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Medical Care Research and Review
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CEO Compensation and Hospital Financial Performance

Kristin L. Reiter

University of North Carolina at Chapel Hill, reiter{at}email.unc.edu

Guillermo A. Sandoval

University of Toronto, Ontario, Canada Government of Ontario

Adalsteinn D. Brown

University of Toronto, Ontario, Canada Government of Ontario

George H. Pink

University of North Carolina at Chapel Hill, University of Toronto, Ontario, Canada

Growing interest in pay-for-performance and the level of chief executive officers’ (CEOs’) pay raises questions about the link between performance and compensation in the health sector. This study compares the compensation of nonprofit hospital CEOs in Ontario, Canada to the three longest reported and most used measures of hospital financial performance. Our sample consisted of 132 CEOs from 92 hospitals between 1999 and 2006. Unbalanced panel data were analyzed using fixed effects regression. Results suggest that CEO compensation was largely unrelated to hospital financial performance. Inflation-adjusted salaries appeared to increase over time independent of hospital performance, and hospital size was positively correlated with CEO compensation. The apparent upward trend in salary despite some declines in financial performance challenges the fundamental assumption underlying this article, that is, financial performance is likely linked to CEO compensation in Ontario. Further research is needed to understand long-term performance related to compensation incentives.

Key Words: hospitals • executive compensation • financial performance

This version was published on December 1, 2009

Medical Care Research and Review, Vol. 66, No. 6, 725-738 (2009)
DOI: 10.1177/1077558709338479
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