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In this episode, health care attorney Dennis Hursh delves into the contentious issue of executive compensation within the health care sector. With a critical eye on the disparities between physician and C-suite salaries, Dennis examines the challenges of obtaining accurate data and the implications of this lack of transparency on health care stakeholders. Join us as we explore the complexities of executive compensation, its impact on patient care, and the potential avenues for reform within the American health care system.

Dennis Hursh is a veteran attorney with over 40 years of experience in health law. He is founder, Physician Agreements Health Law, which offers a fixed fee review of physician employment agreements to protect physicians in one of the biggest transactions of their careers. He can also be reached on Facebook and LinkedIn.

He discusses the KevinMD article, “Are hospital CEOs overpaid? One lawyer’s skeptical take on executive compensation.”

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Transcript

Kevin Pho: Hi, and welcome to the show. Subscribe at KevinMD.com/podcast, and get CME for this episode by clicking on the CME link in the show notes. Today we welcome back Dennis Hursh. He’s a health law attorney. Today’s KevinMD article is “Are hospital CEOs overpaid? One lawyer’s skeptical take on executive compensation.” Dennis, welcome back to the show.

Dennis Hursh: Oh, thank you, Kevin.

Kevin Pho: So Dennis is a regular guest talking about all things physician contracts. Today we’ll take a little tangent from what we normally talk about and talk about hospital executive compensation. “Are hospital CEOs overpaid? One lawyer’s skeptical take on executive compensation.” Dennis, for those who didn’t get a chance to read this article, tell us what it’s about.

Dennis Hursh: I got really annoyed, because honestly I was reviewing a contract for a hospital CMO. This was right after I had done an orthopedic trauma surgeon’s contract review. And for an orthopedic trauma surgeon, I can tell you what the median total compensation is for a specialist employed by a Pennsylvania hospital. So we can really drill it down.

I assume there are a lot of hospitals, I should get some good data for CMOs. There isn’t. About the best I could do was median compensation in the eastern United States.

Then that got me curious. I said, hm, I’m wondering if there’s a trend here. I looked, and CEO compensation is the same way. Now, there are over 6,100 hospitals in the United States. I suspect a huge portion of them report their physician compensation data to MGMA, and yet for some reason there’s not sufficient data to do benchmarks for hospital CEO compensation.

And to me that just tells me it’s a conspiracy. You don’t need to know my compensation. The physicians, sure, we’ll tell the world what they’re making. But what I’m making, I’m an executive, after all I went to school a year after college, so I’m an important person, I shouldn’t have to disclose my compensation.

As you may have noticed, the article was a bit of a rant. It just is so incredibly unfair. I mean, on a lot of specialties I can drill down, as I said, Pennsylvania hospital, and give all kinds of data about the vacation that physicians have, all their benefits, their employment compensation, everything else. And yet CEOs, it’s just, this is the median compensation.

And by the way, the median compensation for a hospital CEO in the United States, according to MGMA, is a little over $280,000. The 90th percentile is $65,000.

Now, if you do any social media or read any news reports, you see about the 35 million that one hospital CEO brought down, you see all these million dollar packages. That can’t possibly be being reported, that can’t possibly be in those statistics. Now, I’m sure those big health systems do very full, complete reports on their physicians, but as I said, I think the C-suite, that’s just confidential, we don’t need to report that. And that’s just so incredibly wrong.

Kevin Pho: So it sounds like there is a significant information asymmetry, where hospitals and medical centers, they can go so granular in terms of how much physicians are making, pretty much everywhere in the country, but when physicians ask how much the executive suite is making, there is so little data to go on.

Dennis Hursh: Right. And the only way that can be is, when MGMA sends the survey, obviously a lot of them just don’t answer on CEOs, and the C-suite in general. I think CMOs are in the same position.

So yeah, we’re happy to tell you everything granular about our physicians, but our CEO, we’re just going to leave that line blank. It has to be the case, as I said, that the median compensation of a hospital CEO is $280,000. There is just no way. Obviously the high end has not been reporting here.

Kevin Pho: Have you had any experience negotiating a hospital executive contract, CMO contracts?

Dennis Hursh: Yes, and it’s a different world. It’s a different world.

Obviously as a physician you’re not going to get severance. That’s just assumed, it’s just not something that you’re entitled to. If you’re really lucky we have a 90-day termination clause, we may tell you you don’t have to come in and we will pay you your normal salary for those 90 days.

