Clipboard: An end to hospital CEO bonuses?

It has become a cliché. The goal of health reform today is shifting the focus of the American health care system from quantity to quality, from paying doctors and hospitals based on how many tests or treatments they perform to rewarding them for keeping patients healthy and out of the hospital.

Yet, Jay Hancock’s excellent stories for Kaiser Health News and ABC News show that many executives are still paid bonuses based on how many patients their hospitals get through the doors. Hancock writes:

“Boards of trustees in health care are oriented around top-line, revenue goals,” said Dr. Donald Berwick, a longtime reform advocate who ran Medicare and Medicaid for President Barack Obama until December 2011 [and who on Monday announced his run for Massachusetts governor]. “They celebrate the CEO when the hospital is full instead of rewarding business models that improve patients’ care.”

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Thirty percent of what’s spent on U.S. health care is unnecessary, studies have estimated. U.S. hospitals spend twice as much per discharged patient as those in other developed nations without delivering much better results, according to research financed by the Commonwealth Fund.

As public and private budget pressures prompt sharper questions about how the system got so bloated, here is one answer: Hospital CEOs are paid to make it that way.

Hancock goes on to note that, for many executives, a portion of bonuses are based on patient volume, while they are also rewarded for hitting certain quality measures.

Kaiser created this handy chart with payments made to some top hospital executives, according to the most recent tax filings. Dr. Gary Gottlieb, chief executive of Boston-based Partners HealthCare, earned a total of $3.13 million during the 2010 tax year, including a $138,000 bonus and retirement benefits reported in prior years. The chart notes that factors used to calculate his bonus are not included in the health system’s filing.

Partners spokesman Rich Copp said the hospital system doesn’t have a specific formula for the bonus payment, but takes into account progress made in health care quality and in changing the structure of the health care system to focus on overall patient health.

The bonus is “based on the overall performance of the system and advancement of the system’s goals,” he said.

Some hospitals are eschewing bonuses, Hancock reports. Among those he cites is Dartmouth-Hitchcock in New Hampshire, where chief executive Dr. James Weinstein said there is no place for a bonus program in a modern health system. Hancock writes:

Weinstein, who eliminated 400 jobs in 2011 in an effort to control costs, says that he’s already very well paid and that his job requires him to run the highest-quality, most efficient system he can, even without bonuses.

“I believe if you do the quality right, the finances will work themselves out,” he said, suggesting financially successful hospitals could give resources back to the community instead of endlessly growing.

“Maybe we should provide [cholesterol] drugs free to everybody who lives in New Hampshire,” he said. “It shouldn’t be just about building more buildings and new structures.”