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What do nonprofit hospitals reward? An examination of CEO compensation in nonprofit hospitals.

ABSTRACT: Nonprofit hospital chief executive officer (CEO) compensation has received considerable attention in light of nonprofits' tax-favored status as well as the high costs of hospital care. Past studies have found that hospital financial performance is a significant determinant of CEO pay but nonprofit performance, including quality and charity care, are not. Using post-ACA data, we re-examine whether a variety of hospital performance measures are important determinants of nonprofit hospital CEO compensation. We found mixed evidence with respect to the significance of the association between financial performance and uncompensated care and CEO compensation. Among the other nonprofit performance measures, patient satisfaction was significantly associated with CEO compensation, but other measures were not significant determinants of CEO compensation. Our results suggest nonprofit hospitals balance their financial health against their mission when setting CEO incentives. Additional policy targeting transparency in hospital CEO compensation may be warranted to help policymakers understand the specific factors used by hospital boards to incentivize CEOs.

SUBMITTER: Mulligan K

PROVIDER: S-EPMC8936479 | biostudies-literature | 2022

REPOSITORIES: biostudies-literature

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What do nonprofit hospitals reward? An examination of CEO compensation in nonprofit hospitals.

Mulligan Karen K Choksy Seema S Ishitani Catherine C Romley John A JA

PloS one 20220321 3

Nonprofit hospital chief executive officer (CEO) compensation has received considerable attention in light of nonprofits' tax-favored status as well as the high costs of hospital care. Past studies have found that hospital financial performance is a significant determinant of CEO pay but nonprofit performance, including quality and charity care, are not. Using post-ACA data, we re-examine whether a variety of hospital performance measures are important determinants of nonprofit hospital CEO comp ...[more]

PMID: 35312703

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Project description:Importance:In the United States, nonprofit hospitals receive tax-exempt status with the expectation that they provide a high level of benefit to local communities. Prior work has shown that Medicaid expansion reduced hospital spending on uncompensated care. Objective:To measure the association of tax-exempt hospital spending with community benefit and changes in uncompensated care after Medicaid expansion. Design, Setting, and Participants:This cohort study was performed using a difference-in-differences analysis (ie, a pre-post treatment-control design) to estimate changes in reported charitable categories associated with Medicaid expansion. Data from Internal Revenue Service form 990, Schedule H, tax filings for 2253 tax-exempt hospitals in the United States from 2012 to 2016 were used. Data were analyzed from June to November 2019. Exposure:The proportion of the hospital's tax filing that spanned the period after Medicaid expansion. Main Outcomes and Measures:Hospital-reported spending on uncompensated care, unreimbursed Medicaid expenses, and other community benefit spending categories. Results:Across 2253 hospitals, mean (SD) uncompensated care costs between 2012 and 2016 were $4.20 million ($8.80 million) and unreimbursed Medicaid expenses were $7.60 million ($18.62 million). Compared with tax-exempt hospitals in states that did not expand Medicaid, those in states that did expand Medicaid reported mean reductions in their provision of uncompensated care of $1.11 million (95% CI, $0.35 million to $1.87 million; P < .001), representing a mean change of -2% (95% CI, -6% to 2%; P < .001). These reductions have been offset by mean reported increases in the provision of unreimbursed Medicaid expenses of $1.63 million (95% CI, $0.31 million to $2.94 million; P = .02), representing a mean increase of 2% (95% CI, 1% to 4%; P = .01). Tax-exempt hospitals in states that expanded Medicaid reported no statistically significant mean increase in spending on other community benefit activities. Conclusions and Relevance:In this study, large decreases in uncompensated care among tax-exempt hospitals associated with Medicaid expansion were not accompanied by increases in other reportable categories of community health benefit spending. Instead, they were accompanied by increased spending on unreimbursed Medicaid expenses.

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What do nonprofit hospitals reward? An examination of CEO compensation in nonprofit hospitals.

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What do nonprofit hospitals reward? An examination of CEO compensation in nonprofit hospitals.

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