100 statistics for CEOs and CFOs
Amidst the changing landscape of today’s healthcare industry, more important than ever are the roles of the CEO and CFO. From navigating healthcare reform to a constantly changing economy, empirical data never fails to be useful when making sense of the nuanced trends of the industry. To assist with the dynamic responsibilities of effectively leading a hospital or health system, we have provided below 100 statistics regarding healthcare finance, executive compensation, CEO succession and more.
Key finance statistics
Source: Moody’s Investors Service, “Preliminary U.S. Not-for-Profit and Public Hospital 2014 Medians: Growth in Hospital Revenue Edges Ahead of Expenses in 2014,” May 2015.
Note: The preliminary medians are based on fiscal year 2014 audited financial statements representing 48 percent of Moody’s rated portfolio. These medians primarily reflect audit year ends of Sept. 30, 2014 and prior.
1. Annual median revenue growth rose to 4.7 percent (up from the all-time low of 3.9 percent in FY 2013), with total operating revenue at $679,912,000, based on the preliminary fiscal year 2014 U.S. nonprofit and public hospital medians.
“Revenue growth was supported by continued consolidation in the nonprofit hospital sector and the initial influence of the Affordable Care Act as benefits of the exchanges and Medicaid expansion were realized,” said Beth Wexler, Moody’s vice president and senior credit officer.
2. The annual expense growth ratedeclined to 4.6 in FY 2014 from 5 percent in FY 2013 and 5.5 percent in FY 2012. The slowdown in the expense growth rate is attributable to the ongoing shift of patient care to lower-cost and more efficient settings, such as outpatient and ambulatory surgery centers, in addition to operating efficiencies gained from increasing size and scale.
3. The median cash on hand rose to 212 days in FY 2014. That’s up from 207 days in 2013 and up 197 days in 2012.
4. Unrestricted cash and investments were $377 million in FY 2014, up $20 million from FY 2013, mostly due to solid equity gains and restrained capital spending.
5. Profitability margins stabilized in 2014, though the 2.2 percent operating margin and 9.2 percent operating cash flow margins are down from higher levels in 2012.
6. Median net patient revenues were $588,190,000.
Average cost per inpatient day
Source: 2015 data is from 2013 by Kaiser State Health Facts
7. State/local government hospitals: $1,878
8. Nonprofit hospitals: $2,289
9. For-profit hospitals: $1,791
Key ratios: Preliminary medians in 2014
Source: Moody’s Investors Service, “Preliminary U.S. Not-for-Profit and Public Hospital 2014 Medians: Growth in Hospital Revenue Edges Ahead of Expenses in 2014,” May 2015
Note: The preliminary medians are based on FY 2014 audited financial statements representing 48 percent of Moody’s rated portfolio. These medians primarily reflect audit year ends of Sept. 30, 2014 and prior.
10. Excess margin: 5.3 percent
11. Return on assets: 4.3 percent
12. Cash-to-direct debt ratio: 157.2 percent
13. Cash-to-comprehensive debt ratio: 111 percent
14. Debt-to-capitalization ratio: 32.4 percent
15. Debt-to-total operating revenue: 35.2 percent
16. Annual operating revenue growth rate: 4.7 percent
17. Annual debt service coverage: 4.9x
18. Maximum annual debt service coverage: 4.5x
19. Debt-to-cash flow: 3.1x
20. Capital spending ratio: 1.1x
21. Accounts receivable: 51.1 days
22. Average payment period: 63.7 days
Medicare and Medicaid payments
Source: American Hospital Association Underpayment by Medicare and Medicaid Fact Sheet 2015
23. Combined underpayments were $51 billion in 2013, the latest year for which data is available. This includes a shortfall of $37.9 billion for Medicare and $13.2 billion for Medicaid.
24. Hospitals received payment of only 88 cents for every dollar spent by hospitals caring for Medicare patients in 2013. For Medicaid, hospitals received payment of only 90 cents for every dollar spent by hospitals caring for Medicaid patients.
25. In 2013, 65 percent of hospitals received Medicare payments less than cost, while 62 percent of hospitals received Medicaid payments less than cost.
M&A activity
26. Moody’s Investors Service predicts merger and acquisition activity will grow and remain elevated for at least two years as financially distressed nonprofit hospitals seek solace in consolidation to avoid payment default.
27. Small hospitals with revenues of $500 million or less are most likely to be affected, according to Moody’s. These providers are facing increasing regulatory and financial changes, leading to increased consolidation with larger, often for-profit hospital operators, which have been buffered from change by economies of scale. Nonprofit hospitals have declined from 80 percent market penetration in 1999 to 73 percent penetration in 2003, and, M&A volume in the first quarter of 2015 and fourth quarter of 2014 show the first significant transaction growth since 2012.