I’m seeing, I think the worst, well, best depending on who you’re looking at, I saw a two-year severance for a CMO. Very commonly it’ll be six months if you stay for three months, and after that you go to a year’s severance with full benefits and everything else.

So it’s just a different world. Aside from the fact the money is so much better than for a practicing physician, then, as I said, you’re in the C-suite, you’re one of the boys, and we take care of our people. And those guys in the white coats are not our people, they’re just some of the workforce.

Kevin Pho: So tell us a little bit about that negotiation. If a physician is negotiating to be part of the executive team, to be a physician executive, what are the dynamics of that contract negotiation? How different is it from the typical contract negotiation that we’ve been discussing on this podcast?

Dennis Hursh: Oh, it’s radically different.

First of all, I’ve never gotten the standard contract line for a physician executive, which I get all the time. I can probably count on maybe two hands, in the 40 years I’ve been doing this, the times a hospital really stood firm on a physician employment agreement. But I’d say 40 percent of the time the first thing you hear out of them is, this is our standard contract, we don’t change it.

When you’re talking the executive suite, it’s always, this is a draft, what do you need, we really want you here, what’s it going to take?

And incredible stuff. I’ve had people say, I’m active in a professional society and I need to keep that, so I’m going to need an additional three weeks a year on top of my vacation so that I can maintain this leadership position. And the answer is almost always, yep, no problem.

Obviously the insurance isn’t an issue, but I’ve had them say, oh, you’ve got a tail, you were practicing before, of course we’ll pay your tail. And for a practicing physician, a clinical physician, you almost never get them to agree to pay your tail at the old location. Sometimes you don’t want to pay your tail at this location. So it’s just a different world.

Kevin Pho: Now, can you speculate as to why that is? Is it so difficult to recruit physician executives that there’s such a large disparity when it comes to contract negotiations?

Dennis Hursh: I honestly believe that you are now joining the club, and it’s a very exclusive club, and we take care of ourselves. And then there’s the workforce. There are the janitors in our workforce, there are the ladies in the cafeteria, and we’ve got these folks running around in white coats that are also part of the workforce, and that’s an expense that we’re going to manage. But you’re now in the club, so we take care of our own.

Kevin Pho: Just to give some context, if a physician is applying for a CMO position or some type of C-suite position, what kind of premium will they receive typically on their salary, for instance?

Dennis Hursh: I think I’ve seen one that was about twice what they were making as a clinical physician, and one and a half times is pretty standard.

It’s just frustrating for me that what health care is in America is doing PowerPoints. Those folks in the white coats and the treating of patients, that’s just kind of a sideline. We sit around and look at PowerPoints, and that’s where it’s at.

So it’s a huge premium, and as I said the benefits are going to be so much better. I don’t think I’ve seen a CME allowance for a CMO. It’s just, of course you will keep your CME up to date, and of course we’ll pay for that. But, as I said, it’s a completely different world.

Kevin Pho: So what other differences are there? You mention things like there’s no CME allowance. Is there more paid time off, for instance? What other benefit disparities are there?

Dennis Hursh: Frequently there are. The huge one, the one that really just stunned me, was that severance agreement. As I said, I have never seen a severance less than six months, and I’ve seen several where, for the first 90 days, if we terminate you for cause in the first 90 days, then we’re only going to give you six months severance, but if you make it through those 90 days then you get a year. And I had one that we negotiated two years of severance. It’s just unbelievable to me. And those two years she had full benefits during that period too.

So can you imagine, going in as a physician I fight to get 120 days notice in a physician employment agreement, just so you have time to find suitable replacement employment. And then six months and a year is just tossed out as, you know, that’s our first offer.

Kevin Pho: Now, knowing what you know about physician executive contracts, do you ever incorporate some of that knowledge when you negotiate regular physician contracts?

Dennis Hursh: I’ve tried to, but it literally is just a different world. For a short time after the first CMO agreement I did several years ago, for a short time after, I was trying to get severance in physician employment agreements, and it’s just not going to happen. That’s a different world, it’s just not going to happen. As I said, it’s us and them, and you’re joining us when you come into the suite.

Kevin Pho: And is that uniform among all the different types of hospitals that you’ve had interactions with, community hospitals, academic medical centers, and whatnot?

Dennis Hursh: Absolutely. I haven’t seen any difference. It doesn’t matter, for profit, not for profit, community, doesn’t seem to matter.

