CEO Compensation and Hospital Financial Performance in Ontario.

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Speakers

Kristin L. Reiter is an Assistant Professor in the Department of Health Policy and Management at the University of North Carolina at Chapel Hill. She received her Ph.D. in Health Services Organization and Policy with an emphasis in finance in 2004 from the University of Michigan. She also holds a Master’s degree in Applied Economics from the University of Michigan. Prior to pursuing her Ph.D., she worked as a senior accountant and auditor at Deloitte and Touche, LLP in Chicago, Illinois. Her research interests include mental health financing policy; financial management of health care organizations; and understanding the business case for quality.

Guillermo A. Sandoval holds a degree in Industrial Engineering and a Master’s of Business Administration from Adolfo Ibanez University in Santiago de Chile. He is currently working on his PhD in Health Services Research at the University of Toronto Department of Health Policy, Management and Evaluation, where he is studying the relationship between financial performance, medical technology, and hospital quality of care outcomes. Guillermo also works for the Assistant Deputy Minister, Health System Strategy Division, at the Ontario Ministry of Health, leading research and policy analyses. Previously, he worked as a research analyst at the Hospital Report Project based at the University of Toronto. He has published in peer-reviewed journals on topics related to hospital performance. In Chile, Guillermo also worked as a financial analyst in a stockbrokerage firm. As an MBA graduate, he received an award of US$10,000 granted to the Best Chilean Graduate in the Finance Area. He also got the First Place Award for the highest ranked abstract on Patient Care in the 2nd National Spinal Cord Injury Conference, Toronto, Canada.

Details

Recently, questions about the appropriateness of compensation contracts of non-profit healthcare organizations have been raised. This study compares the compensation of non-profit hospital Chief Executive Officers (CEOs) in Ontario, Canada to the three longest reported and most used measures of hospital financial performance in the jurisdiction. Our sample consisted of 132 CEOs from 92 hospitals between 1999 and 2006. Unbalanced panel data were analyzed using ordinary least squares regression with CEO fixed effects. Results suggest that CEO compensation was largely unrelated to hospital financial performance. Inflation-adjusted salaries increased over time independent of hospital performance, and hospital size was a significant predictor of CEO compensation. The upward trend in salary despite some declines in financial performance challenges the fundamental assumption underlying this study, that is, financial performance is a likely component of a typical performance-based compensation system. Further research is needed to understand longer term performance related to compensation incentives.