Hospitals: Cut expenses that don’t contribute to better care!


As revenue-strapped hospitals try to figure out how to transition to a health care landscape in which their big-box campus settings play a reduced role, it’s looking like layoffs are likely.

With labor costs averaging 50-60 percent of a hospital’s operating costs, it makes sense. But let’s hope they focus on cutting expenses that don’t contribute to better care. At most large, urban hospital systems, there are a lot of these. A small army of executives and business folks have jobs whose goal is to promote growth, not care.

Hospitals exec salaries are huge

It starts with the CEO. Here are some numbers from The Atlantic:

Of the 1,877 CEOs at 2,681 hospitals studied, the average compensation was approximately $600,000 per year, though this varied widely. CEOs of small rural hospitals earned salaries and bonuses of just $118,000 a year, while those at the largest urban teaching hospitals earned on average nearly $1.7 million per year.

Are CEO salaries correlated with hospital quality? Unfortunately, no. A 2014 study by the Harvard School of Public Health concludes that:

CEO compensation at nonprofit US hospitals varies widely and is associated with greater use of technology and higher patient satisfaction but not with the quality of care delivered, patient outcomes, or community benefit.

In other words, securing the latest technology and creating hotel-like settings are being rewarded over improving care quality.

Management layers are likely candidates for cuts

No amount of evidence, of course, will prompt hospital boards to lay off the CEO. But how about the layers of management just below, whose salaries average more than those of physicians? Becker’s Hospital Review last year published a list of 38 executive titles at hospitals. Take a look at these job descriptions and tell me if you don’t spot a few cost-cutting opportunities.

Hospitals’ cost problems, of course, aren’t all salary-related. Perhaps it’s time for the marketing budget to become a relic of history.

Regardless, let’s hope hospitals take this opportunity to reorganize their priorities. Improved care at a lower cost is possible. Let’s focus on that instead of growth.

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