Kevin Pho: So go on in terms of, what does that say about our health care system, that there’s almost like a two-tiered system when it comes to executives and practicing clinical physicians?

Dennis Hursh: Well, I think, to me, it comes down to, however this happened, somehow our physicians at the front line seem to have gotten themselves at the bottom of the totem pole. And to me that’s inconceivable. The people that are actually doing it, the health care system is to provide health care, the people that are doing it, the real experts, the people with massive amounts of training, are somehow less important than the folks sitting up in the C-suite making big decisions about which PowerPoint style to use and things.

It’s just one more instance where things are completely broken, and once again it’s completely evidence of how badly physicians are treated. It’s not just, well, the health care industry is bad so everybody has it rough. Everybody doesn’t have it rough. The folks in the C-suite, and I’ve just dealt with C-suite, I’m sure assistant vice presidents and everything else also are getting very handsome severance packages and good benefits, and are just treated very differently.

And think of the difference between being an executive and a practicing physician. How much call does a CEO ever take? How many times is a CEO woken up at 2 a.m. with a life and death decision, and by the way, I expect you to be in the office tomorrow again at seven, making more life and death decisions? And you may be doing that four or five days in a row where you’re barely sleeping, but of course we don’t expect that to change your work schedule, because that’s just something you do.

It’s just incredible to me that the executives would have it so much better than the people on the front lines. As I said, it’s a completely broken system.

Kevin Pho: How did it get to be like this? Is it because executives have a background in business and clinical physicians typically don’t?

Dennis Hursh: I don’t think that’s it. I really think what it is, it started with Medicare coming in and government taking care of payment, and then it started to be standardized, and it started to be clear that as a physician we have a concept of what’s fair market value. We have a very strict market as to what you can be compensated for your services. And when I say your services, if you’re employed by a health system your services are seeing patients. So your employment is going to be pretty narrowly circumscribed by what’s coming in on reimbursement.

And then you’ve got this whole separate world of, this is business, I run a hospital, that’s a business. Nobody is saying, well, the assistant vice president in charge of paperclips, this is a reasonable compensation. It’s just, if I can convince the CEO that I’m really important, then the CEO will pay me well. And the thing is, it’s like that everywhere. If you don’t pay me well as a CEO, I’m sure I can find another hospital that will. And that sort of total flexibility, whatever the market will bear, has been wiped out of physician compensation.

Kevin Pho: Do you see any of this changing in the future? Is there anything that clinical physicians can do to change that trajectory?

Dennis Hursh: No. I think just in general, stand up for your rights. I also did an article on hospitalsplaining one time, and I think it’s important that you can’t sit there and say, well, you understand it’s for our patients, so you have to do it, you’re the only specialist in the health system, so you understand you’ve got to do 365, 24/7 call, because it’s for the patients. I’m not asking you, it’s for your patients.

And just so many physicians will say, oh yeah, well, I want to take care of the patients, I guess that’s what it has to be. And instead the answer should be, no, a reasonable call is one in four, and I guess you’re going to have to pay a locums to come in on the other ones. I don’t make patient care sit on my back, that I have to forego a personal life in order to provide care for the patients. There are other options. It would cost you money, but there are other options. The only option is not that I do 24/7 call, 365.

Kevin Pho: We’re talking to Dennis Hursh. He’s a health law attorney. Today’s KevinMD article is “Are hospital CEOs overpaid? One lawyer’s skeptical take on executive compensation.” Dennis, as always, we’ll end with your take-home messages with the KevinMD audience.

Dennis Hursh: Well, I think you asked what you can do. I think physicians need to start standing up and saying, in my clinical position I just want what’s reasonable.

I’m not suggesting that you should say, I want salary and come in one day a week, and I want a year’s severance even though the executives are getting that. But I think it is safe to say there needs to be limits on patient contact hours. I’m not going to be working 70 hours a week to keep my charts up to date. There has to be a limit on call.

I too am valuable. I spent a lot more time than you did, Mr. CEO, in school, and so I have rights as a person. And the physicians have to do that, and it has to be a pushback on the system, saying, no, patient care is not 100 percent on me. This system needs to provide patient care, and maybe you’re going to need to spend some money, but you can’t just throw it on me.

Kevin Pho: And as always, thank you so much for sharing your perspective and insight, and thanks again for coming back on the show.

Dennis Hursh: It was my pleasure.