.

Base Salaries

Base salary increases provided to executives for 2021 were modest, with many organizations freezing executive salaries in response to the pandemic onset. In comparison, salary increases provided for 2022 rebounded due to successful business recovery efforts and high demand for talent that is outpacing supply due to burnout, retirements accelerated by the pandemic, and the need for highly qualified leaders to lead organizations through increasingly complex times.

As in previous years, median base salary increases reported in our 2022 survey for health system executives outpaced subsidiary hospital executives by nearly 1.0% due to the larger scope and more complex nature of a system-wide role. Additionally, while executive salary increases rebounded, the overall median annual executive salary increase of 4.5% is less than the annual growth seen in many clinical roles (5% or higher), including Registered Nurses (over 8%), as reported in our 2022 surveys. This reflects organizations' strategy to reward staff for the day-to-day work that has put extra demand and stress on teams, as well as supporting recruitment and retention efforts.

Planning for 2022 and Beyond

Hospitals and health systems still face uncertainties in regard to inflation, labor costs, a competitive talent market, employee burnout, and more. "While these are industry-wide issues affecting the clinical workforce and staff-level positions as well, organizations must be acutely aware of the impact these challenges may have on executive compensation programs and recruiting and retention strategies. This is particularly important as they look to limit disruption and remain focused on providing the highest quality patient care, improving employee engagement, and advancing other important initiatives designed to support DE&I and ESG," said Ted Chien, President and Chief Executive Officer, SullivanCotter.

As it relates to executive compensation and talent strategy, organizations should consider the following:

• With inflation and the talent shortage, anticipate that salary increase budgets for 2023 will likely need to exceed recent norms of 3.0% in order to retain key talent, mitigate inflation effects, and address issues of pay equity.
  
  
• Establish annual incentive plan goals and performance levels recognizing the current challenges (engagement, patient satisfaction, financial and growth) with goal setting while also ensuring that these measures align with future priorities (operational sustainability, DE&I, and ESG).
  
  
• Understand the need for experienced leaders to address response/recovery efforts as well as access, affordability, and community wellness needs. Differentiate rewards so limited dollars are directed to address retention/recruitment and reward high performers critical to the organization's success; segment total rewards approaches as needed to meet specific business unit needs – thus moving away from a "one size fits all" approach.
  
  
• Make a point to regularly review and refine succession plans; memorialize professional development plans; ensure a strong talent pipeline; determine gaps where external hires may be necessary. Focus on internal leadership development and talent-building where possible to help engage, retain and grow the current leadership team and potentially reduce costs related to external recruitment.
  
  
• Consider all employees' well-being needs, such as time-off and mental health benefits.

SullivanCotter's 2022 Health Care Management and Executive Compensation Survey provides critical benchmarking data on compensation levels and pay practices. As the largest and most comprehensive resource of its kind for hospitals and health systems nationwide, the survey includes information from more than 3,000 organizations representing roughly 42,300 individual incumbents.

About SullivanCotter

SullivanCotter partners with health care and other not-for-profit organizations to understand what drives performance and improve outcomes through the development and implementation of integrated workforce strategies. Using our time-tested methodologies and industry-leading research and information, we provide data-driven insights, expertise, and data products to help organizations align business strategy and performance objectives – enabling our clients to deliver on their mission, vision, and values.

For more information on SullivanCotter's surveys, please visit our website at www.sullivancotter.com, or contact us via email or by phone at 888.739.7039.

Note to media: Additional data and interviews are available on request.

Contact: Becky Lorentz
SullivanCotter
[email protected]
314.414.3719

Jenni Bowring
Padilla
[email protected]
651.226.3858

SOURCE SullivanCotter