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Balancing tips for walking the health care incentives tightrope

Executive compensation guiding principles: Chapter 5

November 1, 2018
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By Matt Sandler, Russell Wilson and Becky Huddleston

The design of effective compensation programs at health systems must reflect their nonprofit status — the case for the majority of U.S. health systems — while providing sufficient incentive to drive both organizational and individual performance and adherence to their missions. This is particularly complex in an increasingly consolidating, regulated industry. This chapter applies the overarching and operating principles of executive compensation (EC) at health systems using the illustrative example of a fictional nonprofit “Mid-Atlantic Health System.” 1 The nonprofit health care organization focused closely on the principles of alignment, engagement and accountability to improve a compensation system hampered by excessive discretion, poor linkage of individual performance to organizational strategy and insufficient depth of eligibility.

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1. Mid-Atlantic Health System is a fictional U.S. health care entity. Chapter details are based on our work with established nonprofit health systems.