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Nonprofit Hospital CEO Compensation: Does Quality Matter?
Derek Jenkins1, Marah Short1, Vivian Ho1,2,3
1Baker Institute for Public Policy, Rice University, Houston, TX.
Medical Care
|August 22, 2025
Summary
Nonprofit hospital CEO pay is increasingly tied to hospital size rather than quality of care. Between 2012 and 2019, the link between quality metrics and executive compensation weakened significantly.
Area of Science:
- Health Services Research
- Healthcare Management
- Health Economics
Background:
- Past research indicates that increased profits, health system size, and reward generosity for these metrics influenced nonprofit hospital CEO pay increases from 2012 to 2019.
- Executive compensation in nonprofit hospitals is a subject of ongoing research and public interest.
Purpose of the Study:
- To investigate whether hospital quality measures supplement other factors in determining nonprofit hospital CEO compensation.
- To analyze the evolving relationship between hospital quality and CEO pay over time.
Main Methods:
- Linear regressions were used to analyze the relationship between CEO wages and hospital characteristics (including quality) in 2012 and 2019.
- Oaxaca decomposition was employed to identify factors contributing to CEO compensation differences.
- Data included nonprofit health systems and independent hospitals, examining metrics like CEO compensation, profits, charity care, hospital size, and quality indicators (e.g., readmission and mortality rates).
Main Results:
- A stronger association between better hospital quality and higher CEO pay was observed in 2012 compared to 2019.
- Inclusion of quality measures in 2012 analyses reduced the pay premium for leading larger hospitals/systems, but this effect diminished by 2019.
- The correlation between hospital quality and CEO compensation weakened considerably between 2012 and 2019.
Conclusions:
- Nonprofit hospital CEOs appear to be compensated more for leading large organizations rather than for delivering superior patient care quality.
- The findings suggest a shift in executive compensation priorities within the nonprofit hospital sector, emphasizing size over quality outcomes.
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