Thursday | June 22, 2017
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Health care CEOs’ fat salaries

In a way, you can argue that Steven H. Lipstein is severely underpaid.

As Jim Doyle of the Post-Dispatch reported Sunday, Lipstein, the president and CEO of BJC Healthcare, got a million-dollar bump in his compensation package in 2011. He took home a total package of $3.3 million; a spokesman said the total reflected deferred compensation from previous years rather than a significant increase in base pay.

Considering that BJC employs nearly 30,000 people, roughly twice as many as any other company in the region, Lipstein is a bargain.

On the other hand, as a nonprofit, BJC pays no taxes; the public has a huge investment in its success. As an administrator, Lipstein plays no direct role in patient care. The Bureau of Labor Statistics reports that the average pay for some internists in 2012 was $218,790. Lipstein thus earned 15 times what one of his internists did.

Moral of the story: Don’t go to med school, young people. Get a degree in hospital administration. And if you really want to get rich, get into the health insurance business.

As health care costs continue to rise — though more slowly than they were rising prior to passage of the Affordable Care Act — more attention is being paid to costs not directly associated with health care. The Kaiser Family Foundation reports that in 2010, the United States spent nearly $2.6 trillion on health care, almost 18 percent of the economy.

Of that $2.6 trillion, spending on hospital care and physician services made up only 51 percent. Prescription drugs ate up another 10 percent. A category called “other personal health care” (dentists, durable medical equipment and the like) accounted for 14.8 percent. In-home care and nursing- and retirement-home care totaled 8.2 percent.

The balance, $407 billion, was the net cost of administration and net cost of private health insurance, public health activity, research, buildings and equipment. Technology was a big driver; as better and more expensive equipment comes along, there is an urgency to buy it and amortize it quickly by pushing patients into it, whether they need it or not.

Then there is this: As the big health insurance firms gear up for next year’s full implementation of the Affordable Care Act, their earnings are mixed, but their executives continue to be extraordinarily well-paid. The median pay for a health insurance company CEO last year was $11 million, according to a recent report from Equilar, the executive compensation analysis firm.

By some estimates, at least a third — and perhaps as much as half — of all the money spent on health care in the United States is wasted.

It’s money spent on services that don’t provide better outcomes than cheaper services. It’s inefficiencies in providing services and equipment. It’s avoidable medical injuries, retreatments and infections. It’s fraud and abuse.

And some of it is just too many fingers in the pie, too many beaks getting too wet. How, exactly, do the eight-figure salaries and luxury perks enjoyed by health insurance executives contribute to sick people getting well?

In pushing health care reform, President Barack Obama chose to work with the health care, pharmaceutical and health insurance industries rather than challenge Congress to pass a single-payer national health care plan. The president got what he could, and then only barely.

Inevitably, the rising cost of care will result in a single-payer plan. In the meantime, the industry is raking it in as fast as it can. The Equilar study of publicly traded companies found that CEOs in the health care sector were outpacing even those in technology and financial services.

As Doyle pointed out, the gains were most pronounced among executives for for-profit companies, like big insurers. One of the few for-profit hospital systems, Tenet Healthcare Corp. of Dallas, paid its CEO $11.2 million last year, even though it earned only $141 million on $9 billion in revenue last year.

Meanwhile, there are nonprofit executives like Lipstein and Anthony Tersigni, CEO of Ascension Health Alliance, a network of not-for-profit hospitals and clinics, who earned $4 million in total compensation in 2012.

Are they worth it? Compared to a lot of for-profit company executives, hospital and otherwise, they certainly are. If they can navigate the changes in the Affordable Care Act and deliver better health outcomes for less money, they ought to ask for a raise.

From the St. Louis Post-Dispatch


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