CEO Compensation and Performance in Publicly-Traded Hospitals| 2011-2016

• Main Author: Zargarian, Herand Ron
• Language: EN
• Published: Northcentral University 2018
• Subjects: Accounting|Health care management
• Online Access: http://pqdtopen.proquest.com/#viewpdf?dispub=10840268

<p>Average compensation of a CEO of publicly-traded hospitals was about $4 million a year for the period 2011 to 2016. Their compensation is growing while people have a hard time to pay the medical bills. The passage of the Affordable Care Act of 2010 has a significant effect on the healthcare system specifically on hospital operations. Hospitals account for 32% of the total healthcare costs. Through the passage of the ACA, lawmakers intended to reduce costs and increase the quality of care. Publicly-traded entities because of the separation of the management (agent) and ownership (principal) have conflicts of interest that lead to agency problems and costs such as the cost of monitoring and low return to shareholders. The publicly-traded hospitals are no exception. Hospitals provide incentives to the CEOs to reduce these costs and align their and shareholders? objectives. The purpose of the quantitative study was to examine the following question. What correlation, if any, existed between CEO compensation and financial performance of the U.S. hospitals post the ACA Act of 2010 for 2011-2016? The following metrics, operating margin, return on assets, return on equity, occupancy rate, length of stay, and profit per discharge, were used to perform multiple regression analysis. Initially, seven hospitals were selected, but one hospital was excluded because of missing data. Spearman?s rho correlation was used because data violated some of the parametric assumptions. The Operating margin, occupancy rate, and profit per discharge variables were statistically significant in explaining the CEO compensation. Other variables affected the CEO compensation but were not statistically significant. Finally, including all six variables explained less than 30% of CEO compensation, which would indicate agency problems exist in the hospitals. Future studies should identify what other variables explain the change in CEO compensations