Compensation figures
28. The average base salary for an independent health system CEO in 2014 was $752,800, according to Integrated Healthcare Strategies’ “2014 National Healthcare Leadership Compensation Survey” report.
29. The average base salary for an independent hospital CEO was $425,200, according to the Integrated Healthcare Strategies report.
30. The average base salary for an independent health system CFO in 2014 was $416,200, according to Integrated Healthcare Strategies report.
31. The average base salary of an independent hospital CFO was $247,900, according to the report.
32. Healthcare executive compensation is adapting to new leadership competencies. According to a B.E. Smith whitepaper, as hospitals and health systems attempt to adapt to the new leadership realities — such as increased CEO turnover and merger and acquisition activity — executive compensation in the healthcare industry rose 2 percent to 3 percent over the past year, with slightly higher pay raises for CEOs.
33. Total cash compensation levels for hospital executivesdecreased an average of 0.4 percent in 2014, according to Sullivan, Cotter and Associates’ “2014 Manager and Executive Compensation in Hospitals and Health Systems Survey.”
34. Compensation levels for health system executives increased by 0.9 percent in 2014 due to lower average payouts under annual incentive plans.
35. The average base salary increases between 2013 and 2014 for executives of health systems are as follows:
CEO — 2.6 percent
COO — 2.9 percent
CFO — 3.5 percent
CMO — 2.5 percent
36. The average base salary increases between 2013 and 2014 for executives of independent hospitals are as follows:
CEO — 6.4 percent
COO — 4.5 percent
CFO — 2.1 percent
CMO — 4.9 percent
37. The average base salary increases between 2013 and 2014 for executives of system-owned hospitals are as follows:
CEO — 1.7 percent
COO — 1.7 percent
CFO — 2.5 percent
CMO — 1.7 percent
38. Roughly 70 percent of CFOs received salary increases in the past two years, according to a Compensation Advisory Partners report studying compensation in all industries.
39. The median salary increase for CFOs was 3 percent in 2014.
40. About half of CEOs received salary increases in the past two years, according to the Compensation Advisory Partners report.
41. The median salary increase for CEOs was just 0.3 percent in 2014.
42. Total CFO compensation continues to be approximately one-third of total CEO compensation across all industries.
43. Health systems offered the following median target award opportunities to their executives in 2014, according to the 2014 Manager and Executive Compensation in Hospitals and Health Systems Survey by Sullivan, Cotter and Associates:
CEO — 35 percent (up from 31 percent in 2004)
COO — 30 percent (up from 25 percent)
CFO — 28 percent (up from 24 percent)
SVP — 25 percent (up from 23 percent)
VP — 20 percent (up from 19 percent)
44. Hospitals offered their executives the following median target award opportunities in 2014:
CEO — 30 percent (up from 28 percent in 2004)
COO — 25 percent (up from 22 percent)
CFO — 25 percent (up from 22 percent)
SVP — 20 percent (down from 24 percent)
VP — 17 percent (down from 19 percent)
Compensation strategies
Source: HealthLeaders Media Intelligence, “Reforming Executive Compensation to Accelerate Change,” November 2014
The 2014 Executive Compensation Survey, conducted in August 2014 is based on the survey results from 454 respondents.
45. Thirty-three percent of respondents said their executive compensation structure needs major enhancement. Forty-nine percent believe minor enhancements are needed and eighteen percent do not think any enhancements are necessary.
46. Only seven percent of respondents think their organization’s executive compensation packages are aligned with their organization’s strategies. Fifty-three percent believe their executive compensation packages are pretty well aligned with their organization’s strategies, and forty percent believe they are either slightly or seriously misaligned.
47. Thirty-five percent of respondents said change is needed to their organization’s executive compensation strategy to meet the financial needs of healthcare today, but there is no plan yet. Twenty percent said no changes have been made and none are needed and fifteen percent reported change is needed and a plan is pending.
48. Thirty-one percent of respondents said change is needed, but there is no plan yet regarding their organizations’ executive compensation strategy to address the patient care objectives of healthcare. Twenty-seven percent said change was made in the right direction, while two percent said change was made in the wrong direction. Seventeen percent believe no change is needed and none have been made.
49. Forty-three percent of respondents said their organization has not modified its group or team incentives for executive compensation packages or don’t expect to do so in consideration of the shift from fee-for-service to value-based purchasing. Thirty-three percent reported their organization has either already modified its team incentives or plans to do so.
50. More health systems (41 percent) than hospitals (31 percent) or physician organizations (24 percent) have made or intend to modify group or team incentives for executive compensation packages.
51. Survey respondents indicated that incentives are weighted slightly toward team goals (55 percent) over individual goals (45 percent).
