April 6, 2022

It never ceases to amaze—the annual rise in NFL player salaries.  Each year, there is a new all-time high contact paid to the star quarterback or flashy wide receiver or dominating defensive tackle, and this trend has just reached astronomical levels.  Late last month, the Cleveland Browns signed former Texans’ quarterback, Deshaun Watson, to a record five-year, $230 million deal.  What made this contract so unique is that it is the first in NFL history to offer so much money on a fully guaranteed basis.  This, in turn, will now drive up the price for other top quarterbacks who will, no doubt, want similar stipulations inserted into their contracts.

How can such salaries be justified, we ask.  It’s all about financial forces and what the market demands.  Hospital boards of directors are facing similar market dynamics these days when it comes to a variety of staff positions.

On the Rise

According to an April 3 article in the Wall Street Journal, median pay for CEOs of the S&P 500 companies rose to $14.2 million last year, which represents an uptick from a record $13.4 million for the same companies a year earlier.  The article also pointed out that a significant number of hospital CEOs have joined what’s being called “The Great Resignation,” leaving their posts for early retirement or other roles.  This naturally leads to a greater demand for CEOs, as is evidenced by the daily articles now being published detailing the various hospitals and health systems looking for new chief executives.  Fewer CEOs means a greater competition to find and hire such executives.  This, in turn, will require hospitals to offer more in pay and incentives to retain the services of highly qualified individuals.

But it is not just CEO compensation that is beginning to spike.  Other hospital workers are beginning to command higher wages.  We don’t need to rehash in detail the phenomenon we are seeing in hospitals across the country, where the nursing shortage is forcing many facilities to offer much higher salaries and bonuses, as well as bringing in short-term and highly-paid travel nurses.

Compensation rates for physician assistants (PAs) and certified registered nurse anesthetists (CRNAs) also continue to rise.  American PAs now make an average of $119,460 annually, according to data released last week by the U.S. Bureau of Labor Statistics, with PAs in Rhode Island, Alaska and Connecticut topping the list in the $140,000+ range.  As for CRNAs, they earn an average of $202,470 in annual compensation, with Connecticut and New Jersey anesthetists leading the way at $276,000 and 263,000, respectively.

Where Will It End?

With hospitals doling out ever-increasing salary packages to sought-after employees, the question becomes: is this sustainable?  That is the question addressed in a recent article in Becker’s Hospital Review.  The authors make the point that, while some hospitals have found it necessary in the short term to increase hourly rates and provide sign-on bonuses in order to attract and keep valued employees, CFOs and other decision-makers realize that this trend cannot be sustained indefinitely.  At some point, revenues must surpass costs in order for the hospital to survive.  But how do you increase revenues without superior caregivers and core leaders?  There is clearly a balancing act that must be achieved.

The Becker’s group interviewed various hospital leaders to get a feel for how this delicate balance between cost and revenue can be maintained, long-term.  These leaders indicated that while large pay increases may not be sustainable over an extended period, substantial bonuses may be a better option to attract and retain needed staff.  In addition to this, these leaders stressed the need for creating a culture within the facility that would keep current workers more dedicated to the organization.  In other words, “improving the workplace itself is key to attracting and retaining employees,” as one hospital executive put it.

There is only so much a facility or health system can do in this highly competitive labor market.  Hospital leaders will have to find creative ways take care of the short-term needs through bonuses and benefits; but, over the long haul, making your facility a profitable health care option (in order to generate revenue), while reinvigorating the culture of the workplace (in order to build employee loyalty), seems to be the sweet spot that may provide ongoing success.

Please feel free to reach out to us if you have questions about the ways we can make your life a little easier.  You can review our hospital-specific services at www.miramedgs.com or you can contact us at info@miramedgs.com.