THOUGH
the recent release of Medicare’s physician payments cast a spotlight on
the millions of dollars paid to some specialists, there is a startling
secret behind America’s health care hierarchy: Physicians, the most
highly trained members in the industry’s work force, are on average
right in the middle of the compensation pack.
That
is because the biggest bucks are currently earned not through the
delivery of care, but from overseeing the business of medicine.
The
base pay of insurance executives, hospital executives and even hospital
administrators often far outstrips doctors’ salaries, according to an
analysis performed for The New York Times by Compdata Surveys: $584,000
on average for an insurance chief executive officer, $386,000 for a
hospital C.E.O. and $237,000 for a hospital administrator, compared with
$306,000 for a surgeon and $185,000 for a general doctor.
And
those numbers almost certainly understate the payment gap, since top
executives frequently earn the bulk of their income in nonsalary
compensation. In a deal that is not unusual in the industry, Mark T.
Bertolini, the chief executive of Aetna, earned a salary of about
$977,000 in 2012 but a total compensation package of over $36 million,
the bulk of it from stocks vested and options he exercised that year.
Likewise, Ronald J. Del Mauro, a former president of Barnabas Health, a
midsize health system in New Jersey, earned a salary of just $28,000 in
2012, the year he retired, but total compensation of $21.7 million.
The
proliferation of high earners in the medical business and
administration ranks adds to the United States’ $2.7 trillion health
care bill and stands in stark contrast with other developed countries,
where top-ranked hospitals have only skeleton administrative staffs and
where health care workers are generally paid less. And many experts say
it’s bad value for health care dollars.
“At
large hospitals there are senior V.P.s, V.P.s of this, that and the
other,” said Cathy Schoen, senior vice president for policy, research
and evaluation at the Commonwealth Fund, a New York-based foundation
that focuses on health care. “Each one of them is paid more than before,
and more than in any other country.”
She
added, “The pay for the top five or 10 executives at insurers is pretty
astounding — way more than a highly trained surgeon.”
She
said that executive salaries in health care “increased hugely in the
‘90s” and that the trend has continued. For example, in addition to Mr.
Del Mauro’s $21.7 million package, Barnabas Health listed more than 20
vice presidents who earned over $350,000 on its latest available tax
return; the new chief executive earned about $3 million. Data released
by Medicare show that Barnabas Health’s hospitals bill more than twice
the national average for many procedures. (In 2006, the hospital paid
one of the largest Medicare fines ever to settle fraud charges brought
by federal prosecutors.)
Hospitals
and insurers maintain that large pay packages are necessary to attract
top executives who have the expertise needed to cope with the complex
structure of American health care, where hospitals and insurers
undertake hundreds of negotiations to set prices.
Ellen
Greene, a spokeswoman for Barnabas Health, said Mr. Del Mauro’s
retirement package was “a function of over four decades of service and
reflects his exceptional legacy.” Nearly $14 million was a cumulative
payout from a deferred retirement plan, she said, and the remainder
included base compensation, a bonus and an incentive plan.
Ms.
Greene also said Barnabas’s compensation program follows I.R.S. rules
and is established by an executive compensation committee with “guidance
from a nationally recognized compensation consultant.”
In many areas, the health care industry is home to the top earning executives in the nonprofit sector.
And
studies suggest that administrative costs make up 20 to 30 percent of
the United States health care bill, far higher than in any other
country. American insurers, meanwhile, spent $606 per person on
administrative costs, more than twice as much as in any other developed
country and more than three times as much as many, according to a study by the Commonwealth Fund.
As
a result of the system’s complexity, there are many jobs descriptions
for positions that often don’t exist elsewhere: medical coders, claims
adjusters, medical device brokers, drug purchasers — not to mention the
“navigators” created by the Affordable Care Act.
Among
doctors, there is growing frustration over the army of businesspeople
around them and the impact of administrative costs, which are reflected
in inflated charges for medical services.
“Most
doctors want to do well by their patients,” said Dr. Abeel A. Mangi, a
cardiothoracic surgeon at the Yale School of Medicine, who is teaming up
with a group at the Yale School of Management to better evaluate cost
and outcomes in his department. “Other constituents, such as device
manufacturers, pharmaceutical companies and even hospital
administrators, may not necessarily have that perspective.”
Doctors are beginning to push back: Last month, 75 doctors in northern Wisconsin
took out an advertisement in The Wisconsin State Journal demanding
widespread health reforms to lower prices, including penalizing
hospitals for overbuilding and requiring that 95 percent of insurance
premiums be used on medical care. The movement was ignited when a
surgeon, Dr. Hans Rechsteiner, discovered that a brief outpatient
appendectomy he had performed for a fee of $1,700 generated over $12,000
in hospital bills, including $6,500 for operating room and recovery
room charges.
It’s
worth noting that the health care industry is staffed by some of the
lowest as well as highest paid professionals in any business. The
average staff nurse is paid about $61,000 a year, and an emergency
medical technician earns just about minimum wage, for a yearly income of
$27,000, according to the Compdata analysis. Many medics work two or
three jobs to make ends meet.
“It’s
stressful, dirty, hard work, and the burnout rate is high,” said Tom
McNulty, a 19-year-old college student who volunteers for an ambulance
corps outside Rochester. Though he finds it fulfilling, he said he would
not make it a career: “Financially, it’s not feasible.”
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